A business plan is like an abstract blueprint for your company. It helps explain the intentions and operating capabilities of an organization. Before setting out on creating a business plan, however, you need to have some general idea of what you actually want to include in it. Thisis why business plans matter:
What’s In a Typical Business Plan?
A tech startup today isn’t going to have the same kind of business plan as a oil company 50 years ago. Regardless of the specifics, there are a few things that should be found somewhere within pretty much every plan. Here are a few of the top elements worth considering:
- Industry analysis – It doesn’t matter if you’re selling shoes or smartphones, you’re not going to be successful if you don’t know the market. A thorough investigation of both qualitative and quantitative aspects will help your business adapt into the future.
- Product and service explanation – What exactly are you selling? This should be outlined in your business plan to at least a moderate degree. Someone should be able to read through your business plan and at least have an idea of what you’re offering customers.
- Cost and revenue projections – A healthy business will eventually grow into a state of profitability. Reaching this point, however, can be a struggle—especially when you’re up against fierce competition. It’s essential to have some idea of the costs associated with this before setting out.
- Profitability modeling – It’s not good enough to simply say your business will be able to make money at some point. You have to understand—even if not to highly specific monetary values—the mechanism that will enable profitability. Without this, your business is going to be a money sink as opposed to a value creator.
Now that you have a basis for what needs to be in your business plan, it’s time to dive deeper into the overarching importance of having one.
More Research Lowers the Likelihood of Execution Errors
They say practice makes perfect. This little saying applies to effectively running a business. You can’t just wake up one day with a great idea and immediately execute it to its fullest potential. Things take time—and lots of trial and error.
Fortunately, some of these tribulations can be bypassed through additional frontend planning. Part of this will involve researching what others have done. Fortunately, the internet is a treasure trove of information, where you can easily find insights from others who have taken a similar path with starting their business.
It’s Necessary to Attract Serious Investors
For many starting a business, finding financing partnerships is an essential piece of the puzzle. Depending on your goals and the scale of your business, it’s likely you’ll need to acquire debt in order to get things off the ground.
A well-crafted business plan will help you woo investors looking for a nice place to park some of their capital. Their interest is to get a return on their investment. If your business plan clearly lays out how you expect to make money—and maybe even have some projections for how investors will be compensated—it can streamline the process of raising funds.
You’re More Likely to Stay On-Track
Life is full of distractions. Running a business doesn’t change this. But if you can accept distractions as part of your reality, you can compensate for them through stronger initiatives. A business plan can keep you and your enterprise on track for success. When you feel like things are getting frazzled, check back with your plan and make sure you’re following it.
Overall, a business plan is a near necessity for anyone with serious ambitions for their company. Creating a solid business plan early on can guide you to long-term success.