As an entrepreneur, a business plan is the most important document you will ever assemble. No one will believe in your business if they feel you are not fully prepared to be in business. By definition, a business plan is a written document that details the steps you will take to start a business and how it will run. A plan will start by stating what business you are in, where you currently stand as far as starting your business, what you need to get going, and where you plan to take the business in the future. It seems simple, but in fact writing a business plan is the hardest task you will undertake when beginning a new venture.
Don’t believe ME yet? Below are main reasons for writing a business plan for a new business endeavor:
- Raise Money. A business plan is also your pitch to investors. Unless you or your friends and family members are independently wealthy, you will probably need to look for financing to start a business. However, no one will just give you money blindly. A business plan will show investors you have given going into business serious thought, and that through all the research and planning you have done, you are prepared to make a profit.
- Evaluate the viability of your idea. Not all great ideas make for great businesses. Before you start selling anything, you need to fully evaluate if making a profit is likely. A business plan will force you to evaluate all costs: materials and supplies, production machinery, labor force required, rent for any business space, costs of distribution, costs of advertising and promotion, cost of a web site, among many others. Then on the other side of the spectrum you will evaluate your target market, what demand exists for what you are trying to do and what people will be willing to pay for your product or service. Once all that work is done, you’ll see if your business makes sense, or not.
- Look for future opportunity. It is possible that by assembling your business plan, you will realize some faults in your original idea. Luckily, you are at a phase now where you can change and adjust your plan. Maybe you need to change materials or change specifications. Maybe you will realize a whole new market exists for your idea than you were previously aware of. A business plan can also serve to steer you in a new and better direction. Keep an eye out for what can be improved, and what can be changed for the maximum chance of success.
- Outline the groundwork for operations. Another great outcome of a well executed business plan is that it will give you a how-to guide for business operations. By outlining the team members for the new business and their roles, the processes needed to produce a certain amount of product and the strategies for marketing the product – you’ve effectively written a guide to how to set up and operate on a day-to-day basis.
A business plan is like a business bible. However, it is not enough to just have a business plan; it needs to be well researched and very thorough. A poorly written business plan will fail – It will not allow you to find financing for your business and it will not give you the groundwork to build a moneymaking venture. A great plan, in contrast, will get people excited about you and your product or service, and that excitement will allow you to obtain the financing you need to begin.