A business plan is a tool used for monitoring business progress and controlling the future of it, as well as a sales tool for employing new staff or attracting future investors. It’s a way of understanding how your business is put together and how it runs, and it is a vital part of business success.
Still not convinced? Here are some more reasons:
- To monitor your business’ progress
A business plan isn’t something you just write up and store away somewhere. Your plan should be your guide for monitoring your progress in most aspects of your business. For example, you’ll be writing out the marketing tools and techniques that you use, and then every so often analysing what marketing techniques have been working and what needs to be altered.
- To help you prioritise
Many business owners have lots of goals and objectives, which can be hard to prioritise when you’re so busy doing the day-to-day running of the business. A business plan can help you work out the small strategies and steps towards achieving long-term goals. You can decide what goals you want to achieve, by when, and what you will need to do. It’s a lot easier to focus your efforts and energy onto exactly what you want and need to do.
- To help manage finances
Many businesses fail not because they are unprofitable, but because they become insolvent (i.e. not being able to pay their debts when they’re due) – careful management of cash flow is crucial for all businesses. By making sales forecasts and analysing your business’ target market, you’ll be able to see if your business is succeeding or the steps that need to be taken to make it succeed. A detailed business plan will have exactly what your expected incomings and outgoings are in given periods of time.
- To support potential funding
If you ever need financing for your business, having a detailed, up-to-date business plan with clear objectives will help an investor understand the business, making them much more likely to invest. Investors only put their money in places they believe will be profitable to them.
The most important component for business investors is to have clear evidence of the company’s ability to operate effectively, and this can be proven in a business plan. A university study found that start-up businesses with a plan raised twice as much capital in the first 12 months as those without a business plan.
- To map out the future
A business plan isn’t just required at the start-up phase, but it is vital in helping you manage your business in the long run. By committing your thoughts into a document, you’ll be able to really understand your business and see exactly what actions need to be taken to develop or improve your business.
A good plan can have specific goals and objectives set alongside the resources and timescale needed to accomplish them. It’s easy to set goals in our heads, but by having specific time frames written in a plan, the goals are going to be a lot more achievable.