Business plans provide entrepreneurs with a comprehensive framework for structuring, operating and expanding a new company. They help entrepreneurs navigate each stage of starting up a company more easily while convincing others to invest in them.
Nerd Wallet reports there are numerous advantages of having an effective business plan for your startup business, which include:
Getting Started
No matter whether you are just beginning or expanding an existing business, creating a comprehensive business plan is crucial for setting clear goals and identifying company focus. A well-written business plan also can help secure funding from private investors or banks as well as provide a roadmap that guides your company from its startup stages through growth.
An effective business plan includes an executive summary, company description, market analysis, product/service information, marketing strategy and analysis, financial planning strategy and budget. An appendix may also be added that supports each section.
Business plans can be long and detailed documents, so it’s crucial to present only the most pertinent details at the start of your plan to capture readers’ interest. Your plan must convince investors that your company deserves their investment by producing enough profit to justify initial funding requests.
Market Research and Analysis
Business plans require entrepreneurs to carefully consider all aspects of their venture, from its marketing strategies and products or services they plan on selling, to market research and analysis to ensure your startup understands its target audience – something market research will ensure will make a significant difference to whether or not their venture succeeds or fails.
An effective market analysis should provide insight into your competitors, industry you are entering and potential target customer base. A SWOT analysis will also be helpful when it comes to identifying your strengths, weaknesses, opportunities and threats. There are various software programs designed to make creating business plans simpler such as step-by-step wizards, templates and financial projection tools such as LivePlan (a cloud-based business plan app with over 500 templates, collaboration tools, third-party app integrations and video tutorials).
Financial Planning
Entrepreneurs seeking outside funding should always create a financial plan. Investors and banks will want to see detailed forecasts that show how your business will expand as well as projections of cash flow projections.
Planning will also assist in setting company goals. A clear vision of what you hope to achieve with your startup will provide direction and prevent unnecessary or risky mistakes from being made.
Consider creating multiple financial forecasts for your business as this will enable you to plan how to respond in times of volatility – these contingency plans will save your organization from having to react ad hoc when crises strike, saving it both money and effort in crisis situations.
Financial Projections
Your innovative business idea has generated enthusiastic response, and now is the time for action to begin. However, before getting underway it is imperative that financial projections be created that outline both best-case and worst-case scenarios for how it may unfold.
A business plan typically contains forecasted income statements, balance sheets, and cash flow statements for any startup business. When creating these projections for startup businesses, these must be based on industry research as well as conservative estimates.
Investors expect accurate financial projections in order to evaluate whether investing in your business makes financial sense. Projection also help businesses meet financial goals on track while preventing surprises down the line. Though creating accurate projections may take some effort and time, the results will certainly justify your effort – here are a few helpful tips that should get you underway:
Investors
Operating your business without a comprehensive business plan can be disastrous, and investors will generally shy away from any venture without such an established plan in place. Before they risk investing their capital they require financial projections demonstrating the potential profit over a five-year period before risking their capital with you.
According to Forbes, depending on your business model, the company description section of your plan could include information such as its type, its products and services offered and a brief summary of competitors. Furthermore, your plan could also describe your management team.
An effective business plan is an invaluable asset when it comes to strategic planning, attracting investors and obtaining loans from lenders. As your startup develops and changes over time, the plan should also adapt.
