Importance of a business plan cannot be overemphasised. During my years of consulting for small and medium businesses, I realise that over 47% of my clients find it very difficult to grasp the significance and importance of business plan. They see it as one of the formalities that are needed to get loans from the banks. Yet, a bankable business plan helps you get the kind of finance you need for your business but, there is more to business plan than simply using it as a tool to help you get loan from bank- after all, there are other sources of finance that can be used to finance your small and medium businesses.
For the meaning of business plan and its structure, read an earlier article following the link above. The aim of this article is to discuss the importance of business planning on the overall success of our business and not just to get loans.
SIX REASONS WHY YOU MUST HAVE A FUNCTIONAL BUSINESS PLAN
TO GET A CLEAR DIRECTION: one of the major reasons why businesses fail is the absence of business compass that helps the business find its way amid the ocean of business challenges. Businesses are like far journey into the unknown arena. You easily get lost if you do not sit down to plan your journey from the unset. Imagine how you will feel like travelling to a place you have never been to before if you fail to consult your Google map before embarking on your journey. A carefully written business plan puts you on the driving seat in your business.
FOR PLANNING: the nature of business plans makes it a useful tool for both strategic planning and short term planning. Managers will not be able to perform their management function of planning if they fail to have robust a business model. In fact, business plan is the petrol that helps fuel the business model of businesses. Issues like working capital management and cash management form part of a business plan and aids decision makers make the right decision when the need arises.
TO RAISE FUND: the traditional role of a business plan is to help the holder raise money for investment in profitable projects. Having a business plan is however not an automatic ticket to getting loan or finance. The tone of the business plan has to be real and realistic enough to compel people into parting with their hard earned money. The golden rule is not to present only the rosy pictures of the business outlook. Strive for a perfect blend between ups and downs of your business. This gives it a flavour of reality.
TO EASE TRANSITION STRESS: change management is on its own a difficult thing to do, but, it is more difficult to manage that has to deal with transition. This could be anything from management transition to changing the way things are generally done. A good business plan for instance lays rules and procedures to follow when there is need for change.
TO SAVE MONEY: business mistakes caused by inadequate planning can cost a firm fortune. Having the right kind of business plan can easily be the Holy Grail to solving the money problem that is experienced by many businesses.
TO HELP BUILD YOUR CREDIBILITY: it is a well known fact that plans that are not committed to writing is simply a mere wish. Nobody takes you serious if you do not have your plans written down on paper. A business plan is a business document that contains is a written format what a business intends to achieve in the future and how it plans to go about it- you really should read the article referred to at the beginning of this article to get more insight of what a business plan is. The business ethics of a commercial entity is ingrained into the business plan for the purpose of building credibility.
TO MEET CERTAIN REQUIREMENT: there are times when certain agreement will make it mandatory that a business develop a business plan. For example, government of some countries of the world made it compulsory for businesses seeking to secure government to have a robust business plan showing specific issues and how it is intended to be resolved. Also, business partners during negotiations for foreign investments make decisions based on the business plan of the company they are potentially hoping to partner with.
Having explored the importance of having a business plan in your business, you now know what you will be missing if you are not having one for your business. You must necessarily have the technical knowledge required to have a business plan. You can outsource it to those whose specialty it is so you can concentrate on getting the important aspects of your business fixed. I sure this article has thrown more light on your understanding of the importance of a business plan in your quest to survive in this highly competitive modern business environment. Action is all I ask from you now.