Why you should have a business plan
Do you really need a business plan? Is it worth the investment of time and resources? Can’t you just go with the flow and skip the whole planning process? Here’s everything you need to know
It’s essential if you’re seeking a loan or investment According to www.articles.bplans.com, if you’re asking a bank, an investor or a venture capitalist for funding, they’re going to want to know that you have a good handle on your small business’ trajectory.
You don’t need to write a 200-page document but you will need something to hand to your banker or investor that shows there’s a market for the problem your business solves and includes your key financial statements and forecasts.
Your business plan should make it simple for potential partners to understand your business model and financials. It’s even better if you’re able to present data visually through charts and graphs.
Business planning can help you grow 30 per cent faster
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 be successful.
Business planning is about regularly setting goals, tracking your progress toward those goals, and making changes to your business as you learn more about your customers.
Studies have proven that companies that plan and review their results regularly grow 30 per cent faster. Beyond faster growth, research also shows that companies that plan, actually perform better. They’re less likely to become one of those woeful statistics on businesses that fail, or that experience cash flow crises that threaten to close them down.
You’ll make big spending decisions with confidence As your business grows, some of the best problems you’ll have are figuring out when to hire new employees, when to expand to a new location, or whether you can afford a major purchase.
These are major spending decisions and if you’re regularly reviewing the forecasts you mapped out in your business plan, you’re going to have better information to use to make your decisions.
You’ll likely catch cash flow challenges early
The other side of those major spending decisions is understanding and monitoring your business’s cash flow. Your cash flow statement is one of the three key financial statements you’ll put together with your business plan. The other two are your balance sheet and your income statement.
Reviewing your cash flow statement regularly as part of your business plan review will help you see potential cash flow challenges earlier so you can take action to avoid a cash crisis where you can’t pay your bills.
Having a business plan minimises your 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 uncover your weak spots—the flaws, gaps and assumptions you’ve made—and develop contingency plans.
From there, you can seamlessly adjust your forecasts and make adjustments in your business (marketing, sales strategies, production, inventory) as you learn what works and what doesn’t.
How to get started The importance of having a business plan and reviewing it regularly goes far beyond simple planning and goal-setting. The key is to just get started. It is really not as hard as you might think. It does not have to be a formal business plan that’s long and you don’t need to spend months on it.