Why Is A Business Plan Important?

Why Is A Business Plan Important?

What is a business plan?
A business plan can be concisely defined as “a formal statement of a set of business goals, the reasons these goals are believed attainable and the plan to reach these goals”. It is also a strategy for businesses to outline key viability aspects such as market research, competitor analysis, business purpose, financial projections, plans for growth, key stakeholders, a mission statement and more.

Anyone who starts a new business should have a business plan to give an overview of the company’s future. A well-written business plan is crucial to give entrepreneurs the ability to plan effectively, track progress over time and as a tool for continual improvement and growth.

Raising capital
Whether you are pitching to venture capitalists, private investors or borrowing from a bank, it’s likely you’ll need a business plan. Investors will want to determine the viability of your business and check out if you are a sound investment. Having a well-constructed business plan, showing you have left no stone unturned and are on the right path, will provide them with the confidence they need to invest their capital. Financial forecasts, vital to investors, will also indicate there is a market for what your business is offering. According to a study by CBInsights, 38% of startups failed due to running out of cash or failing to raise capital, which further emphasizes the importance of getting this right.

Understanding your asset requirements
For new, small business owners who are often budget-conscious, effectively understanding how much money you need and what you will use it for can be tricky. A business plan can provide a real sense of clarity to the process of determining your financial needs, where you can allocate budget and whether it’s most appropriate for you to buy or lease certain assets. It will also help you understand when and how feasible it is for you to secure additional funding in the future.

Setting goals and objectives
Creating a business plan forces you to consider your goals and objectives for the business. This helps you make decisions with confidence, knowing you’ve planned ahead. Having foresight of SMART goals will help you to establish business milestones, but keeping track of your progress and revising your business plan as the business grows will help minimize your future risk. 

Understanding your customers and competitors
Gaining a good understanding of your customers and the competitive landscape is fundamental to the success of any new business. As part of compiling a business plan, you will be required to do some in-depth customer and market analysis, which will ultimately direct you as to whether your new business is a viable proposition or not. Having a grasp on who your customers are, why they buy, when they buy and where they buy will help foster a more cost-effective approach to your marketing and advertising efforts. Illuminating consumer trends and preferences along with constructing a dynamic marketing strategy will ultimately help propel the growth of your business.

Understanding strengths and weaknesses
It is critical to understand your company’s strengths, weaknesses and what your USPs are. Writing a business plan will allow you to spot any pitfalls in your idea before you have made any financial commitments. Sharing or writing your business plan with professionals will mean they can give their advice and opinions, which could, in the long-term, prove invaluable. It’s important to catch any threats to your business early. Writing a strong business plan can help by making you fully consider and comprehend the revenue model of your business, how you will position your brand, understanding your staffing needs and much more. The business plan will also be a strong indication to potential investors that you have been proactive in trying to understand the pros and cons of your entrepreneurial idea and therefore will make you a more attractive proposition.

How can cbm help?
As an entrepreneur, writing a business plan can be daunting, but is essential to define and focus your business on continued success. At cbm we specialise in business plans, priding ourselves on using only highly qualified and experienced business consultants to write fully bespoke business plans, tailored to each of our customer’s individual needs.

Check out our free Sample Business Plan and Business Planning Process and if you’d like our help or advice, please get in touch using our contact form or give us a call on 01604 420420.

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