Why you need to write a business plan

Every business starts with a good idea. Even though it is tempting to start right away, it is worth spending the time to take steps to do some research and develop your concept through writing a business plan. A business plan includes information on the market opportunities, details on what you are selling, why people will buy from you, how you will operate your business, and what resources you have available. A business plan also includes strategies on how you will promote your business and sell your product or services.

Here are 4 reasons why every start-up needs a business plan

Test your business idea. Is it feasible?

So you have an idea to start a business, but how do you know if it is a good idea? And, even if it is a good idea, is it the right business for you? It takes a lot of time, energy, and money to start and operate a business, so you want to make sure you do your homework. Writing a business plan helps structure your research and ideas and ensure that you don’t miss any essential information to help make your decision to move forward. Once you write it down, you will have something to present to others so you can get objective and professional opinions, such as from your accountant, lawyer or business consultant.

A business plan can help with a smoother start-up.

There may be some things you didn’t think you should consider when starting a business. Working through the process of writing a business plan helps you review all aspects of starting a company which will help for a smoother start-up. Through the exercise of writing a business plan, you will be able to better position yourself in the market for earlier success. Before you start, do your research! Learn about your competition, define your product offering, get to know your target market, and understand what resources are needed to start your business. Taking the time to write your business plan will give you the necessary confidence and guidance in the early stages of starting your business.

Opens up opportunities for financing

If you are looking for financing or funding for your business, you need to present your business idea, including key facts and figures, to potential investors in a well-written way. Whether it is family or friends, a loan from your bank, or angel investors, you need to show them your plan to operate a sustainable and profitable business. Financial reports are critical, as they will show investors where you intend to spend money and projected revenue. Be realistic with your goals and make sure your numbers are supported by a strategic sales, marketing and operational plan.  

There are risks and challenges to starting a business. Your business plan should show you have thought through any potential threats and weaknesses, and offer a strategy on how you will reduce these risks. If there are assumptions, be sure to articulate them in your plan. 

Investors often say they invest in the team as much as the business itself. Tell your story. Why are you starting this business? What is your vision? What is the expertise you have to support the success of this business? If applicable, include any other team members and the roles they will play.

Helps make business decisions

Your business plan is your guiding document to keep you focused! It reminds you why you started in the first place, defines your goals, and includes strategies on how you plan to operate your business. Reference this document when developing your annual business, marketing and sales action plans to ensure your short-term goals align with your long-term milestones. 

And remember, your business will evolve, economic conditions change and new opportunities arise. Review your business plan every year and update as needed, so you have current information on hand to make the right business decisions.

For example, during severe economic conditions, if your current sales and operational models aren’t working, you can rewrite your business plan to define, try, and validate new ideas and strategies.