It is possible to get by without a business plan, at least to some extent. You will find that almost every successful business has had a well structured and thoroughly thought out business plan that has contributed to their success. There are a number of reasons why you still need a business plan and there are a wealth of reasons why they will be relevant for a very long time. Let's get into it.
Having a well-written and thorough business plan is a great tool to use throughout your business’s life. They help you stay on track and stay motivated if completed correctly. Business plans are also necessary when applying for loans, or other types of credit. Your plan says as much about you as it does your business or idea.
In this article, we are going to take an in-depth look at this topic. We are going to talk about the 3 main reasons why you need a business plan. We are going to discuss why a business plan is relevant and as a little bonus section, we are going to talk about whether or not you still need a business plan even if you are not looking for funding. For everything that you need to know, keep reading.
3 Reasons Why You Need A Business Plan
In this section, we are going to talk about the entire point of this article which is why you need a business plan. Also, in this section, you will see why having a business plan is still relevant and why a business plan will be relevant for a very long time.
Here are the 3 main reasons why you need a business plan:
- To prove Your Legitimacy to credit providers.
- You want to appeal to lenders.
- Understand your goals and strategies.
Now let's take a closer look at each of these reasons.
To Prove Your Legitimacy To Credit Providers
This is something that we hear all the time and it is something that almost everyone who has ever thought about starting a business has learned either by talking to people or the hard way. In this section, we're going to talk about why credit providers require a business plan and we are not just going to mention the generic stuff.
You would have heard it a thousand times, the bank wants to know how you are going to run your business and therefore that's why they need a business plan. However, it's not just because of this. The business plan tells the bank or the credit provider a lot about you as an individual.
A business plan takes a lot of thought and effort and if you can keep a rational head while coming up with a 30 to 50-page business plan, that says a lot about you, and if the business plan is viable that makes it even more appealing to a bank.
To Appeal To Lenders
There is a wealth of reasons why you want to appeal to investors. One of the main reasons is because it is less risky than taking out loans from the bank. However, whether you are a successful entrepreneur with a successful business or somebody who is looking to get an idea off of the ground, here are the reasons why you need a business plan.
For a company that is already up and running, an investor will look at several things such as your books, the current value of your company, a prediction of your future, and then your business plan. This is so that they can get a clear idea of where you are going, what your intentions are, and whether or not your ideas are feasible financially.
For somebody who is just looking to start out, let's say that you have a great idea, you still can't really just go up to somebody and say “hey invest in my idea”. They will pretty much laugh at you but if you have a business plan, things might be a little bit different. Now let's take a look at what an investor will look for in your business plan.
- Who you are and what your qualifications are.
- The structure of your startup.
- The qualifications of key employees.
- Your product or service and how much you know about it.
- How much do you understand the target market?
- What are your strategies?
- Is it feasible?
That is only a small fraction of what an investor will look for.
To Understand Your Goals
Drawing up a business plan isn't just for presenting to investors or potential credit providers but it holds a lot of value to you as well. A business plan should be seen as a step-by-step plan of action, a guide, and something to use as a reference.
Once in a business plan, you can have your goals laid out in front of you and you can also have the ways in which you are going to achieve those goals. Having them written down in a carefully thought-out business plan can help you stay on track, better understand your goals, and have more chance of successfully achieving them.
When you think about your goals, it might seem like you really have a good grip on things but once you start putting pen to paper and have your ideas, your goals, and your objectives in front of you in writing, you will see that not everything might be as it seems.
You might find that some goals are easier to attain than you might have thought and some might be harder than you thought. Finally, and unfortunately, you might figure out that some objectives are not feasible.
When you start to gain this kind of insight into your business or your business idea this is where your entrepreneurship skills are going to come into play the most.
Here's Why Having A Business Plan Will Stay Relevant
A business plan will stay relevant simply because most entrepreneurs will fail without one. Now, there are a lot of entrepreneurs who run a business for up to two years without a business plan but eventually you will reach a point where you have to have one.
Do You Need A Business Plan Even If You Don't Need A Loan?
This is a great question and I have actually been asked this a lot of times so I decided to include it here as I thought it is actually quite relevant to this article. Do you need a business plan even if you will not be requiring any financial assistance from lenders? Let's find out.
As we have stated in this article, a business plan is not just necessary for financial reasons it is also so that you and your business partners, if you have any, understand your goals and what you need to do to achieve them. It also helps you keep on track with your company's progress.
Let's take a little recap of what we should have learned in this article. We have learned that a business plan is absolutely necessary if your business needs funding either now or in the future and regardless of whether that funding will come through private investors or through financial institutions.
We have also learned that a business plan is absolutely still relevant and will be in the future for as far as we can see. I hope that this article gave you all the information that you need to know and I hope that you can walk away from it without having any further questions.