Key to Success | Need for Business Planning

Need for Developing Business Plan

A business plan enables to demonstrate to stakeholders, including founders and investors, that there is potential for considerable growth in a large market. It should illustrate that your company is capable of achieving significant market power with a sustainable and differentiated product or service offering.

The business plan also demonstrates that the opportunity is a good investment deal. It should include value-enhancing milestones and a realistic valuation that will enable investors to achieve their target return on investment. The plan should also outline a clear exit strategy.

The exercise of developing and writing a business plan provides the entrepreneurial team with the opportunity to organize your collective insights about the company and, the business opportunity, as well as how you plan to achieve your objectives.

Need for Business Planning

The business plan is the product, but the planning process is more important. Planning, tracking, reviewing and setting goals, and executing on the plan, are the foundation of running your business. The following are the need for business planning:

  1. To prove that you’re serious about your business
  2. To establish business milestones
  3. To better understand your competition
  4. To better understand your customer
  5. To enunciate previously unstated assumptions
  6. To assess the feasibility of your venture
  7. To document revenue model
  8. To determine financial needs
  9. To attract investors
  10. To reduce the risk of pursuing the wrong opportunity

To prove that you’re serious about your business

A formal business plan is necessary to show all interested parties employees, investors and partners that you are committed to building the business

To establish business milestones

The business plan should clearly lay out the long-term milestones that are most important to the success of your business.

To better understand your competition

Creating the business plan forces you to analyze the competition. All companies have competition in the form of either direct or indirect competitors, and it is critical to understand your company’s competitive advantages.

To better understand your customer

Why do they buy when they buy? Why don’t they when they don’t? An in- depth customer analysis is essential to an effective business plan and to a successful business.

To enunciate previously unstated assumptions

The process of actually writing the business plan helps to bring previously “hidden” assumptions to the foreground. By writing them down and assessing them, you can test them and analyze their validity.

To assess the feasibility of your venture

How good is this opportunity? The business plan process involves researching your target market, as well as the competitive landscape, and serves as a feasibility study for the success of your venture.

To document revenue model

How exactly will your business make money? This is a critical question to answer in writing, for yourself and your investors. Documenting the revenue model helps to address challenges and assumptions associated with the model.

To determine financial needs

Does your business need to raise capital? How much? The business plan creation process helps you to determine exactly how much capital you need and what you will use it for. This process is essential for raising capital for business and for effectively employing the capital.

To attract investors

A formal business plan is the basis for financing proposals. The business plan answers investors’ questions such as: Is there a need for this product/ services? What are the financial projections? What is the company’s exit strategy?

To reduce the risk of pursuing the wrong opportunity

The process of creating the business plan helps to minimize opportunity costs. Writing the business plan helps you assess the attractiveness of this particular opportunity, versus other opportunities.

To force you to research and really know your market

What are the most important trends in your industry? What are the greatest threats to your industry? Is the market growing or shrinking? What is the size of the target market for your product/service? Creating the business plan will help you to gain a wider, deeper and more nuanced understanding of your marketplace.

To attract employees and a management team

To attract and retain top quality talent, a business plan is necessary. The business plan inspires employees and management that the idea is sound and that the business is poised to achieve its strategic goals.

To Plot the course and focus the efforts

The business plan provides a road map from which to operate, and to look to for direction in times of doubt. Without a business plan, you may shift your short-term strategies constantly without a view to your long-term milestones.

To attract partners

Partners also want to see a business plan, in order to determine whether it is worth partnering with your business. Establishing partnerships often requires time and capital, and companies will be more likely to partner with your venture if they can read a detailed explanation of your company.

To position your brand

Creating the business plan helps to define your company’s role in the marketplace. This definition allows you to succinctly describe the business and position the brand to customers, investors and partners.

To judge the success of your business

A formal business plan allows you to compare actual operational results versus the business plan itself. In this way, it allows you to clearly see whether you have achieved your strategic, financing and operational goals.

To reposition your business to deal with changing conditions

For example, during difficult economic conditions, if your current sales and operational models aren’t working, you can rewrite your business plan to define, try and validate new ideas and strategies.

To document your marketing plan them?

How are you going to reach your customers? How will you retain them? What is your adverting budget? What price will you charge? A well- documented marketing plan is essential to the growth of a business.

To understand and forecast your company’s staffing needs

After completing your business plan, you will not be surprised when you are suddenly short-handed. Rather, your business plan provides a road map for your staffing needs, and thus helps to ensure smoother expansion.

To uncover new opportunities

Through the process of brainstorming, white-boarding and creative interviewing, you will likely see your business in a different light. As a result, you will often come up with new ideas for marketing your product/service and running your business.