Business Plans are an important business startup step for entrepreneurs and small business owners. At The Startup Garage, we’ve helped a wide variety of entrepreneurs who want a business plan to get their strategy together or raise money. We’ve also helped many who think they might need a business plan, but they don’t really know what they’ll use it for, other than “getting everything down on paper.” With them in mind, well go over the purpose of a business plan and its benefits.
One of the most common reasons that entrepreneurs write a business plan is to raise funds from financial institutions, angel investors, venture capitalists and others. Before betting on you, they want to learn as much as possibly about your business. A business plan is an effective, and often required, tool that you can use to give investors all of the information they need and to demonstrate that you are a credible entrepreneur who is poised to succeed.
Writing a business plan is not only helpful with raising money. When starting a business, it is easy to focus on some aspects of the company and forget others, especially if you are very strong in one area but weak elsewhere. By writing a complete business plan, you are forced to examine all areas of your business and build strong strategies that will prepare you for successful execution when launching. Furthermore, writing a business plan will help you eliminate any grey areas in your business as it will force you to answer tough questions and provide specific information about your business. For example, you may be uncertain as to exactly what products you will sell and at what price. However, you will not be able to complete the Product Overview or Financial Plan sections of your business plan without narrowing down this information.
Unfortunately, there are a lot of entrepreneurs that put their business plan in a drawer never to be seen again after they have launched their business. However, your business plan is still useful even after launching your business. A business plan provides a framework of where you are and where you want to be by outlining certain action items, next steps and future activities. Furthermore, by revisiting and updating your plan every few months will be able to apply what you’ve learned through operations to your strategy and stay focused on your high level goals.
Lastly, your business plan will help you enroll strategic partners. Many small businesses are unable to succeed by themselves and require skilled partners to jointly build their business. However, this can be easier said than done. Most well-qualified potential partners will have many questions that must be answered before signing on. You may or may not be prepared to answer all these questions. However, with a business plan in place, you’ll be able to communicate your high level vision, clearly articulate your strategy and show any potential partner where they fit into it all. Having this well prepared written document will also boost your credibility tremendously.
There are many businesses out there that have gotten started and succeeded without writing a business plan. However, if you’re interested in maximizing your chances of success, a business plan is a great way to make that work. Also, if you’re interested in getting help from outsiders, such as partners or investors, a business plan is an essential tool for establishing credibility and getting them to believe in you and your business.
