• ReidChung

Why do you need a business plan?

A business plan is a very important and strategic tool for entrepreneurs starting businesses. A good business plan not only helps entrepreneurs focus on the specific steps necessary to make business ideas succeed, but it also helps them to achieve short-term and long-term goals.


While a business plan is essential whether you are establishing a corporation or a simple sole prop, not every entrepreneur sees the need for one. Many are reluctant to have their plan written down. There are also numerous articles online claiming that the business plan is dead or irrelevant.


A large number of business funding experts support the idea that having a good business plan. Even excellent business ideas can be useless if you cannot formulate, execute and implement a strategic plan to make your business idea work.


If you are looking to raise funds from institutional investors and lenders, keep in mind that having a good business plan is extremely valuable. You should aim to have a well-documented plan that speaks for itself. It needs to be clear and easy to read and understand.Before writing a business plan it is important to consider two important factors:

 

  • Who is the reader?

  • What do you want their response to be?


For example, if you are interested in raising capital, investors will likely be your target audience. If you are interested in partnerships or joint ventures, your potential business partners will be your audience. Whoever this audience may be, focus on the key message you want them to receive in order to get the response you want. 

 

Four Reasons to Write a Business Plan

 

1. To raise money for your business

Potential investors or lenders want a written business plan before they give you money. A mere description of your business concept is not enough. Instead, ensure you have a thorough business and financial plan that demonstrates the likelihood of success and how much you will need for your business to be successful in the long term.


2. To make sound decisions

As an entrepreneur, having a business plan helps you define and focus on your business ideas and strategies. You not only concentrate on financial matters but also on management issues, human resource planning, technology, and creating value for your customer.


3. To help you identify any potential weaknesses

Having a business plan helps you identify potential pitfalls in your idea. You can also share the plan with others who can give you their opinions and advice. Identify experts and professionals who are in a position to give you invaluable advice and share your plan with them. 


4. To communicate your ideas with stakeholders

A business plan is a communication tool that you can use to secure investment capital from financial institutions or lenders. You can also use it to convince people to work for your enterprise, secure credit from suppliers, and to attract potential customers.


Creating a business plan involves a lot of thought. You need to consider what you want to do and use that as a starting point. It does not need to be complicated. At its core, your plan should identify where you are now, where you want your business to go and how you will get there. Writing a good business plan does not guarantee success, but it can go a long way toward reducing the odds of failure. Besides, even if you are not looking for investment, your entrepreneurial plans will fall flat quickly without a plan to guide them.


For more resources, check out my business plan template that can help you get started writing that ultimate business plan.


The Ultimate Business Plan Template

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Reid Chung

 Reid is a finance expert in banking and is currently a financial trainer for a medium size financial institution.  Helping others improve their knowledge about money, finances, and financial education is his passion.  Through his work, he hopes to open the door to financial freedom to the masses.

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