Why are business plans so important? What is the purpose of a business plan? Let’s look at 20 reasons why business plans are so important.
- To Prove That Your Business Is Serious. To demonstrate to all interested parties – such as investors, employees, and partners – that you are serious about building the business, you must have a formal business plan. As you create your plan, you are forced to consider and select the strategies that will propel your business forward.
- Establish Milestones For Business Growth. An effective business plan should clearly outline the most important long-term milestones for your company’s success. A milestone is something remarkable you can mention to your spouse (without boring her/him to death) when you’re at home. Says Guy Kawasaki. How about the company brochure that you tweaked? I doubt it. If you launch a new website or reach $1 million in revenues, you will certainly share the news.
- Improve Your Understanding Of Your Competition. Planning your business means assessing your competitors. Direct or indirect competitors are part of every company, and understanding your company’s competitive advantages is important. It is also important to find out how to gain competitive advantages if you don’t currently have them.
- Getting To Know Your Customers Better. What drives their purchases? Getting to the bottom of why they aren’t buying? It is essential to be able to analyze customers in-depth for a successful business plan. You can create better products and services for your customers when you understand them. You can reach them more effectively with advertising and promotions when you do.
- To Express Previously Unstated Assumptions. As a result of writing the plan, previously “hidden” assumptions become apparent. You can test them and analyze their validity by writing them down and assessing them. In your business plan, you could analyze the results of the scenario where local retailers do not carry your product.
- To Determine Whether Your Venture Is Viable. Would this be a good investment? A Business plan writer is a feasibility study that explores your target market as well as the competitive landscape. Planning may result in tabled ventures in some instances. Perhaps it would be better to go ahead with a different venture that might be more likely to succeed.
- Documenting Your Revenue Model. Where will your business earn its revenue? For you and your investors, this is an important question to answer in writing. It is helpful to document the revenue model in order to address models’ challenges and assumptions. Additionally, others might suggest additional revenue sources to consider after reading your plan.
- Calculate What You Need Financially. Is it necessary to raise capital for your business? In what amount? In addition to determining how much capital you need and what you will do with it, a business plan helps you determine how much cash you need and what you will do with it. Raising capital for business and utilizing it effectively requires this process. Moreover, planning ahead can help you raise more funds in the future if you need to.
- As An Investor Attraction. Financing proposals are based on formal business plans. An investor’s questions are answered in a business plan such as: Is there a need for the product/service? How will finances be handled? If the company exits, what is their plan? In many cases, investors will also thoroughly review your business plan before writing you a check despite the fact that they would prefer to meet you personally.