
A friend of mine back in Vancouver, BC once told me the importance of having a sound business plan. At that time I was starting and running a local IT consulting business in Vancouver, BC. As an amateur I was, I did not understand the importance of a business plan to the growth of my business. Without a proper business plan, I still managed to make a decent income from the local IT consulting business. The business grew slowly but it was at least, a stable business.
However, if I had a proper business plan, I believe the business would have grew at a much faster speed.
What exactly is a Business Plan?
To avoid repeating myself, please reference: Your Business Plan, Your Business Blueprint
Now to elaborate more about the benefits of having a proper business plan, here is the list of 5 reasons why you need a business plan:
1. Helps You Get the Capital You Need
If you walk into a bank or an investor's office and try to get a loan in order to gain enough capital to start your business, you need to explain to them why you are a good investment. Most lenders or investors will require a written business plan before they will even consider your proposal seriously.
- Investors want to know if you really understand your business.
- Investors want to know if you have carefully thought through critical issues facing you as a business owner.
If you have a thoroughly thought out business and financial plan that demonstrates a good likelihood of success, and if you are persistent and passionate, you will find the capital you need.
2. Helps You to Decide to Proceed or Stop
You, as the prospective business owner, are the most important person you must convince the soundness of your proposal. When you write your business plan, you need to go through an extensive debate with yourself.
For example, you won't have a problem coming up with 10 reasons on why you should start the business that you have in mind. The first process that you go through is to convince yourself to start a business. And when you are thinking about writing a business plan, you have already convinced yourself to start a business.
However, the second step, for example, is to come up with 10 reasons on why you should not start the business that you have in mind. This process is particularly hard because you have to constantly switch perspectives and work out every little details of your business. The ultimate goal is, of course, to make it work.
A business plan is the written copy of every details of the debate that you go through, with yourself, or with your partners.
3. Gives You a Better Understanding of Your Business Concept
When you analyze the flow of your business from, for example:
- Getting enough capital
- Analyzing your competitors
- Developing products or services
- Marketing products or services
- Getting your first sale
- Stabilizing your business
- Hiring employees
- Expanding your business
- Defeating your competitors
- Becoming a corporate giant
You will get a much better understanding of how your business operates from time to time. If you know more about what's to come, you can better prepare yourself for your own benefits. This ability to fine tune your plans and business process increases your chances of success.
4. Improves Your Odds of Success - Survival of the Fittest
In the world of business, it's all about survival. Having a well developed business plan improves your odds of success. Many new, small businesses don't last very long. And many small businesses simply don't have a business plan. (I was one of them) Is that a coincidence?
The whole idea about writing a business plan is to be better prepared of what's to come down the road. The more effort you put into it, the better prepared you are.
5. Helps You to Keep on Track
A written business plan gives you a clear course toward the future and makes your decision making easier in the events of emergencies. Many business owners spend countless hours and effort dealing with emergencies simply because they haven't learned how to plan ahead. The keyword here is also "preparation".
The question is... Do You Have a sound Business Plan?