If you’re entering the entrepreneurial world, you’ve likely been told to start with a business plan.
However, simply creating a business plan isn’t enough. The true powers of a business plan unravel when you use it actively to drive your business forward.
Whether you’re launching a business, securing funding, evaluating growth opportunities, or guiding your team— a business plan is more than just a document. It’s a versatile tool that can support almost every aspect of your business when used consistently.
Want to learn how?
Well, in this blog post, we’ll dive into more details about how to use a business plan. But before that.
Why is a business plan important?
A business plan is an important document, whether you use it for formal or internal use.
Here are a few reasons why this document is important:
- Gives you a roadmap to achieve your business goals.
- Offers a framework for making strategic decisions.
- Outlines the business goals and sets benchmarks for tracking business performance.
- Secures funding for your business by demonstrating financial sustainability.
- Helps overcome the challenges by developing mitigation strategies.
- Aligns the team members and stakeholders by facilitating clear communication.
Now, let’s understand the different use cases of a business plan to launch, grow, and fund your business.
How to use a business plan to start a business
A business plan is a quintessential document that can help you plan and launch your business. Whether you need to validate a business idea, establish your goals, or equip yourself with the understanding of a target market—a business plan helps with it all.
Here’s a more detailed overview of how a business plan can help start a business.
1. Validate your business idea
Before investing money in a business venture, you need to test the viability of your business idea.
You need answers to questions such as:
- Should I pursue this business venture?
- Who will be the target audience for my solution?
- How much sales will it make?
- What is the scope of scaling my business idea?
- How is my idea different from that of existing competitors?
A business plan can help you find answers to these critical questions.
Whether it’s the market, competitors, product offerings, expected sales, business objectives, or your finances—a business plan helps you assess each aspect of your business idea to test its overall feasibility.
Evaluating your business idea using a business plan forces you to address the gaps in your business idea.
This validation step ensures you don’t invest time and resources in an idea that may not succeed.
2. Establish business goals and mission
A business plan offers a strategic framework to transform vague business aspirations into concrete goals. It makes it easier for you to communicate what your business stands for and what it aims to achieve with a clearly defined mission statement.
A business plan helps you align the short-term goals of your business with its ultimate mission. It guides you in setting clear KPIs to help you track the progress and success of your goals.
With a well-defined mission, objectives, and value proposition, businesses tend to stay on their path.
3. Navigate market entry
Writing a business plan nudges you to understand the market space in which you will operate. It helps you determine your unique brand position and guides you to target the right set of people for your business.
A business plan details the exact steps of how you will introduce your business to the market. Whether it’s the position of your product, identifying your go-to-market strategy, strategizing the pricing, or securing the distribution channels—a business plan guides you to perfect your market launch.
To summarize, a business plan minimizes the risks associated with a new market by strategizing your market entry.
4. Plan the operations
A business plan turns your vision into an operational roadmap to help you optimize your business operations.
It helps you find answers to questions like these.
- What will be the SOP (standard operating procedure) of a business function, i.e., manufacturing, marketing, and hiring?
- Who would look after particular processes?
- How many people will you require to fulfill a task?
- Where will you perform the business activity?
- How will you ensure the quality of your services?
An operational plan outlines everything, helping you allocate the resources and establish clear workflows.
A business plan is further used to identify the gaps and bottlenecks in your operations. A regularly reviewed business plan accommodates the changing market conditions by introducing timely changes to your operations.
In short, an operational plan ensures that the business runs smoothly and is prepared to scale optimally.
5. Identify professional gaps
Even if you’re starting a business as a solopreneur, you will require the expertise of professionals to fulfill your business objectives. This is where a business plan can be of help.
Writing a business plan helps you identify the gaps in your current capacity. With this knowledge, you can determine the skills and people essential to execute your business strategy.
This can be an accountant, product developer, marketing specialist, legal head, or financial expert.
Once you identify a professional gap, a business plan can assist in onboarding the right type of people for your business. It offers you a detailed hiring and training plan to ensure everyone on the team remains aligned to a common goal.
6. Build strategic a. alliances
Entrepreneurs need to build relationships with suppliers, vendors, and other strategic partners early on to accelerate their market growth.
A business plan can help identify potential partners for your business. Besides, it can help you build valuable relationships with your potential partners by outlining the benefits and goals of the partnership for them.
When you approach someone for a partnership, they will have questions about growth, finances, business goals, and your outlook. Having a business plan handy will help you answer them confidently.
Moreover, a business plan will help evaluate the favorable terms of a strategic alliance. This knowledge can be used to guide the negotiations and get a contract that favors your business.
This excerpt by Jonathan Goldberg, the CEO of Kimberfire, demonstrates how they used a business plan to get a significant partner on board.
“ Kimberfire acquired a partnership with the World’s largest diamond manufacturer using a business plan. By clearly outlining our market strategy and growth projections we were able to demonstrate the value of a partnership that offered direct access to high-quality diamonds at competitive prices. This partnership not only bolstered our inventory but also allowed us to pass on significant savings to our customers, thereby enhancing our competitive edge.”
7. Forecast the capital requirement
Lastly, a business plan can help you understand capital requirements for your company. It helps determine the costs to start and run your business.
Such information guides you in evaluating your funding options.
By referring to your startup costs, you would know whether bootstrapping would be enough or if you would need loans and funding from investors.
These are just a few ways in which one can use a business plan to start a business. However, the use cases can be exhaustive depending on the details put into your plan.
How to use a business plan to secure funding
Most businesses may require funding from external sources to launch or grow their business.
Now, it doesn’t matter whether they secure funding through investors, banks, or grants. What’s important is that they have a business plan to prove the financial sustainability of their business.
Here’s how one can use a business plan to secure funding and convince investors:
8. Define funding needs
A business plan can help you determine the funding essential for your business. Moreover, it can also help evaluate the funding source that’s better suited for your business.
By building detailed projections for costs, expenses, sales, and cash flow, your plan helps determine the capital essential to launch or grow your business.
Additionally, a business plan can be used to justify your funding demands. A clear funding plan explains how you intend to use the investor’s money, i.e., buy new machinery, hire new staff, or expand the business operations.
This clarity demonstrates careful financial planning and builds investors’ confidence in your venture.
9. Manage fundings
Your funding plan already includes details about where you intend to use the money. However, you can now use it to create a detailed roadmap.
A well-planned business plan demonstrates how you should delegate the funding to different business departments. Additionally, it guides you in managing the secured funds efficiently by helping you set budgets, financial controls, and performance trackers.
This detailed approach assures investors that their funding is used responsibly and efficiently.
Further, as you update the plan, identify if your execution strategy requires change. If so, you can make the necessary changes and update the investors, keeping them in the loop. This will help them trust you more.
10. Support the loan application
A business plan is compulsory for everyone submitting an SBA loan application. Even private lending firms would require a business plan to make their funding decision.
A well-detailed business plan is sufficient to support your loan application. It demonstrates that you have conducted essential planning to make your business idea viable and sustainable.
A business plan answers all the questions that a lender might have to assess your creditworthiness and repayment capacity.
Questions such as:
- What will be the profitability of your business?
- What are the major cost drivers of your business?
- What will the debt-to-equity ratio be if you approach investors?
- How stable is your cash flow?
- What will the ROI and the payback period be?
Lenders can trust you more when they get essential answers backed with data.
That said, let’s understand how a business plan can drive enterprise growth.
How to use a business plan to grow your business
A business plan can be instrumental in testing different scenarios, evaluating growth opportunities, and making strategic decisions. All these help you grow your business and face the challenges efficiently.
Here’s how:
11. Guide strategic decisions
A business plan can help you make strategic decisions that align with your ultimate growth objectives.
Whether you want to launch a business at a new location, invest in new machinery, introduce a new product line, hire new employees, or onboard new technology—a business plan can help.
A business plan provides a framework to assess the risks, opportunities, and financial impact of a strategic decision on your business. It helps determine the right time to launch your growth initiative and demonstrates whether making a particular decision will be fruitful or not.
This way you won’t make a decision that can put you off your long-term goals.
12. Monitor business performance
Once you make a strategic decision, use your business plan to clarify the strategy and outline your execution plan.
A business plan can additionally assist in measuring business performance against set KPIs and performance benchmarks. Regularly evaluating these metrics allows you to identify areas that may need improvement or adjustments.
By using the business plan as a performance management tool, you can make data-driven adjustments to your approach and grow your business sustainability.
13. Adapt to market changes
A business plan isn’t set in stone. It’s a living document that adapts to changing market conditions.
It can be used to adapt your strategies based on new market data and shifts in customer preferences. Such regular updates help you remain competitive and agile in the face of changing market conditions.
Additionally, a business plan can help you develop a response to an emergency crisis.
A business plan accommodates all your strategies, milestones, metrics, tactics, and projections in one place. By using the plan as a performance dashboard, you can anticipate the changes and adjust the priorities to deal with the crisis.
Mark McShane offers a practical example of how he used a business plan to meet contingencies in his company, Cupid PR.
“When we hit cash flow problems, we followed the financial contingency section of our plan to manage expenses and short-term funding. We were able to quickly implement the cost-saving strategies and secure a bridge loan to stabilize our finances without sacrificing growth. Business plan made it possible to respond to this challenge efficiently which gave us a 40% revenue increase the next year.”
14. Test different scenarios
A business plan can be used as a tool for scenario analysis.
As the regulatory, economic, and competitive landscape of a business evolves, you need to test and plan for different scenarios, like:
- Entry of a new competitor
- Regulatory changes
- Technological advancement
- Market demand shifts
- Recession
- Natural disaster
Businesses can evaluate the financial and operational impact of these scenarios using a business plan. By using business plan forecasts as a base, they can prepare for various worst- and best-case scenarios.
Preparing for different scenarios helps you leverage the opportunities and mitigate the risks whenever they arise.
Those are quite a few ways in which a business plan can assist or facilitate growth. Entrepreneurs can find more ways to use a business plan depending on the depth that their plan covers.
How to use a business plan internally
One of the most essential uses of business plans is to guide your operations, management, and team toward the goal.
Here’s how.
15. Align team and stakeholders
A business plan is an excellent tool for aligning your team and stakeholders toward a common mission.
A well-crafted business plan documents the company’s goals, mission, KPIs, and milestones. With the basics clearly articulated, it gets easier to bring your internal team and stakeholders on the same page.
Now, you don’t need a detailed plan to convey your goals. A simple list of goals and how they contribute to your ultimate objectives is enough for internal use.
This quote from our conversation with Shawn Plummer, the CEO at the Annuity Expert, shows how he used a business plan to drive a 50% revenue increase in 2 years:
“By breaking down our growth strategy into clear, measurable goals, the business plan became more than just a document; it was a tool for uniting our team. Everyone, from marketing to operations, understood how their efforts related to our overall goals. This connection was critical to our success, resulting in a 50% revenue rise in just two years.”
16. Streamline business operations
A business plan can streamline business operations by outlining the standard operating procedures (SOPs) for different business processes. It’s further used to define the responsibilities, resource allocation, and hiring plans for your organization.
Remember, a well-crafted operations plan acts as a guidebook for your business. It details every process, responsibility, and resource essential for running a smooth operation. Referring to it can help increase efficiency, reduce waste, and enhance productivity.
Now if you’re writing a traditional plan, you’ll have a detailed section on business operations. However, if you’re writing a lean plan, we recommend building a separate internal operations plan to guide your business operations.
Simply list the business processes, create an outline, and use ChatGPT to write a business plan. Your internal use operations plan doesn’t need to follow a specific format or structure. It should just distill clarity.
17. Efficient performance reviews
A business plan outlines the KPIs and goals, offering you a benchmark to evaluate the individual performance of team members. These metrics can be used to track actual results and take appropriate actions.
A business plan helps foster the environment for continuous development by linking performance to strategic goals.
That’s a few definite ways to use business plans for internal growth and management. Internal business plans can follow any structure or format, as long as they get the task done.
How to keep your business plan relevant
As we discussed, a business plan is a living document that requires frequent updates and changes to maintain relevancy.
Ideally, one should update their business plan at least once a year to keep it useful. However, businesses in highly volatile or competitive markets should consider reviewing it quarterly.
A business plan must represent accurate market conditions. If that’s not the case, a review should incorporate new market trends into the strategy, adjust the operational realities, and revise the financials. This ensures that your plan remains relevant and realistic to help you achieve your business objectives.
Include your team members in the review process to ensure the strategies address their key concerns and align with the entire organization.
All in all, adopt a flexible planning approach to keep your plan relevant to the dynamic world.
Conclusion
By now, you have a thorough understanding of the different uses of a business plan. However, these use cases are only relevant if you have a realistic and actionable business plan offering a true overview of your business. Only then can you use a business plan to launch, grow, and fund your business.
Now, draft a quick business plan using the Upmetrics business planning app. Its AI planning features, business plan templates, financial forecasting assistance, and detailed guides will help you prepare a reliable business plan in no time.
