10 Reasons You Need A Business Plan. A business plan, even just a one-pager with a few financial projections can be a valuable internal tool. This is a road map for even the smallest or earliest-stage idea. It can foster alignment, set the tone for the business and even help you craft your brand messaging.
1. It Holds You Accountable
When using any business plan format, there are standard questions that force you to think and create a long term vision and strategy for your idea. Once these are down on paper, they can serve as a guide to allow you to track your progress and hold yourself accountable for the future.
2. It Sells Your Business
Usually the business plan is a very important part of selling the business. Help buyers understand what you have, what it’s worth and why they want it.
3. You Can Create A New Business
Use a plan to establish the right steps to starting a new business, including what you need to do, what resources will be required, and what you expect to happen. The production of a credible business plan is one of the primary requirements for any entrepreneur seeking investment to grow.
4. To Manage Cash Flow
Careful management of cash flow is a fundamental requirement for all businesses. The reason is quite simple-many businesses fail, not because they are unprofitable, but because they ultimately become insolvent i.e., are unable to pay their debts as they fall due.
5. To Value A Business
Given that valuing firms is notoriously difficult and subjective, a well-written plan will clearly highlight the opportunity for any prospective investors, explain the value of the business, and increase the likelihood of a successful exit by the current owner.
Writing a business plan or putting together an investor deck allows you to think more clearly about what you’re doing and where you are going. Key point to remember though is that the minute that your business plan hits the printer it is already out of date, so don’t depend on it as your to-do list.
7. Confirm The Math
A lot of ideas sound great on paper and even in discussions. However, simple math can make or break an idea. Before we launch any new idea, we at least create a financial model to project the ROI from several realistic scenarios. You can save a lot of time and frustration thinking through the numbers, and making sure it’s possible to hit your revenue and profit goals.
8. Know Your Message
Business planning is incredibly helpful for describing what you do, understanding who your competitors are, and crafting a realistic three to five year plan. Each of these activities is crucial if you are looking to launch or expand a venture, and learning to speak concisely about your company will always be crucial no matter what stage you’re in.
9. Practice Makes Perfect
It’s great to write one simply to throw it away. The mental gymnastics are great. The plan is basically worthless the moment you’re finished, but it will force you to think about things you might not have otherwise
10. Establish Benchmarks
Business plans are a valuable, iterative, document that can serve as a successful bench-marking tool. Where did your business exceed expectations? In what areas did your strategy maybe fall short? While it’s fine to “pivot” your company based on what you’ve seen in the market, having something in writing puts the onus on you to be honest about your company’s performance.