Trying to start a business without a plan is like trying to build a house without a blue print or going on an unknown journey without a map. While it is possible to start a business without a plan, but your chances of success are much greater if you have a plan.
On the long run, preparing a business plan will save you time and money by assisting you to form a reasonable and sound blueprint before spending your time, money, energy and resources on an idea that may not work.
A business plan will also give you the confidence that you will need if you are going to approach banks for a business loan.
No doubt, writing a business plan is time consuming but the time invested will definitely pay off later. It is an investment that you will profit from in the future.
What is a business plan?
A business plan is a step-by-step approach for fine-tuning your business ideas and putting them on paper. It is composed of several sections explaining important elements of the business plan such as the description of your product or service that you will sell, how you will market, what types of tools of technology will be used etc. The plan is also supported by financial statements that illustrate for example Sources and Uses of Funds, Profit and Loss, Balance Sheet/Income Statement etc.
While it is helpful to ask for assistance in writing the business plan, you should be familiar with the plan yourself since you will be the one to implement the business once it starts.
A business plan serves two important functions:
- as a road-map or blueprint to follow in operating your business.
- as a tool that you can use in. obtaining financing.
Why plan ahead?
Business plan will show if the business is a good one. To know whether business can make profit in future. To have an idea of the sales and cost your business can expect.
A business plan enables the owner of the business to focus on every part of the business one step at a time – this will enable the operator to see clearly which aspects of the business require improvement.
A business plan is critical when applying for a bank loan. A well prepared plan convinces the bank that you know your business and you have a plan to succeed.
The plan will chart for your business – cash flow i.e. the money that comes in and goes out of the business. This is to make sure that you always have on hand enough cash for the business to grow and thrive.
Who reads the business plan?
- YOU: The business owner in order to help clearly chart the progress towards profit. It serves as a checklist to make sure that you have thoroughly plan every step of the business.
- BANK OFFICIALS: Before Bankers make decisions whether to or not to lend your business money, they want to know that you have a sound business plan to prove that it is a good idea. On the basis of a well thought out business plan, banks are more secured in their knowledge that you will invest the loan wisely.
- BUSINESS PARTNERS: You may decide to expand and bring in new partners. Before potential business partners invest, they will want to read the business plan in order to evaluate the investment.