Starting your own business is a big step. But if you are asking yourself why is a business plan important, here’s an example.
Let’s say that you are planning to build a house. You just don’t buy a barren land and start putting bricks & wood together, right?
This applies to every type of investment. The more planning you put in an investment, the more likely it is to be a fruitful one!
Business is your investment. You can’t start your own business just because you have a unique idea! Or maybe, because you are really passionate about it.
Every industry is flooding with new businesses every day. Unless you have solid research and planning to back your business, it probably will turn out to be a big disaster.
Did you know that 50% of businesses fail within their first five years?
In this article, I am going to list out 5 different reasons why is a business plan important.
Before I begin with the importance of a business plan, here’s a FREE Business Plan Template for you. We have created a Business Plan Template with our years of industry experience and after going through thousands of business plan examples. Grab one for your business today!
Importance of Business Plan #1: Helps in Funding
The first reason why is a business plan important is – to get investors on-board.
Without a well-documented business plan, it would be impossible to get banking institutions, venture capitalists, or angel investors to fund your startup. This is where the importance of business plan kicks in.
Creating a business plan will help you secure funding!
This doesn’t mean that your business plan should be 200-300 pages long document. You just have to create a business plan with essential components such as the target audience, competitors, revenue model, etc.
This document should just be enough for potential investors to understand your business model.
Importance of Business Plan #2: Checks Feasibility of Your Business
Here’s the next reason why is a business plan important.
When you have a brilliant business idea, do you check for its market relevance or competitors? Probably not!
The importance of a business plan is that its defining process helps you to check the feasibility of your business idea.
Through the process of creating a business plan, you go in-detail to check the market validity of your business idea. As such, if you find that your business idea is not feasible in the planning phase, you save a lot of money and other resources.
Besides this, a business plan also allows you to spot loopholes in your business idea. This, in turn, helps you to modify your business idea to create a more profitable end product!
Importance of Business Plan #3: Revenue Model Documentation
At the end of the day, the primary idea behind any business is to make money. How is your business going to make money?
No matter what a business is all about, the efficiency of your revenue generation model is what keeps it running in the long run.
The documentation of the revenue model will help you address any loopholes or market/consumer assumptions you might have made when planning your business.
Let’s say that you have a unique mobile app idea. You think that it’s going to be the next Facebook. But, how do you plan to make money from this app after you grow a user base of, say, 100,000 or more?
You have got another answer to why is a business plan important. Creating a business plan will help you actualize the revenue generation model of your startup. This will definitely influence your potential investors to make a favorable funding decision for your business.
Importance of Business Plan #4: Faster Growth
This is another reason why is a business plan important.
According to a survey,
Startups with a well-thought business plan are known to grow at a 30% faster rate!
Entrepreneurs often confuse business planning with growth estimation. A business plan actually helps you to document how you want your startup to grow and where you want to take it!
The importance of a Business Plan is not about predicting the growth of your business or market fluctuations. It’s about setting milestones & goals that eventually helps you strategize how you want to achieve them.
Writing a business plan creates realistic goals and gives you a list of deliverables that result in faster business growth!
Importance of Business Plan #5: Minimized Business Risks
In a way, business risks are nothing but planning flaws and overlooked analytics. This is where the importance of a business plan comes in.
The more time and resources you invest in strategizing and planning ahead for your startup, the better. Creating a business plan will help you minimize risks down the road, be it market risks, consumer acquisition risks, or other risks.
Every market comes with a bit of uncertainty. The key is to keep adjusting your forecasts and adapting your business using them to survive in the long run.
When you are just starting, it is completely possible that you don’t know the market, your target audience, best practices, and more. Studying them thoroughly and creating a business plan will help you eliminate the blind spots in your business idea and thus, minimizes risks!
Importance of Business Plan: Final Words
A business plan lays a solid groundwork for further strategizing and prioritizing deliverables in your startup. If you are planning your first venture, you can start off by using our FREE Business Plan Template.
If you are planning to start your second and subsequent business, it is good to include the experiences of your previous ventures such as how to manage cash flow in your business plan. The more thorough your business plan is, the more likely is your startup to succeed! Did you get your answer to why is a business plan important?
Besides a flawless business plan, you need a dedicated team to run your startup successfully.
Hire mobile & web developers from Resourcifi who will act as your extended team and help your business skyrocket in no time!
