‘he importance of a business plan vn 2,2022 | Sminutes read | Entrenrenaurshin |siness plans are like road maps: i's possible to travel without one, but that will only increase the odds of getting lost along. way. @or es tuners with a business plan see grovith 30% faster than those without one, and 71M ofthe fast-growing companies have business lane. Before we get into the thick of it, let's dafine and go over what a business plan actually is. What is a business plan? {A business plan is a 18-20 page document that outlines how you will achieve your business objectives and includes information about your product, marketing strategies, and finances, You should create one when you're starting a new business anc keep Updating it as your business grows. Rather than putting yourself in a position where you may have to stop and ask for directions or even circle back and start over, small business owners often use bi picture, plan ahead, make important decisions, and improve the overall Ukelihaed of success. jess plans ta help guide ther. That's because they help them see the bigger Why is a business plan important? ‘A well-written business plan i an important tool because It gives entrepreneurs and small business owners, as well as their employees, the abilty to lay out their goals and track thelr progress as their business begins to grow. Business planning should be the First thing done when starting a new business. Business plans are also Important f attracting investors s0 they can determine if your business ison the right path and worth putting money into, 22 ‘Susinose plans typically include detailed information that can help improve your businese's chances of success, tke: 16Is: gathering information about tactors and conditions that affect your industry + Competitive analysis: evaluating the strengzhs and weaknesses of your competitors + Customer segmentation: cvide your customers into different groups based on specific characteristics to improve your marketing ‘+ Marketing: using your research to advertise your business ‘+ Logistics and operations plans: planning and executing the most etficent production process + Cath flow projection: being prepared for how much money s going into and out of your business all path to long-term growth 10 reasons why you need a business plan | know what you're thinking: “Do | really need a business plan? It sounds like a lot of work, plus I heard they're outdated and | like Figuring things out as 1 go. The answer is: yes, you really do need a business plan! As entrepreneur Kevin J, Donaldson said, “Going into business without 1 business plan is ike going on a mauntsin trek without a map oF GPS support—you'll eventually get lost and starve! Though it may sound tedious and time-consuming, business plans are critical to starting your business and setting yourself up for Ta outline the importance of business plans and make the process sound less daunting, here are 10 reasons why you need one for your small business. To help you with critical decisions ve primary importance of a business plan is that they help you make better decisions. Entrepreneurship is often an endless ‘ercse in decision making and crisis management. Siting down and considering al the ramifications of any given decision Is luxury that smal! businesses can't always afford, That's where a business plan comes i. ding a business plan allows you to determine the answer to some of the most critical business decisions ahead of ‘eating @ robust business plan ie a forcing function—you have to sit down and think about major components of your ssiness before you get started, ike your marketing strategy and what products youl sell. You answer mary tough questions before they arise. And thinking desply about your core strategies can also help you understand how those decisions will Impact your broader strategy. Manage your business finances with Wave—it's free. 2. To iron out the kinks her a business plan requires entrepreneurs to ask themselves @ lot of hard questions and take the tims sgearched and insightful answers. Even if the document itself were to disappear as soon asi com the practice of writing it helps to articulate your vision in realistic terms and better determine if there are any gaps in 12° strategy, 3. To avoid the big mistakesOnly about half of small businesses are still around to celebrate their fifth birthday. While the businesses fail, many of the most common are purposefully addressed in business plans. re many reasons why small According to data from CB Insights, some of the most common reasons businesses fall includ + No market need: No one wants what you're selling. + Lack of capital: Cash low issues or businesses simply run out of money. Inadequate team: This underscores the impartance of hiring the right peaple to halo you run your business, + Stiff competition: I's tough to generate a steady prait when you have a lot of competitors in your space. + Pricing: some entrepreneurs price their products or services too high or too low-—both scenarios can be a recipe for disaster. The exercise of creating a business plan can help you avoid these major mistakes. Whether it's cashflow forecasts or a product-marke fit analysis every plece of a business plan can help spot some of those potentially critical mistakes before they arise. For example, don't be afraid to scrap an idea you really loved if it turns out there's no market need. Be honest with vyoursetf ‘Gat a jumpstart on your busines plan by creating your own cash flow projaction, 4, To prove the viability of the business Many businesses are created out of passion, and while passion can be a great motivator, it's not a great proof point. Planning out exactly how you're going to turn that vision into a successful business is perhaps the most important step “otween concept and reality. Business plans can help you confirm that your grand idea makes sound business sense, _ company Description - Marketing & Sales Qe Market analysis & Funding Request a2 Organization & Management {Bi __ Financial Projections ‘critical component of your business plan ls the market research section, Market research can offer deep insight into your customers, your competitors, and your chosen industry. Not only can it enlighten entrepreneurs who are starting up a new business, but it can also better inform existing businesses on activities Uke marketing, advertising, and releasing new products or services. Tan Want to prove there's @ market gap? Here's how you con get started with market research, 5. To set better objectives and benchmarksWwrrnout a business plan, objectives omen become arbitrary, without much rhyme or reason behind them. Having a business plan can help make those benchmarks more intentional and consequential. They can also help keep you accountable to your long-term vision and strategy, and gain insights into how your strategy is (or isn't) coming together over time. 6. To communicate objectives and benchmarks Whether you're managing a team of 100 or a team of two, you car't always be there to make every decision yourself Think of the business plan like a substitute teacher, ready to answer questions any time there's an absence. Let your staff know that when in doubt, they ean always: the business plan to understand the next stops in the event that they can't get an answer from you directly ‘Sharing your business plan with team members also helps ensure that all members are aligned with what you're doing, why. and share the same understanding of long-term objectives. 7. To provide a guide for service providers ‘Small businesses typically employ contractors freelancers, and other professionals to help them with tasks lke accounting, ‘marketing, legal assistance, and as consultants. Having a business plan in place allows you to easily share relevant sections with those you rely on to support the organization, while ensuring everyone is on the same page. ‘Ready to grow your tear? Leata when fand how! to hire a contractor for your business, ©. To secure financing you know you're 2.5x more likely to get funded If you have a business plan? If you're planning on pitching to venture: ipitalists, borrowing from a bank, or are considering selling your company in the Future, you're likely going to need a ssiness pian. after all, anyone ths in good nds and that it's viable in the long run. Business plans are the most effective ways of proving that and are typically a quirement for anyone seeking outside financing. 's interested in putting money into your company is going to want to know vam what younsed to get a small business loan, y. To better understand the broader landscape No business is an island, and while you might have a strong handle on everything happening under your own roof, Important to understand the market terrain as wel, Writing a business plan can go a long way in helping you better 's equally Understand your eompetition and the market you're operating in mare broadly luminate eonsumer trends and pref potential dlsruptions and other insights that aren't always plainly visible, 10. To reduce risk Entrepraneurship isa risky business, but that risk becomes significantly more manageable once tested against a well-crafted business plan. Drawing up revenue and expense projections, devising logistics and operational plans, and understanding the ‘market and competitive landscape can all help reduce the risk factor from an inherently precarious way to make a ving. Having a business plan allows you to Leave less up to chance, make better decisions, and enjoy the clearest possibie view of the future of your company. Understanding the importance of a business plan Now that you have a solid grasp on the “why” behind business plans, you can confidently move forward with creating your Remember that a business plan will grow and evolve along with your business, so it's an important part of your w/ To ney not just the beginning 46Categories Entrepreneurship Read next How to calculate retained ear + examples) 195 formula Learn how you can better understand the financial health of your business by calc earnings. How small businesses can save money by going paperless [As more businesses undergo sigital transformations, more are also going paperless in the process. This post explains the benefits of doing so and a few ways to go paperless (digital invoicing is ust one way)Doing well by doing good: four stories of social entrepreneurs ‘Today's consumers connect best with brands that have integrity. But that doesn’t mean a company car't also be wildly successful. Here are four stories of businesses doing well by doing good, Prooucts. FEATURES wave RESOURCES contact us About us aor Contact us Accounting Software Invoice Software Hela Genter stam S Mobile invoicing ‘Reourcing billing carers community tnvoice templates Press Freelance Hub ‘ulektooke Payments Report