A business plan is a document that outlines how you’re going to operate your business. A solid plan can help you on your way to success. Let’s look at the top 10 reasons why you need one.
What is a business plan?
A business plan is a very important business document: It outlines how you’re going to operate your business, get customers, and ultimately, make money. The plan also ensures that stakeholders, employees and shareholders understand your mission and strategy—in that way, it’s vital to align the team.
Additionally, the business plan can outline milestones or key performance indicators (KPIs), that help you track your progress and adjust course, if necessary.
It’s important to keep in mind that things change—the world, the industry you’re operating in, and your customers—and it’s important that your business plan doesn’t become a static document. Rather, you should revisit and update it regularly to ensure that you’re still following the steps in your plan, or to make the necessary changes to your plan.
Why a business plan matters
A business plan is important for several reasons:
- It sets clear goals that everyone can work towards
- It helps you measure your progress with clear benchmarks
- It ensures that you spend your time and resources where they’ll have the most impact
- It helps you manage and mitigate risks, by identifying them in advance and having guardrails in place
- It helps you expand, if that’s your goal
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Why do you need a business plan?
Starting without a plan is like setting sail without a direction. Here’s why planning matters.
1. It helps you get started on the right foot
A business plan helps you buy the necessary equipment, hire the right people, market and sell to the right customers, and get stakeholders and shareholders onboard.
If you haven’t sat down and thought through everything that goes into a business plan, you might be surprised along the way—and not in a good way.
Even if you don’t have employees or shareholders, a business plan will help you think through the important things before you get started. It helps you consider things such as:
- What is your product? What are you going to sell?
- Who are your customers?
- What makes your business different from existing businesses?
- What do you need to produce the product or sell the service?
And so on.
2. It can secure funding
For many startups, getting funding is key to success. That’s where investors come in. To get investors you need to showcase the potential of your business, and sell them on the idea. A structured business plan also demonstrate the dedication and thought you’ve put into it.
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3. It helps you understand the market
Part of setting up a business plan, is doing market research to figure out who your competitors are, and which customers you want to target. This is essential in order to be able to develop a product or service that meets customer demands and stands out from the competition.
See also: How to make a business model—with a free template
4. It’s part of good risk management
Unexpected costs and challenges are par for the course when you run a business. However, with a business plan it’s easier to identify potential risks, whether that’s shifts in the market or operational hiccups. With this knowledge, you can develop risk management strategies that could save time, money, and maybe even your startup.
5. It sets a direction
It is important for everyone involved in a business to know the goals they’re working towards. A clearly outlined business plan ensures that your team’s efforts are coordinated and that every action contributes to the collective goals, embodying true teamwork spirit.
See also: What is a brand identity, and how can you make one?
6. It sets priorities
When you’re running a business, the things you want to do and the things you need to do are not necessarily the same. A good plan prioritizes what you have to tackle immediately, and what you should put on hold for now. This allows you to spend your time and resources in the best way.
7. It helps with decision making
A solid plan makes decision-making easier. If you have a plan to fall back on, each decision is less reliant on gut feeling and instead grounded in strategic planning. This can make the decision process far quicker and more effective.
8. It attracts talent
Ambitious and skilled employees are drawn to companies with a clear vision and solid plan. A detailed business plan does not only impress potential investors, but can also entice top talent to join your team.
See also: How to build a strong brand for your startup
9. You can measure performance
A business plan sets out key performance indicators (KPIs) that help you monitor your business’ financial health, gauge how successful you are, and pinpoint areas for improvement.
10. You can adapt
A good business plan is designed to be revisited and revised, and allows you to pivot your efforts in response to market changes or internal shifts.
In the end, your business plan is first and foremost a tool for you, to ensure that you get all your good ideas down on paper, and so that you have some long-term goals to work towards.
Happy planning!
