There's no point in being an entrepreneur unless you're prepared to get involved in paperwork and documentation. This could be anything from business proposal templates and examples to full-on business plans. Some people say that you should never spend too much time on planning and just dive in, while others believe business plans are the key to success. This article provides 6 reasons why entrepreneurs should always have a good business plan.
What's A Business Plan?
A business plan is a formal document containing the goals of the business, and the strategies for achieving those goals. It outlines the resources required, who will be responsible for each task, and when they need to complete it.
- All business plans should contain these key elements:
- An executive summary that outlines the main points of the plan
- A description of your business and its products or services
- A market analysis detailing your target market and competitors
- A sales and marketing strategy outlining how you'll reach your target market
- A financial plan detailing your projected income, expenses, and profits over time
1. Because It Can Be Professionally ProducedThere are many templates and specialist blogs/articles online that can help you. There are even articles discussing the business plans used by companies such as McDonald's, KFC and Pizza Hut. Besides using the internet, however, a lot of entrepreneurs choose to seek professional help. There are many advantages to working with a specialist consultant or agency, including:
- They'll have worked with many businesses and can provide you with an outside perspective on your company.
- They'll save you time, so you can focus on other aspects of your business.
- They'll know how to format and present your information in the most favourable light (e.g., for potential investors or lenders).
2. It Can Be Used to Attract InvestorsEntrepreneurs rarely have all the financial resources needed to enable their projects to take off. In order to succeed, they frequently approach others who can provide monetary input and support. One of the most common types of investors is a venture capitalist. They provide funding for early-stage companies in exchange for equity. Your business plan can help you attract these types of investors by providing a clear overview of your company, your product or service, and your market opportunity in financial terms.
Other types of investors include angel investors and institutional investors. Angel investors are typically wealthy individuals who invest their own money in businesses they believe have high growth potential. Institutional investors are organizations that invest large sums of money in businesses, such as banks, insurance companies, and pension funds. Your business plan can help you attract these types of investors by providing detailed financial projections and demonstrating a solid understanding of your industry and how you can succeed in it.
3. It Can Encourage LendingAnother major reason why entrepreneurs should always have a good business plan is that it can encourage lending. Lenders, such as banks and other financial institutions, are usually more willing to give money to businesses that have a solid plan in place. This is because they can see that the business has thought about its goals and how it intends to achieve them. Having a well-crafted business plan can also help to get lower interest rates on loans, which can save the company money in the long run.
In return for all your hard work creating your business plan, here are some of the ways a loan could help you:
- You can use the money to buy more inventory or raw materials, which can help you increase sales and grow your business.
- You can use the money to hire more staff, which can help you increase productivity and efficiency.
- You could also use the loan to finance other important projects, such as a website or marketing campaign.
4. It Can Help You Measure Your ProgressA business plan can help you set milestones and track your progress toward them. This is important because it can give you a sense of whether you're on track to achieve your goals. Also, a business plan can help you monitor your financial performance. This is important because it'll allow you to see whether your business is generating the revenue and profits that you projected.
Finally, a business plan can help you assess your customer acquisition and retention rates. This is important because it will give you an indication of whether your marketing efforts are effective and whether your customers are loyal. By tracking these things, you'll be able to get a good sense of how well your business is doing and whether it is on course to achieve its goals. If you don't have a business plan, however, it can be difficult to measure your progress in any of these areas.
5. It Can Be Adapted When Your Business EvolvesA business plan should be regularly reviewed, it's not something that should be set in stone. It should be a living and breathing document, and as your business grows and changes, so too should your business plan. This is why organizations like the DVLA and FCA post online versions of their business plans that are specific to 2022/23. As your company expands into new markets or introduces new products, your business plan should be updated to reflect these changes.
You should continually refine your business strategy by reviewing the success of your marketing campaigns. If your PPC marketing campaigns or use of electronic billboards aren't working, change them and update your business plan accordingly. Perhaps you decide to no longer keep any inventory but instead use a dropshipping product platform such as AliExpress. Once again, you'll need to update your business plan to reflect this change in direction.
6. It Keeps You AccountableIt doesn't matter which one of the 10 types of entrepreneurs you are. The truth is, if you've received investments or loans from others, you need to be accountable for how you're stewarding that money. You should be able to provide regular progress reports with statistics to back them up. A business plan can keep you accountable by providing a road map for your activities and making sure that you're on course.
It does this by:
- Defining your business goals and objectives
- Acting as a reminder of what you need to do in order to achieve these goals
- Tracking your progress and identifying any areas where you may be falling behind
- Helping you stay motivated and inspired to continue working towards your objectives
- Helping you identify any potential risks or challenges that could impact your business
These have been 6 compelling reasons why every entrepreneur should create a business plan. Produce it well and get outside help if needed, and then regularly review and amend it. In turn, it will become an invaluable tool for securing finance and ensuring your ongoing success as a company.