The importance of a Business Plan

What is a Business Plan?

A Business Plan is a written document that describes what your goals are and how you plan to achieve them.

Think of it as a roadmap providing direction and helping you to make the right decisions to ensure you stay on track to achieve your long-term goals.

It is designed to help you, and others, understand how you plan to generate money and make your business sustainable.

Why is a Business Plan Important?

1. Organises thoughts & ideas.

To turn your idea into reality, you need to accurately assess the feasibility of your business idea.

You need to verify:

• If there is a market for your product or service

• Who your target audience is

• How you will gain an edge over the current competition

• If your business can run profitably

A business plan forces you to take a step back and look at your business objectively, which makes it far easier to make tough decisions down the road.

Additionally, a business plan helps you to identify risks and opportunities early on, providing you with the necessary time to come up with strategies to address them properly.

2. Enables Faster Growth

Business planning is proven to help you grow 30 % faster and perform better.

Writing a business plan isn’t about producing a document that accurately predicts the future of your company. The process of writing your plan is what’s important.

Writing your plan and reviewing it regularly gives you a better window into what you need to do to achieve your goals and succeed.

3. Requirement from Lenders

One of the top reasons to have a business plan is to make it easier to raise money for your business. Without a business plan, it’s difficult to know how much money you need to raise, how you will spend the money once you raise it, and what your budget should be.

Investors want to know that you have a solid plan in place – that your business is headed in the right direction and that there is long-term potential in your venture.

4. Minimizes risk

When you’re just starting out, there’s so much you don’t know—about your customers, your competition, and even about operations.

As a business owner, you signed up for some of that uncertainty when you started your business, but there’s a lot you can do to reduce your risk.

Creating and reviewing your business plan regularly is a great way to spot gaps and develop plans to fill them.

Your business plan will also help you define budgets and revenue goals. And, if you’re not meeting your goals, you can quickly adjust spending plans and create more realistic budgets to keep your business healthy.

5. Maps out a route to measure progress

A business plan is like a roadmap for your business. It helps you set, track and reach business milestones.

For your plan to function in this way, your business plan should first outline your company’s short- and long-term goals. You can then fill in the specific steps necessary to reach those goals. This ensures that you measure your progress (or lack thereof) and make necessary adjustments along the way to stay on track while avoiding costly detours.

In fact, one of the top reasons why new businesses fail is due to bad business planning. Combine this with inflexibility and you have a recipe for disaster.

And planning is not just for start-ups... Established businesses benefit greatly from revisiting their business plan. It keeps them on track, even when the global market rapidly shifts as we’ve seen in recent years.

Look out for our next article for our Top Tips on HOW to write a Business Plan.