18 Apr What is a business plan and why is it important? – Joseph Ashford
You have all heard of a business plan, but do you know what one is and why it is important? If you have answered no to both questions, you have landed on the right spot. During this article, I will outline what a business plan is and exactly why it is vital to the success of your business or organisation.
A business plan in a nutshell
A business plan has been defined by Wikipedia as a formal statement that outlines the aims of a business alongside how these will be achieved. They sometimes contain information about the business or organisation that is working to achieve said goals. It is used by both existing and start-up businesses.
Have you heard of the term ‘elevator pitch’? For the uninitiated, it is a very short sales pitch (30 seconds approximately), and you have to really hone your ideas into such an enticing idea that the listener wants in. The concept is based on a short elevator ride and is used to create interest in a particular product or service.
Reasons why a business plan is important
Attract funds for your business
Does your business need extra investment? With the help of a clear business plan, you have a higher chance of securing funding from external parties such as investors or banks. Carefully thought out plans will signal that you are serious about your business as external parties will need convincing before investing money and time.
“In the past, I had a radical business idea that had not been done before and involved streamlining several businesses with the idea of providing customers with an accessible service. I wrote a clear plan which outlined the idea very clearly so that investors could understand all aspects of the business. I also put my predictions for income and profits.”
Gets rid of uncertainty
Planning for every eventual outcome will dispel uncertainty around your business and ideas. A plan gives you the tools to plan the required steps for improvement. You can also set goals for your business and determine the resources needed. By preparing for every eventuality, you will be better equipped to deal with the many uncertainties that come with running a business.
Gain a better understanding
Business plans will aid you in more ways than one. Research is required and will help to clear up uncertainty around the following areas:
- Finances (such as cash flow, break-even point and more)
- Challenges to your business (complete with strategies to counteract)
- Industry, market and competitors
As a result, you will be in a better position having researched all aspects of your business thoroughly and prepared for every likely outcome.
Expand your business
Expanding your business is not for everyone but being prepared for a change in circumstances will save you the hassle later on. With a clear business plan, you outline room for expansion, and I would recommend doing so to help secure funds. Investors are more likely to invest as they will see your business as a long-term investment rather than a get-quick-rich scheme.
“I started a business in Southampton with the aim of taking on two full-time employees within the first month. I researched the market and discovered that to get the company where I wanted it by the end of the first year, I would need 10 employees. This was a discovery to me that I had not expected to find and gave me extra motivation to ensure that I got the business up to said level.”
Value the business
A common reason established businesses write a plan is to give their business a value which helps to facilitate a future sale should this be required. Investors are more likely to put their money forward if they know the business is a viable prospect and knowing the overall value. Plans that 3-to-5 years long are heavily favoured since they show a long-term view and commitment to the business.
Expose flaws with the design
Not every idea is perfect and it will take lots of preparation and many drafts to get your business plan in a coherent form. I would say be prepared to find problems within your business ideas and concept but don’t be disheartened. Use problems as that extra bit of motivation and don’t be afraid to ask other entrepreneurs for advice.
Spotted a problem that could derail your idea? If you have been forced to go back to the drawing board, I would say be grateful and count this as a blessing. As long as you have the motivation and desire to succeed, you will soon overcome every obstacle that comes your way. If you are unable to solve the problem, never give up and keep going.
Get started today
With the ideas being fresh in your head, there is no time like the present so get started right away! Before you enter into a fruitless journey, I advise that you click here for a list of template business plans. This website is a great tool for business owners and contains templates for a huge array of sectors. All you have to do is rewrite the plans and adapt them as required to fit your ideas and plans.
The internet is a valuable tool with many examples of great business plans. In spite of this information overload, I advise you to be critical of business plan templates. Not all business plans are created equal, and there are many that do not the job effectively. Once you have found a plan you like and filled in the relevant parts, don’t be afraid to show a fellow entrepreneur your ideas. You may find it worthwhile showing a close friend or relative to gain an outsider’s perspective.
A business plan is vital to the success and longevity of your business. By completing a plan early on will not only help to identify potential problems early-on but make you more aware of all aspects of the business that you may not have considered. I hope that you have found this article useful and that you are successful in your endeavours.