10 Reasons Why You Need a Business Plan

Business Plan: A plan that sets out the future strategy and financial development of a business, usually covering a period of several years

1. To prove that you’re serious about your business. A formal business plan is necessary to show all interested parties—employees, investors, partners and yourself—that you are committed to building the business. 2. To establish business milestones. The business plan should clearly lay out the long-term milestones that are most important to the success of your business.  To paraphrase Connectnigeria.com, a milestone is something significant enough to come home and tell your spouse about (without boring him or her to death).  Would you tell your spouse that you tweaked the company brochure?  Probably not.  But you’d certainly share the news that you launched your new website or reached 1 million Naira in annual revenues. 3. To document your revenue model. How exactly will your business make money?  This is a critical question to answer in writing, for yourself and your investors.  Documenting the revenue model helps to address challenges and assumptions associated with the model. 4. To determine your financial needs. Does your business need to raise capital?  How much?  The business plan creation process helps you to determine exactly how much capital you need and what you will use it for.  This process is essential for raising capital for business and for effectively employing the capital. 5. To attract investors. A formal business plan is the basis for financing proposals.  The business plan answers investors’ questions such as: Is there a need for this product/service?  What are the financial projections?  What is the company’s exit strategy? 6. To plot your course and focus your efforts. The business plan provides a roadmap from which to operate, and to look to for direction in times of doubt.  Without a business plan, you may shift your short-term strategies constantly without a view to your long-term milestones. 7. To position your brand. Creating the business plan helps to define your company’s role in the marketplace.  This definition allows you to succinctly describe the business and position the brand to customers, investors, and partners. 8. To judge the success of your business. A formal business plan allows you to compare actual operational results versus the business plan itself.  In this way, it allows you to clearly see whether you have achieved your strategic, financing, and operational goals (or whether you have not). 9. To document your marketing plan. How are you going to reach your customers?  How will you retain them?  What is your advertising budget? What price will you charge?  A well-documented marketing plan is essential to the growth of a business. 10. To uncover new opportunities. Through the process of brainstorming, white-boarding and creative interviewing, you will likely see your business in a different light.  As a result, you will often come up with new ideas for marketing your product/service and running your business.

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This article was first published on 15th March 2012 and updated on March 27th, 2012 at 11:13 am

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