Making the decision to start a new business is both an exciting and stressful experience. Starting a business involves many tasks and obstacles, so it is important to focus before taking action. A solid business plan can provide direction, help you attract investors, and keep your momentum going.
No matter what industry you plan to enter, a business plan is the first step in any successful business. Developing your business plan helps you determine where you want your business to go and identify the steps needed to get there. It is a key document for your business to both guide your actions and monitor your progress.
What is a business plan for?
Think of a business plan as a road map. It enables you to solve problems and make key business decisions, such as marketing and competitive analysis, customer and market analysis, and logistics and operational plans.
It can also help you organize your thoughts and goals, as well as give you a better idea of how your business will operate. Good planning often makes the difference between success and failure.
Here are nine reasons why your business needs a business plan.
1. Prove that your idea is viable
Through the process of writing a business plan, you can assess whether your business will be successful. Understanding the dynamics of the market, as well as the competitors, will help determine if your idea is viable.
This is also the time to develop financial projections for your business plan, as the estimated start-up costs, a profit and loss forecast, a profitability analysis and a Cash Flow. By taking the time to study the viability of your idea, you can establish goals and strategies to support your path to success.
A proper business plan proves to all interested parties, including potential investors, customers, employees, partners, and most importantly yourself, that you are serious about your business.
2. Set important goals for yourself
As a business owner, most of your time will likely be spent managing day-to-day tasks. Therefore, it can be difficult to find time after starting your business to set goals and milestones. Writing a business plan allows you to set important goals for yourself in advance for three or even five years. Create short and long term business goals.
3. Reduce potential risks
Avoid unexpected dangers to your business by doing your research before you start. A business plan opens your eyes to the potential risks your business could face. Don’t be afraid to ask yourself the tough questions that may require research and analysis to answer them. It is also good practice in how your business would actually handle issues when they arise. Incorporate a contingency plan that identifies the risks and how you would respond to them effectively.
The most common reasons why businesses fail include:
- Lack of capital
- No impact or need in the market
- Unwanted pricing (too high or too low)
- Explosive growth that drains all your capital
- Strong competition
Lack of capital is the number one reason businesses fail. The best way to overcome this problem is to take the time to figure out how your business will generate income. Build a comprehensive model to help mitigate future risks and long-term problems. It can be turned into a tool to manage growth and expansion.
4. Secure investments
Whether you are planning to apply for an SBA loan, build a relationship with angel investors, or seek venture capital funding, you need more than just a sales pitch to get funding. All credible investors will want to review your business plan. While investors will focus on the financial aspects of the plan, they will also want to see if you’ve spent time researching your industry, developing a viable product or service, and creating a solid marketing strategy.
When developing your business plan, think about how much capital raised you need to get your idea off the ground. Determine exactly how much financing you will need and what you will be using it for. This is essential for raising and using capital.
5. Allocate resources and plan purchases
You will have many investments to make when starting your business, such as product and service development, new technologies, hiring, operations, sales and marketing. Resource planning is an important part of your business plan. This gives you an idea of how much you will need to spend on resources and ensures that your business will manage those resources efficiently.
A business plan provides insight into the assets and investments required for each item. A good business plan can also determine when it is possible to expand a store or a larger workspace.
In your plan, include research on new products and services, where you can buy reliable equipment and what technologies you might need. Allocate capital and plan how you will finance large purchases, for example with a Chase Small Business Checking Account Where business credit card.
6. Build your team
From seasoned executives to a skilled workforce, a compelling business plan can help you attract top talent, ideally inspiring management and employees long after hiring. Business plans include an overview of your leadership team as well as the different roles you need to fulfill immediately and beyond.
Small businesses often employ specialist consultants, contractors and freelancers for individual tasks such as marketing, accounting, and legal assistance. Sharing a business plan helps the larger team work collectively in the same direction.
This will also come into play when you start working with new partners. As a new business, a potential partner may request to see your business plan. Building partnerships takes time and money, and with a solid business plan, you have the ability to attract and work with the kind of partners that your new business needs.
7. Share your vision
When you start a business, it’s easy to assume that you’ll be available to guide your team. A business plan helps your team and your investors understand your vision for the business. Your plan will outline your goals and can help your team make decisions or act on your behalf. Share your business plan with employees to align all of your staff with a collective goal or objective for the business. See employee and stakeholder ownership as a compelling and motivating force.
8. Develop a marketing strategy
A marketing strategy details how you will reach your customers and build brand awareness. The clearer your brand positioning is to investors, customers, partners and employees, the more successful your business will be.
Important questions to consider when developing your marketing strategy include:
- What segments of the industry are we pursuing?
- What is the value proposition of the products or services we plan to offer?
- Who are our customers ?
- How are we going to retain our customers and keep them engaged with our products or services and our marketing?
- What is our advertising budget?
- What price are we going to charge?
- What is the general appearance of our brand? What are our brand guidelines?
- Will we need to hire marketing experts to help us build our brand?
- Who are our competitors? What marketing strategies worked (or didn’t work) for them?
With a thoughtful marketing strategy built into your business plan, your business goals are much more within reach.
9. Focus your energy
Your business plan determines which areas of your business to focus on while avoiding possible distractions. It provides a roadmap for critical tradeoffs and resource allocation.
As a business owner, you will feel the need to resolve all of your internal issues and those of your customers, but it is important to stay focused. Keep your priorities in mind as you start building your business.
As a small business owner, writing a business plan should be one of your top priorities. Read our Checklist for starting a business and learn how to take your business from a plan to a reality. When you are ready to begin, talk with an investment banker from Chase open a Chase business verification Where savings account today.