Importance of having a business plan for starting and running a business

If you are currently in the process of starting a small business, the first important thing you should keep in mind is a small business plan. Each year, because of a variety of reasons a large number of individuals plan to start a business. Yet despite the desire and motivation to run their own business, many don’t get off the starting blocks. One of the reasons for the inability to get a business off the ground is the lack of a clear thought process – the task appears so daunting that the idea quickly fades away. One tried and tested method for developing ideas into action is to write a business plan. Business plan will serve as a stepping-stone of your business success. Whilst it may come in different formats you will find that all business plans have the same aim and that is to give a clear idea and direction as to exactly what your business is or will be.

One of the key benefits to having a business plan is that you will know what you need to do to get your business up and running. For example, if you know what type of customers you will be targeting and how, you have a better chance of success. In a way, a business plan for a start up business (or one that is looking to expand) is essentially a to-do list. A business plan will force you to think about the steps you need to take to get your business up and running; it ensures you get your planning as accurate as possible. A business plan is a great guide, especially if this is your first time starting your own business.

Business plans are also an effective tool and requirement to attract capital to invest in your business. Venture capitalists are individuals or a company that can provide you with the necessary capital that you need to start a business. Business loans are used to finance new business start ups or give a boost to your existing business for growth and improvement. These loans are tailored according to your requirements. And a business plan is really the only way (other than your charm!) to convince a financial lender or investor that their money will be put to good use and is safe in your hands. It is also an ideal tool to use when selling your business. A business plan will not only let an intended buyer know exactly what your business is or what it does, but it will also help them understand exactly how it got to where it is today. Even if you have not got your business off the ground, you may still be able to sell your idea based on your business plan and the research you have done. An effectively written business plan can be the spring board to realize a good selling price for the core idea of a new business.

Now there are a number of business plan software packages and self-help books that sell thousands and thousands of copies. Software can be very helpful in developing financial models and preparing projections. But they are not going to write the narrative sections of the business plan for you, so you may be disappointed in the results you get from using a computer program in building your business plan. How can the programmers of “Super Duper Hot Business Plan Whizzed” or writers of similar books, possibly know how your plan should look since they have never met you and do not know anything about your company?

So, here are the tips that you should keep in mind in order to write an impressive business plan:

–          A business plan should be easy to read. A good business plan is a complete business plan-containing all the information but it mustn’t be too long.

–          If it isn’t straight to the point it’s a bad business plan. You should specify your objectives in simple sentences.

–          Your plan should be realistic. If you put in unrealistic sales goals or unrealistic expense budgets you will scare off the person or company that you are trying to convict to invest in your business.

–          You shouldn’t make complex financial models-for example planning the finances for next few decades. Particularly in this age when technology is evolving so quickly, it is impossible to accurately forecast 3 years out, let alone 7. Concentrate instead on answering these questions: How fast are we going to use the investor s money, when does the company s cash flow turn positive, and what margins can this company earn? If the plan is to include different periods, these can be separately categorized into short, medium and long term plans.

Structure of a business plan:

–     Executive summaries which is written after the plan is finalized briefly provides an overview of the business plan in terms of the approach employed and key considerations in terms of business offerings, key staff and expectations in terms of financial results. Introduction consists of a brief description of the business, the policies, mission, vision, purpose and objectives of the business for the specific business period. A short review of the previous business period would be appropriate.

–      Marketing analysis. Here the specific industry is assessed in terms of how the business would meet the challenges.

–     Marketing plan. What would be the marketing strategy best suited to benefit from the opportunities identified and overcome the challenges foreseen.

–      Operations plan. The how and what of the business in terms of structure, location, rules and regulations, key operational processes and such other details.

–     Management plan. How the business is to be managed including key personnel, their qualifications and experiences as well as relevant business credentials.

–     Financial plan. The dollars and cents that will realize the business including costing and financial projections. Charts and graphs would be beneficial. General Recommendations In putting together a business plan the process must include adequate consultation, gathering of relevant inputs, discussion on strategies, review and validation of information.

Your business plan must be easy to understand, logical and promising that if a friend asked you to invest in this business, you‘d say yes. Most importantly, make sure you record your business plan somehow…whether you write it by hand, type it into your computer, or put it on sticky notes on your wall. Keep it someplace handy where you can refer to it when you are making important business decisions. And, make sure you review it monthly–or, even better, weekly–and update it at least annually.

It is also important not to loose the main idea for your business, and that is one more reason to invest some effort and time in making this kind of plan:

1. Your goals: What do you want your business to provide for you? (time, money, freedom, who you work with)

2. Customers : Who are your customers and what do they want/need?

3. Products and Services : What products/services will you provide to meet customer s needs?

4. Markets : Where are your customers and what do you know about them as a group? “Where” might be geographic, it might be what kind of places they hang out, or where they go to find products or services like yours. What is their age, income, gender, hobbies, family structure, etc.

5. Your Style : How will you reach customers and what will you say? Your methods of reaching customers needs to match with where your customers are–and with a message that they can relate to.

6. Competitors : Where else are your customers likely to get this need met? Find out all you can about how your competitors price, market, and provide service.

7. Your Uniqueness : How will your product/service meet customer s needs differently than your competitors? Consider how your personal uniqueness impacts that.

8. Your Abilities : Of the skills necessary to run your business, what do you do well, and what do you need help with?

9. External Resources : What people/technology/services will support you in the skills you need help with?

10. Fulfilling your Dreams : How will your business provide the kind of working environment you desire, both in how much time you spend, how you perform your work, and how much money you make?

Here s where the rubber meets the road–make sure you can show how you will sell X amount of product or service at Y price, cover your expenses, and reach the goals you set in 1. above.

And let’s remind us once again-why do you need it?

  • A business plan is a must for an entry level entrepreneur-for it gives you the focus toward your business goal.
  • This makes your efforts credible in the eyes of the investors or the financial institutions that are willing to finance your project. Your business plan is the proof of your understanding of the business to the investors and financers.
  • It is also your blueprint for entrepreneurial success. A well chalked out business plan helps you to keep track of your business growth and provides guidelines for tackling the situations when it goes downward.

Always keep in mind that persistence is the key element to success. If you have a good plan and spend enough time and energy on realizing that plan you will soon be privileged to watch your business grow and expend.

Article Source: http://www.articlesbase.com/strategic-planning-articles/importance-of-having-a-business-plan-for-starting-and-running-a-business-1526641.html

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