As we all know, every small business needs a business plan in order to target and stand out in their market. What is a business plan? It is a written document which will highlight all the to-dos of your business in the next 3-5 years in the market –
A strategically designed business plan will help you encapsulate the perfect strategy. Then you must execute it to make sure your business doesn’t make losses in what is likely a competitive market.
For a small business, a business plan is a must for a tenure of 3 to 5 years. It will provide a clear view of how to manage, operate and strategically analyze your competition in the market as well as it clearly defines your responsibilities.
Having no business plan is like hitting the road without having an end destination in mind. You are just going somewhere. Here are the key reasons a small business should have a business plan.
Designing your Business’s Future
As soon as you write your business plan, you are not merely writing some words. You are designing the future of your business. You are making a prolonged commitment to letting your business grow from a caterpillar into a beautiful flying butterfly.
As far as small businesses are concerned, a business plan will help secure them their idea to evaluate as time passes and keep them ahead of the market. This ensures long-term success for a business starting from zero as it has set objectives. As obvious as it is, a business plan also highlights alternative future scenarios such as in the case of an exit being needed or how to adapt the business so it survives in the case of extreme loss or bankruptcy.
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Secures your money
Even a small business requires investment. However small that looks, it could still be a family’s life savings at risk. Poor planning could see all of the money go down the drain. Here, a successful business plan saves the day.
In case there are multiple investors, all will require access to the company’s recent income statements/profit and loss statements, along with an up-to-date business plan.
A successful business plan will help you let the investors know the likely profits and losses the business might face. Using this information, the investors will be able to check and balance the business cashflows to meet the debt.
A Solid Foundation
As a start-up or a small business, the workload and managing every single task can be very stressful. You will have to focus on business strategies, management issues, human resource planning and a long list of other things. That’s why creating a plan early can help eliminate “stress overload”.
It goes without saying that the business plan should include strong strategies which give your business the ability to position itself in the market fully aware of the risks in every domain it might face, hence giving your business a solid foundation.
Supporting a Strategical Exit
Despite the best efforts and courageous work done by the teams and the owners, the business was unable to survive, and you are considering closing your small business. The business plan you designed will help you focus on a strategical exit such that the company’s liabilities and debts are taken care of, keeping in mind, cash flows, investments and profits.
Common exit strategies include:
- Initial Public Offering of stock (IPOs)
- Acquisition by competitors
- Mergers
- Family succession
- Management buy-out
A business plan highlights your weaknesses
For a start-up or small business, it is considered very important to know about any potential weaknesses and the mistakes you could make while you are setting the business up. Pursuing your idea can cloud your judgement, and you might ignore the risks through which your money can be lost. A business plan will assist and lets you assess problems before they arise and hence, you can solve them easily.
The Ultimate Motivation
When starting a business – large or small – motivation is what keeps you going in order to survive.
However, not seeing the expected results can demotivate you and can result in more loss of performance further demotivating your team.
In situations like these, the business plan will help you to evaluate yourself to keep you on the right track regardless of not meeting the expected results giving you the best possible motivation.