A business plan is a fundamental tool that every small business needs. Imagine this: you wake up suddenly, finding yourself in a rain forest with no maps and no means of communication. In this jungle, you are forced to navigate without any clear directions, like being thrown into a labyrinth. This is the unfortunate life cycle of many small businesses.
Starting up a business requires that you have the necessary tools at hand. These tools, and your mastery of them, will determine whether your business will survive or be swallowed by the sometimes volatile marketplace. One tool needed to ensure long term market survival is a Business plan. In this article, we will focus on small businesses, as data shows that those with a business plan grow 30% faster than those without one.
What is a Business Plan?
A business plan is a formally written, well structured document that contains a detailed explanation of a business’s goals. It also contains the business’s background, financial projections and its strategies to ensure that targets are met.
In other words, it is a road map, a consistent variable that guides the actions of your business. A good business plan will consider the historical and environmental context that gave rise to the business, it’s current operating environment, and the nature of its relationship with the said environment.
Furthermore, the plan will take into cognizance the business’s strengths, weaknesses, opportunities, and future potential.
What is the General Purpose of a Business Plan?
Why do you, a blossoming entrepreneur, need a business plan? We summarized some of those reasons above, and we’ll explain more in depth below. A business plan has various purposes, some of which include:
To Prioritize and Set Goals
As hinted above, a business plan is a road map. However, this map is not just a generalized or broad view of your business in relation to the general business landscapes. A business plan includes both the long and short term goals of a business. These goals should be in depth, detailing what the business must prioritize with regards to the overall business goal.
For Business Opportunities and Obtaining of Loans
Most businesses need some type of support or funding from investors. However, in order to give out funding, investors must see tangible proof that your business has an end goal, as well as a feasible means of attaining that goal. This way, they will be able to know the exact details of their investments and make informed decisions.
To Track and Guide Progress
A business plan contains details of everything your business seeks to achieve. This makes it easier for you to observe current progress and chart out future road maps in relation to the template you set out for your business within the business plan.
Why is Business Planning Important for Small Businesses?
The ability to run requires that a person first knows how to walk. However, one is not born with the ability to walk, only the potential to do so. To maximize their innate potential, small businesses should pay utmost attention to building a solid business plan and mapping out in it the relevant details that show both foresight and structure. Why, you ask? Well, let’s have a look:
Small Businesses Need to Better Understand their Potential
To begin your business without this key tool is to throw yourself into a jungle without any navigational kit. Not only does a business plan save you from unguided and spontaneous business decisions, it also gives your business a sense of direction amidst an unpredictable market.
Small businesses often have low capital to run their business operations. A good business owner takes this into consideration while formulating their business plan, and carries out an analysis of the business’s strengths, weaknesses, opportunities, and threats (SWOT). With this, the business will be able to reflect on both its financial and structural weaknesses. This helps the business channel its limited resources towards more profitable ventures.
A very key ingredient for a successful business also lies within its structure. A bad business structure can negatively affect even a seemingly profitable business. Crafting a solid business plan for your small business will enable you to design and implement systems and structures that best suit your goals.
It is very important to note, however, that whatever business structure you adopt within your business plan must also factor in the nature of the business industry/environment.
Every business has a business environment, and every business environment consists of different factors and agents. From competitors and customers to collaborators and even regulatory government bodies, interactions between the many actors within the business landscape can be very complex.
This complexity becomes easier to grasp when you map out your businesses position in relation to the general landscape. Your business plan should contain all the market research needed to get a grasp of your industry, as well as the ways that various market factors interact with each other.
This is specifically relevant for small businesses. Entering a newer terrain requires that you know your way around. For small businesses to compete in their market, they need to cover gaps that exist due to lack of experience. A business plan allows them to have a good idea of what they are doing and where they are going, rather than taking uninformed steps.
Small Businesses Need to Generate Capital
This is the most relevant reason why small businesses need a business plan. As a small business, capital is essential to the sustenance of your business. To attract the needed capital, it is important that you have a well written business plan to show potential investors.
Investors will not make any solid decisions on investing in your business until they see evidence of potential profit. You should note, however, that a business plan does not guarantee that investors will back your business. Small businesses find it harder to attract investors than bigger businesses due to a lack of trust that may come with the way they structure, manage and organize the business. It is therefore pertinent for small businesses to outline an efficient structure within their business plan. The structure should detail the nature of its profit sharing and its sustainability plan.
Furthermore, many small business owners do not place a distinction between money for their business and their own personal income. This lack of proper in-house regulation can put a strain on the business in times of need and crises.
Conclusion
Are you stuck in unfamiliar business terrain? Are you lacking the resources to pull you out? Does a lack of awareness affect your innovative ideas?
Well, Biztraction is coming to your rescue! We are here to aid your business and put your vision into perspective, getting you from where you are to where you want to be by designing a realistic business plan and strategies for your business. Contact us today at [email protected] and get the clarity your business deserves.