Why you need a business plan
Business planning is one of the most crucial parts of starting a business. Get it right, and you'll earn the trust of investors, distributors, suppliers and staff. Get it wrong, and your business could face huge problems just getting off the ground.
What is a business plan?
- A business plan is a document which sets out in detail exactly how and why you will run your business, and includes everything from how you will promote it to how you plan to fund it and who your customers will be.
- Your business plan will include details of your financial forecasts, explaining how much money you think you will make and how, as well as how much you will need to finance the business and how you plan to go out raising funds, as well as how many rounds of funding you think you will need.
- Business plans include detailed market research looking at how big your market is and who your customers are. You will segment your market depending on information such as your customers' spending habits, interests, earning power, age and socio-economic groups.
- Many business plans include a section explaining how many employees you will need, at what stage in the life of the business you will recruit them and how many you will recruit. This helps you to make financial forecasts, and will help you to convince investors you have thought your business idea through.
- Update your business plan regularly to take into account the economic climate and what's going on in the industry to ensure you always have a clear idea which direction you will be taking your business in.
Why do I need a business plan?
- Setting out an accurate plan will help you determine whether your business idea is feasible. By making cashflow, sales and other financial forecasts and looking at what sort of target market you will have, you can work out whether your idea will work as a business and how easily you will be able to monetise it.
- Because it sets out exactly what your strategies are and how you are planning to run your business, a well-written business plan containing relevant figures will help you convince investors your business is a reliable proposition.
- A well-researched business plan which includes the right figures and realistic forecasts will also reassure potential investors you are a sensible investment opportunity.
- Even if you're not planning to raise money, a business plan will allow you to map the future of your business. By putting your thoughts down on paper, it will allow you to come up with a comprehensive strategy on how you will deal with various scenarios.
- Your business plan gives you a place to list specific goals and objectives for your business, helping you to set out clearly how you plan to meet these goals and on what sort of timescale, and forcing you to commit to that course of action.
- Because you include detailed financial and market forecasts in your business plan, it will help.
- Business plans you manage cash flow by showing in detail exactly what you expect your incomings and outgoings to be within given periods of time.
- A business plan sets out in detail exactly how and why you will run your business
- Your business plan will include financial forecasts
- include detailed market research
- Many business plans help determine how many employees you will need
- Update your business plan regularly
- Setting out an accurate plan will help you determine whether your business idea is feasible
- A business plan will help convince investors your business is a reliable proposition
- A well-researched business plan will reassure investors you are a reliable investment opportunity
- A business plan will allow you to map the future of your business
- Your business plan gives you a place to list specific goals and objectives
- Your business plan will help you manage cash flow
I'm not planning to borrow any money. Do I still need a business plan?
Yes. Contrary to alarmingly popular belief, a business plan isn't just there to help you secure investment - it also gives you a place to map exactly how you want to run your business, what your goals are, and how you will meet them.
How often should I update my business plan?
It depends on your business, and the market conditions. Some businesses update - or at least review - their business plan once a month, while others update their goals and objectives every year or so. During a recession, the market is unpredictable and likely to change with little notice, so frequent updates are important.
Executive summary: Section at the beginning of a business plan summarising its main points for readers who don't have time to read the full plan.
SWOT analysis: Strategic method used to objectively look at a business' strengths, weaknesses, opportunities and threats.
Financial forecasts: An estimate of how your business will fare in a given space of time, taking into account historical data and external factors such as market conditions.
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