what are the 8 reasons for having a business plan

🎧 Real entrepreneurs. Real stories.

Subscribe to The Hurdle podcast today!

14 Reasons Why You Need a Business Plan

10 min. read

Updated May 10, 2024

There’s no question that starting and running a business is hard work. But it’s also incredibly rewarding. And, one of the most important things you can do to increase your chances of success is to have a business plan.

A business plan is a foundational document that is essential for any company, no matter the size or age. From attracting potential investors to keeping your business on track—a business plan helps you achieve important milestones and grow in the right direction.

A business plan isn’t just a document you put together once when starting your business. It’s a living, breathing guide for existing businesses – one that business owners should revisit and update regularly.

Unfortunately, writing a business plan is often a daunting task for potential entrepreneurs. So, do you really need a business plan? Is it really worth the investment of time and resources? Can’t you just wing it and skip the whole planning process?

Good questions. Here’s every reason why you need a business plan.

• 1. Business planning is proven to help you grow 30 percent faster

Writing a business plan isn’t about producing a document that accurately predicts the future of your company. The  process  of writing your plan is what’s important. Writing your plan and reviewing it regularly gives you a better window into what you need to do to achieve your goals and succeed. 

You don’t have to just take our word for it. Studies have  proven that companies that plan  and review their results regularly grow 30 percent faster. Beyond faster growth, research also shows that companies that plan actually perform better. They’re less likely to become one of those woeful failure statistics, or experience  cash flow crises  that threaten to close them down. 

• 2. Planning is a necessary part of the fundraising process

One of the top reasons to have a business plan is to make it easier to raise money for your business. Without a business plan, it’s difficult to know how much money you need to raise, how you will spend the money once you raise it, and what your budget should be.

Investors want to know that you have a solid plan in place – that your business is headed in the right direction and that there is long-term potential in your venture. 

A business plan shows that your business is serious and that there are clearly defined steps on how it aims to become successful. It also demonstrates that you have the necessary competence to make that vision a reality. 

Investors, partners, and creditors will want to see detailed financial forecasts for your business that shows how you plan to grow and how you plan on spending their money. 

• 3. Having a business plan minimizes your risk

When you’re just starting out, there’s so much you don’t know—about your customers, your competition, and even about operations. 

As a business owner, you signed up for some of that uncertainty when you started your business, but there’s a lot you can  do to reduce your risk . Creating and reviewing your business plan regularly is a great way to uncover your weak spots—the flaws, gaps, and assumptions you’ve made—and develop contingency plans. 

Your business plan will also help you define budgets and revenue goals. And, if you’re not meeting your goals, you can quickly adjust spending plans and create more realistic budgets to keep your business healthy.

Brought to you by

Create a professional business plan

Using ai and step-by-step instructions.

Secure funding

Validate ideas

Build a strategy

• 4. Crafts a roadmap to achieve important milestones

A business plan is like a roadmap for your business. It helps you set, track and reach business milestones. 

For your plan to function in this way, your business plan should first outline your company’s short- and long-term goals. You can then fill in the specific steps necessary to reach those goals. This ensures that you measure your progress (or lack thereof) and make necessary adjustments along the way to stay on track while avoiding costly detours.

In fact, one of the top reasons why new businesses fail is due to bad business planning. Combine this with inflexibility and you have a recipe for disaster.

And planning is not just for startups. Established businesses benefit greatly from revisiting their business plan. It keeps them on track, even when the global market rapidly shifts as we’ve seen in recent years.

• 5. A plan helps you figure out if your idea can become a business

To turn your idea into reality, you need to accurately assess the feasibility of your business idea.

You need to verify:

• If there is a market for your product or service
• Who your target audience is
• How you will gain an edge over the current competition
• If your business can run profitably

A business plan forces you to take a step back and look at your business objectively, which makes it far easier to make tough decisions down the road. Additionally, a business plan helps you to identify risks and opportunities early on, providing you with the necessary time to come up with strategies to address them properly.

Finally, a business plan helps you work through the nuts and bolts of how your business will work financially and if it can become sustainable over time.

6. You’ll make big spending decisions with confidence

As your business grows, you’ll have to figure out when to hire new employees, when to expand to a new location, or whether you can afford a major purchase. 

These are always major spending decisions, and if you’re regularly reviewing the forecasts you mapped out in your business plan, you’re going to have better information to use to make your decisions.

7. You’re more likely to catch critical cash flow challenges early

The other side of those major spending decisions is understanding and monitoring your business’s cash flow. Your  cash flow statement  is one of the three key financial statements you’ll put together for your business plan. (The other two are your  balance sheet  and your  income statement  (P&L). 

Reviewing your cash flow statement regularly as part of your regular business plan review will help you see potential cash flow challenges earlier so you can take action to avoid a cash crisis where you can’t pay your bills. 

• 8. Position your brand against the competition

Competitors are one of the factors that you need to take into account when starting a business. Luckily, competitive research is an integral part of writing a business plan. It encourages you to ask questions like:

• What is your competition doing well? What are they doing poorly?
• What can you do to set yourself apart?
• What can you learn from them?
• How can you make your business stand out?
• What key business areas can you outcompete?
• How can you identify your target market?

Finding answers to these questions helps you solidify a strategic market position and identify ways to differentiate yourself. It also proves to potential investors that you’ve done your homework and understand how to compete. 

• 9. Determines financial needs and revenue models

A vital part of starting a business is understanding what your expenses will be and how you will generate revenue to cover those expenses. Creating a business plan helps you do just that while also defining ongoing financial needs to keep in mind. 

Without a business model, it’s difficult to know whether your business idea will generate revenue. By detailing how you plan to make money, you can effectively assess the viability and scalability of your business. 

Understanding this early on can help you avoid unnecessary risks and start with the confidence that your business is set up to succeed.

• 10. Helps you think through your marketing strategy

A business plan is a great way to document your marketing plan. This will ensure that all of your marketing activities are aligned with your overall goals. After all, a business can’t grow without customers and you’ll need a strategy for acquiring those customers. 

Your business plan should include information about your target market, your marketing strategy, and your marketing budget. Detail things like how you plan to attract and retain customers, acquire new leads, how the digital marketing funnel will work, etc. 

Having a documented marketing plan will help you to automate business operations, stay on track and ensure that you’re making the most of your marketing dollars.

• 11. Clarifies your vision and ensures everyone is on the same page

In order to create a successful business, you need a clear vision and a plan for how you’re going to achieve it. This is all detailed with your mission statement, which defines the purpose of your business, and your personnel plan, which outlines the roles and responsibilities of current and future employees. Together, they establish the long-term vision you have in mind and who will need to be involved to get there. 

Additionally, your business plan is a great tool for getting your team in sync. Through consistent plan reviews, you can easily get everyone in your company on the same page and direct your workforce toward tasks that truly move the needle.

• 12. Future-proof your business

A business plan helps you to evaluate your current situation and make realistic projections for the future.

This is an essential step in growing your business, and it’s one that’s often overlooked. When you have a business plan in place, it’s easier to identify opportunities and make informed decisions based on data.

Therefore, it requires you to outline goals, strategies, and tactics to help the organization stay focused on what’s important.

By regularly revisiting your business plan, especially when the global market changes, you’ll be better equipped to handle whatever challenges come your way, and pivot faster.

You’ll also be in a better position to seize opportunities as they arise.

Further Reading: 5 fundamental principles of business planning

• 13. Tracks your progress and measures success

An often overlooked purpose of a business plan is as a tool to define success metrics. A key part of writing your plan involves pulling together a viable financial plan. This includes financial statements such as your profit and loss, cash flow, balance sheet, and sales forecast.

By housing these financial metrics within your business plan, you suddenly have an easy way to relate your strategy to actual performance. You can track progress, measure results, and follow up on how the company is progressing. Without a plan, it’s almost impossible to gauge whether you’re on track or not.  

Additionally, by evaluating your successes and failures, you learn what works and what doesn’t and you can make necessary changes to your plan. In short, having a business plan gives you a framework for measuring your success. It also helps with building up a “lessons learned” knowledge database to avoid costly mistakes in the future.

• 14. Your business plan is an asset if you ever want to sell

Down the road, you might decide that you want to sell your business or position yourself for acquisition. Having a solid business plan is going to help you make the case for a higher valuation. Your business is likely to be worth more to a buyer if it’s easy for them to understand your business model, your target market, and your overall potential to grow and scale. 

Free business plan template

Join over 1-million businesses and make planning easy with our simple, modern, investor-approved business plan template.

Download Template

• Writing your business plan

By taking the time to create a business plan, you ensure that your business is heading in the right direction and that you have a roadmap to get there. We hope that this post has shown you just how important and valuable a business plan can be. While it may still seem daunting, the benefits far outweigh the time investment and learning curve for writing one. 

Luckily, you can write a plan in as little as 30 minutes. And there are plenty of excellent planning tools and business plan templates out there if you’re looking for more step-by-step guidance. Whatever it takes, write your plan and you’ll quickly see how useful it can be.

Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.

Table of Contents

• 6. You’ll make big spending decisions with confidence
• 7. You’re more likely to catch critical cash flow challenges early

Related Articles

7 Min. Read

5 Consequences of Skipping a Business Plan

8 Business Plan Templates You Can Get for Free

11 Min. Read

Use This Simple Business Plan Outline Example to Organize Your Plan

5 Min. Read

How to Run a Productive Monthly Business Plan Review Meeting

The LivePlan Newsletter

Become a smarter, more strategic entrepreneur.

Your first monthly newsetter will be delivered soon..

Unsubscribe anytime. Privacy policy .

The quickest way to turn a business idea into a business plan

Fill-in-the-blanks and automatic financials make it easy.

No thanks, I prefer writing 40-page documents.

Discover the world’s #1 plan building software

onEntrepreneur is an online magazine centered on business, finance, marketing, technology and more. We are regularly updated – sign up with our newsletter to send the updates directly to your inbox.

Follow Us on Google News

Subscribe to Updates

Get the latest creative news and ideas from onEntrepreneur about business, finance, marketing and more.

Recent Posts

Here’s how your business can make a positive first impression on customers, how to customize employee uniforms for maximum brand impact, building a strong team for your startup, how do hard money lenders assess the after repair value of a fixer upper.

8 Reasons Why You Need a Business Plan

You might pride yourself on being a risk-taker, the kind of person who doesn’t feel the need to plan. And while agility and adaptability are critical skills in today’s business world—especially among small business owners—being reckless isn’t. If you don’t have a plan, then you are risking the health of your business.  Creating a business plan  can keep you focused, which will help you make better, more informed decisions.

A well-drafted business plan also allows you to quickly convey strategies and goals to investors, partners and even customers. Here are eight reasons why you should start writing your business plan today.

1. Maintain Big-Picture Thinking

A business plan forces you to think long-term so that you ensure you don’t turn down opportunities, miscalculate projections or make mistakes that could cause you to fail. Your plan will allow you to keep the end game in sight.

2. Stay Focused on the Overall Goal

Your love of the business could lead you to make emotional decisions that could ultimately hurt the business. Your plan will keep you and other stakeholders grounded in reality and focused on your priorities.

It becomes even more important as the business grows, especially as you hire more employees and create management positions. A business plan can keep all of those people on the same page.

3. Estimate Profits and Expenses More Accurately

In the course of creating a business plan, you’ll define your market and figure out how much of the market share you can expect to take from competitors. In addition, you’ll calculate your overhead costs, so you’ll have a better idea of how much profit you can expect to make early on.

4. Figure Out Where to Allocate Your Money

Should you rent an office space or open a storefront? How much staff do you need? What technology is critical for you to invest in? You will be forced to think about the bare minimum you need to function and then what investments you need to make to take the business to the next level.

5. Connect With Customers More Quickly

During the process of creating your business plan, you’ll evaluate your customers or would-be customers to discover what they want, how they want you to market to them, what kind of experience they expect, what they are willing to pay and more. With that kind of analysis, you attract customers more quickly and improve the customer experience, which will ultimately lead to more business.

6. Inform Service Providers of Your Goals

If you work with attorneys, consultants, freelancers, accountants or other service providers that handle key areas of your business, you can use your formal business plan to quickly bring them up to speed and highlight your priorities and goals for the business.

7. Calculate the Value of Your Business

You will need a business plan if you want to receive a professional valuation from an accounting firm, business broker or investment banking firm should you decide to sell or ask for capital from investors.

8. Raise Money

Most investors and banks want to see a clear plan for how you will conduct business and generate revenue. A business plan offers you a simple way to share your goals and strategies with anyone whom you hope to raise capital from.

Finally, a business plan tells you if you are making the right decisions regarding your business. With a well-thought-out plan, you’ll feel more confident about the direction in which you are headed. That confidence can mean the difference between success and failure, especially during difficult times.

onEntrepreneur is the go-to source for entrepreneurs looking to get ahead. Our online magazine offers practical, actionable advice to help startups succeed across key areas like business strategy, marketing, technology, leadership, management and more. Sign up for our regularly updated newsletter to receive our latest articles and insights directly in your inbox.

Related Posts

Save my name, email, and website in this browser for the next time I comment.

Type above and press Enter to search. Press Esc to cancel.

This website uses cookies to enhance the user experience.

Like this content? Sign up to receive more!

Subscribe for tips and guidance to help you grow a better, smarter business.

We care about your privacy. See our Privacy Policy .

🎧 Real entrepreneurs. Real stories.

Subscribe to The Hurdle podcast

You can do this! Tour LivePlan to see how simple business planning can be.

Have an expert write your plan, build your forecast, and so much more.

Integrations

For Small Businesses

For Advisors & Mentors

15 Reasons Why You Need a Business Plan in 2025

10 min. read

Updated December 3, 2024

Imagine you’re going on a road trip. You know your final destination, but you haven’t figured out how to get there. 

While it might be fun to start driving and figure things out as you go, your trip will likely take longer than expected and end up costing more. But, if you take the time to look at a map and chart the best way to get to your destination—you’ll arrive on time and on budget. 

Planning for your business isn’t much different, which is why a business plan is so important to your continued success.

What is the purpose of a business plan? 

The primary purpose of a business plan is to help you figure out where you want to go with your business and how you will get there. Writing a business plan helps you set your direction and determine a winning strategy. A solid business plan will set your business up for success and help you build an unbeatable company.

If you start off without a plan, you may go down some interesting detours, but you’re unlikely to grow quickly or stick to your budget.

15 reasons why you need a business plan

“Creating a road map for my business is all well and good, but do I really need a business plan? I’d rather just get started.”

If you’re still thinking like this and decide to skip writing a business plan, you’re making a big mistake and setting yourself up to fail. Even if your business survives, without a plan, you’ll miss valuable growth opportunities and never truly be in control.

Still not convinced? Here are the critical reasons why a business plan is important for small businesses. 

1. You’re more likely to start

Documenting your business idea makes it more official. It takes rough ideas and turns them into the making of a real business. 

According to a study by the Harvard Business Review , entrepreneurs who write formal plans are 16% more likely to achieve viability than those who don’t.

Even if it’s just notes about your potential business, writing things down will make you more likely to proceed with your business. Without a plan, you can’t prove to yourself, partners, mentors, or investors that you’re serious about starting.

2. Reduce potential risks

Writing a business plan takes some of the risk out of starting a business. It helps you think through every facet of your business to determine if it can truly be viable. 

• • Does your solution fit the market? Are your startup or operational costs manageable?
• • Will your proposed business model actually generate sales?
• • What sort of milestones would you need to hit to achieve profitability?

Your business plan can answer these startup questions .

For those already running a business, writing a plan can help you better manage ongoing risk. 

• • Should you bring on a new employee?
• • What does cash flow look like for your next month, quarter, or even year?
• • Will you meet your milestones or do you need to change your focus?

Keep your plan up to date, review it regularly and you can easily answer these growth questions and mitigate risk.

3. Test a new business idea and prove it’s viable

When you have a new business idea, it helps to spend time thinking through all the details. 

A business plan will help you think about your:

• • Target market
• • How much money you’ll need to launch
• • How your idea will actually work before you spend any real money

A business plan will also help you easily share your idea with other people to get input and feedback before you get started. 

There’s no need to create a detailed business plan either. 

Instead, I recommend using a one-page business plan to quickly test your ideas and determine if you have a viable business. 

4. Understand your market and build a marketing plan

No matter how good your idea is, you have to figure out who your ideal customers are and how you will get the word out to them. 

That’s where a marketing plan comes in. It can be an indispensable tool to figure out how you get your first customers as well as your thousandth customer. It can start as a simple bulleted list of potential marketing channels that expands in detail as you need it.

5. Build a better budget and a financial forecast

Without a business plan, it’s impossible to know how much money it will cost to start and run a business. You don’t just need money for your initial purchases; you need enough cash in the bank to maintain your cash runway and keep your business afloat while you get fully up and running.

When you plan, you’ll need to create your expense budget , set sales goals, and identify how much cash is needed to keep your doors open, purchase inventory, and more. 

The beauty of incorporating forecasts into your business plan is that you don’t need exact numbers to start. You can work with general assumptions and compare against competitive benchmarks to set a baseline for your business. 

As you operate and collect financial data, you can revisit your business plan and update your forecasts to generate a more accurate picture of your business’s future.

6. Attract investors and get funding

Sharing your business idea with investors requires a business plan. 

Investors may never actually ask for your full business plan, but they will certainly ask you questions that you’ll only be able to answer if you’ve taken the time to write a plan. 

At the very least, they’ll want to see your financial forecasts, so you should be prepared for this. If you pitch your business to investors, having a business plan makes it much easier to translate the right information into a pitch deck. 

In short, you’ll have all of the right information ready and available to show why your business is worth investing in.

7. Plan for different scenarios

Things rarely actually go to plan. The world is always changing, customer tastes change, and new competitors arrive. 

Having a plan allows you to experiment with different scenarios to see how changes to your business will impact your forecasts, budgets, profitability, and cash flow.

Without a business plan, you’ll be reacting blindly with no way to track if your decisions are making a real impact.

8. Attract employees

Especially if you’re a young startup company, attracting employees can be hard. Without a proven track record, why should someone take a risk to work for you? 

Having a business plan can help solve that problem. Your plan can help prospective employees understand your business strategy and growth plans so that they can feel confident joining your team. It’s also incredibly useful in determining when and if it’s feasible for you to hire more employees . 

9. Get your team on the same page

A great business strategy can only be successful if your team understands it. By documenting your strategy with a business plan, you can easily get everyone on the same page and working towards the same goals. 

It’s even better if you regularly review your plan with members of your team. Have everyone revisit your core strategy, analyze it, and explore how it impacts individual and team goals .

10. Manage your business better 

A business plan is all about setting goals for your company — both financial goals and milestones you hope to accomplish. 

When you use your business plan to manage your business, you’ll see which parts of your strategy are working and which aren’t. 

For example, you may have invested in new marketing efforts to sell one of your products, but that strategy just isn’t working out. With a business plan in hand, you’ll be able to see what’s going to plan and where you need to adjust your strategy, pivoting to new opportunities that will drive profitability.

Regular business plan reviews , ideally monthly, will help you build a strong, resilient business.

11. Effectively navigate a crisis

Having a business plan not only helps you create a roadmap for your business but also helps you navigate unforeseen events. Large-scale economic downturns, supply shortages, payment delays, cash flow problems, and any number of other issues are bound to pop up. But by leveraging your business plan, you can be prepared to face each crisis head-on.

A plan helps you assess your current situation, determine how the crisis will alter your plan, and explore what it will take to recover. 

With a little planning, you can even prepare your business for future downturns with this same process. Having the right plan and processes in place will make crisis planning easier and, ideally, recession-proof your business .

12. You’ll be ready to sell

You might decide to sell your business or position yourself for acquisition down the road. Having a solid business plan helps make the case for a higher valuation. 

Your business is likely worth more to a buyer if it’s easy for them to understand your business model, your target market, and your overall potential to grow and scale. 

Remember, if you were buying a business , you’d likely want to see their business plan and any previous documentation. So, the more organized and professional your plan is, the easier it will be for a buyer to say yes.

13. It’s easier than you think

You may be procrastinating in writing a business plan because it sounds like a lot of work. The truth is that planning is much less complicated than you think. 

Start small by writing a simple business plan you can complete in about half an hour. With the emergence of AI business plan generators , getting stuck with a blank page is a thing of the past. Just be sure that you don’t just let AI write your plan for you and keep yourself involved in the planning process.

From there, refine your plan until your idea is solid. At that point, you can invest more time in a more detailed business plan. Just start with the basics and expand from there.

14. You’ll sleep better at night

When you have a plan for your business, you have peace of mind. You know that you’ve invested the time to figure out a business model that works, and you’ve considered different financial scenarios so you can handle the unexpected. 

Plus, you have a management tool to run your business better than your competitors. 

15. Research shows that business plans work

A Journal of Management Studies study found that businesses that take the time to plan grow 30% faster than those that don’t. 

Our own 2021 small business research study found that 58% of small business owners who have or are working on a plan feel confident in their business, even amidst a crisis. 

A study in Small Business Economics found that entrepreneurs who write business plans for their ideas are 152% more likely to actually start their businesses.

There’s plenty of additional research linking business planning with success, so it’s a proven fact that you won’t waste time when you write your plan.

Why is a business plan important? Because it sets you up for success

There are plenty of reasons to write a business plan, but they all relate to one thing—increasing the likelihood of success for you and your business. 

Taking the time to plan is an investment in yourself and your business that will pay dividends, whether you’re starting a new business or taking your existing business to the next level. 

If you’ve been putting off writing a business plan, now is the time to do it. Start by downloading one of the many free business plan templates out there, or for additional guidance, invest in an online business plan builder .

No matter what business planning tool you choose, just deciding to write a business plan will set you up to build, run, and grow your business. So, don’t wait—start planning today.

What is a business plan?

A business plan is a structured document that outlines the goals, strategies, target market, and financial forecasts of a business. It serves as a roadmap for the business, detailing the steps necessary to achieve success.

Why is planning necessary?

Business planning is essential because it helps businesses set clear goals, allocate resources efficiently, identify potential challenges, and develop strategies to overcome them. It also provides a framework for decision-making and helps attract investors by demonstrating the viability of the business.

What happens if a business doesn’t plan?

Without planning, a business may lack direction and clarity, leading to inefficient use of resources, missed opportunities, and an inability to respond effectively to market changes. This can result in financial difficulties, operational challenges, and ultimately, business failure.

Like this post? Share with a friend!

Noah Parsons

Before joining Palo Alto Software , Noah Parsons was an early Internet marketing and product expert in the Silicon Valley. He joined Yahoo! in 1996 as one of its first 101 employees and become Producer of the Yahoo! Employment property as part of the Yahoo! Classifieds team before leaving to serve as Director of Production at Epinions.com. He is a graduate of Princeton University. Noah devotes most of his free time to his three young sons. In the winter you'll find him giving them lessons on the ski slopes, and in summer they're usually involved in a variety of outdoor pursuits. Noah is currently the COO at Palo Alto Software, makers of the online business plan app LivePlan.

Table of Contents

Related articles.

November 23, 2024

What is Accounts Payable (AP)? [Definition + 4 Ways to Reduce]

What is Cash Runway + How to Calculate it

Cash Flow Statement: Definition + How to Create and Read it

Elon Glucklich

November 22, 2024

Budget Vs Forecast: Differences Explained + What to Prioritize

• Starting a Business
• Growing a Business
• Business News
• Science & Technology
• Money & Finance
• For Subscribers
• Write for Entrepreneur
• Tips White Papers
• Entrepreneur Store
• United States
• Asia Pacific
• Middle East
• United Kingdom
• South Africa

Copyright © 2024 Entrepreneur Media, LLC All rights reserved. Entrepreneur® and its related marks are registered trademarks of Entrepreneur Media LLC

12 Reasons You Need a Business Plan Writing a business plan gives you a much better chance for success. But it does open you up to some risks.

By Eric Butow Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.

This is part 4 / 12 of Write Your Business Plan: Section 1: The Foundation of a Business Plan series.

The only person who doesn't need a business plan is the one who's not going into business. You don't need a plan to start a hobby or something you do on the side for fun. But anybody beginning or extending a venture that will consume significant resources of money , energy, or time and that is expected to return a profit should take the time to draft some kind of plan.

Who Needs a Business Plan?

The classic business plan writer is an entrepreneur seeking funds to help start a new venture. Many great companies had their starts in the form of a plan that was used to convince investors to put up the capital necessary to get them underway.

However, it's a mistake to think that only startups need business plans. Companies and managers find plans useful at all stages of their existence, whether they're seeking financing or trying to figure out how to invest a surplus.

Established Firms Seeking Help

Many business plans are written by and for companies that are long past the startup stage but also well short of large-corporation status. These middle-stage enterprises may draft plans to help them find funding for growth just as the startups do, although the amounts they seek may be larger and the investors more willing because the company already has a track record. They may feel the need for a written plan to help manage an already rapidly growing business. A business plan may be seen as a valuable tool to convey the mission and prospects of the business to customers, suppliers, or other interested parties.

Just as the initial plan maps how to get from one leg of the journey to the next, an updated plan for additional funding adds another leg of your journey. It's not unlike traveling from the United States to Paris and then deciding to visit London or Barcelona or both along the way. You would then need to add to, or update, your plans. A business plan can, therefore, address the next stage in the life process of a business.

Related: How To Write A Business Plan

12 Reasons You Need a Business Plan

Business plans could be considered cheap insurance. Just as many people don't buy fire insurance on their homes and rely on good fortune to protect their investments, many successful business owners do not rely on written business plans but trust their own instincts. However, your business plan is more than insurance. It reflects your ideas , intuitions, instincts, and insights about your business and its future—and provides the cheap insurance of testing them out before you are committed to a course of action. There are so many reasons to create a business plan, and chances are that more than one of the following will apply to your business.

1. A plan helps you set specific objectives for managers.

Good management requires setting specific objectives and then tracking and following up. As your business grows, you want to organize, plan, and communicate your business priorities better to your team and to you. Writing a plan gets everything clear in your head before you talk about it with your team.

2. You can share your strategy, priorities, and plans with your spouse or partner.

People in your personal life intersect with your business life, so shouldn't they know what's supposed to be happening?

3. Use the plan to explain your displacement.

A short definition of displacement is, "Whatever you do is something else you don't do." Your plan will explain why you're doing what you've decided to do in your business.

4. A plan helps you figure out whether or not to rent or buy new space.

Do your growth prospects and plans justify taking on an increased fixed cost of new space?

Related: Do You Need To Write A Business Plan

5. You can explain your strategy for hiring new people.

How will new people help your business grow and prosper? What exactly are they going to do?

6. A plan helps you decide whether or not to bring on new assets.

How many new assets do you need, and will you buy or lease them? Use your business plan to help decide what's going to happen in the long term and how long important purchases, such as computer equipment, will last in your plan.

7. Share your plan with your team.

Explain the business objectives in your plan with your leadership team, employees, and new hires. What's more, make selected portions of your plan part of your new employee training.

8. Share parts of your plan with new allies to bring them aboard.

Use your plan to set targets for new alliances with complementary businesses and also disclose selected portions of your plan with those businesses as you negotiate an alliance.

9. Use your plan when you deal with professionals.

Share selected parts of your plan with your attorneys and accountants, as well as consultants if necessary.

10. Have all the information in your plan when you're ready to sell.

Sell your business when it's time to put it on the market so you can help buyers understand what you have, what it's worth, and why they want it.

Related: How To Build A Business Plan

11. A plan helps you set the valuation of the business.

Valuation means how much your business is worth, and it applies to formal transactions related to divorce, inheritance, estate planning, and tax issues. Usually, that takes a business plan as well as a professional with experience. The plan tells the valuation expert what your business is doing, when it's doing (or will do) certain things, why those things are being done, how much that work will cost, and the benefits that work will produce.

12. You can use information in the plan when you need cash.

Seek investment for a business no matter what stage of growth the business finds itself in. Investors need to see a business plan before they decide whether or not to invest. They'll expect the plan to cover all the main points.

Bonus: The Benefits for You

If you and/or someone on your team are still skeptical about the benefits of a business plan and how it will benefit you personally, consider some advantages that can help in your day-to-day management:

Your educated guesses will be better. Use your plan to refine your educated guesses about things like potential markets, sales drivers, lead processing, and business processes. Priorities will make more sense. Aside from the strategy, there are also priorities for other factors of your business including growth, management, and financial health. Use your plan to set a foundation for these, then you can revise them as the business evolves.

You'll understand interdependencies. Use a plan to keep track of what needs to happen and in what order. For example, if you have to time a product release to dovetail with your marketing efforts, your business plan can be invaluable in keeping you organized and on track.

You'll be better at delegating . The business plan must make clear who is responsible for what. Every important task should have one person in charge.

Managing team members and tracking results will be easy. The plan is a great format for putting responsibilities and expectations in writing. Then during team member reviews, you can look to your plan to spot the differences between expectations and results so that you can make course corrections.

You can better plan and manage cash flow. A cash flow plan within your overall business plan helps you and your leadership team make better-educated guesses about sales, costs, expenses, assets you need to buy, and debts you have to pay.

Related: How To Craft A Business Plan That Will Turn Investors' Heads

Business Planning Risks

There are risks associated with writing a business plan. That's right: While one of the main purposes of a business plan is to help you avoid risk, the act of creating one does create a few risks as well. These risks include:

The possible disclosure of confidential material. Although most of the people who see your plan will respect its confidentiality, a few may (either deliberately or by mistake) disclose proprietary information. For this reason, you may want to have a nondisclosure agreement, or NDA, signed before sending it to others.

Leading yourself astray. You may believe too strongly in the many forecasts and projects in your business plan.

Related: The Basics Of Writing A Business Plan

Ruining your reputation . . . or worse. If you purposely fill the plan with overly optimistic prognostication, exaggeration, or even falsehoods, you will do yourself a disservice. Some plans prepared for the purpose of seeking funds may run afoul of securities laws if they appear to be serving as prospectuses unblessed by the regulators.

Spending too much effort planning. You then may not have enough energy or time to actually run your business. Some call it "analysis paralysis." It's a syndrome that occurs when you spend so much time planning that you never do anything. For a lot of business people, this is a nonissue—they detest planning so much that there's no chance at all they'd forgo actually doing business and merely plan it.

Business planning can take on a life of its own. It's possible to spend so much time planning a startup that you miss your window of opportunity or to schedule such frequent updates of a plan for an established business that it becomes difficult to administer its other details. Big corporations have large staffs, which can be devoted to year-round planning. As a small business owner, you have to be more selective.

Your planning may be approaching the paralysis stage if you find yourself soothing your nerves about starting a business by delaying the startup date so you can plan more. If you notice yourself putting off crucial meetings so you can dig up more information for a plan update, suspect that planning has become overly important.

Related: What To Include And Not Include In A Business Plan

Diluting the effectiveness of your plan . If you put too much detail into your plan, you run the risk of overburdening anybody who reads it with irrelevant, obscuring details. A plan isn't supposed to be a potboiler, but it should tell a story—the story of your business.

Therefore, it should be as easy as possible to read. That means keeping technical jargon under control and making it readable in one sitting.

Explain any terms that may be unfamiliar to a reader who's not an expert on your industry. And never make the mistake of trying to overawe a reader with your expertise. There's a good chance someone reading your plan will know more than you do. If you come across as an overblown pretender, you can bet your plan will get short shrift.

It's easy to believe that a longer, more detailed plan is always better than a short, concise one. But financiers and others to whom you may send your plan are busy people. They do not have time to plow through an inches-thick plan and may be put off by its imposing appearance. Better to keep it to a couple of dozen pages and stick to the truly important material.

Expediting your plan . While some insist on endless planning, others try to speed up the process. In an effort to get a plan written quickly to show a potential investor, you may find yourself cutting corners or leaving out vital information. You don't want to take forever to prepare a business plan but using some of the business plan software programs can make it so easy that you find yourself letting the programs do more of the work. Remember, the tools are there to guide you and not the other way around. Give yourself enough time to make sure that:

• Each section says what you want it to say.
• All of your numbers add up and make sense.
• You have answers to anything readers could possibly ask you.

Entrepreneur Leadership Network® VIP

Owner of Butow Communications Group

Editor's Pick Red Arrow

• Lock You Might Be Offending Your Co-Workers With These Passive-Aggressive Email Phrases — Here's What to Say Instead
• I Tried Buying a Car on Amazon. Here Are the Pros and Cons.
• 'I Just Hustled' : She Earned More Than $300,000 Wrapping Gifts Last Year — and It All Started With a Side Hustle
• Lock This One Act of Courage Completely Shifted My View on Leadership
• These Are the Top New and Emerging Franchises of 2024 — And You Can Start One for Less Than $5,000
• Lock More Than 75% of Americans Have Side Hustles During the Holidays — Here Are the Most Popular Gigs This Season

Most Popular Red Arrow

The 10 best franchises to open in 2018.

Here's everything you need to know about the startup costs, training and investment opportunities from the top 10 companies in our Franchise 500.

3 Lessons I've Learned as a Successful Woman In a Male-Dominated Industry

I was a single mother raising two boys and a company in the patriarchal 90s. Here are three hard-won lessons I learned — insights every entrepreneur, regardless of gender, could learn from in 2025.

Is ChatGPT Search Better Than Google? I Tried the New Search Engine to Find Out.

ChatGPT Search is now available for free for all users.

'We Need Panic Buttons': Some Walmart Employees Begin Wearing Body Cameras

Walmart has started a pilot program that they hope will deter situations with aggravated customers from escalating.

'Warm Spot in My Heart': TikTok's CEO Was Spotted at Mar-a-Lago With President-elect Donald Trump. Here's Why.

TikTok CEO Shou Zi Chew was at Mar-a-Lago in Palm Beach, Florida, on Monday, according to reports.

How Mission-Driven Leadership Fuels Innovation and Growth in the Digital Era

This leadership approach is the key to sustainable success in today's fast-changing digital landscape.

Successfully copied link

Get the Right Office at the Right Price...Without the Usual Hassle

• OfficeFinder.com
• Request a Quick Call

Business Intelligence

8 Reasons Why You Need a Business Plan

Are you thinking of starting a business? If so, you need to create a business plan. A business plan is a document that outlines your business goals and how you plan on achieving them. It also includes information about your company, such as its mission statement, target market, and products and services. Creating a business plan is essential for any new business venture and is a good idea to update for existing businesses. Here are eight reasons why you need one:

1) Business Funding

Our first reason why you need a business plan is for business funding. When you’re seeking funding for your business, a well-written business plan is essential. Investors and banks will want to see how you plan to make your business successful. A business plan shows that you have a clear understanding of your goals and the steps you need to take to achieve them. It also demonstrates that you are knowledgeable about the industry and your target market. For this reason, it is important to find business plan development services that can help you create a professional and polished document. They will also be able to help you with the financial projections and analysis that are often required by investors.

2) Business Planning

Creating a business plan is more than just writing down your goals. It’s also a great way to organize your thoughts and come up with a strategy for how you will achieve those goals. In other words, it forces you to think about every aspect of your business , from the big picture down to the details. This process can help you identify any potential problems with your business idea and come up with solutions before you even start. By taking the time to develop a business plan, you will save yourself time and money in the long run.

When you  hire a fractional cmo , they will also help you create a business plan that aligns with your overall marketing strategy. This ensures that your business plan is not just a document but also serves as a roadmap for your marketing efforts.

Can you please add: Also, it is good to empower your leaders with 360 assessments to get an accurate understanding of their strengths and weaknesses, which can then be used to develop a more effective business plan. Planning ahead will help you avoid making costly mistakes that could jeopardize your business’s success.

Planning ahead will help you avoid making costly mistakes that could jeopardize your business’s success.

3) Time Management

Time management is critical for any business owner. Without a plan, it can be easy to get sidetracked and spend too much time on tasks that aren’t important or relevant to your goals. A well-crafted business plan will help you stay on track by outlining your priorities and specific steps needed to achieve your desired outcome. For example, if your goal is to launch a new product, your plan might include steps like research and development, marketing, and sales. By outlining each task and setting deadlines, you’ll be able to better manage your time and ensure that your business is moving in the right direction. Additionally, a business plan can be a helpful tool for keeping your team members on track and aligned with your company’s goals.

4) Market Research

Market research is an essential part of any business. It helps you understand your target market , what products and services they want and need, and how best to reach them. Without market research, you could be wasting your time and money on products and services that no one wants or needs. A business plan should include a section on market research so that you can demonstrate to investors or lenders that you have done your homework. This section should include data from surveys, focus groups, interviews, and other sources. You should also include your analysis of this data, as well as your conclusions about the potential size of your target market.

5) Competition Analysis

Competition is a fact of life for every business. In order to be successful, you need to know who your competitors are, what products and services they offer, and how they are positioned in the marketplace. You also need to understand your own strengths and weaknesses relative to your competitors. A business plan should include a section on competition analysis so that you can show investors or lenders that you have done your homework and are aware of the risks and opportunities involved in competing in your industry. This section should include data about your top competitors, as well as insights about how you plan to differentiate yourself from them.

6) Staffing Plan

Every new business needs talented and experienced employees to be successful. A staffing plan is a critical part of any business plan, as it outlines the roles and responsibilities of each member of your team. It should also include information about how you will find and hire the best employees for your company. The staffing plan should be tailored to the specific needs of your business. For example, if you are starting a restaurant, you will need a chef, waitstaff, dishwashers, etc. If you are starting a tech company, you will need software engineers, marketers, etc. A good staffing plan will help you find the right employees for the job and set your business up for success.

7) Exit Strategy

No one knows what the future holds, so it’s important to have an exit strategy in case things don’t work out with your business venture. An exit strategy is a plan for how you will get out of your business in a way that protects your investment and minimizes losses. It should include information about how much money you need to break even or make a profit, what steps you will take to sell or close down your business, and what arrangements you have made with creditors or suppliers. Having an exit strategy shows investors or lenders that you have thought about the risks involved in starting a business and have a plan for how to deal with them.

8) Organizational Tool

Lastly, a business plan is a great organizational tool. It can help you keep track of your progress, set goals, and measure success. Having a business plan gives you a roadmap to follow and helps ensure that you are making the right decisions for your business. Not only that, but it also makes it easier to track your progress and make necessary changes along the way.

A business plan is a must-have for any new business. It can help you raise capital, find investors, and get your business off the ground. Additionally, a business plan can be a helpful tool for keeping your team members on track and ensuring that everyone is working towards the same goals. If you’re not sure where to start, there are plenty of resources available to help you write a business plan. And if you need more help, there are plenty of consultants and service providers who can assist you in developing a comprehensive and effective business plan.

If you are looking for office space, visit OfficeFinder . We can help you to find exactly what you are looking for. We have hundreds of tenant representatives that can help you find space, for free. Message us. 

Subscribe For Latest Updates

Sign up to the best of business intelligence, lead generation and marketing ideas on what matters to you.

• Business Planning

Why Do You Need a Business Plan

Written by Vinay Kevadiya

Published Jul. 27 2024 · 10 Min Read

16% of entrepreneurs who write business plans are more likely to make their ventures work compared to those without. Sean Hackney's story is a perfect example of this.

The plan he wrote detailed how he would take on his former employer, Red Bull North America Inc. Hackney's father, and a former Red Bull executive saw the plan and urged him to start his own business instead.

That unexpected advice led Hackney to co-found Roaring Lion Energy Drink, now a $6.2 million company. With an initial investment of just $62,000, he built the second-largest energy drink brand in bars and nightclubs. His business plan, refined over time, guided his remarkable journey.

If Hackney's success story hasn't convinced you of the power of a business plan, let us share ten practical reasons that might just change your mind.

10 reasons why you need a business plan

Writing a business plan is like creating a roadmap for your entrepreneurial journey. But it holds more power than you realize. Let's explore 10 compelling reasons why you should take the time to create a business plan.

Reason 1: To test if your business plan has any legs

You may think you have a fantastic business idea until you put it down on paper. That's when reality hits and aspiring entrepreneurs can test if their idea has legs.

When you start documenting your plan, you'll have to think about how you'll launch, how much money you'll need, and what kind of return you can expect. You'll probably hit a few roadblocks along the way, which is a good thing.

This is your chance to adjust your strategies and expectations before you jump in headfirst.

A business plan shows that you've done your homework. It reassures investors and partners that you're serious about your idea, and that you've put in the time to make it work.

Reason 2: To help you avoid making mistakes

Only half of all small businesses survive until their fifth anniversary.

Now this is a sobering statistic for a small business owner.

But the good news is that many of the most common reasons for failure can be tackled head-on with a solid business plan.

CB Insights data reveals that businesses often fail because:

• There's no market need for their product.
• They run out of money.
• They have the wrong team in place.
• There’s intense competition.
• There are pricing issues.

By writing a business plan you can avoid these pitfalls.

Let's say, you own a small coffee shop. Your business plan has helped you identify your target customers, set pricing, and forecast sales. But suddenly, a new competitor opens across the street. They are offering lower prices and a wider selection.

Now your plan acts as your survival guide here. With it, you can:

• Review your market analysis
• Re-evaluate your pricing strategy
• Develop a plan to differentiate your shop.

Or maybe you introduce a loyalty program, host live music events, and focus on sourcing unique coffee beans.

By regularly reviewing your business plan, you identify weak spots and prepare for the unexpected. You also establish financial guardrails. If you're not meeting your revenue goals, your plan helps you adjust spending, create realistic budgets, and keep your business on track.

In short, a business plan is your tool for turning uncertainty into opportunity.

Reason 3: It builds a foundation for your business

Let's say you're starting a company that creates educational apps for kids. There are endless possibilities. Simply stating "I'm starting an educational app company!" isn't enough.

You need to define your niche like:

• Which age groups will your apps cater to?
• What subjects will you cover?
• Why do kids need these specific apps?

Answering these questions helps shape your entire business strategy. Your initial research will guide your financial projections, goals, operational needs, and marketing efforts.

The benefit? You can constantly refer back to the goals outlined in your business plan to track progress and focus on areas that need improvement.

Only this way you'll spend less time fixing problems and more time engaging with your target audience—ultimately, leading to revenue generation.

Reason 4: To seek funding and investment

Every new business needs funding to get started. Banks don't hand out loans based on a simple request. They need to see a well-structured plan that clearly shows:

• How you'll use the money.
• Where it will go.
• How you plan to repay it.

Investors also need reassurance before they commit funds. They'll have questions about your pricing, revenue models, and overall financial strategy. A well-written plan will do more than just explain your business and goals to investors.

This will prove that you've done your homework and carefully considered the challenges your business might face. Moreover, it will demonstrate you have a deep understanding of the financial side of your business model—giving investors confidence in your ability to succeed.

Reason 5: It brings every person in your team on the same page

A great business plan does more than attract investors. It unites your team and gives everybody a clear understanding of where the company is headed and how to get there.

A study by McKinsey & Company proves this point. In companies with no plan, over half (51%) of executives were unhappy with their company's direction. It's clear: a shared plan matters.

But here’s the thing: Not just any plan will do. It needs substance. It needs to be well-thought-out and based on good research.

The same McKinsey study found that less than half (45%) of those surveyed were happy with their company's planning process. Only 23% said important decisions were even made using it.

This means a bad plan, or a plan that just sits on a shelf, can be as bad as having no plan at all. To benefit from a plan, it needs to be thorough, based on real information, and used to guide all the decisions a company makes.

Reason 6: Help you build a marketing strategy

A business plan isn't just about the numbers; it’s about your marketing plan too. It shows you the map to ensure that all the marketing roadways lead where you want them to—your business goal.

This helps you identify your target audience, and how you can effectively reach them.

A good business plan will also help you:

• Streamline all marketing efforts for you, saving you time and money.
• Keep your marketing strategies focused on what matters most—overall.
• Make the most out of your marketing budget by choosing the best ways.
• Truly understand your customers so you can give them what they want.
• Build a strong, recognizable brand.

Reason 7: It makes your company future-proof

Business plans aren’t just a tool that helps forecast the future. It shapes your future and helps you make wise decisions.

How? Take Alex, a tech enthusiast with an innovative app idea for an example. His business plan isn't just about predicting downloads.

It pushes him to analyze his competition: Who else offers similar apps? What makes his app unique?

This leads him to highlight his app's user-friendly interface and personalized features in his marketing, attracting a loyal user base.

When unexpected development delays arise, Alex doesn't panic. His plan includes extra time and money for unexpected issues.

This allows him to adjust his timeline without jeopardizing the launch. He even finds ways to team up with big tech companies, a strategy outlined in his plan for future growth.

However, the business plan isn’t cast in stone. It's a living document and should change according to trends.  This flexibility lets businesses stay one step ahead. It turns challenges into opportunities and creates a future that's not just imagined but actively built.

Reason 8: It helps you hire top talent

Once you're done mapping your strategy in your business plan, you may come across areas that may need some additional skills. It could be a marketing strategy expert, a financial advisor, or a sales professional.

As a result, it helps you figure out exactly who you need to hire. It's like a checklist that shows you the different jobs that need to be done for your business to succeed.

By knowing these jobs, you can write clear descriptions helping potential candidates know exactly what’s expected of them.

Moreover, when you share your business plan with potential hires, it acts as a recruiting magnet. It attracts top talent by showing them that your ship is sailing towards success, not sinking. It’s probably because when you're sure of your company's direction, it's easy to get others excited about it too.

Reason 9: You can track your progress

Your business plan is not just a guidebook but also a report card for your company. You'll include things like:

• How much money you'll expect to make
• How you'll get customers
• What big steps you'll need to take.

They're not just guesses about the future, but targets that you're aiming for.

For example, financial reports will help you track your money. Are you making as much revenue as you predicted? Or are you spending too much?

Similarly, marketing plans will indicate your advertising and other promotional efforts. Are your ads reaching the right people? Are they visiting your website?

And the goals you set for your operations (like opening new stores or hiring employees) help you measure how far along you are in reaching those targets.

By checking how you're doing compared to what you planned, you can quickly find out if your business is working or not. This lets you make smart changes, avoid big mistakes, and keep your business on the path to success.

Reason 10: To sell your business

Selling your business is a big decision, and timing is everything. Your business plan can be a valuable tool in that process.

If you've set goals and business milestones within your plan, then you've created a timeline for yourself.

Eventually, when it’s time to sell, your business plan becomes a selling point. It demonstrates to potential buyers the success and future prospects that can affect your business's value.

Summing it up

You might hear stories of successful established businesses like Apple or Google starting without formal business plans. While those stories are inspiring, it's important to remember that these companies likely developed plans when seeking potential investors or going public.

After all, convincing others to invest in your idea won’t happen if you can’t pen your passion and success roadmap.

Of course, you don't absolutely need a written plan to succeed in business. But having one significantly increases your chances. Investors want to see your plan, and public companies need to share theirs to attract investors.

But we know writing a business plan can be hard. That's where AI business plan generator help. They can quickly create a plan based on a few details about your business, making the process much easier.

Get Your Business Plan Ready In Minutes

Answer a few questions, and AI will generate a detailed business plan.

Generate your Plan

Frequently Asked Questions

How does a business plan help small business owners with decision-making?

A business plan is like a map for your business. It clearly shows your goals, plans, and possible problems. This helps you spot challenges early on and find solutions before they become big problems.

Can a business plan help me solve problems unique to my industry?

Of course! Your business plan is as unique to you as a custom-made suit. It will deal with your business sector’s peculiar challenges and opportunities, whether you have to negotiate tough regulations, put yourself ahead of the trends, or outwit the competition.

I'm seeking investors or a loan. How can a business plan help?

Your business plan will be the investor's and lender's selling document. It’s proof that you’ve done your homework and have a definite plan for success. An effectively developed plan is what builds their confidence in your business and gives you the best shot at getting the funding you need.

As the founder and CEO of Upmetrics, Vinay Kevadiya has over 12 years of experience in business planning. He provides valuable insights to help entrepreneurs build and manage successful business plans.

Follow Vinay Kevadiya

Related Posts

How Long Does it Take to Write a Business Plan

The 8 AI Prompts You Need to Write a Business Plan

How to Format a Business Plan

8 Reasons Why You Need a Business Plan

Embarking on a new business venture can be both exciting and daunting. Amidst the thrill of innovation and entrepreneurship, it’s crucial not to overlook one fundamental tool: the business plan .

A well-crafted business plan is more than just a document; it’s a strategic roadmap that guides your business towards success. Here are eight compelling reasons why you need a business plan.

On This Page

1. Provides Clear Direction

A business plan acts as a compass, providing clear direction and defining the path for your business. It outlines your goals, strategies, and the steps needed to achieve them.

This clarity helps you stay focused on your objectives and prevents you from deviating from your core mission.

• Goal Setting: Clearly define short-term and long-term goals.
• Strategic Roadmap: Outline the steps required to reach these goals.

2. Attracts Investors and Secures Funding

Investors and lenders require a detailed business plan to understand your vision, strategy, and financial projections.

A well-written business plan demonstrates your business’s potential for growth and profitability, making it easier to secure funding.

• Investor Confidence: Show investors that you have a solid plan in place.
• Funding Requests: Clearly outline how much funding you need and how it will be used.

3. Helps Identify Potential Challenges

A business plan allows you to anticipate potential challenges and devise strategies to address them.

By conducting a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats), you can identify risks and prepare contingency plans.

• Risk Management: Identify and mitigate potential risks.
• Problem Solving: Develop strategies to overcome obstacles.

4. Facilitates Better Decision Making

Having a business plan in place enables more informed decision-making. With a comprehensive understanding of your business’s goals, market, and competitive landscape, you can make strategic decisions that align with your overall objectives.

• Informed Choices: Base decisions on detailed analysis and research.
• Strategic Alignment: Ensure decisions support your business goals.

5. Improves Organizational Management

A business plan outlines your organizational structure, roles, and responsibilities, ensuring everyone in the company understands their part in achieving the business’s goals.

This clarity enhances operational efficiency and team collaboration.

• Role Clarity: Define the roles and responsibilities of team members.
• Operational Efficiency: Streamline processes and improve workflow.

6. Monitors Progress and Performance

A business plan acts as a benchmark for monitoring your business’s progress and performance.

Regularly reviewing and updating your plan helps you track achievements, measure performance against goals, and make necessary adjustments.

• Performance Metrics: Set and track key performance indicators (KPIs).
• Continuous Improvement: Regularly update the plan to reflect progress and changes.

7. Supports Strategic Marketing

A business plan includes a detailed marketing strategy that outlines how you will attract and retain customers.

By defining your target market , marketing channels, and promotional tactics, you can create effective marketing campaigns that drive growth.

• Target Market: Clearly identify your target audience.
• Marketing Strategies: Outline effective marketing and promotional tactics.

8. Enhances Financial Management

A business plan includes detailed financial projections, such as income statements, cash flow statements, and balance sheets.

These projections help you manage your finances more effectively, ensuring you have the resources needed to grow your business.

• Budgeting: Create realistic budgets and financial forecasts.
• Financial Health: Monitor financial performance and make informed financial decisions.

A business plan is not just a static document but a dynamic tool that evolves with your business. It provides clear direction, attracts investors, identifies potential challenges, facilitates better decision-making, improves organizational management, monitors progress, supports strategic marketing, and enhances financial management.

By investing time and effort into crafting a comprehensive business plan, you lay a solid foundation for your business’s success. Remember, a well-thought-out business plan is your blueprint for turning your entrepreneurial dreams into reality.

Related Articles

How Perceived Value Can Boost Your Sales

In the competitive world of business, simply offering a great product or service is not always enough to guarantee success. Consumers often make purchasing decisions based on their perceptions of value, which encompasses not just the intrinsic worth of a product, but also their subjective judgment of its benefits, quality, and brand reputation. Understanding how perceived value can boost your sales is crucial for any business looking to enhance customer satisfaction, loyalty, and profitability. In this article, we will explore ...

How to Plan and Execute a Successful Product Launch

Launching a new product can be one of the most exciting and challenging milestones for a business. A successful product launch not only introduces your product to the market but also sets the stage for its long-term success. Whether you are a startup releasing your first product or an established company expanding your product line, careful planning and execution are crucial. A well-orchestrated launch can generate buzz, attract customers, and drive sales, while a poorly managed one can lead to ...

Micro Businesses: Advantages, Challenges, and Popular Types

In today’s dynamic economic landscape, micro businesses play a crucial role by contributing to local economies and providing innovative solutions to niche markets. Defined as small-scale enterprises typically employing fewer than ten people, micro businesses are often characterized by their adaptability, personalized customer service, and unique product offerings. They represent a significant portion of the global economy, driving job creation and fostering entrepreneurial spirit. This article will explore the advantages and challenges associated with micro businesses, as well as highlight ...

Understanding Vertical Markets: Definition and Guide

In the world of business, understanding market dynamics is crucial for achieving success. One such concept that plays a significant role in strategic planning is the idea of vertical markets. Vertical markets are specialized segments within broader industries where businesses cater to the specific needs of a niche group of customers. By focusing on these specialized markets, companies can tailor their products and services to meet the unique demands of their target audience, leading to higher customer satisfaction and competitive ...

Benefits of Choosing to Engage the Best Real Estate Firm in Florida

Are you planning to buy or sell a home in South Florida? It is crucial you look for the top realtors who will help you buy or sell a home. You will, therefore, need to know the qualities that will aid you to find this best company. Hence, this company has highly qualified realtors working as a team. It is crucial you seek to know the gains of hiring the best real estate agents in a given field. Below are ...

Strategies of a Position Trader: Optimizing Long-Term Investment Success

Litecoin Mining: A Deep Dive into Scrypt Algorithm and Proof-of-Work

Imperative Approaches Why Considering a Good Domain Name Would be Influential for the Exponential Growth of Your Business

Exploring the Different Types of Investment Banking

Choosing the Best Bad Credit Loan Company: What to Look For

PradoMag.com, your comprehensive source for insights and updates in the fields of business, investment, and loans. Our mission is to equip you with the knowledge and tools necessary to navigate the complex landscape of these critical areas.

Networks: DoctorGev › KickDrop › NewsBlind

© 2024 PradoMag.com. All Rights Reserved.

Why Crafting a Business Plan is Important: Insights for Entrepreneurs

Written by Dave Lavinsky

A well-crafted business plan is more than just a document; it’s the backbone of any successful business. Drawing from years of experience working with entrepreneurs, I’ve seen countless ventures succeed and fail. Often, the difference lies in one critical factor: the presence of a clear, actionable business plan.

In this article, we’ll explore the most compelling reasons why creating a business plan isn’t optional; it’s essential for turning your vision into reality.

1. Solidifies Your Aspirations and Company Goals

From my personal experience as an MBA graduate and consultant, one of the biggest mistakes entrepreneurs make is starting a business without knowing exactly what they want to achieve. A business plan forces you to put pen to paper, translating your aspirations into tangible long-term objectives.

For instance, I once worked with a boutique fitness studio that struggled to define its niche. After developing a comprehensive business plan that clarified their mission and audience, they saw a 40% increase in memberships within the first six months.

Having a structured plan ensures that your efforts are focused, and your resources are aligned with your vision. This prevents wasted time on initiatives that won’t yield results. A business plan example is a great way to get started.

2. Blueprint for Strategic Action

Your business plan is your strategy manual. Whether you’re mapping out a marketing campaign or scaling operations, it lays out the exact steps to take. Consider this: A technology startup I advised knew they had a great product but no clear strategy to bring it to market. Their business plan became their guiding light, identifying outreach tactics, potential partnerships, and operational processes. Within a year, they achieved profitability.

Without a strategic plan, your business risks drifting aimlessly. This structured foresight empowers you to anticipate hurdles and adapt swiftly when faced with unexpected challenges.

3. Invaluable for Securing Funding

Investors need more than passion. Rather, they need proof of feasibility — they need a business plan. In my career, I’ve seen entrepreneurs secure millions in funding simply because they provided detailed financial forecasts and a clear ROI for investors. For example, one client, a sustainable clothing brand, was able to raise $1.2 million by demonstrating their projected growth through a robust business plan.

Even if you’re self-funded, a plan ensures your own money will be used effectively, showing you exactly where to allocate resources for maximum impact.

4. Hones Your Market Understanding

When I consult startups, one of my first questions is, “Who is your target market?” You’d be surprised how many struggle to answer. A business plan forces you to define your audience, diving into their needs, preferences, and behaviors. For instance, a SaaS company I worked with initially targeted small businesses but found through their market analysis that midsize firms were a better fit. They pivoted and doubled their customer base within a year.

Understanding your target audience is key to effective marketing strategies and prevents costly missteps, like promoting to the wrong demographic or mispricing your products.

5. Establishes Financial Groundwork

As someone with extensive experience in financial modeling, I can confidently say that a business plan’s financial section is its backbone. Creating realistic budgets, financial projections, and profit margins ensures you have a solid grasp of your business’s viability.

Take the example of a local bakery I consulted. They were running at a loss because they hadn’t accounted for seasonal fluctuations in demand. After creating a detailed financial plan, they adjusted their staffing and inventory, resulting in a 25% increase in profitability.

6. A Proactive Risk Management Framework

Every business encounters risks, but the difference between survival and failure often comes down to preparation. A well-written business plan identifies potential vulnerabilities and outlines strategies to mitigate them.

For instance, one client, a manufacturing firm, was heavily dependent on a single supplier. Their business plan highlighted this risk, prompting them to diversify suppliers. When supply chain issues hit, their operations continued uninterrupted.

7. Boosts Operational Organization

Operational chaos can cripple even the best business ideas. A business plan streamlines your processes, clarifying roles, responsibilities, and workflows.

I’ve seen this firsthand with a digital marketing agency I advised. Before developing a good business plan, their executive team often duplicated efforts. After defining workflows in their plan, productivity improved by 30%, and they could take on more clients without additional hires.

8. Benchmarks Progress and Measures Success

How do you know you’re succeeding? A business plan helps set clear benchmarks to measure progress.

For example, I recently helped a healthcare startup set quarterly revenue goals tied to their business plan. Reviewing their progress allowed them to adjust their strategies and exceed their first-year targets by 15%.

Tracking your business milestones ensures that you stay on course and allows for course correction when necessary. It also helps you avoid “shiny object syndrome” which is when existing businesses shift attention to something new when they should have continued focusing on their existing plan.

9. Encourages Cohesion Among Stakeholders

A business plan isn’t just for you, it’s for everyone involved in your venture. By presenting a cohesive plan, you foster alignment among co-founders, employees, and investors. A client of mine, a tech platform, used their business plan to secure buy-in from skeptical stakeholders. The clarity and professionalism of the plan turned initial skepticism into full support.

10. Keeps You Agile in Shifting Markets

Markets change, often unpredictably. A business plan encourages continuous evaluation and adaptation. During the COVID-19 pandemic, a restaurant I worked with used its business plan to pivot quickly to a delivery-focused model. That agility allowed them to thrive while competitors struggled.

By revisiting and revising your business plan regularly, you ensure your business remains relevant, regardless of external disruptions.

11. Instills Confidence in Your Enterprise

Your confidence in your venture sets the tone for everyone else. A detailed business plan reinforces your belief in your business and convinces others of your preparedness. Whether you are attracting investors or recruiting top talent, a comprehensive plan inspires trust.

12. Identifies Competitive Advantages

Understanding your competitive landscape is essential, and a solid business plan helps you pinpoint what sets you apart. A fitness tech startup I consulted identified its competitive edge, data-driven personalization, through a business plan. This focus helped them secure partnerships with two major gym chains.

13. Holds You Accountable

A business plan isn’t static, it’s your accountability partner. It keeps you focused on priorities and ensures deadlines are met. One founder I worked with credited their plan for maintaining discipline in tracking expenses, helping them avoid a cash flow crisis during a tough quarter.

Final Thoughts: Building a Strong Foundation

From personal experience to real-world case studies, it’s clear that a business plan is the linchpin of entrepreneurial success. Whether you’re seeking funding, clarifying your vision, or adapting to market changes, a plan provides the structure and insight you need.

Don’t think of writing a business plan as an obligation, it’s an investment in your future. Start today, and you’ll thank yourself tomorrow.

20 Reasons Why You Need a Business Plan

Written by Dave Lavinsky

What is a Business Plan?

A business plan is a document that details your business concept and strategy for growth. It provides details about your company, a competitive analysis, a market analysis, a marketing strategy to reach potential customers, and a financial plan so that you make the best possible decisions to start or grow your company. A good business plan will help you take your business idea and turn it into a tangible action plan for success.

What is the Purpose of a Business Plan?

A business plan serves as an essential tool for guiding a company’s direction and decision-making processes. Its core purpose is to provide a detailed roadmap that communicates the company’s mission and vision, long-term objectives, and tailored strategies intended to steer the business towards success. This living document plays a pivotal role in streamlining operations, achieving goals, and setting a foundation for sustained growth. The purpose of a business plan include:

• Creating an Effective Growth Strategy : It outlines a comprehensive plan that identifies clear steps and strategies for expanding the market presence and ideal customer base for the business.
• Determining Future Financial Needs : By creating financial projections, a business plan helps in understanding the capital requirements to fuel growth initiatives and sustain operations.
• Attracting Investors and Lenders : A well-crafted business plan is instrumental in drawing attention from potential investors, including angel investors and venture capitalists, by showcasing the growth potential and profitability prospects of the business.

By leveraging a business plan template , entrepreneurs can significantly enhance their ability to communicate their vision, attract necessary funding, and ensure that all stakeholders are aligned with the company’s strategic direction. Update your business plan regularly to ensure that it remains a dynamic and relevant tool that aligns with the evolving market landscape and the company’s evolving objectives.

Why is a Business Plan Important? Here are 20 Reasons

There are countless reasons why having a well-crafted business plan is essential to the success of any company. Here are top 20 reasons why a business plan is important:

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. Creating your plan forces you to think through and select the strategies that will propel your growth.

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 large or small business. To paraphrase Guy Kawasaki, 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 $1M in annual revenues.

3. To Better Understand Your Competition

Creating the business plan forces you to analyze the competition. All companies have competition in the form of either direct or indirect competitors, and it is critical to understand your company’s competitive advantages or unique value proposition. And if you don’t currently have a competitive edge, figure out what you must do to gain one.

Finish Your Business Plan Today!

Quickly & easily complete your business plan: Download Growthink’s Ultimate Business Plan Template and finish your plan & financial model in hours.

4. To Better Understand Your Customer

Why do they buy when they buy? Why don’t they when they don’t? An in-depth customer analysis is essential to a good business plan and to a successful business. Understanding your customers will not only allow you to create better products and services for them, but will allow you to more cost-effectively reach them via advertising and promotions.

5. To Enunciate Previously Unstated Assumptions

The process of actually writing a business plan helps to bring previously “hidden” assumptions to the foreground. By writing them down and assessing them, you can test them and analyze their validity. For example, you might have assumed that local retailers would carry your product; in your plan, you could assess the results of the scenario in which this didn’t occur.

6. To Assess the Feasibility of Your Venture

How good is this opportunity? The business plan process involves researching your target market, as well as the competitive landscape, and serves as a feasibility study for the success of your venture. In some cases, the result of your business planning will be to table the venture. And it might be to go forward with a different venture that may have a better chance of long-term success.

7. 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 potential challenges and assumptions associated with the model. And upon reading your plan, others may suggest additional revenue streams to consider.

8. To Determine Your Financial Needs

Does your business need to raise funds? How much? You need a business plan to help 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. It will also enable you to plan ahead, particularly if you need help securing funding in the future.

9. To Attract Investors

A formal business plan is the basis for financing proposals. The 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? While investors will generally want to meet you in person before writing you a check, in nearly all cases, they will also thoroughly review your plan.

10. To Reduce the Risk of Pursuing the Wrong Opportunity

The process of creating a solid business plan helps to minimize opportunity costs. Writing a business plan helps you assess the attractiveness of this particular opportunity, versus other opportunities. So you make the best decisions.

11. To Force You to Conduct Market Research and Really Know Your Market

What are the most important market trends in your industry? What are the greatest threats to your industry? Is the market growing or shrinking? What is the size of the target audience for your product/service? Creating the business plan will help you to gain a wider, deeper, and more nuanced understanding of your marketplace. And it will allow you to use this knowledge to make decisions to improve your company’s success.

12. To Attract Employees and an Executive Team

To attract and retain top quality talent, a business plan is necessary. The business plan inspires employees and management that your great idea is sound and that the business is poised to achieve its strategic goals. Importantly, as you grow your company, your employees and not you will do most of the work. So getting them aligned and motivated will be key to your success.

13. 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. You wouldn’t go on a long driving trip without a map; think of your business plan as your map.

Quickly & easily complete your business plan: Download Growthink’s Ultimate Business Plan Template and finish your business plan & financial model in hours.

14. To Attract Partners

Partners also want to see a business plan, in order to determine whether it is worth partnering with your business. Establishing partnerships often requires time and capital, and companies will be more likely to partner with your venture if they can read a detailed information about your company.

15. 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. With the industry, customer and competitive insight you gain during the business planning process, you can best determine how to position your brand.

16. 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 (and why you have or have not).

17. To Reposition Your Business to Deal with Changing Conditions

For example, during difficult economic conditions, if your current sales and operational models aren’t working, you can write a business plan to define, try, and validate new business ideas and strategies.

18. 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. And the marketing strategies and tactics you use will evolve each year, so revisiting your marketing plan at least annually is critical.

19. To Understand and Forecast Your Company’s Staffing Needs

After completing your business plan, you will not be surprised when you are suddenly short-handed. Rather, your business plan provides a roadmap for your staffing needs, and thus helps to ensure smoother expansion. Importantly your plan can not only help you understand your staffing needs, but ensure your timing is right as it is time consuming to recruit and train great employees.

20. 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. It’s coming up with these ideas and executing on them which is often the difference between a business that fails or just survives and one that thrives.

Make Your Business Planning Count

One of the most common reasons businesses fail is the lack of a clear, strategic plan that addresses key elements of running a business. Business plans help in identifying and navigating the challenges that can derail a business’s success, including poor market analysis, inadequate financial planning, and an unclear business model. By taking the time to write a business plan, entrepreneurs can clarify their business strategy, identify potential obstacles before they arise, and establish company goals that will set you up for success.

About Growthink Since 1999, Growthink’s business plan experts have assisted thousands of clients in launching and growing their businesses, and raising more than $2.5 billion in growth financing.

Need help with your business plan? 

• Speak with a professional business plan consultant from our team.
• Use our simple business plan template .
• Check out our business plan examples .
• Or, if you’re creating your own PPM, you can save time and money with Growthink’s private placement memorandum template .
• Learn more about us via our Growthink Business Plan Review page

The World’s #1 Business Plan Template

Would you like to know the quickest and easiest way to create a winning business plan?

And how to use it to raise funding, improve your strategy, or both?

Well, we’ve developed the ultimate business plan template to help you do this. Simply click below to learn more.

Other Helpful Business Plan Articles & Templates