When Meta was initially planning to go mass scale, founder Zuckerberg had a plan for the next three, five, and ten years.
As reported by Business Insider, they knew their expenses would increase by a whopping 70%, but they were confident because they had a foolproof business plan at their disposal.
Fast forward to today, we all know where they stand—neither Facebook nor Mark needs an introduction.
Well, if that is not a compelling reason as to why you need a business plan, we have 20 straightforward reasons to convince you.
But before we get there, let’s have a quick rundown of the benefits of having a business plan.
Key benefits of having a business plan
A meticulously crafted business plan holds significant value, offering operational, financial, as well as strategic benefits to emerging as well as existing businesses.
A quick rundown of these key benefits will help you get a more enhanced understanding.
- Helps evaluate the feasibility and viability of your business idea.
- Identifies potential business challenges and creates strategies to mitigate them efficiently.
- Offers a strategic and operational roadmap to attain your business goals.
- Develop strategies to attract your target audience and retain your existing customers.
- Attract investors to raise funding.
- Define resources and SOPs to operate the business efficiently.
That being the benefits, a well-drafted business plan is indeed an asset for your business.
20 Reasons Why You Need a Business Plan
- To test the viability of your business idea
- To reduce potential risks
- To determine your funding needs
- To outline a perfect marketing strategy
- To better understand your competition
- To help you grow 30% faster
- To secure funding
- To attract investors
- To set goals for everyone
- To make sound decisions
- Catch critical cash-flow problems early
- To position your brand in the market
- To better understand your customer
- To build the team
- Future-proof your business
- Tracks Your Progress
- To sell your business
- To allot resources
- To increase the odds of succeeding
- To make An exit plan
Let us now understand the sure-shot reasons why you need a business plan.
1. To test the viability of your business idea
Think about this—you have a couple of business ideas. However, can you start working on both of them at once? Of course not. You need to see which idea can gain you profitability and which needs to be chucked off permanently.
A business plan forces you to think of everything about your business as:
- What is the market demand?
- Which market segment will you cater to?
- What is the expected profitability of a particular business idea in the local market?
- Who are the competitors and what is your competitive advantage?
- What entry barriers do you have to go through?
- How much capital will you require to start a particular business?
- What is the financial forecasting of the business?
This way you will get a chance to question everything that takes to start a successful business, which will ultimately help you decide the viability of your business idea.
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2. To reduce potential risks
Every business contains risks, and a solid plan is like taking some of that risk out of the business.
It not only helps you to know the viability of your business but also other aspects like:
- Are your operational costs manageable?
- Will your proposed model generate sales or do you need to switch to another?
- What will be the break-even point and when will your business achieve it according to the financial projections?
- How will you manage if the demand for your product or service decreases?
- What will be your exit strategy?
These are all risk-related questions you will get answers to while creating a business plan.
For those who already have a business and are working on expanding it, a business plan will help you understand the associated potential risks and challenges and strategies to mitigate them.
Hence, knowing potential risks beforehand will help you solve them smoothly without a big fuss.
3. To determine your funding needs
A business plan helps evaluate the funding essential for your business. It tells you exactly how much money you need to raise and what funding sources you should opt for.
A business plan includes detailed financial projections and a plan explaining how the funding will be utilized in different business ventures. This makes it easier for you to make realistic funding demands essential to grow your business.
4. To outline a perfect marketing strategy
When you sit to write a business plan, you will be required to dive deep into the study of the target market and competitors.
Such a nuanced understanding of your customers, strengths, and business environment will help you create a marketing plan that’s in line with your objectives and reality.
A solid plan outlines your marketing objectives, brand position, and marketing budget, and describes the marketing strategies to attain your desired market position.
Not only is this plan essential from an investor’s point of view. But it will also serve as a guide for your marketing team to streamline the marketing activities.
5. To better understand your competition
You have to first understand and describe who are your competitors, what is their price point, what is their USP, what is their market positioning, and what products or services they provide.
This stage helps you know the competitors, their working styles, target customers, and everything about them. It forces you to do 360° research about your competitors to know the exact brand positioning of your business.
6. To help you grow 30% faster
Creating a plan goes beyond trying to foresee the future of your company. The significance lies in the process itself. The business plan is a living document; you can revisit your plan and alter it according to the market situation to reach your goals and ensure success.
Studies confirm that companies engaging in regular planning experience a 30% faster growth rate.
It’s proven that businesses that plan are less prone to facing unfortunate failure or cash flow crisis that could jeopardize their existence.
7. To secure funding
Traditional banks and investors ask for a well-detailed business plan to consider your funding request. While their focus would be on the financial aspects of the plan, they would also like to understand your industry and market before making any decision.
A well-detailed plan wins the trust of potential investors in your business idea and your ability to turn it successful by helping you secure essential funds.
8. To attract investors
A business plan is the basis for investors decisions. It demonstrates your market understanding, offers a realistic sense of finances, and answers important questions an investor might have.
This may include questions like,
- Is there any market demand for your products and services?
- What are the financial forecasts?
- When will the company turn profitable?
- What is the company’s exit strategy?
An investor will analyze and evaluate your business on all fronts before entertaining the idea of investing in your business.
9. To set goals for everyone
Setting goals and deadlines for everyone from the management team to other employees will make everyone’s task clear. This way everyone can make their mini-plan and organize things according to the priority.
Business planning makes everything clear in your head before you communicate it with your team and makes sure that you all are on the same page.
10. To make sound decisions
A well-detailed plan acts as a reference point for any kind of decision-making. Think of it as your business guide, which will eventually bring everything into place.
11. Catch critical cash-flow problems early
Smooth cash flow is one of the main bricks of any business. It is one of the key financial statements your investors will review.
A part of preparing a business plan includes creating detailed cash-flow projections for the next 3-5 years. With projections at hand, it gets easier to track your performance and take timely action to avoid extreme cash-flow disturbance.
In short, having a financial plan will ensure that there aren’t any cash-related crises where you can’t pay your bills timely.
12. To position your brand in the market
Writing a business plan helps you to thoroughly understand the industry, competitive, and customer landscape of your business. It defines your company’s role in the marketplace and thereby helps you position your brand in the right place.
13. To better understand your customer
Preparing a business plan helps you understand your target audience and their behavior patterns in great detail. It offers insight into the pain points, needs, wants, and purchasing patterns of your potential customers and shows the best possible way to reach them.
Such an in-depth understanding of customers helps you to optimize your product offerings and marketing strategies.
14. To build the team
One of the main overlooked sides of a business plan is the success metric it provides. An integral part of creating a plan involves mentioning all your goals and predictions.
By regularly reviewing that, you will be able to know which business milestones you have reached and what is the next one. Furthermore, you can even know about the setbacks of your business and then re-edit your business plan according to the market analysis and situation.
15. Future-proof your business
Whether yours is a new business or an existing one—the readers will be interested in getting a future overview of your business.
While writing a business plan, you work on practical assumptions and test various unlikely scenarios to understand the position of your business under different circumstances.
By preparing for different challenging situations, a business plan equips you to promptly face any expected challenges that may arise in the future.
16. Track your progress
One of the main overlooked sides of a business plan is the success metric it provides. An integral part of creating a plan involves mentioning all your goals and predictions.
By regularly reviewing that, you will be able to know which business milestones you have reached and what is the next one. Furthermore, you can even know about the setbacks of your business and then re-edit your business plan according to the market analysis and situation.
17. To sell your business
Down the road, if you ever decide to merge your business with someone else or want to sell it, a business plan will be an asset that will support you in selling your business.
It will help protect your brand and financial position from any third party. From portraying your brand’s milestones to business experience— one can get all the essential business information from your business plan.
18. To allot resources
As a business owner, you know there are many investments and expenses you need to make before & after starting a business. Thus, allocating those resources to different segments of the business is necessary.
A business plan provides an exact idea of your investments and resources needed in each segment of the business.
19. To increase the odds of succeeding
A well-written business plan increases your chance of building a successful business.
According to research, entrepreneurs with a written plan are 16% more likely to attain business viability than those who don’t.
A business plan helps anticipate the challenges, prepares you to face them strategically, and increases your odds of succeeding in the competitive environment.
20. To sell your business
Beyond guiding day-to-day operations, your business plan is a valuable tool for planning your exit strategy. While many entrepreneurs focus extensively on launching their businesses, not as many plan for the eventual need to liquidate or transfer ownership.
Your chosen exit strategy could be driven by various factors, such as achieving your business goals and shifting focus or selling to an acquirer. Therefore, even for partnership or dissolvation, an exit strategy is necessary.
Start Writing your Business Plan with Upmetrics
Told you, there are various reasons why you should not skip writing a business plan. Besides, why should you, especially when you have resourceful business plan software like Upmetrics to help you out?
It offers an extensive collection of highly customizable business plan examples along with step-by-step instructions to help you write a detailed and actionable plan for your business.
Simply choose a sample relevant to your business and get started.
