Why You Need to Write a Business Plan
By Katherine Wernet
Writing a business plan can be a daunting task—but an important one. When you are first setting out to open your dream business, you are far from having all the answers. It’s easy to feel driven by your vision and not want to get bogged down with all the details. A business plan is essential, though, in that it forces you to bring all of your scattered thoughts about marketing, financial projections, key performance indicators and even your future vision in one place. It is homework well worth doing.
Here are just a few reasons you should write a business plan:
1. A business plan makes you more attractive to potential investors
Financing your business with any sort of bank loan will require that you have a clear plan of exactly how you will repay it. Banks are in the business of loaning money—not taking a chance on what sounds like a cool idea. With a business plan, you show your potential lender that you have been thoughtful about your venture and considered how you can repay your loan in a certain amount of time. If you’re bringing on other investors, your business plan can be a persuasive part of your pitch. You can show how you’re setting the business up for success and that you have a strong sense of the market and challenges ahead.
2. A business plan helps to keep you on course
When you first open your business, you have a specific goal in mind. Whether it’s to help people get healthy or give every customer great hair and the confidence that comes with it, it’s why you’re doing this. You wouldn’t be starting a business if you didn’t have passion. However, when the going gets tough, it can be easy to make a small decision here and there that ultimately distract you from your initial goal. A business plan allows you to capture your intention and have something you are actively working toward as your business grows.
3. Businesses with plans tend to be more successful
An independent study commissioned by software firm Exact found that 70% of small and medium-sized businesses with business plans were consistently profitable. This is higher than the 52% of similarly sized businesses without a business plan that were consistently profitable. Planning pays off. A little prep work goes a long way.
Writing a business plan is in your future company’s best interest. If you are wondering when the best time to create your business plan is, research covered in Harvard Business Review indicates plans work best when they’re formulated when entrepreneurs are actively working to get the business off the ground on other fronts as well. You’ll want to be already in the midst of thinking about your marketing efforts and have a sense of future costs.
When you’re ready to get started on your business plan, you don’t need to start with a blank page. We’ve created business plan templates specifically for the type of business you’re starting.
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