5 Reasons You Need A Business Plan
January 19, 2022
July 23, 2021
If you’re looking to form your own company, there are many different factors to consider. You can check out our series on how to start a business to find out more. One of the essential parts of any venture is a solid basis for your ideas. That’s why you need to know how to write a business plan.
We explore what a business plan is and why it’s so important that you have one. We also look at some top tips for writing one, as well as a step-by-step guide. By the time we’re done, you’ll be ready to draw up a business plan of your own, no matter what niche you’re aiming for.
Let’s start by getting to grips with the key term at the centre of all of this. At a glance, it’s straightforward enough – a plan for how your business is going to work. However, in reality, it’s a bit more complicated than that.
As we’ll see, there are several different types of business plan out there, used for both emerging and established businesses. It’s a strategic document that outlines a business’ aims for the future, as well as how you’re hoping to achieve them.
When you write a business plan, you’re creating a roadmap for business success, focusing on areas such as finances, operational issues, and marketing. To create one, you’ll need a thorough understanding of your business aims, the landscape of the market you’re targeting, and the challenges and opportunities they present.
Business plans can vary in length, scope, and detail depending on the situation you’re going to use it for. However, they often have similar elements and cover the same key areas, no matter how long or short they are.
Why should you write a business plan? It’s a question that’s often asked by those with a business idea and lots of enthusiasm. Surely, you can just get started and fill in the details as and when the need arises?
For some freelancers, this might be the case. However, there are plenty of reasons why you should consider preparing a business plan, particularly if you’re launching your own business. These reasons include:
If you have a brilliant idea for a business venture, you probably want to dive headfirst into getting it up and running. Although this enthusiasm is certainly useful, without some direction, it’s not always productive. When you make a business plan, you’re creating a strategy, usually for the next one to three years.
You’re able to set attainable business goals and objectives, identify priorities, and set a benchmark for your performance. Not only is this useful for your own ambitions as a business owner, but it also means that anyone else involved in the business (such as a business partner or investor) is on the same page.
One of the main reasons for learning how to write a business plan is for financing your venture. If you’re approaching investors or a bank for money, they’ll need to see financial statements and proof that you have a detailed understanding of what you’ll spend it on and how much it will return.
As well as showing proof that there is a demand in the market for your product or service, it also demonstrates that you’ve forecasted how much you’re likely to make. Ideally, your business plan should clearly show how your business model is going to be profitable.
In addition to providing financial information for your potential investors, a business plan helps with many other areas of your business. As we explored in previous business articles, a central document helps you make informed decisions about your company and its actions.
No matter what type of business you are, a business or marketing plan can make sure everyone is aligned with the same priorities. This, in turn, ensures that processes are well-considered and run smoothly.
There have been various studies that show the link between strategic planning and performance in businesses. One even found that planning can help businesses grow up to 30% faster. Again, part of this revolves around setting clear objectives and having detailed strategies in place.
A business plan can also help you identify risk, forecast sales, and highlight opportunities to reach new customers.
The answer to this question depends a great deal on the size, scope, and ambitions of your business. For example, a freelancer working part-time on a side project may not need to develop a detailed marketing plan and financial forecast, at least not at first.
For those looking for financial investment or a business loan, then you definitely do need a business plan of some kind. Even in these situations, however, the length, formality, and amount of detail required will vary depending on a large number of factors.
Yet even if you’re not seeking investment or finance, a business plan can still be useful, as outlined above. Whether you’re starting a totally new company or re-thinking an established one, having a strategic document is essential. And, depending on your situation, the process of writing a business plan doesn’t have to be a lengthy one.
Before we get into the step-by-step process of how to write a business plan, let’s first look at some general guidelines that can help. These pointers will help you evaluate the type of document you need, as well as how you should approach writing it.
There are several types of business plan format you can choose from when it comes to things like structure and length. Although most cover the same kinds of points, they vary in terms of purpose and contents. Some of the styles to choose from include:
The style you choose will depend on the current stage of your business, as well as what your eventual aims are for the next one to three years.
Whichever style you choose, you want to make sure that you don’t get distracted from your goal. This document shouldn’t be a novel-like tome detailing every intricacy of your business. Instead, it should be a concise summary of your aims and objectives and how you’re going to achieve them.
Of course, you need to give sufficient detail to show you’ve done your due diligence. However, don’t waffle on or create something ridiculously long. At the end of the day, someone is going to have to read it, and you want to keep your readers’ attention.
The details and information you include when you write a business plan should be grounded in reality. Of course, you have ambitions and objectives that you want to reach. However, these should be backed up with research and data. Similarly, you want to recognise potential risks or threats.
If you’re using the document internally, you don’t want to underachieve and miss your targets. When it comes to external use, investors or financiers will be able to see through an overly optimistic plan that fails to account for current market conditions.
You’ll want to consider where your business plan is going to be used and match the tone accordingly. Whenever you create effective content, you should keep your audience at the centre of your work. For example, if you’re using the document to secure investment, you’ll want to strike a professional tone and style. However, if it’s for internal use, you can match it to the company’s usual tone of voice.
Although, as mentioned, you’ll want to keep it brief, when you write a business plan, you need to focus on the right details. When someone reads the document, they should be able to easily access the essential information about what your aims are and how you’ll achieve them. However, the finer details will depend on how and where you’re going to use your business plan.
This doesn’t have to be (and shouldn’t be) a static document. The information you research and layout will only be relevant for so long. As such, you should regularly review your business plan and make sure that it’s up-to-date and reflective of your business. You might need to update a variety of factors, and it’s easier to make small, regular adjustments than have to rewrite it every few years.
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