Do You Need a Business Plan?
If you want to show investors, bankers or venture capitalists that you are worth financial support, then you need to have a strong business plan. It should be clear, realistic and focused. Your plan will get you in the door when you need to convince investors and loan officers to help finance your business. As your business changes and develops, you’ll need your plan.
Why You Need a Business Plan
Not every business starts out with a plan, but it helps if you do have one. If you plan to seek out financing, then you absolutely need a plan. Often, lenders will require you to have one before you apply for financing. Here are some reasons why you should write a plan:
- It defines a new business
- Set a value on a business for legal purposes
- Raises equity funding
- Supports a loan application
- Creates a regular business review
- Defines your agreements with your partners
- Evaluates a new product line or an expansion of your business
To have a plan for your business is more advantageous than not having one at all. It might take extra work, but it’s worth it.
What a Business Plan Includes
A business plan proves that your business can generate enough revenue to cover expenses. It needs to show investors that it can make a satisfactory return. Here are the components of a business plan:
- Executive summary – This includes the highlights of the plan and will sell your business in about two pages or less.
- Company summary – This is the description of your company, history, and ownership.
- Products – This will be a description of your products and services. It should also include how your products stand out from competitive products or services.
- Market analysis – This is your summary of customers, market size and competition. You should also discuss your expected market growth.
- Strategy – Your strategy is simply how you plan to sell your product or service and the action you will take to make it all happen.
- Management summary – This is the background on your management team and their accomplishments.
- Financial Plan – This is the most important part of the plan for your investors. This is where you list key financial information.
When it comes to your plan, it needs to describe your business in a positive and realistic light so that you can use it as a roadmap and encourage investors to finance your company.
A solid business plan is important for a company to have. While some companies opt not to have one, this is usually a bad idea. Most companies need financial help at some point or another and without a plan, you may not be able to receive it.