5 Reasons You Need A Business Plan

A business plan is a formal document which explains in details what business you are in, your goals and how those goals would be attained. It is like having a picture of what you want to do, how you want to do them, when and with what resources.

At every stage of a business, it is necessary to write a business plan and this is always a hurdle for most people especially small-scale entrepreneurs who have little or no business background. You don't need a plan of 500 pages. Even a pager with some financial plans is enough to get you started.

Many people believe business plan is necessary only to source for finance from banks or other money lenders. This is baseless as there a lot of reasons while you need business plan at every stage of your business. This write-up looks at the five major reasons while you need a business plan.

FIVE REASONS YOU NEED A BUSINESS PLAN

• To secure a loan from the bank. This is the number one reason why most entrepreneurs write a business plan. No bank or money lender will finance your idea without having a look at your plan. Banks will want to know how you intend to generate enough cash flows to pay back your debt. They will also like to see if your idea is concrete enough. No one will like to finance idea that is not practical.

• To attract investors. Just like banks, investors, both local and foreign, will like to recoup their investments as well as making real returns on their money. As a result, they need to study your business plan to assess if your business worth the risk. The business plan is more than mere a paper you write and drop on the table. Investors look at the marketability, practicability and profitability of your business ideas.

• To test the feasibility of your business idea. I am sure no one will want to put his funds where he is not sure of making returns. Having a business plan will help you assess if your idea is practical. Every start-up needs to confirm if his idea is technically and financially feasible. These can only be answered by a well written business plan.

• To expand your business. Another reason you need a business plan is when you want to grow your business. Business expansion requires a detail understanding of your business, your strengths and weaknesses, your customers, your competitors and your available resources. The business plan you write will give you a picture of how you can grow from where you are to where you want to be.

• To understand the market. Business plan gives a lot of information about the market you operate. The customers and the competitors. Details of marketing strategy are also presented within a business plan.

If you want your business to have a shot at all, writing a business plan is essential. A typical business plan will contain the following sections:

• Executive summary. This is always the first section in a business plan and it contains an overview of your business. It should contain your business name, your mission statement, the purpose of the business and a brief appraisal of the business. This is the first section of your business plan but it's always written last.
• Business Overview. This is the section where you explain in detail who you are, how you operate, your goals, a brief history of the business, its legal form, your products/services and some of your achievements.
• Products and Services. What are the products/services you are offering? What are its benefits? Who are you suppliers and how are your products/services made? This is the section where you are going to give answers to these questions.
• Industry Overview. In this section, you are going to give answers to the following questions: What are the size of the industry both in terms of revenue and numbers? What are the current trends? What are the barriers of entry into the industry? What factors affect the success in the industry? Is there a potential for growth? These are just few of the questions you need to answer when writing this section of your business plan.
• Marketing Strategy. Since marketing is the heart of a business, developing a working marketing strategy is very important for the success of your business. Many businesses fail because of lack of proper marketing plan. Here, you will specified your target markets and how you intend to reach them. You will also have to prepare a sales projection for about three years.
• Operations Plan. This section describes the requirements of your business such as your location, people and equipment. You may need to explain the manufacturing process of your business. In a nutshell, this is where you need to explain in details how you will make your product, store it and make it available to the final consumers.
• Financial Plan. This sections always comes last but it is a section that you will use to assess the viability of your business. It contains your pro forma income statement, projected statement of financial position and project statement of cash flow. Analysis of these three financial statements should also be included as well. If you need to source for funds or attract investors for your business, this is the section that will make or break you.

Remember the old saying; if you fail to plan, you are planning to fail. Business plan should not be prepared only when you are starting your business. It doesn’t have to be complicated. A plan that specifies your business direction and what you need to put together to get there is enough for you to take off.

A business plan is not a document to be written at start up and drop on the shelf. It should always be updated at every phase of your business and use as a guide to every decision you make. As a reminder, you don't need to write a complicated one. Your plan can be as few as five pages if you so wish. Write a business plan today because your business needs one.

“Give me six hours to chop down a tree and I will spend the first four sharpening the axe.”
― Abraham Lincoln

“A goal without a plan is just a wish.”
― Antoine de Saint - Exupery