What is a Business Plan and Why You Should Have One

After years of brainstorming and journaling different ideas, you decide to take those ideas beyond paper to make them a reality.  You have always thought of having a business of your own, and now it is gradually becoming a reality. However, you ask yourself several questions, like, how do I get it started? What blueprint do I follow? How do I give the business a structure? If you have always had these questions on your mind, what you need is a business plan. However, why do you need to create a business plan? This article will help you understand a business plan and why you should have one:

What is a Business Plan?

A business plan is a document that comprehensively outlines the goals, mission, and vision of a company and how to achieve them. In general, it includes your business description, products or services, competitors, target market, sales, and market strategies. Another important section included in the business plan is the financial part of your business: cash flow, expenses, revenue forecast, and many more. Whether you are a startup or established, a business plan is a valuable document to give your company a direction.

Why Do You Need a Business Plan?

The purpose of a business plan can depend on your needs as a company. First, it will help you document and summarize your strategies for a streamlined execution. You can use it to secure funds from investors or get a loan for your business. Also, you can use it to forecast your future business needs.

According to the United States Bureau of Labor Statistics (BLS), around 20% of startups fail in their first 2 years of operation, and 45% fail in their first 5 years. At the same time, 65% fail in their first 10 years. Only about 25% make it into 15 years or more without failure. These statistics will help you understand that, more than before, you need a business plan to give your business a perfect trajectory. These are a few reasons you need to develop a business plan before starting a new business:

Turns Business Ideas to Reality

Brainstorming a business idea is different from execution. Every business has a goal; however, it is easier to lose sight of this goal at the conceptual stage. Especially if it is your first time starting a business, you can get overwhelmed with various directions to take your business. With a business plan, you can document your goals and strategies to achieve them. You are able to set clear business objectives that will help steer your business toward success. It is a way of cutting through the noise and distraction in the market.

Set Business Milestones

One of the purposes of a business plan is to help you forecast your revenue. This means you get to set milestones for your business, and it will eventually set a standard by which to measure your growth. Setting milestones will ensure you know whether your business is growing or not. Consequently, it will help you know what you are doing right or wrong since you have documented strategies.

Secure Funding and Business Partnership

Business plans can help you attract business partners or secure funding to develop your business. Investors will trust your business more since the business plan gives them a clear understanding of what your business entails. So, it is not just a business tool to document your plans but also to convince others to invest in your business.

Identify Risks and Opportunities

An important part of preparing a business plan is market research. Through market research, you will be able to identify the potential risks, threats, and opportunities for your business. This will ensure you are prepared ahead so you don’t fall victim to them unexpectedly. On the other hand, identifying opportunities ahead will ensure you are prepared enough to take maximum advantage of them.

Conclusion

While the importance of having a business plan is not limited to this list, the ones mentioned above should be enough to get you started. If you are passionate about seeing your business survive through economic landscapes, you need to have a business plan. If you need clarification on how to get started, you can refer to the article on how to create a business plan.