- October 24, 2020
- Posted by: Waqas Siddiqui
- Category: Others
Importance of Business Plan Development for Entrepreneurs & Startups
A majority of entrepreneurs and business owners do not believe in writing a business plan unless they are seeking external funding. Often excited with the idea or consumed in the thoughts of starting their business as soon as possible, they fail to understand the importance of making a business plan or doing market research to ascertain business success. Consequently, more than half of the businesses fail during the first five years of operations.
Some of the major reasons for new businesses to fail can be attributed to not properly investigating the market, understanding consumer need & demand and evaluating the business potential. Other reasons include failing to create a business model and business execution plan.
For any entrepreneurial venture, either upcoming or existing, a business plan should be considered as a critical document and therefore the benefits could not be undervalued. Some of the major benefits of creating a business plan are as follows:
A business plan can be used to double check critical aspects of a business such as the existing market conditions, competition, cost of goods sold, sales drivers and revenue projections. A market research company could support in assessing market conditions and potential. The need for market research is even more important to assess the impact of the ongoing COVID-19 pandemic on business and economy.
Business Modeling & Strategy Formulation
Based on market research findings, a business model and plan can be devised and implemented. Furthermore, market research can also help in formulating and implementing a business, operations and market strategy.
Setting Priorities & Pivoting
A business plan helps in setting priorities with respect to business growth, operations and financial health. Additionally, a business plan is used as a document to pivot and revise priorities as the business evolves, matures and gets exposed to external factors (political, socio-economic, technological, environmental & legal).
Better Financial Planning
A business plan helps in computing the finances required, forecast cash flows, project cost, expenses and revenues. The plan also helps in understanding the investment required, profitability and return on investments. Managing cash flow is highly critical for any business and many entrepreneurs / business owners fail to understand the role of financial planning before and during business operations.
A business plan helps in identifying risks (i.e. economic, market, competition, end-user, demand & supply etc.) in initial stages. Likewise, the business plan also helps in periodically tracking different risks associated with a business (at present & in future) and helps with taking action to mitigate and treat them.
Obtaining Funds & Investments
A business plan is a must requirement for serious investors, venture capitalists, angel investors and lenders. The business plan not only reflects the passion of the entrepreneur / business owners along with the future growth, but also indicates the level of seriousness and professionalism.
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