Why Do You Need A Business Plan?

A?business plan will help you build a business that will support you financially, have an impact on those around you, and leave a lasting legacy you can be proud of.

But can’t you just get things up and running and make adjustments on the fly? Can’t you sort of learn as you go?

Yes, you can do those things, but the odds that your business will fail are much higher. See, a business plan functions as a “crystal ball” of sorts. It helps you to peer into the future and predict different outcomes. Though it’s certainly not perfect, it helps you map out where you currently are and where you’re headed.

Specifically, a business plan helps you to:

● Estimate total startup costs. Once you know the approximate costs, you can determine whether you’ll need to raise funds from investors.

● Project revenues and profits. By forcing you to define both your market and how much of that market you expect to reach, a business plan helps you estimate potential revenues and profits.

● Convince investors. A business plan shows investors that you have a clear and defined strategy for achieving success. If this strategy isn’t present, investors won’t want to finance your business.

● Compete from the start. As part of your business plan, you’ll identify key gaps in the marketplace which your company will fill. This allows you to hit the ground running.

● Anticipate challenges. When you create your business plan, you’ll look ahead and try to identify any potential problems you might encounter. This prepares you to address these issues if they do arise.

Are you starting to see the value of a business plan?

It may be helpful to think of it in construction terms. If you were building a new house, you would use a plan, right? If you didn’t use a plan, you’d encounter all sorts of issues. Wires and pipes and even walls could end up in the wrong places. A building plan keeps you on track. In the same way, a business plan helps keep you on track. It ensures that you focus your attention on the right things and helps you avoid mistakes that could sink you.

Writing for The Balance, Alyssa Gregory notes:

...one study found that entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical non-planning entrepreneurs. Other studies have shown that while completing a business plan is not a guarantee of success, it does indicate that the type of entrepreneur who completes a business plan is also more likely to run a successful business.

So how do you write a business plan? What things need to be included?

Stay tuned for steps on how to write an effective business plan!