A business plan is also a road map that provides directions so a business can plan its future and helps it avoid obstacles.
We often come across about business plans in the context of seed-stage companies, but forming excellent business plans is difficult and time-consuming, so many entrepreneurs avoid them. That’s a mistake, as there is sturdy proof demonstrating that business plans results in positive returns on time and money invested.
There has been long debates regarding the importance of business plans in the business world, and most involved understand the “soft” arguments. Some of them reached to a conclusion that while a business plan may not be required for a venture to become successful, having one does seem to greatly improve the probability of successful outcomes.
1. To boost cash for business
Potential investors or lenders want a written business plan before they are convince to invest. A mere description of your business concept/idea is not enough. Rather it is necessary to ensure them that you have a thorough business as well as financial plan that demonstrates the plausibility of success and your requirement for your business to take off.
2. To be able to make sound decisions
As a businessman, having a business plan helps to define and focus for better execution of business ideas and business strategies. It is not only important for a businessman to concentrate on financial issues, but should also be concerned about other matters such as management issues, human resource planning, technology and creating value for your customer.
3. To assist you to determine potential weaknesses
Having a business plan assist in identifying potential loopholes in planned idea. It is also suggested to also share the plan with advisory who can give you their worthy inputs and advice. Reach out to experts and professionals who are at a position to give you worthy guidance, and discuss plan with them.
4. To convey plans with stakeholders
A business plan is a communication tool that can be used to secure investment capital from financial institutions or investors. It can also be used to recruit people for your organization, to secure credit from suppliers, and to attract potential customers.
Constructing a business plan involves vigorous thought process. It is important to consider what is to be done, and use that as a pickup point. It doesn’t need to be complicated. At its core, your plan should identify where you are now, where you want your business to go, and how you will get there i.e. start, route and destination.
There are four common elements that are mentioned for making of an excellent business plan.
1. Company Overview
- An explanation of why your company is relevant and the need are you addressing
- A description of company priorities and also the processes to realize them.
- An overview of the various resources, including the people that will be needed, to deliver what’s expected by the customer.
2. Market Insights
- A description of the state of your market and its important trends.
- A detailed description of your customers.
- A description of your current competitors and their advantages.
3. Product/Service Insights
- A description of your products, how they compete with other brands, and why they are needed.
- A rationalization of why customers pays a good value for your product or service. This element is conspicuously absent from some of today’s most expensive unicorns. Companies such as Uber and Tesla are losing huge money on fast growing sales because these companies may not be selling their services/products for reasonable economic value. Of course, sales grow rapidly when customers can purchase your services/products for far less than their affordable economic values!
4. Financial Projections
- Three thorough financial plans:
- Each scenario should have realistic and achievable sales, margins, expenses, and profits on monthly, quarterly, and annual bases. Again, these elements appear to be conspicuously absent from some of today’s most expensive unicorns.
Thus, having a business plan benefits new as well as existing business to reach to its best potential. Also, it is advisable to plan and solve obstacles rather than having to solve after the occurrence of them. It is easy to convince the finance and customers to invest money in your enterprise.