Why Write a Business Plan?
Writing a business plan is important for any start-up or expanding company in two respects. First, business plans serve to define and legitimize the business and its prospects in the eyes of others. Secondly, a business plan serves an important purpose within the business, acting as a guide and route to future growth and success.
For those outside the business, a business plan is viewed as an entry-level requirement in order for the venture to be considered as a serious enterprise. This is especially important when seeking capital, whether it be seed capital or investment for further growth. A business plan will be necessary to gain the confidence of those who would invest in the business, whether the method of investment is via grant, SBA loan, a bank, an angel investors or a venture capitalist. Ultimately, outsiders will only put their money into a venture if they understand why the business exists, how and where it operates, how it finds customers, who its competitors are and, importantly, whether the management team is competent and effective. In short, a good business plan plainly lays what a business does and how it will be profitable.
Looking internally, a business plan acts as a road map to success for the management team. Undertaking a business venture can be complicated and hectic. Writing a business plan forces the entrepreneur to consider all aspects of the undertaking in advance and helps with follow through once the enterprise is up and running. A good business plan will help an entrepreneur stay focused through each phase of the business, including defining the company, researching the market and competitors, delegating tasks to execute the plan, calculating costs and estimating revenues.
Having a thorough understanding of these aspects is essential both before the launch of the business and during its operation. In advance, it helps both the management team and outside investors assess whether the business will be profitable and whether its goals are achievable. A business plan helps insure that everyone involved has a realistic idea of the challenges of starting the business and the prospects for success – all before any significant costs are incurred.
Remember, business plans should be live and evolving documents. Business plans act as guidelines for how the company will be built and introduced into the market, but it should also reflect the latest information and changing landscape of the market. Plans should also change in regards to the progress and execution of the plan, adapting to create a template for continuing profit and success as goals are met and new challenges emerge.