Why Do I Need a Business Plan to Start and Grow my Business?
An entrepreneurial initiative cannot be undertaken or grow without considering some important and strategic objectives. A good business plan not only helps entrepreneurs to focus on the specific steps necessary for making business ideas succeed, but it also helps them to achieve both their short-term and long-term objectives.
Many entrepreneurs jump into business without first writing out a business plan. This is a no no! A business plan shows banks, investors, and other potential financiers, that you have done your research, understand the market, your target clients, and how your business will generate revenue. Without something written out in a clear and concise way, to an outside observer, your business is just and idea with no compass to guide it.
Why is a business plan useful you ask?
Understanding the advantages of a business plan is very simple if you consider these two important features:
- Develop an internal strategy. Having a business plan helps you to define and focus on your business ideas and business strategies. A business plan can also help you to identify the weaknesses and strengths of your business.
- Communicate with your stakeholders. A business plan is an informative document that you can use to attract potential investors and inform internal fundes. Business plan rises the credibility of the company business and shows its sustainability.
Items you should always address in your business plan:
- Products or Services? This is your product or service: how are you addressing the problem you have identified in the market?
- Target market Who is your ideal customer? How many of them are there? How will you reach them? It’s very important to be specific. You may choose to include a sales strategy in this section, highlighting how you will acquire new clients and retain them. As well, this can outline whether your business will be b2b (business to business) or b2c (business to consumer). For more information on building your sales strategy, click here.
- Competitors How is your target market solving their problem today? Are there any alternatives or substitutes in the market?
- Financial Plan Your business plan isn’t complete without a financial forecast. Three-year projections are typically adequate, but some investors will request a five-year forecast.
- Team and Company You’ll review the structure of your company and who the key team members are. These details are especially important to investors as they’ll want to know who’s behind the company.
The business planning process is more important than the business plan document which it reveals. As they say, “It’s not the destination, but the journey that matters”.
Be sure to remember these 3 rules when writing a business plan
- If you want your business plan to be read, Keep it short!!! An excessively long business plan is a huge hassle to deal with and guarantees that your plan will be relegated to a desk drawer, never to be seen again.
- Know your audience and adapt your language so they can understand you.
- Don't be intimidated! If you know your business and are passionate about it, writing a business plan and then utilizing it to operate will be not nearly as challenging as you think.
Inspire yourself and take a look at this innovative business plan example here.
Not sure where to begin?
The process CANVAS-tly become easier with the business model canvas (see what we did there... :))
The Business Model Canvas is a strategic management and lean startup template for developing new or documenting existing business models. It is a visual chart with elements describing a firm's or product's value proposition, infrastructure, customers, and finances. It assists firms in aligning their activities by illustrating potential trade-offs.
This Business Model helps you validate that you are solving a real problem in the market with a solution that meets the customers' needs. Through customer discovery and rapid experimentation, the Business Model Canvas helps you validate that you are going into the market with strong a business model built on a product/service that matters. The BMC also provides guidance on how to test and learn from your minimum viable product so that you can ultimately build better products.
So, what’s the takeaway? TLDR (Too long didn’t read)
To sum up, there are four key points to keep in mind in order to craft a strong business plan.
- Your business plan is useful for two reasons: it helps you to organize your internal strategy and to ensure you have done your homework.
- A business plan helps you to make your organization more attractive to potential investors.
- Your job is to convince the investor that you have identified the plan, strategy, resources, team, and actions, which will be necessary to bring that idea into the market–and succeed.
- There are many business modelling tools you can use to prepare for writing your business plan. We suggest you the business model Canvas. It reflects systematically onto the business plan, so you can focus on your business model segment by segment and then easily transfer this information to your business plan.
Hearder Image Courtesy of: Uber London Business Plan. Credits of Davide Turi