The Must-See Notables For Crafting A Winning Business Plan
It has been observed that about 20% of new businesses pack up within the first year of their establishment, while a majority do not exceed a lifespan of five years. Many reasons can be adduced for this recurrent unfortunate phenomenon, chief among which is the use of a shoddy business plan.
It is often said that if you fail to plan, you inadvertently plan to fail. Every new endeavor requires an in-depth research on several issues surrounding the area of interest. Such a research will help you understand the concepts and how to develop an effective modus operandi to get intended results.
This is the reason every intending founder of any business needs to have an unambiguous business plan.
A great business idea is only the starting point of a promising business venture. What ensures the success of the business is a deliberate, in-depth and realistic approach in building a strategic plan to establish and grow the business till you can break even.
Though it is possible to eventually make a success out of a business without an initial business plan, it is a risk equal to traveling to an unknown place without a map or leading whatsoever.
This guide thus gives a case on the necessities of a business plan, and the possible drawbacks of not having one.
CLARITY OF VISION
The process of developing a business plan helps put your dreams and vision for your venture into perspective, enabling you to sort out unrealistic expectations and see more clearly.
More often than not, the excitement of having a potential solution that meets perceived needs of people in an area overshadows a person’s sense of caution and tact.
A business plan enables you to do some research that refines your vision to fit the real needs/wants of your target audience. A business plan also provides a document to critics who can help point out inadequacies, risks and fantasies in the business idea; helping to tweak the plan to a reasonable level.
The major danger upcoming/startup businesses face is running out of money. It is necessary to have a near-perfect idea of what total running (capital plus variable) costs will amount to over a specified period of time, so as to draw up how to gather the required fund.
This is one of the things a well drawn business plan enables a business owner to achieve. You can safely avoid running short of cash without making any profit from the business.
RISK ANALYSIS AND MANAGEMENT
During the research leading up to writing a business plan, the prospective business person is able to spot possible risks and challenges to be encountered in the course of the business. This makes it possible to develop strategies to combat the risks in the event of their occurrence.
One of the importance of a business plan is to give a prospective investor an overview of what he intends to invest in, the risks and financial promise.
For instance, a bank would need to scrutinize the business plan of a business man seeking a loan facility to finance his business to check if the business is viable enough to repay the loan with accruing interest under the stipulated time frame.
Individual investors also need to look at the business plan to know if the business is worth the risk of their investment and see terms of repayment in case the business flops. It should also state what amount of equity the owner is providing investors if returns are not in cash.
SOURCE OF MOTIVATION
A business plan usually serves as a confidence booster in the bleak periods of a business. A look at the plan after a while will show how far you have come and overcome obstacles on your path in the business, strengthening your resolve to solve the present issues confronting you.
Just as a traveler going to a new destination needs a map and maybe a GPS device for direction, an intending business owner needs a business plan to give a direction from the start of the business up till when he breaks even.
A business plan could also serve as a template for future expansion. It is a reference that can be looked up to know which milestones have been achieved and which challenge is next to be taken up.
Challenges, new technology and emerging market data sometimes make a business owner lose originality and focus, swaying the business away from its foundational goal. A business plan therefore is important as a medium of checking if the current business philosophy and targets are in line with initial goals, and enable correction and a reset if the business has gone off its course.
BIRD’S EYE VIEW
A business plan carefully highlights the different parts of the proposed business model and their intricacies and interconnections. This gives a broad view of the relationship between the parts of the business and also the mutual effects of the capital elements (labour, capital etc.) on one another. This outlook helps to determine how each element can be varied to create optimum results at the most reasonable costs.
One of the challenges emerging ventures face is choosing which business establishment steps to take at particular times, which options of marketing and distribution to utilize, among other service delivery options. A business plan helps outline the focus and goals of your business such that you know which options to pick above others, and which steps in your road map should be taken before or alongside another.
From the benefits outlined so far, it is evident that having a comprehensive business plan before launching a business venture is really important to its success.
A well-researched plan serves as an anchor for the owner to fall back on when challenges arise, as well as a tool for convincing potential investors on the safety and potential profits on their investments in the business.