Why do startups need business plans? Every good entrepreneur knows that running business almost never goes as planned. Being able to adapt to changes a fundamental trait of being a successful entrepreneur. If a business startup hardly ever follows its plan, why is having a business plan still a fundamental necessity for any startup?
“A real business plan should grow organically, just like a lean startup. The process starts with a concrete and specific plan for what’s supposed to happen and continues forever with regular review and revision.” – The Entrepreneur
Clearly, the importance of a startup business plan is undervalued and needs to be looked at more clearly. Whether a new business or an established one, a business plan is essential for many reasons.
Here are the top 10 reasons why you need a start-up business plan.
Reason (1) A good business plan maps out business and guides growth: Having a business plan is a permanent solution to laying out the outline/plan of activities. Once ready with this business plan outline, it works as a map to plan your activities.
Reason (2) Guided growth: The business grows with dependence on many external factors, including the economic trend, market needs etc. Planned actions result in proactive and guided growth, not just merely in reaction to business events.
Reason (3) Set objectives for managers: A business process goes successful with good management, as, setting objectives, tracking and follow-up. Without winging, taking a pre-set business plan at hand helps you set targets for managers in a more organised way; and the managers at the same time can set goals for themselves to stay in sync with the business plan.
Reason (4) Hiring Resources: One obligation when starting a business is hiring the suitable resources. With a business plan, entrepreneurs will already know the scope and area of work their resources are supposed to be doing; and thus put finance and effort in the same direction.
Reason (5) Calculating the business worth: For formal transactions, it is essential you know your business worth. For the valuation of your business, a business plan gives the valuation expert a clear picture of the business standing.
Reason (6) Back-up loans and financing: Any investor, loaner or lender will only put money into your business once he has full faith in it. And in cases of start-ups, a business plan strengthens the prospects of getting investors and lenders. A well-drafted plan will have more investors confide in you, specially if it projects the company’s future.
Reason (7) Priority Management and resource allocation: With a plan at hand, you will be able to allocate the right people for the right task at the right time. While the key to a prospering business is focus, planned allocation assist in working toward strengths and farther away from weaknesses.
Reason (8) Cash Flow Management: This is one fundamental activity for any business to function efficiently. A planned assessment through seasonal variations will aid in monitoring current funding, future requisites, cash inflow and outflow.
Reason (9) A business plan enhances the selling proposition: A business plan helps explaining the prospective buyers what you have, to offer. They worth and why they want you is automatically therefore enhanced, making a business plan an essential part of selling your business.
Reason (10) Strategic and profitable exit: While valuing a firm is disreputably difficult, the startup business plan will highlight all likelihood of investments, thereby enhancing valuation. So at any point, when a business owner plans on making an exit, better valuation will result in a more successful exit.