A business plan is perhaps the most important document that every prospective business owner needs to have. Formalizing a plan for your business sets you on the pathway to growth and success. A useful business plan is one that is documented; not just stored in the head of the business owner or made up as the business progresses. Here are five reasons why having a business plan is essential for businesses:
Five reasons why you need a business plan
- Avoid Making Big Mistakes– One of the most significant benefits of a proper business plan is that it helps you avoid certain pitfalls. As you write the plan, you will be able to identify and correct any flaws that the business idea might have, possibly helping you avoid mistakes as your business is established.
- Necessary for Raising Capital – A comprehensive business plan is critical to obtaining funds for your business. Investors want to know you have a long-term plan for your business. A solid business plan also includes anticipated obstacles as you grow your business – a great way to reassure potential investors that you are well-prepared for ALL challenges ahead.
- Provides a Roadmap– One of the most important reasons to create a business plan is that it helps you, the owner, set clear goals and step-by-step tactics to achieve them. Put simply, this plan serves as a yardstick to help you take stock of progress as your business develops. For instance, common elements of a business plan include projections on things like revenues, clientele, and more. As you move further along the business cycle, you can always look back and measure where you are in relation to where you are expected to be. Is your plan working or not? Do you need to make some adjustments? Questions such as these will be laid out as you check the business plan to see where you stand. Then, you can take action as required.
- Holds you, the business owner, Accountable – As a business owner, one thing you need to understand with your business plan is accountability. Over time, we have worked with many business owners who chase revenues or goals that were never drafted in the first place. In most of these cases, the potential benefits (such as revenues or opportunities) sound attractive. However, more often than not, the excitement that these potential opportunities provide never pans out. The owner ends up wasting time, energy, and resources on nothing. So, our recommendation is this: As a business owner, you would have to explore multiple opportunities, but determine how every opportunity impacts the direction of the business as well. With a written plan, a business owner could always measure a potential opportunity based on how it affects the business. If it could help you achieve the objectives outlined in the business plan, then it is viable.
- Facilitates Decision-making – When in doubt about the direction of your business, always refer to your business plan. This is the framework for your business. If your plan is well-written, it can be a great tool to help with those hard business decisions down the road.
While there are several reasons why creating a business plan could potentially benefit your business, it is important to remember it is an evolving document that is updated periodically. It should also account for factors that could have been missed or lessons learned along the way. The ultimate objective is to have a realistic plan and to follow it as your business grows.
The team at Rektio Accounting as a proven track record in helping businesses exceed their financial goals. Contact us to get your business on track.