One of the fundamental laws of business is to minimize input (cost) and maximize output (profit).
When I stress on the essence of a having a business plan, I’m not just laying emphasis only on multi- million or billion naira firms/companies, the above topic cuts across all sizes of business, from small to large scale. Before I skip to the importance of a business plan, let’s see what a business plan truly is.
A BUSINESS PLAN is a formal statement of a set of business goals, the reasons they are believed attainable, and the plan for reaching those goals. The focus is on ‘the output’ when the real value in a business plan is the business-planning process itself. It may also contain background information about the organization. A business plan is not just a document. It is a holistic analysis of your company, the environment it operates in, and a route map to achieving success based on the resources available. Business plans may also target changes in perception and branding by the customer, client, taxpayer, or larger community.
The very process of producing a business plan enables management to give due consideration to the various factors that mesh together to create the opportunity they are seeking to explore, and resources required which are key drivers needed for success.
Business planning is an essential element of running any successful business, particularly given that the growing uncertainty all businesses face, coupled with the ongoing changes in consumer behaviour. The business plan captures the strategic operational and financial aims of the business.
A good business plan will contain:
-An initial executive summary, summarizing the detail of the business proposal
-A written overview of the business’ aims
-Its product or service
-Initial investors
-Management team etc
How much money you need, what for, your purpose of business, marketing, sales strategy, profit projection, and more all depends on your business plan. A business plan not only designed to help you raise capital, but it also gives you a road map so you know the destination business is headed for.
Here are some benefits of a business plan:
1. Commit to a particular course of action
A business plan can help a company assess future opportunities, choose one, and then commit to a particular course of action. By committing to one opportunity, all other options are effectively marginalized and the company is aligned to focus on key deliverables.
2. To plan for an uncertain future
Business planning is vital to help you manage your business more effectively. By committing your thoughts to a plan, you can understand your business better and also chart specific courses of action that need to be taken to improve your business. A plan can also detail alternative future scenarios, set specific objectives and goals, and list the resources required to achieve these goals. It prepares one for uncertainties
3. To help grow your business
In an ideal world, all businesses would be self-financing in exploiting business opportunities. In reality, few are afforded this luxury, and hence, will be required to secure external investment eventually. The production of a credible business plan is one of the primary requirements for any entrepreneur seeking investment to grow.
4. To value a business
Given that valuing firms is difficult and subjective, a well-written plan will clearly highlight the opportunity for any prospective investors, explain the value of the business, and increase the likelihood of a successful exit by the current owner.
5. To manage cash flow
Careful management of cash flow is a fundamental requirement for all businesses. The reason is quite simple-many businesses fail, not because they are unprofitable, but because they ultimately become insolvent (i.e., are unable to pay their debts as they fall due).
6. To ensure all bases are covered
When you start a new business, the temptation is to spend time on the idea and then react to events as they come up rather than focusing on what is important. The very creation of a business plan ensures that you cover all the various bases you need to when taking an idea from conception through to launch.
Why don’t you get a pen and paper today, write out a business plan, you never can tell how far those words on that sheet will elevate your brand.
