Is it true that you need a formal business plan before you start your new business? Well, the answer is not a simple yes or no, but instead depends on the circumstances. The following are seven situations where you need a formal business plan for your business.
1. You’ve Never Done This Before
If this is your first time starting a business, a business plan can be an indispensable resource for you to refer to as your business grows. It can serve as a road map that can help you reach your goals, or get you back on track when inevitable detours send you off course. Get a business plan template here.
2. To Obtain Financing or Attract Investors
Is your business venture ready to go, but for the funding? The business plan is the tool used by the entrepreneur to convey the viability of their business idea to potential investors and financiers. If you are going to be dependent upon outside capital to get your business off the ground, you need a well thought out business plan to convince the small business loan manager at your bank to approve a loan or to persuade potential investors to invest in your business idea.
3. To Avoid Costly Mistakes
To be clear, mistakes will be made as you get your business up and going. However, a business plan can help you avoid costly mistakes that will not only create a speed bump in your fast-lane to success, but may detour you altogether.
4. To Remind You of the Bigger Picture
Small business owners have a myriad of responsibilities. It is therefore understandable that often times the owner loses sight of the bigger picture and develops a tunnel vision approach focusing on the here and now and the business’ long-term priorities get skewed. A business plan can help to steer you back out of the tunnel where the big picture can be seen again.
5. To Understand the Responsibilities of Business Ownership
Too many business owners struggle due to a poor understanding of what business ownership is actually all about. There is a big difference between being the owner of a business that sells a product or service, and being a salesman who owns a business. The owner understands the responsibilities that come with owning the business; the salesman who owns a business knows how to sell, but understands little about running the business. A good business plan will touch on all areas of the business enterprise, thus informing the owner as to the totality of responsibilities that fall on their shoulders.
6. To Better Develop Your Product, Your Projected Revenue Streams and Your Marketing Plan
Do you have an idea for a business, but you can’t quite get a grasp on how exactly your idea becomes an income generating machine? Find answers to your questions by drafting a business plan. A thorough business plan will require that the idea for your business be looked at from all angles. With a complete business plan in hand you will be able to tell whether your intended business model is viable and has the essential ingredients to develop a product that generates actual revenue.
7. You Need It To Take That Next Step
Starting a business can be a daunting endeavor and taking that next step where idea becomes reality can be a difficult leap of faith. However, the transition from dreamer to doer can be made less overwhelming by having a solid business plan in place ready to guide you step-by-step.