Do I Need a Business Plan?

• Posted on November 5, 2008
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Business plans are used primarily for raising capital and guiding growth. Not everyone who starts and runs a business begins with a business plan, but it certainly helps to have one.

If you are seeking funding from a venture capitalist, bank, or other lending institution, a comprehensive business plan that demonstrates sound business reasoning will help you negotiate through the funding process. The business plan will convince investors that your new venture is worth funding, that you have identified an opportunity and have gathered the management and organization needed to be successful.

A well-written business plan is the best way to show investors that you deserve their financial support. Make sure that your plan is clear, accurate, focused and realistic. Use it to convince prospective investors that you have the tools, talent and team to build and run a successful business.

A business plan can be a valuable tool in analyzing all aspects of your business as it grows. Since most business owners are in fact learning on the job, a business plan takes this information and analyzes different possibilities without the risk and cost of working them out in real time. A variety of marketing or pricing scenarios can be played out on paper before testing even occurs.

The business plan helps focus the entrepreneur by:

• Defining objectives and detail programs to achieve forecasted results.
• Creating a regular business review and course correction process.
• Evaluating a new product line, promotion, or growth opportunity.
• Analyzing the quality of staff and future staffing needs.
• Clarifying financial requirements and cash flow forecasts.
• Refining strategy when making difficult decisions.
• Determining the strength of the competition and analyzing market trends.

Understanding where your venture is heading can determine whether or not you need to plan. Your business plan can help you work smarter, anticipate the future, test ideas and help create a results-oriented organization.