A business plan is a very important strategic tool for entrepreneurs. A good business plan not only helps entrepreneurs to focus on the specific steps necessary for their to make business ideas succeed, but it also helps them to achieve both their short-term and long-term objectives.
If you fail to plan, you are planning to fail! ― Benjamin Franklin
Venture capitalist and Silicon Valley pioneer Eugene Kleiner once stated that writing a business plan forces you into disciplined thinking. An idea may sound great, but when you put down all the details and numbers, it may fall apart.
While a business plan is absolutely essential in entrepreneurship, not every entrepreneur sees the need for it. Many are reluctant to have their plan written down. In fact, there are numerous articles online claiming that the business plan is dead or irrelevant. Of course not everyone agrees with that. A large number of business funding experts, agree that having a good business idea is not enough. Even excellent business ideas can be totally useless if you cannot formulate, execute and implement a strategic plan to make your business idea work.
If you're looking to raise funds from institutional investors and lenders, keep in mind that having a good business plan is extremely valuable. You should aim to have a well documented business plan that speaks for itself. It needs to be clear and easy to read and understand.
Unless commitment is made, there are only promises and hopes; but no plans ― Peter F. Drucker
Before writing a business plan, it is important to consider two important factors-
- Who will the reader be?
For example, If you are interested in raising capital, it is very likely that investors will be your target audience. If you are interested in partnerships or joint ventures, your potential business partners will be your audience.
- What do you want their response to be?
Depending on your target audience, focus on the key message you want them to receive in order to get the response you want.
Here are 4 reasons why you need a business plan
1. To raise money for your business
Potential investors or lenders want a written business plan before they give you money. A mere description of your business concept is not enough. Instead, ensure you have a thorough business and financial plan that demonstrates the likelihood of success and how much you will need for your business to take off.
2. To make sound decisions
As an entrepreneur, having a business plan helps you to define and focus on your business ideas and business strategies. You not only concentrate on financial matters, but also on management issues, human resource planning, technology and creating value for your customer.
3. To help you identify potential weaknesses
Having a business plan helps you to identify potential pitfalls in your idea. You can also share the plan with others who can give you their opinions and advice. Identify experts and professionals who are at a position to give you invaluable advice, and share your plan with them.
4. To communicate your ideas with stakeholders
A business plan is a communication tool that you can use to secure investment capital from financial institutions or lenders. It can also be used to convince people to work for your enterprise, to secure credit from suppliers, and to attract potential customers.
Creating a business plan involves a lot of thought. You need to consider what you want to do, and use that as a starting point. It doesn't need to be complicated. At its core, your plan should identify where you are now, where you want your business to go, and how you will get there.
Writing a good business plan, the Ernst and Young Business Plan Guide adds, can’t guarantee success, but it can go a long way toward reducing the odds of failure.
Cover Image by Olu Eletu