Having a business plan will equip you with a clearer understanding of your business strategy and the current market. Whilst it doesn’t guarantee success on its own, a business plan will give you a much better chance to succeed and prepare for any risks that may arise.
New business owners often go into their new ideas without any research and simply rely on their intuition or confirmation bias to assume that it will be successful. However, no matter how confident you are about your business and its success, a prudent business owner will always create a business plan to outline how that success will be achieved.
In this article, we will look at the reasons to create a business plan to increase your chances of success.
Reasons to Write a Business Plan
Understand your market
A survey by CBInsights found that 35% of all failed businesses did so because there was no market need for their business. This suggests that a large number of businesses do not even consider where they fit within the market or if there are any opportunities for their services or products.
Before you begin your business venture, you must carry out the necessary market research within a business plan to understand where you fit and what the current market is doing.
Failing to do so will result in you being blind to the risks that may lie ahead. Market research is an essential aspect of any business plan and is one of the 8 key areas of a business plan.
Understanding Your Finances
Without any clear financial information it can be tough to understand the capital needs and the likely cash flow forecast for your business.
A business plan should include financial information from your research before starting your business. This includes the costs of capital expenditure, ongoing cost of sales, and staff costs.
This information helps you build a cash flow forecast that shows you how much money you need to make from your business venture to break even and eventually make a profit. Understanding this will help you have a clear idea of how to price your product or service and how much you need to sell per day, week and month.
Understand The Risks
Understanding risks is vital in a business plan; this outlines any problems that could arise that impact whether you can continue to trade. Some areas that to consider are:
- Economic downturns
- Competition
- Loss of staff or premises
By creating risk forecasts and looking at the impact they may have, you will be able to mitigate these risks should they arise.
With a new business, you may overestimate the number of sales you will make, and a good business plan will form “what if?” scenarios to create a forecast of earnings should these goals not be met.
A Good Idea Doesn’t Equal a Successful Business
Having a great business idea is one thing but turning that into a profitable business is another. You may have all the credentials to build the perfect business, but without a business plan, you may still fail.
A good business idea isn’t the only thing investors and bank managers look for in a startup business. They want to see that you have considered the financial implications of your business, and they also want to see that the business will still make money should anything go slightly wrong.
There is always some risk involved in business, whether you have a business plan or not, but having a well-researched business plan will mitigate many issues and help you understand what is needed to make sure it is a success.
Should You Hire an Expert?
A professional business plan writer could be an option for you if you have a great business idea but are unsure of how to showcase this in a business plan to an investor or bank manager.
Professional business plan writers understand what needs to be included in a business plan so that the key aspects of the business are highlighted, and the financials are appealing.