7 Reasons Why You Need A Business Plan (2021)
All the buzz is out there, screaming into your godly ears “get a business plan!”
You’ve probably even encountered people who trashed your big business idea just because you don’t have a detailed business plan.
So the question: do I really need a business plan?
Short answer: Yes, you need it!
Long answer: read further into this article to find out why you should have a well-documented business plan for your business.
In fact, organizations with business plans grow 30% faster than those who don’t.
So if you’re looking for further insights into why a business plan is important, read on.
1. Creates Roadmap For Business
Most successful businesses have some things in common, whether you believe it or not.
They know where they are going and they know how they will arrive there.
In other words, they nail the vision and mission aspect of their business.
Having a solid blueprint about where your business is headed seems an obvious first step.
But many today entrepreneurs tend to deprive their business of a lasting success by overlooking this first step – they instead charge straight at the sea and wade in, slogging through the surf until pretty soon they’re out of their depth and flailing around wondering how they ended up there at all.
Think of the business plan as a foundation – or stepping stone – on which your business is built.
The more time you invest in creating a solid, comprehensive, easy-to-follow business plan, the better the chance at succeeding in business.
A business plan helps you establish short and long-term goals, creating a roadmap that helps you understand the journey properly.
2. Helps You Pitch Effectively To Investors And Lenders
No reasonable person wants to partner with a business that is likely to fail, in a civilized world where 50% of startups fail in their fifth year in business.
Investors and loan providers will want to know where your business is headed before they can part with their money.
They need to know that you’re serious with your business, that you have a concrete marketing strategy, that you have strong branding, and that your business can be financially stable.
A business plan helps you to check all this giving you an edge and helping you to attract the right investors.
3. Make Better Decisions
Great companies are only in their echelon of greatness because they made good and smart decisions that boosted the overall performance of the company.
During a crisis or at certain growth levels of your business, you’ll be required to make key decisions, say, hiring new employees to join the workforce or buying a new machine.
Without a well-written business plan, you’re likely to make irreversible mistakes that could cost your business venture.
An up-to-date business plan gives you all the necessary tools and information you need to make confident decisions, yet minimizing the risks.
4. Understand Customers Better
A business that focuses on the needs of the customers and puts them as a priority is certainly to succeed.
On the other hand, any company that attempts to create products or services for the sake of its uniqueness alone without exploring the needs of potential customers is on its way to falling.
Needless to say, the number one reason you’re in business is that you’re solving problems; all others including profit-making are secondary.
And with that in mind, you need to understand the behavior, location, challenges, and age of your potential customers so you create products or services that best resonate with them.
A well-written business plan will have a section that includes these, allowing you to always have a reference point whenever you’re stuck or about to make key decisions.
5. Devise Working Marketing Strategies
Marketing is enthusiasm transferred to the customer.
Having understood your customer’s pain points and current needs, a business plan allows you to have a written document that highlights the marketing strategy that best presents your sell your products and services to them faster.
A solid business plan will give you a detailed and clearer breakdown of your marketing and how to best approach it.
6. Analyze Your Competition
Most startups fail in business because they don’t properly study their markets and ignore competition.
Overlooking the importance of competitor analysis is another great recipe for failure in business.
It doesn’t matter if you’re bringing in something new, someone is already doing something similar, why not learn from them or look for ways to do better than them.
As a business, you can either have direct or indirect competitors or both.
With a business plan, you’re forced to do proper competitor analysis, helping you to identify new opportunities to outsmart your competitors.
7. Determine Your Financial Needs
A business plan gives you proper insights into the financial needs of your business – much the way you would count the cost before buying a new shoe.
Are you going to need $1 million to start your business?
What amount of money would you need at a certain stage of your business?
These questions and more can be properly answered with a business plan, helping you plan and increase your chances of succeeding in business.