Jeanne A. Estes would always say that your reason for wanting to start your own business is laying a solid foundation for your business is the key. So now I will show you why business plan is the business key.
HOW DO YOU LAY A FOUNDATION FOR YOUR BUSINESS?
With the idea being born and things being readily available, the next step is a well-written business plan. It means that laying a foundation entails producing a well-written business plan.
A well-written business plan contains vital and essential information needed for its smooth and effective running and management.
You could illustrate this plan to be like the university course outline. This course outline is a focusing device that serves as guidelines for both the university bodies and the students themselves. It projects to the future and has a determinant factor of how the semesters are divided. A departmental entire course outline determines what the department would finish and how they would do it. It is precisely what a business plan dose to a business.
Going into business without a business plan is like going on a mountain trek without a map or GPS support. You will eventually get lost and starve. It is what happens to any business establishment without a business plan. There would either get lost in their business or close up.
Until now, most entrepreneurs still see and treat the business plan as just ordinary paperwork that even when they write it for their business, they do it rigorously, forgetting that you must be ferocious in whatever rules you decided to abide by.
HERE ARE 6 AMAZING REASONS WHY YOU MUST HAVE A WELL-WRITTEN BUSINESS PLAN.
1. TO IDENTIFY YOUR PROBLEMS:
When you start a small business or launch a startup, the one thing you can count on is the unexpected. No matter how thoroughly you plan, forecast, and test, problems are bound to arise. But the amount and quantity of problems you encounter depend on how thorough you were while writing and executing your business plans. That is why, as an entrepreneur, you need to be detailed and factual while writing a plan and possibly set out the possible problems and how to solve these problems effectively when they arise.
A 20% record of entrepreneurs who are on the verge of giving up In business often relentlessly says that problem-solving comes naturally, and some are destined to be problem solvers. Moreover, it’s a skill you can grow and refine with a thorough business plan and the right set of works over time. The best business leaders didn’t just find a magic solution to solve their problems; they built processes and leveraged tools to find success. And you can do the same.
The primary and easiest way of solving a problem in business is by defining the problem. When a problem arises, it can be effortless to jump right into creating a solution. However, if you don’t thoroughly examine what led to the problem in the first place, you may make a strategy that doesn’t solve it. You may just be treating the symptoms.
For instance, if you realise sales from new customers are dropping, your first inclination might be to rush into putting together a marketing plan to increase exposure. But what if decreasing sales are just a symptom of the real problem?
When you define the problem, you want to be sure you’re not missing the forest for the trees. If you have significant issues on your hand, you will want to look at it from several different angles.
With this, you will understand that defining a problem can only be done when there are a business plan and a review of it. A business plan would give the entrepreneurs a clear insight into what possible problems and challenges. 100% of startups aim for a successful business, and 60% do not look at the potential issues and challenges that would likely occur. Nevertheless, a business plan would force you into disciplined thinking and make you ready for the possible difficulties that would surface in the future and help you anticipate potential problems so you can solve them before they become disasters.
Through a well-written business plan, there is an 80% chance of getting financial mentoring. It creates revenue for investors to know and be aware of all the parts of the business plan. It would provide structure and confidence that the investors need to make decisions about its financial involvement.
Having a business plan will lead you to a financial review which entails:
Cash flow – this is the balance of all of the money flowing in and out of your business, ensuring that your financial forecast is regularly reviewed and updated.
Working capital – this review will help recount your working capital and check if your requirements have changed? If so, it will explain the reasons for any movement. Compare this to the industry norm. If necessary, take steps to source additional capital.
Cost base – it will help keep your costs under constant review. Ensure that your expenses are covered in your sale price – but don’t expect your customers to pay for any business inefficiencies.
Borrowing – what is the position of any lines of credit or loans? Are there more appropriate or cheaper forms of finance you could use?
Growth – do you have plans in place to adapt your financing to accommodate your business’s changing needs and growth?
A financial forecast estimates future economic outcomes for a company or project, usually applied in budgeting, capital budgeting and valuation. Predicting and planning your business finances can show potential investors that your business idea will fly. But preparing financial forecasts is a good idea even if you don’t need to raise the start-up money.
The discipline of developing financial projections for your business plan, including an estimate of start-up costs, a break-even analysis, a profit-and-loss forecast, and a cash flow projection, will help you decide if your business is worth starting or if you need to rethink some of your key assumptions.
In other words, a good business plan will convince you that you’re doing the right thing — or not. As any experienced businessperson will tell you, the business you decide not to start because a financial projection doesn’t pencil out can be more critical to your long-term success than the one you bet your economic future on
3. TO KNOW AND UNDERSTAND YOUR TARGETED AUDIENCE:
Given the current state of the economy, having a well-defined target market is more critical than ever. No one can afford to target everyone. Small businesses can effectively compete with large companies by targeting a niche market.
Many businesses say they target “anyone interested in my services.” Some say they target small-business owners, homeowners, or stay-at-home moms. All of these targets are too general.
Targeting a specific market does not mean that you are excluding people who do not fit your criteria. Instead, target marketing allows you to focus your marketing dollars and brand message on a specific market that is more likely to buy from you than other markets. It is a much more affordable, efficient, and effective way to reach potential clients and generate business.
Deep customer analysis would help you understand your audience well, which is essential for every successful business. However, an effective business plan has a detail part of this.
On writing a business plan, you need to know why do they buy when they buy? Why don’t they when they don’t? Many other questions will give you a broader understanding of your audience and what they want.
An in-depth customer analysis is essential to an effective business plan and a successful business. Understanding your customers will not only allow you to create better products and services for them but will allow you to reach them via advertising and promotions more cost-effectively.
4. Know your Competitors :
A business plan will make you know who your competitors are. Learning more about what your competitors are doing will put you in knowing how to outshine them by making your business different.
A business plan will expose you to the type of competitor information that will be useful to you depending on the type of business and the market you’re operating in. It will make you ask questions such as ;
who they are
what they offer
how they price their products
what the profile and numbers of their customers are compared to yours
what their competitive advantages and disadvantages are compared to yours
what their reaction to your entry into the market or any product or price changes might be
Answering all this question will help you improve your services and products
5. KEEPS YOU IN TRACK WITHIN YOUR AIM
Writing a business plan is like setting a goal, and Part of successfully setting goals is tracking how far you’ve come. Finding out what motivates you can also help you plan your future goals and action steps. This would quickly be done after a business plan has been duly crafted out.
However, the business plan would expose you to tracking your company’s progress by conducting weekly and monthly goal check-ins that help you evaluate what you have accomplished and where you need to focus more of your attention. It may also help you create milestones based on time and progress so you can quickly tell if you’re on track for reaching your goal.
Seth Godin would say that there is no shortage of remarkable ideas. What is missing is the will to execute then. A well-written business plan will keep you on track with your aim and help you achieve your ideas. It will act as a guide that will put you through the stage and level of your business.
6. PROMOTE YOUR BUSINESS:
A business plan determines the seriousness of the business. This seriousness proves to interested parties that you are determined and committed to building the business. With this, buyers and investors would understand what you have and what it Worth’s, thereby promoting and selling the company/business.
Having full known the primary reasons you must have and update your business plan as a company, asking these questions from time to time would help you understand how far you have gone and what you can do to improve your self. The questions include:
What is my direction?
To answer this, you need to look at where you were before, where you are now, where you want to go over the next three to five years and how you intend to get there.
How can the business perform better than the competition in my chosen markets?
What resources do I require to succeed? What skills, assets, finance, relationships, technical competence, and facilities do I need to compete? Have these changed since I started?
What business environment am I competing in? What external factors may affect the business’s ability to compete?
How do I measure success?
Remember, measures of performance may change as your business matures.
It’s doubtful whether you will answer these questions on your own – involving your professional advisers, your fellow directors, and your senior staff will all help make your review more effective.
In the end, every startup is different. But in the beginning, every startup is the same. What makes the difference between the start and the future is the business plan and its efforts.
A business plan’s importance cannot be overemphasised because it is the foundation of every successful business. Real success comes from having a vision and being organised in the way you strive towards that a vision and business plan entails that organisation.
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