Now that you know what a business plan is, it is crucial to know the importance behind having one. Execution is everything and a business plan helps to ensure that your execution of your business is as optimal as you can be. Obviously, it does not guarantee success, but it helps put you on the road to it. Without further ado, here are some reasons as to why you should have a business plan.
External Funding
Sometimes, you may not have enough funds to support your business yourself and thus would need to seek external funding from investors, banks, or even friends and family. When trying to obtain funding from such people, you would need to prove that your business has merit and has a good chance of succeeding. What better way to show that than to have a business plan with a road map of your path to business success.
If you have confidence in your own business plan, and show that they have a good chance of having a return on their investment, it would be more likely that they would invest in you. Investors want to see that you’ve developed a vision for your company and that you’ve given thought to the details of how to get there.
Make sure everyone is on the same page
When you start to expand your business, you probably need to hire more people or get more partners in on the business. Discussing and outlining your common goals in the form of a business plan will make sure that everyone is going in the same direction. It would be unwise to not have a common vision for the company and that would lead to harmful disagreements that cannot be allowed in the initial stages of growth.
Thus, having a business plan will at least make sure everyone is aware of how the business is going to be oriented.
Even when discounting the fact that you might not have partners, having a business plan will also keep your emotions in check. The initial stages of a start-up is a truly wild period. You might get so passionate about your ideas that you lose sight of what is reality and what would actually work. Sometimes, your fears and self-doubt may cripple you. When those kind of circumstances do occur, having a business plan allows you detach from it all to take an objective look at the situation and re-orientate yourself, giving your business the best chance of success.
A game plan from the start
Developing a business plan will force you to ask yourself some key questions about the business that you may not otherwise think of. You need to identify those key questions, like how will target my target audience? Or how would my product genuinely make their lives better? Thus, writing out a business plan to answer those type of difficult but yet pertinent questions will allow you to set priorities, establish goals, as well as measure your performance along the way.
Envisioning your future, identifying pitfalls and trying to avoid your worst-case scenarios will tend to make your growth plans at the initial stages more optimised. Your startup period will be smoother as you pay more attention to operational and financial objectives, because your business plan forces you to do comprehensive research and really undestand your market to the fullest of your ability.
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