The importance of a business plan cannot be overlooked. This detailed document is an effective tool and roadmap that provides greater clarity on all business sectors to encourage successful decision making in the future. It can be overwhelming to start a business plan. Therefore, we have outlined the key areas of the document and some of the many benefits it can have for new entrepreneurs.
What is a Business Plan?
Budding entrepreneurs are sometimes eager to jump ahead and launch their business without first developing a detailed strategy. However, it’s a common downfall to ignore the importance of a business plan.
The document is a vital tool to access the sustainability of an organisation before investing too much time and money. An effective business plan will provide insight into the resources and steps needed to achieve business goals and the timeline of anticipated results. If an organisation is already established, a business plan should be updated each year as a method to navigate expansion and guide growth.
Key Areas of a Business Plan
A business plan should include information on marketing logistics, cash flow projection, competitive analysis and long-term growth. Highlighted below are key areas in the document which set the foundation for a strong business:
1. New asset evaluation: It’s common for small businesses to be budget-conscious, therefore purchasing new equipment such as software, office appliances, and company vehicles is not a simple decision. A business plan will determine the feasibility of purchasing new assets, whether to buy or lease them and the optimal amount.
2. Employee objective setting: Business plans are a great referencing tool to guide employees in the right direction. The document should be consulted regularly to measure employee objectives and performance, as well as provide structure to meet goals.
3. Plot growth: A business plan acts as an operational roadmap to focus growth efforts and business direction. The importance of a business plan cannot be ignored in this regard as it helps business owners determine the steps needed to expand their organisation.
Benefits of a Business Plan
An effective business plan will help owners successfully evaluate all areas of their business, increasing their chance at success. Below are the top three benefits of a business plan:
1. Decision making: Being a business owner often involves continual decision making and crisis management, leaving little time to consider the impact short-term decisions have on their long-term goals. An effective business plan can help owners evaluate core strategies and the outcomes of critical decisions ahead of time.
2. Avoid mistakes: According to Real Business, only 45% of UK small businesses make it to their fifth birthday. There are common reasons as to why small businesses fail, including an inadequate team, cash flow issues and lack of market needs. Critical mistakes can be addressed in a well-crafted business plan before they have a negative impact.
3. Secure financing: If a business owner is hoping to secure investment, they will need to pitch a solid business plan to demonstrate the viability of their business to potential investors. The document should answer key questions around revenue generation and profitability. We recommend seeking help from small business accountants to ensure the financial aspects of your plan stack up.
A well-written business plan can influence the longevity of a business. By investing adequate time at the initial stages of business development, you are more likely to avoid critical mistakes in the future.