5 Keys to a Business Plan and the Pitfalls of Not Having One
So you have put your heart and soul into this amazing idea that you had. You gave up your job and steady income to dedicate every waking hour to build your dream into a reality.
Which now has found its fundamental feet and people are starting to show interest, you have even managed to set a price and magically people are starting to pay you money for the privilege of using it.
Everywhere you go, you see ideas that you can apply to grow and perfect your baby. Everyone you speak to is showing interest in your business, some are even starting to suggest you could undertake global domination.
It’s getting to crunch time and you are realising that you either need an injection of capital or to bring in a partner. But in order to do either of those things, you need to understand what this business is worth.
Usually at this stage the business is more than likely making a loss, however it has the potential to make huge profit moving forward. So how do we value something like that?
It all comes back to the business plan and the strategic goals of the business. A typical business plan is usually 10 to 15 pages although they can be a one-page summary and contains three main sections regarding the business concept, the industry market and the financial aspects.
So why is a business plan so important? Here are five reasons why having a business plan is a must for any new business:
1. Clarify the Business Direction
This section defines the purpose and directors of the business which allows people to understand the goals and what needs to be undertaken moving forward. This can be a simple description of the business, its products or services. And it can explain the detail of each product or service to be offered as well as a detailed description of the perfect client.
2. Understand the Future Vision
Business goals evolve and adapt over time, however having a clear goal to where the business wants to be both in terms of reputation and market share in the industry can help guide it there. A clear set of values can help to steer the business through any difficulties. Additionally, having clear benchmarks, can help keep the business on track with its performance and allow you to see if corrections may need to be made.
3. Outline Business Management
A business plan outlines the organisational structure including roles and duties of key personnel. This is often used as a management tool to ensure the business is keeping true to its course.
It may also include a clear analysis of the industry and how the business sits in that industry including any strengths, weaknesses, opportunities and threats.
4. Obtain Needed Financing
By applying the business direction, future vision of the business and its management assessment, forecast budgets are able to be developed with a greater degree of certainty around the assumptions used to create said budgets. This is most helpful when applying for any level of financing or attracting a future joint venture or business partner.
5. Attract Quality Staff
These plans are also useful in attracting new employees as they describe the business’s core values, who it is and where it wants to go.
Without a plan, businesses have the risk of
- Running out of cash as start-up costs haven’t been fully researched or anticipated.
- Overlooking potential sale opportunities as the customer market wasn’t developed properly
- Being overwhelmed by too many options because the time wasn’t taken to nail down the vision for the business
- Not being profitable because the business model isn’t viable or well planned.
Take the time to settle these business plans and your business will have clear goals to lead it into the future.
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