Let us first look at some available statistics before reasons for business plans. About 85% of all businesses that fail to plan their business plan fail. Nevertheless, 85% of those that write their business ultimately succeed. In addition, 40% of those that draw up a strategic plan double their business during the first 2 years of writing their business plan. Moreover, 70% of those that write their business plan will eventually exceed their expectations in the first 5 years.
It is therefore quite strange not to wish to be part of those who are succeeding. The way to succeed in business start from the commencement. Do you have a viable business plan? Have you written any business plan at all? In this article, we will look at reasons why we need to prepare a business plan.
1. To determine the feasibility of a particular venture or project.
Sometimes when you analyse business ideas into different parts, it makes one to see everything as a whole. All the dark areas become visible. This makes it easy to determine the feasibility of the business model at the planning stage.
It is really time consuming to plan out and start a business. Discovering at the later part that a business lacks feasibility is really time wasting. But if an entrepreneur takes time to prepare a business plan taking an objective and critical look at the business, may throw out its weaknesses and strengths at the early stages before making great financial commitment into the business.
2. To identify the required capital to start off a new business or expansion of existing business.
Obviously, this is the most common reasons why business executives think of drafting a business plan. Often, it is because they are in need of emergency fund to finance the operation of the company. Accountants, attorneys and consultants may not have this emergence need to warrant preparing a business plan. Nevertheless, manufacturing, technology firms and some start-up businesses often find themselves in this situation. These companies are required to prepare business to show how viable their businesses are to bankers or investors.
3. To set the targets for the operations of the entire company which are usually categorized by cost or profit centres.
When businesses set targets for either cost or profit centres, it guides their operations. Every department runs to meet up with the set targets. The target set in the business plan are useful for this purpose. The entire company has something to run with.
4. Business plans are beneficial for setting business targets for the company.
It will later be translated into financial budgets and action plans. More so, you can develop a fully blown financial budgets using the business plan figures as the basis.
5. Take the opportunity to identify operational weaknesses
When one is aware of the weaknesses, it will, therefore, aid ability to formulate plans to remedy or minimize the impact on its profitability. Business plans exposes the operational weaknesses of the business. This will trigger actions to mitigate or eliminate its impacts on the business.
6. Identify new business opportunities and prepare plans on how to realize them.
Every business has opportunities and strength. It is usually good to explore these areas of opportunities to better position the organization against impending competitions.
7. Helps in Keeping an Eye on Your Competition
A business plan is where you will identify all the competitions you will face. Interestingly, this can be extremely helpful in many ways. Firstly, competition analysis may assist you to make decisions on where to locate an office. It may even serve as a warning to steer clear a particular product or service. Moreover, you may need to modify your marketing to make your product or service somewhat uniquely branded.
8. Helps You Develop New Products and Services
Sometimes the aftermath of extensive researches into certain niche market may bring about development of another product or service. Preparing a business plan before the take-off of the business is therefore somehow essential. The outcome of your researches may lead to the development of another product entirely not originally planned for.
9. Helps You Expand Your Marketing
Business plans may expand your marketing horizon and introduce you to an existing market where your products and services are in much demand which you never dreamed about. Sometimes, it exposes you to an entirely new market. All these are the benefits of making adequate plans before commencement of your business.
10. To monitor cash requirement at every stage of the business.
Cash is the blood of an organization. Insufficient volume of blood may lead to death. One of the reasons business plans is that it will let you know before hand when you may run into cash flow challenges. Otherwise, you will know when to inject more funds or where to make enough savings to cater for some operations in the future that are key to the organization and require more capital.
11. One Reason for Business Plan is Communication
Human resource is the most valuable asset of an organization. It is exciting and more rewarding when you have a team of sharp and smart people running the affairs of your company. A sure and better way to communicate the intent of the organization to these people is by preparing a business plan that covers every operation of the company. This is one of the reasons for business plans preparation. You may need to update this business plan from time to time to make it quite relevant to the operations of the organization. This may be all you need to keep your head above the water.
Your business plan may contain a roadmap for your organization or timeline that you will follow at every stage of the operation. It is not good enough to prepare a business plan and just use it to decorate the shelf. But it is an excellent benchmark to conduct annual review throughout the entire life of your organization. This is a good reason for business plan preparation.