4 Areas where a Business Plan is Needed
Many describe business plans as road maps for entrepreneurs. It is a permanent location to describe why the business was created and where it intends to go. It outlines the goals and acts as a reference to measure progress. Should financing or partners be needed, the business plan will be needed.
Some describe it as an outdated and time consuming task that can force someone to think inside the box. Yes, the time required to create the plan cannot be denied, but you need to have a clear picture about the business. This includes: evaluating the concept, identifying the available and needed resources, understanding the potential in the market, and creating real goals. These outweigh any negatives associated with writing a business plan.
Developing a plan will help you in the areas of:
1. Opening possibilities & Developing a Foundation
Writing a business plan forces a person to think about all possibilities of what their business can do and achieve. Research conducted for writing the plan will unveil the concepts that need additional adjustments and resources not previously identified. Recognizing this information ahead of time can prevent shortcoming in the future.
Formulating a plan can spark additional ideas that strengthen the business concept. This foundation allows the business to be developed in the direction the entrepreneur— not limiting them to stay inside the box.
The process prepares the new entrepreneur for business ownership. And, prepares the veteran business owner for the next steps.
2. Evaluating if you’re the right person for the business
Business ownership is more than having an idea or enjoying doing something. It requires constant evaluating and searching for new opportunities. The writing process forces the entrepreneur to have honest thoughts and conversations about their future. This is helpful when starting a new venture or even reevaluating if you are still the right fit for your business.
3. Adding new product/service lines
Business plans are also an important part of introducing new services to an existing business. The process should follow similar steps to the initial creation of a business plan. Research is needed, product or service evaluation should be done and all the results need to be evaluated. In many instances, established business owners do seek to create a business plan at this point because one wasn’t created when they first started. Or, they see the value of writing the plan and reference back to it.
4. Obtaining Financing
Banks and investors are going to ask for a business plan before releasing any funds. They want to know if your business is a viable endeavor. The plan needs to include current financial statements in addition to tax returns. A clear statement indicating why and how much is needed demonstrating how the loan will be repaid. Entrepreneurs continue to be evaluated using the 5 C’s of credit – credit history, capacity of repayment, character of past performance, capital invested by the owner, and collateral used to guarantee the loan request.