10 Benefits of Creating a Business Plan (Video)
When it comes to business plans, the first question people usually ask is “Do I need a business plan to start a business?” and to be honest, the answer is no. So why should you create a business plan? It’s simple, starting a business without a business plan is like building a house without a blueprint. You need a strategy on how you plan to operate your business. If you aren’t convinced, then take a look at some of the benefits of having a business plan:
1. Raise Capital
It’s almost impossible to raise capital from investors or get approved for a bank loan without a business plan. Investors and banks want to know about your business, your projected financials (or past if you are an existing business) and your business strategy before they invest or lend you money. A business plan can help you show them that not only is your business viable, but you have strategy to make the business successful.
2. Test the Feasibility of Your Business Idea
How do you really know your business idea is worth the time, energy and resources it requires to turn it into a business? Businesses fail everyday right? While a business plan will not guarantee success, it can lower you chances of failure by helping you determine how viable your business idea is. In a business plan, you might discover some red flags, especially when you determine your profit margin for your products or services, the size of your target market and the projected profit or loss among other important characteristics that will help you determine if your business will succeed. This preliminary test can help you save time, energy and most importantly capital by investing into a bad business concept. Completing a business plan can also show you if you need to make a few changes or do something totally different in order to succeed.
3. Understand Your Industry and Competitors
Understanding your industry and your main competitors can help you create a market niche for your business by seeing where the market is currently being under-served or it can help you create a competitive advantage by seeing how you can do something better than how your competitors. By surveying the marketplace, a business plan can help you see opportunities that you did not previously know existed.
4. Define Your Target Market
When it comes to starting a business, one of the first things you need to figure out is who will actually buy your product or service? With a business plan, you should create a target market profile that helps you understand the characteristics of the people who will buy your product or service; by knowing your target market, you can create products and services specific to that audience as well as interact and market to them better because you know who they are and what makes them tick. In business, finding the right target market is key.
5. Determine Your Products or Service Offerings
When you have a business idea, it’s usually centered around a product or service you can offer; but when you create a business plan you will learn how to tweak those products or service to best fit the needs of your target market in addition to what other product or services you can offer and what product or service you planned to offer that may no longer be feasible.
6. Define Your Competitive Advantage
A competitive advantage is anything that allows you to outperform your competitors in the marketplace. One of the benefits of creating a business plan is that you devise a strategy to create a competitive advantage in the market place.
Marketing is the lifeline to every business. If your target market doesn’t know about your company or the product or services you offer, then how can they know how to buy from you? In the world of business, the company that is usually at the top of the marketplace is usually the company that has the best marketing. He (or she) who markets best wins. Creating a marketing strategy is very important to the success of a business and a business plan can help you organize your marketing strategy and the marketing programs your company will utilize.
8. Determine your Start-up Expenses
If your company is a start-up, knowing how much capital you need to invest to start is important. One of the biggest reasons businesses fail is because of a lack of capital. One of the benefits of a business plan is forecasting your start-up expenses and overcoming the hurdle of not having enough capital because you know how much money you need to invest or raise.
9. Forecast Sales and Financial Statements
In a business plan, you will have to make projections about how much revenue you expect to bring in and what you expect your expenses and net profit to be. Just as determining your start-up expenses can help you determine the resources you will need immediately to start your business, forecasting your sales and creating financial statements can help you determine what resources you need for the next 12 to 36 months. Lack of capital is not only limited to just starting the company but also the ongoing operation of the company. A benefit of a business plan is to knowing how big the hill (or mountain) is before you try climb it so you can set the expectation of what it will take to reach the top.
To summarize the previous points, the key benefit of creating a business plan is that you give yourself a starting point and a path to follow. With direction, you can map the actions you will need to complete to get your business where it needs to be in order for it to be successful. With a business plan you are able to assess what you need to do to not only survive in the market place but thrive in the marketplace.
Now that you know the benefits of creating a business plan; are you ready to fire your boss? Are you ready to start a business? Do you want to bring in extra income in addition to your job with a side business? If you do, then check out Horn and Shield Consulting latest product, Optimize Your Business Plan. With over 30 sections and fill in the blank templates and instructional videos for each section, Optimize Your Business Plan has everything you need to create a complete business plan within a day or two. To learn more about Optimize Your Business plan, click here.