Making the decision to start a new business is an exciting but stressful experience. Starting a business involves many tasks and obstacles, so it is important to focus before you act. A solid business plan can provide direction, help you attract investors, and ensure you maintain momentum.
No matter what industry you plan to get into, a business plan is the first step to any successful business. Developing your business plan helps you determine where you want your business to go and identify the steps needed to get there. It is a key document for your business to both guide your actions and track your progress.
What is a business plan used for?
Think of a business plan as a roadmap. It enables you to solve problems and make key business decisions, such as marketing and competitive analysis, customer and market analysis, and logistics and operational plans.
It can also help you organize your thoughts and goals, as well as give you a better idea of how your business will work. Good planning is often the difference between success and failure.
Here are nine reasons why your business needs a business plan.
1. Prove your idea is viable
Through the process of writing a business plan, you can assess whether your business will succeed. Understanding market dynamics, as well as competitors, will help determine if your idea is viable.
This is also the time to develop financial projections for your business plan, such as estimated start-up costs, a profit and loss forecast, a break-even analysis and a cash flow statement. By taking the time to explore the viability of your idea, you can establish goals and strategies to support your path to success.
A proper business plan proves to all interested parties – including potential investors, customers, employees, partners, and most importantly yourself – that you are serious about your business.
2. Set important goals
As a business owner, most of your time will likely be spent managing day-to-day tasks. Therefore, it can be difficult to find time after launching your business to set goals and milestones. Writing a business plan allows you to set important goals in advance for three or even five years. Create short and long term business goals.
3. Reduce potential risks
Prevent your business from falling victim to unexpected hazards by researching before you start. A business plan opens your eyes to the potential risks your business may face. Don’t be afraid to ask yourself the tough questions that may require research and analysis to answer. It is also a good practice in how your business would actually handle issues when they arise. Incorporate a contingency plan that identifies risks and how you would respond effectively.
The most common reasons businesses fail include:
- Lack of capital
- Lack of market impact or need
- Pricing not studied (too high or too low)
- Explosive growth that drains all your capital
- Strong competition
Lack of capital is the most common reason businesses fail. To best mitigate this problem, take the time to determine how your business will generate revenue. Create a comprehensive model to help mitigate future risks and long-term pain points. It can be turned into a tool to manage growth and expansion.
4. Secure investments
What you plan to applying for an SBA loan, building a relationship with angel investors, or seeking venture capital funding, you need more than just an elevator pitch to get funded. All credible investors will want to review your business plan. While investors focus on the financial aspects of the plan, they’ll also want to see if you’ve spent time researching your industry, developing a viable product or service, and creating a solid marketing strategy.
When developing your business plan, consider how much capital you need to raise to get your idea off the ground. Determine exactly how much financing you will need and what you will use it for. This is essential for raising and employing capital.
5. Allocate resources and plan purchases
You will have many investments to make when starting your business, such as product and service development, new technologies, hiring, operations, sales and marketing. Resource planning is an important part of your business plan. This gives you an idea of how much you will need to spend on resources and ensures that your business will manage those resources efficiently.
A business plan provides details of the assets and investments needed for each item. A good business plan can also determine when it’s possible to expand to a larger store or workspace.
In your plan, include research on new products and services, where you can buy reliable hardware and what technologies you might need. Allocate capital and plan how you will finance large purchases, for example with a Look for a small business checking account or business credit card.
6. Build your team
From seasoned executives to a skilled workforce, a compelling business plan can help you attract top talent, ideally inspiring management and employees long after hiring. Business plans include an overview of your management team as well as the different roles you need now and in the future.
Small businesses often employ specialist consultants, contractors and freelancers for individual tasks such as marketing, accounting and legal assistance. Sharing a business plan helps the extended team collectively work in the same direction.
This will also come into play when you start working with new partners. As a new business, a potential partner may ask to see your business plan. Building partnerships takes time and money, and with a solid business plan, you have the ability to attract and work with the kind of partners your new business needs.
7. Share your vision
When you’re starting a business, it’s easy to assume you’ll be available to guide your team. A business plan helps your team and investors understand your business vision. Your plan will outline your goals and can help your team make decisions or take action on your behalf. Share your business plan with employees to align all of your staff towards a collective goal or objective for the company. See employee and stakeholder ownership as a compelling and motivating force.
8. Develop a marketing strategy
A The marketing strategy details how you will reach your customers and build brand awareness. The clearer your brand positioning is to investors, customers, partners and employees, the more successful your business will be.
Important questions to consider when developing your marketing strategy include:
- What industry segments do we pursue?
- What is the value proposition of the products or services we plan to offer?
- Who are our customers ?
- How will we retain our customers and keep them engaged with our products or services and our marketing?
- What is our advertising budget?
- What price will we charge?
- What is the general appearance of our brand? What are our brand guidelines?
- Will we need to hire marketing experts to help us build our brand?
- Who are our competitors? What marketing strategies have worked (or not) for them?
With a thoughtful marketing strategy incorporated into your business plan, your business goals are much more within reach.
9. Focus your energy
Your business plan determines which areas of your business to focus on while avoiding potential distractions. It provides a roadmap for critical trade-offs and resource allocation.
As a business owner, you will feel the need to solve all your internal problems and those of your customers, but it is important to stay focused. Keep your priorities in mind as you set out to build your business.
As a small business owner, writing a business plan should be one of your top priorities. Read our checklist for starting a business and learn how to take your business from plan to reality. When you’re ready to start, speak with a Chase investment banker to open a Chase business verification or savings account today.