Advantages of a good business plan
Planning is a vital ingredient in the success of any business. Developing a business plan is not just a requirement, but a basic necessity for building a business today. It is an honest truth that every business needs a plan, from large corporations to entrepreneurs. Developing a business plan will help build a framework that would propel your business to its true destination. The business plan helps develop business guidelines, map out strategies, understand the target market, measure performance, monitor progress, make future plans, and raise additional capital for expansion or to boost operations.
Very often the thought on the mind of most business owners or investors is failure. The only way to overcome this failure is to address the common reasons businesses fail in the first place. At present, the world is facing economic challenges, global economic crisis, high cost of commodities, high rate of foreclosures, and difficulties in getting credit from banks, tough competition, complicated tax laws, and high operating costs, etc. All of these challenges facing businesses today make it even harder for start-ups to survive. In today’s world, both small and large companies have realized the need to assess their business potentials and formulate strategies for the future.
However, inadequate planning has been the reason so many businesses fail, and the rate at which they fail is staggering. It is generally believed that most businesses fail in their first year of operation and among those that fail, 80% of them do not have a well researched plan. It has been observed that business failure is not only related to small businesses, which I do not mention here, but also. Although the failure rate is very significant in small businesses, it is the main reason why a good business plan is needed. Probably to raise additional cash and provide potential investors and lenders with the information they need to make investment decisions. This makes developing a business plan extremely important. One’s business plan must stand out and his projection must be strong due to the increased competition in attracting financing for his business. Investors no longer risk their money on businesses that do not show great potential for them.
A business plan is like a road map, it shows the route to follow, the pitfalls to avoid to reach your destination. For example, if one decides to travel by road from one place to another, one would first need a road. map that shows you the route to follow. You will need to determine the distance and amount of gas your car will need to get you to your destination. In addition, you will need to calculate how much the trip will cost you, if you intend to raise money, if you are borrowing, how you intend to repay the money. With all this in mind, you now have a travel plan that will get you to your destination. Along the same lines, that is what provides a business plan, the strategies, the roadmap and a roadmap to success.
By the way, the idea of working with a business plan is that you stay focused on your stated goals. Statistics say that many businesses fail due to improper planning. If one does not know where one is going, any route seems to be the correct one. Most people make big mistakes when starting a business without proper preparation and planning. A good business plan helps you stay focused on your goals and execute the strategies that the plan helped you create. Just like a highway, one’s business plan has to be consulted to keep one’s focus and not run the business in a layman’s way.
Working with a business plan will prevent one from entering uncharted territory. The plan becomes a work map for him and his organization. It explains the do’s and don’ts, functions, and how each and every department should operate. It helps you become more efficient, reduces waste and redundancy, directs your resources to the right place, and is a guide to running your business successfully.
As a performance tool, it measures the progression of goals in one’s business through tracking, monitoring and evaluation, and can also be used as checkpoints to measure performance. Today’s world is so dynamic that what applies today might not apply tomorrow, and as a result of this dynamism, it is necessary to set up a good business plan to protect against the risks associated with doing business.
In addition to a performance tool, the perfect business plan must contain other necessary tools in its system that really make it a perfect plan. You must have an HR tool, a marketing and strategy tool, a financial tool, a communication tool, and most importantly, an investor guide. A well-defined business plan attracts others to be part of the vision. You have to have a well-defined goal and objective that will set the stage for bringing others into the business. You need to inspire teamwork and creativity among your people and ensure that everyone understands the goals and objectives.
However, a good business plan defines your target market, the kind of people you intend to sell your products to, how to reach them, promote your products, and defines your market mix: people, place, product and price. People: This defines the people involved in promoting one’s goods and services. Product: This defines what one’s goods and services are. Place: defines the location which also includes the means to deliver the goods and services. Price: defines how much one’s products and services are worth in the market, which will allow you to analyze and evaluate your return on investment (ROI). A marketing and strategy tool defines the strength of a business, its weakness, its opportunities and threats. Draw a graph that helps reduce costs and maximize profits.
A financial tool in a good business plan allows one to understand the financial position of your business, develop your budget and determine how your finances will be allocated. It also calculates return on investment return, analyzes your income statement, cash flow, balance sheet, breakeven point, that is, the analysis that tells you how many sales you need to break even, which gives the basis for setting the price of its products. and services, and at the same time calculates how much is needed to finance one’s business, which helps clarify your financial needs.
A good business plan communicates one’s ideas to people, communicates its mission, objectives, management approach, responsibilities, and demonstrates how one’s strategy will increase profitability and performance, identifying its audience without overstating its business goals and objectives. your business plan. A company communicates in two ways: internal communication and external communication. Internal communication includes communication of the corporate vision, shared value, strategies, guiding principles, and employee motivation. External communication includes branding, customer relations, marketing, advertising, media and public relations, etc.
A good business plan serves to attract financing from investors. Most investors will consider a business plan as a decision-making tool. There are certain things that investors look for in a business. These include one’s management team, each investor will want to know a business owner’s management skills, passion and dedication to her business. A complete description of how one’s products or services should be downloaded, their customer base, their market and financial analysis. A business plan must have a realistic financial forecast. All investors will always like to see their trading partner’s return on investment, cash flow and break-even analysis. Therefore, a well-crafted business plan is the key to attracting investors.