17 Reasons Why do you Need a Business Plan?

Ultimate Guide On Writing A Business Plan

Free Business Planning E-Book

11 Min Read

why do you need a business plan
Table of Contents
Writing a business plan?

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 know where they stand—neither Facebook nor Mark need an introduction.

That’s enough evidence, I guess to prove why you need a business plan.

Any organization, regardless of size or age, needs a business plan as a fundamental document.

It helps you reach significant milestones and lead your company in the right direction, from luring potential investors to keeping it on course.

Convinced? No? Here are 17 reasons you need a well-prepared business plan as a business owner.

Benefits of having a business plan

A meticulously crafted business plan holds significant value, providing entrepreneurs, existing businesses, and their teams with a means to communicate goals and monitor progress as their business expands. Some other benefits are:

  • Guides your business with a clear path to achieve goals
  • Evaluate the feasibility of your business idea
  • Identifies potential challenges and risks
  • Outlines plans to reach and retain customers
  • Essential for attracting potential investors and securing funding
  • Defines business structure and operational processes
  • A living document that adapts to changes in the business environment

17 Reasons why you need a business plan

1. To Test The Viability Of Your Business Idea

Think about this—you have many business ideas, but how do you know which is better to start with and which one to shut permanently? Well, with a plan, it is easier to understand each aspect of the business.

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 profitability status of the particular business idea in the local market?
  • Who are the competitors?
  • 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.

Say goodbye to boring templates

Build your business plan faster and easier with AI

Plans starting from $7/month

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?
  • What if the demand for the product or service you provide 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 ongoing risks & costs and how to manage them.

Hence, knowing potential risks beforehand will help you solve them smoothly without a big fuss.

3. To Determine Your Financing Needs

Can you go to investors, banks, or anyone else for funding without knowing your financing needs, Of course not!

A business plan will help you know the financing needs of your business. It will help you think about the financial projections practically by comparing the market situation with the competitor’s revenue.

Also, when you go for funding, there should be evidence of how much you need, your budget for each aspect of business, and where you will spend all the funding money.

Investors also need to see the break-even point and when the company will start turning profitable. This all is possible with a sound business plan.

4. To Outline a Perfect Marketing Strategy

A marketing plan is about how to reach new customers and retain them. With the help of a business plan, you can make a chart of SWOT analysis & competitor analysis to understand the USPs of your business.

All this will make your brand positioning clear for investors & readers to make their decisions. A business plan will help to define the target audience of your business.

You can also get an idea of the marketing budget and on which marketing strategies you should spend.

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. It Helps 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.

Moreover, research indicates that planning contributes to overall better performance. Businesses that plan are less prone to becoming unfortunate failure statistics or facing cash flow crises that could jeopardize their existence.

7. To Get Funding

Finally! Getting funding is a relief, right? But you can’t just go to them with an elevator pitch, you will need a solid business plan and everything else in one place to show them about your business.

All readers will want to know your business plan and review it for their benefit. Although investors will mainly focus on the financial aspects of the plan, they will also understand your industry and market before making any decision.

Without enough funding, your business will collapse. So, first, write a business plan, make necessary financial assumptions, and then go to investors for funding. In short, having a business plan will increase your chances of having funding.

8. To Attract Investors

A business plan is the basis for investors’ decisions. The business plan answers a lot of questions of investors 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?

They will review your plan thoroughly and make their investing decision accordingly. Thus, make sure you have the perfect length business plan and not just a long essay.

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

After mentioning everything in detail about your business in the business plan, you will be confident enough to know the market scenarios and make decisions.

It serves as a roadmap for your business and 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.

Reviewing your cash flow statement regularly will help you see potential cash flow disturbances and challenges at the earliest. It will also support you in avoiding any cash-related crisis where you can’t pay your bills timely.

12. To Position Your Brand In The Market

Luckily, there is one section of competitive analysis that will give you all the information about your competitors. According to that, you can place your brand in the market. It points out certain questions like:

  • What are the strengths and weaknesses of your competitors?
  • What are your USPs?
  • How can you make your business stand out?
  • What is your target market, and what are your competitors’ customers?

Answering these questions will help you to know your strengths and market position in the industry.

13. Future-Proof Your Business

Whether it is a new business or an existing one: everyone is interested in what will be there in the future. To understand the financial position of the future, you need to write a business plan thoroughly with practical assumptions.

This proves to be risk-saving and future-oriented for your business by saving time on predicted problems.

14. Tracks 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.

15. Your Business Plan Is An Asset When Considering Selling Your Business

Out of the woods 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 to showcase the brand position and finances of your business to any third party. Also, how many milestones have you achieved, and what is the experience of your business; one can get everything from your business plan.

16. 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.

Here there are different activities like purchasing raw materials, marketing costs, or some other production costs.

A business plan provides an exact idea of your investments and resources needed in each segment of the business.

17. To Make An Exit Plan

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.

Worried about creating a Business Plan?

Our Free Business Plan Generator does it all for you! Let Upmetrics simplify the process and propel your business towards success.

Generate a Business Plan

Start Writing Your Business Plan With Upmetrics

Told you, there are various reasons why you should not skip writing a business plan. Though daunting, you can not skip this part. Now the question is, how to write a business plan? Well, a business plan software like Upmetrics can resolve your problem.

It has an amazing AI feature that can bring the essence of your idea into the document. Here you can even make financial calculations without complicated formulas. Apart from that, there are various tools and guides to make your business plan writing process smoother.

Build your Business Plan Faster

with step-by-step Guidance & AI Assistance.

Frequently Asked Questions

About the Author


Vinay Kevadiya

Vinay Kevadiya is the founder and CEO of Upmetrics, the #1 business planning software. His ultimate goal with Upmetrics is to revolutionize how entrepreneurs create, manage, and execute their business plans. He enjoys sharing his insights on business planning and other relevant topics through his articles and blog posts. Read more


Reach Your Goals with Accurate Planning

No Risk – Cancel at Any Time – 15 Day Money Back Guarantee