Why do you must have a business plan?

When entrepreneurs want to start a new business and ask “Do I need a business plan? Is it will help me to raise fund?” The answer is, “Yes.” A business plan is an essential part of starting a new business. In reality, business plans take a long time to write and require an amount of data, a long list of research you need to complete the full business plan. I was asked by lots of people why they needed a business plan if they are getting all the money/funding they needed from their friends and families. Basically business plan is nor for funding only. It’s not just a fund-raising tool. Actually it’s much more that. A business’s fate depends on a successful business plan. Its make you accountable about your business. A business plan will force you to review everything at a glance: the value proposition, the marketing assumptions, the operations plan, the financial plan and the staffing plan. A well-prepared, good-looking written business plan is an important document for either debt or equity financing business. Its gives a benchmark for the business to compare the actual result. It’s a roadmap.

2,877 people finished the survey and 995 had completed a plan.

  • 297 of them (36%) secured a loan
  • 280 of them (36%) secured investment capital
  • 499 of them (64%) had grown their business successfully

1,556 of the 2,877 had not submitted their business plan.

  • 222 of them (18%) got secured a loan
  • 219 of them (18%) got secured investment capital
  • 501 of them (43%) had grown their business successfully

Source: www.smallbiztrends.com

Why do you need Business Plan?

Establish Business’s Milestone

Every business need to setup a goal to get success. It may be for long term or short term goal. The business plan should clearly lay out milestones.

Understanding the competition

A business plan forces you to investigate the competition of the market. The competition may be direct or indirect. Form. But its critical to understand your company’s competitive advantages. Then you have to take decision based on the analysis.

To understand your customer

Why do they buy when they buy? Why don’t they when they don’t? An in-depth customer analysis is essential to an effective business plan and to a successful business.

To file your revenue model

How accurately will your business make revenue or profit? This is a critical part to answer in writing, for you and your investors. So documenting the revenue model helps to address the challenges associated with the model.

To define your financial needs

Does your business need to finance capital? How much? And Which way? The business plan helps you to define exactly how much funding you need and how will you use it?

This process is crucial for raising capital for business and for efficiently employing the investment.

A business plan has the following contents

To attract investors

Basically a business plan is the basis for financing proposals.

The business plan responses investors’ questions such as: What is the need for this product/service? What are the financial forecast? What is the company’s exit plan?

To reduce the risk of pursuing the wrong opportunity

The business plan helps to reduce opportunity costs. A business plan helps you evaluate the attractiveness of this particular opportunity and costs.

To attract management team

A business plan is necessary r retain and recruit the talent people. The business plan encourages employees and management to achieve its strategic goals.

To force you to research and really know your market

You need to prepare market research to prepare a good plan. Without research you cannot start the business. If you do that, surely you will lose the money unfortunately. You need to know target market for your product/service?

To attract partners

You must need to get investment from your partners. You need to attract them. Business plan is the summery of the full business strategy and research. Partners will ask a business plan from you.

To position your brand

Business plan will help to determine your company’s role in the market. Business plan will position your company’s brand to customers, investors, and partners.

To judge the success of your business

A formal business plan permits you to compare actual results versus the business plan’s expectation. It helps you to clearly see whether you have attained your strategic, financing, and operational goals.

A business Plan consists of following contents

Cover Page

The cover page will be included the followings:

  1. Company Name
  2. Logo
  3. Contact Person of the company
  4. Address and Phone Number
  5. Date and State of Incorporation
  6. Statement of Confidentiality and Nondisclosure

Body of a Business Plan

The body of the business plan should include the following subjects:

Background and Purpose

  1. a brief overview of the history of the company (for old Company)
  2. Current situation of Company
  3. The Product or Service of the company
  4. Business Objectives

Market Analysis

  • Overall Industry or Market analysis
  • Specific Market Segment analysis
  • Competition of the product or services
  • Sales Forecasts for next few years

Product or Service Development

  1. Research and Development on the service or products
  2. Production Requirements and Process system
  3. Proprietary Features and Protections
  4. Contingency Plans for business

Marketing

  • Marketing Strategy
  • Marketing plan

Financial Data

  •  Current Financial Situation
  • Accounts Payable
  • Accounts Receivable
  • Break-Even Analysis
  • Financial Ratios
  • Financial Projections
  • Profit and loss statement
  • Balance sheet
  • Cash flow statement
  • Startup Expense summary
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Organization Structure and Management

  • Key Personnel of the business
  • Other Personnel
  • Directors and Advisors of the company
  • Professional Advisors of the company
  • Key Future Personnel
  • Immediate Labor Force

Business Structure

  • Current Capitalization Fund
  • Forecasted Capitalization for next few years
  • Exit Strategy if capitalization fund reduced
  • Royalty or Licensing Arrangements with vendors

Risk Factors

  1. Failure to Meet Production Deadlines
  2. Problems with Labor, customers, Suppliers, or Distributors
  3. Risk of sales Projections not Met
  4. Competition between the competitors
  5. Technological Developments
  6. Inadequate Capital problem
  7. Business Cycles
  8. Other Risks

Conclusion

  • Summary
  • Timetable for Funding and Future Developments

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