Why Write
a Business Plan
Research indicates
that about 50% of businesses that start up will fail
within 3 years - a majority of failures are due to being
ill prepared to meet the changes that influence the
course of a business - in other words, a lack of planning.
Many people think that a business
plan is just a case of producing some financial projections.
A few financial spreadsheets do not constitute a business
plan. They do not take into account the Marketing, Personnel
and Operational aspects, which are required to support
the figures.
Business planning is not just for
Start-ups and small existing businesses are not exempt
from the process either, even if done on a smaller scale.
Firstly, they are more likely to be vulnerable to change
and secondly, if they have aspirations for growth, they
will need a plan to achieve it.
The benefits of having a business
plan are, principally, that it empowers managers, giving
them a direction to follow, providing an on-going analysis
of the state of the business, the marketplace and customers.
Having a plan displays responsible leadership, gives
confidence to the workforce that your feet are firmly
on the ground and promotes a cohesive operating structure
on which to sustain your business. It provides a benchmark
by which performance can be measured and, if necessary,
adjustments to strategy made.
There are a number of reasons
why you should write a business plan:
• To provide information about
your intentions to you and others.
• To persuade a third party to provide resources
or assistance.
• To help strategic thinking so you know what
you are trying to achieve and how to achieve it.
• To set financial targets so you can forecast
sales & control costs
• To raise money to invest in the business
• To provide a background against which to assess
new ideas & changes
• To clarify & set goals
• To analyse the existing state of the business
and what improvements might be achieved
How can a
business plan help your business?
A business plan is a strategy document that defines
where your business is going and how it intends to get
there. It is usually a long-term vision and normally
spans either 1, 3 or 5 years. A business plan is not
just useful at critical moments in time. It has a role
to play every day.
From a business owner’s point
of view, it is easy to get immersed in one subject -
usually your favourite - and ignore the ones you find
difficult or uninteresting. Therefore the business does
not develop in a balanced way and probably does not
realise its full potential in achieving results.
The process involved in producing
the plan is as valuable as the document it creates.
When you draw up a business plan, you are forced to
distil your ideas, rank your priorities and clarify
your objectives.
You have to analyse the resources you have available
- finance, people, facilities and premises - to see
whether you have enough to help you reach your end goal.
And if you don't, you have to work out how you will
make up the shortfall.
Also you have to research the markets
you compete in, to ensure that customers will continue
to want what you sell and keep a check on competitive
activity. In short, it makes you focus on the future
- and plan and be prepared for it - rather than just
flying blind.
Why it is
necessary to write it down
Even if you are the only person to ever see your business
plan, you should still commit it to paper.
• Firstly,
it stops you kidding yourself. If it’s down in
print you can't pretend, three months later, that it
didn't exist. If your plan didn't work out then it is
important to acknowledge it, assess what went wrong
and see what changes you need to make.
• Secondly, by going through the
process of writing it - you are forced to ask questions
you could otherwise ignore or fudge your way through.
• Thirdly, it gets you focused on
the important issues. It's easy to be distracted by
new opportunities that may come along. Having a pre-determined
plan allows you to compare any new ideas against your
original objectives. Will they really help you achieve
your goals? If not, you may want to adapt your strategy,
focus on them later or ignore them altogether.
• Lastly, if you are ever asked
to produce a business plan, having such a document immediately
to hand will make you and your business look more credible.
stepbystep micro
business plan software will help you write your plan
- see demo
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