Do I Need a Business Plan: Everything You Need to Know
There may be mixed answers to this question. However, if you are looking to raise funds through a bank loan, angel investment or venture capital.3 min read
Do I need a business plan? There may be mixed answers to this question. However, if you are looking to raise funds through a bank loan, angel investment or venture capital, you will almost always need a business plan to present to the investors.
Even if you write down your business plan as a broad outline, you will have something to start with. Instead of having random ideas in your mind, putting down your ideas on paper can be effective in the long run.
When Do You Need a Business Plan?
Following are some of the main reasons for creating a business plan:
- To define the scope of a new business.
- To seek external funding.
- To raise equity capital.
- To define business goals and objectives.
- To evaluate or test a new product.
- To review the business and take corrective actions on a regular basis.
- To define a partnership agreement.
- For valuation of a business.
A business plan should provide all the essential information required for management, monitoring, review and revision of business operations.
If you are preparing a business plan for the purpose of raising a loan or investment, your business plan should show that you will have enough revenue to meet your expenses. You should include the important sections commonly found in a business plan. However, you can customize the plan to suit your audience.
Features of a Successful Business Plan
A good business plan typically bears the following features:
- It fits the needs of your business.
- It is realistic and practical, rather than idealistic and perfect.
- It is specific and measurable so that results can be tracked.
- It defines responsibilities and assigns them to specific individuals.
- It defines assumptions in clear terms.
- It conveys the information to the target audience.
- It evokes commitment from people towards their responsibilities.
- It establishes a schedule for regular review and planning.
A business plan is an important management tool; it defines your business strategy, guides you through execution and helps monitor your progress. Whenever required, the plan document also helps you convince your investors that your business is well-planned for success.
Why Is It Important to Write a Business Plan?
Helps You Make Decisions- You cannot finish some of the sections of a traditional business plan with an undecided or half-committed mind. A business plan thus brings clarity to your ideas and simplifies the decision making process.
Acts as a Reality Check- In an excitement and enthusiasm to launch a new venture, a small business owner often forgets to double check his business idea. Putting down a business plan on paper forces the entrepreneur to do a reality check and discover any flaws in the idea.
Gives You New Ideas- We generally tend to procrastinate making tough decisions due to lack of clarity. Sitting down to write a business plan gets you many creative solutions to deal with several challenging situations. New ideas are especially helpful in designing your marketing strategy.
Creates an Action Plan- As they say, no idea works unless you work on the idea. A business plan outlines a clear action plan to execute your ideas so that you know the time and priority of things you should be doing to get the expected results.
How to Create a Business Plan for Your Business
- Prepare a basic outline of how you will operate the business.
- Begin with a strong, core idea.
- Outline the key elements of your plan.
- Create a functioning prototype of your business.
- Write down informally how you plan to move on from conceptualization to product development, commercialization, marketing and expansion.
- Don't hesitate to revisit and revise your plan. Remember, nothing is set in stone. You will learn many new things as you get off the ground. What seemed to be the best path initially may change when you actually execute the plan. Hence, be ready to explore and deviate as required.
- Define your vision in clear terms. The way to accomplish your vision may change with the situation, but the vision itself should not be subject to any changes.
- Remain focused and formalize your plan. It should clearly express the problems you intend to solve, your target market, how the business will earn revenue and all other relevant issues.
If you need help with whether or not you need a business plan, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.