Misconceptions about Business Plan and Why you need one for your Business

Oftentimes, entrepreneurs and business owners think they need a Business Plan only when they want to pitch to an investor or when they need to secure funding, this is a one-sided idea of what a Business Plan can do.
Unfortunately, some entrepreneurs still think they do not need a Business Plan.
Some think investors don’t (or won’t) read the plan.
Some think that the purpose of the Plan is only to raise funding, and that it’s only for start-ups.
Some also have the notion that a Business Plan should be short.
Some think that Business Plan should be written once.

All these above stated points are wrong notions about Business Plan. Usually, Business Plans are written to project a business for a period of either 3 or 5 years, this means that an update of the plan will be necessary after the 3/5years period, to plan for another period.

Also, a detailed Business Plan shouldn’t be short, investors want to know everything that needs to be known before they put in their money, they shouldn’t be left to guess. A detailed plan shouldn’t be less than 50pages of A4.

Sincerely, I strongly believe that those who think investors don’t read Business Plans are making a joke out of it, really. Why would they not read a document that tells them all they need to know about what they want to put money into? On the contrary, investors don’t just read the Business Plan, they study it. That’s how important it is to them.

Business plans are inherently strategic, the purpose is not to raise fund alone, neither is it for start-ups alone. A well written plan can do much more than just raise funding, and it can help existing businesses to properly manage their operations.
Below are some of the reasons a Business Plan in needed for both start-up and existing businesses…

1). A Business Plan is needed to ‘sell’ the business

Before you can ‘sell’ your business, you need to show the growth progressions/regressions of the business, the income statements, profit & loss statements…
These are very important to determining what your business is truly worth, and if your business is capable of growing beyond its current state.
A well written business plan would show potential investors the true business opportunity that is available in your business.

2). A Business Plan helps to position the business, strengthen the brand, and uncover new opportunities

Preparing a business plan can help you know where your business stands in the marketplace. This is key to knowing how to better present your business to your target market, position you well against your competition, and show you how to generally strive for growth.
During your market research process, you could also discover new business opportunities.
Looking at your business plan from different angles would give you a newer perspective on how to address customers. This could show you problems that consumers already face and how to solve them.

3). A Business Plan keeps you organized

Business plan will help you stay organized and on track.
A good plan in a properly organized business would lead to more revenues generated yearly.
Without a good plan, you could easily lose your focus, and your revenues would go on to suffer for it.

4). A Business Plan helps to secure investments

Just like financial institutions and professional money lenders, investors want to be sure that they’re not throwing their money into the thin air. They want assurances that their investments will pay off.
Since investment is highly competitive, investors will not just need a business plan, but would want to see in-depth profit and loss statements, cash flow projections, balance sheets, and a whole lot more.

5). A Business Plan helps to manage cash flow

A plan can help your business manage its cash flow better.
If the cash flow in a business is not properly monitored, the operations could go numb.
Most businesses fail not because of unprofitability, but because they were unable to control their debts and general expenditure.
With a well written business plan, you can ensure your business focuses only on what matters, and cuts out most expenses.

6). A Business Plan can help to grow an existing business

An existing business can make a business plan for the sole purpose of documenting new strategies and reallocating resources to sprout growth.
When a business feels it’s moving in the wrong direction or not hitting its projected revenues, it could take a step back to the drawing board and draw up a new plan to redirect the company’s affairs. This technique is particularly helpful for businesses that have been experiencing a negative cash flow for a while.

7). A Business Plan helps to predict the future

A good plan can help you manage the direction of your business more efficiently.
Putting down your strategies, consumer insights, and more on paper would help you better forecast where you plan to see your business in the near future.
This will help you understand your business, and guide you in making related decisions that will help you improve the business.
As you determine what route your business would take, existing and forecasted market trends would give you a fair idea on whether your plans would be effective on the long-run or not.

8). A Business Plan helps to establish benchmarks and milestones

Writing a business plan is a way to set milestones for your business.
By setting benchmarks, you can stay focused and work harder to attain your goals. Any business without milestones set would be unable to truly measure its progress rate.
When goals are set, attained, set again, and attained again, your business can experience growth in a good direction.
Using a business plan as a benchmarking tool would help you know where you’re exceeding your expectations, where you have shortcomings and a whole lot more.

Now, writing a Business Plan can be daunting, this is simply because it is one of the most technical documents in the corporate world.
You may want to click here to learn how to write a standard Business Plan.

My name is Emmanuel Afolabi, I am an extraordinary corporate writer & trainer, and I run DashingWords.

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