Why a Business Plan Is Vital?
Whether you’re just starting a business or exploring ways to expand an existing one, you can benefit from creating a business plan.
“This document guides you through every stage of starting and managing your business,” explains Scott Mass, Senior Vice President of Investments for David Lerner Associates. “It describes what your business is, your goals, and how you’ll set about accomplishing those goals.”
Beyond being a document that describes your business and helps guide your decisions, a business plan can help you:
- Organize Your Resources
Often, entrepreneurs who attempt to launch a business without a plan will fail mainly because they don’t consider the funds required to get a business off of the ground.
A business plan acts as the primary guide for how you’ll structure and allocates your resources. The document will quickly show you just how feasible it is to hire employees, open an office, etc. You will make big spending decisions with confidence.
A business plan will also help you see whether you’ll be making a profit or running at a loss. This document lists the projected costs of the business, as well as the revenue. Provided you meet the financial goals listed in the plan, you can envisage when and how you’ll make a profit.
- Better Understand Your Competition
When creating a business plan, research the business in the industry you want to indulge in.
Businesses (big or small) have competition as direct and indirect competitors, and it’s essential to understand your business’s competitive advantages.
By analyzing competitors and where they’re not currently reaching customers, you’ll be in a better position to organize how you will reach them.
- Approach Investors
In addition to helping you organize your resources, your business plan could also be key in securing funding.
If you intend to seek financing from a bank, angel investor, or venture capitalist, the potential investor will want to know that you know what you’re doing.
A business plan is the single key document you can present to your investors that will provide the structure and confidence necessary to make informed choices about funding and supporting your company.
Answering questions about revenue generation and profitability can determine whether an investor jumps in–or how much they might decide to invest.
- Create an Effective Marketing Strategy
Getting your business in front of potential clients consistently is one key to making sure your business not only stays afloat but also thrives.
Marketing strategies can seem simple, but the situation on the ground can be a different story.
A business plan can ensure that before you decide on how you will get the word out, you’re clear on your target audience, how your business solves customers’ problems, and the methods or platforms you will connect with them on.
All these can make sticking to your marketing plan easier.
- Hire the Right Talent
For your business to succeed, attracting talented employees and partners is critical.
Your business plan inspires people that you have a sound idea and that the business is poised to attain its strategic goals.
By using your business plan to show the direction and growth potential of the business, you’re more likely to attract the right talent, from the executive level to skilled staff.
A business plan can also help secure vendor accounts, particularly with exclusive suppliers.
- Navigate Difficult Situations
If you plan on launching a business, you will need a business plan to tackle obstacles along the way.
As a business, you may have to deal with things like legal challenges or employee conflict.
A well-written business plan can help you deal with such issues while highlighting your business’s purpose and what you hope to achieve.
- Know When to Sell Your Business
As time goes by, you may develop new interests and decide to sell your business or position it for acquisition. But deciding when to sell can be a tough decision.
When you set clear guidelines for what goals you’d like to achieve with your business, setting a timeline and knowing when it’s the right time to sell will be much easier.
The info in your business plan can also be helpful when selling, as it lays out the accomplishments, as well as the plans for the business, which can increase its value.
Conclusion
The importance of having a business plan goes far beyond simple planning and goal-setting.
As you’ve read, a business plan is good for many reasons.
Remember that a business plan will evolve and grow alongside your business, so it’s a vital part of your entire journey—not just the start.
IMPORTANT DISCLOSURES
Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc.
This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.
To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.
These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable– we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual’s personal circumstances.
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