Understanding importance of business plans for small businesses
Listed below are some important reasons why you must invest time and effort in writing a business plan.
1. To support your request for funding:
While starting a new business or during the course of running, you might need a business loan or investment from banks or other funding agencies. These agencies ask for a strong proof to assess how sound and profitable your business idea is. Your business plan will back-up your request.
2. To re-establish viability of business:
A business plan is not a document just to back-up request for finance, it is also important for understanding viability of your business. It helps in doing market research and provides insight into viability of business idea.
3. To do SWOT analysis of your business idea:
A good business plan prompts you to do analysis of Strengths, Weaknesses, Opportunities and Threats related to your business idea. This brings ground realities to light, which you might not have known earlier. Being aware of realities you will get well equipped to deal with uncertainties.
4. To project vision and business objectives to your team:
A carefully drafted business plan outlines all the business objectives with greater clarity. By sharing these objectives with the operating team you make them realise their role and responsibility in achieving goals of the business. It creates a platform for joint effort and enhances team spirit.
5. To get clear picture of all business requirements:
A well documented business plan helps you in getting a clear picture of all your business requirements. These include finance, cash-flows, assets (building, equipments etc.) and projection on future expenses and profitability. In the absence of these details you will be totally unprepared to run business smoothly.
6. To evolve strategy for growth of your business:
A business can not be run without having a clear plan of actions for sales and marketing. You cannot afford growth of your business to remain stagnant. It is necessary to identify factors that can positively contribute to growth. A business plan serves to evolve strategy for growth.
7. To facilitate valuation of business:
A business plan enables you to do overall valuation, by providing summary of book value, value of all assets and growth potential. This is useful in case you plan to switch over to any other type of business.
Above reasons should help you get rid of the thinking that a business plan needs to be written only for applying for a loan or seeking funds. It’s in fact a key for the success of your business!