Joe DavidImportance of a business plan (Benefits of Business Planning)
This article aims to assess the importance of a business plan. A business plan is an essential tool for anyone wishing to start a business. It is a document that describes the business and focuses on what it wants to achieve and how to achieve it. However, it is a difficult document to construct and certainly time-consuming. Therefore, many entrepreneurs tend to avoid it. Well, avoiding business plans is not a good approach as a well-constructed plan can generate positive returns on investment.
Assessing the importance of a business plan (Benefits of Business Planning)
There are a number of benefits for entrepreneurs to have well-written business plans in place. The following discussion outlines some of them.
A well-written business plan helps entrepreneurs test the feasibility of their business ideas. It makes sense to check out whether an idea would work prior to jumping in and implementing it. Whether the idea is feasible or not can be determined by several means. One of the ways to do so is to identify how much interest the plan has generated from the potential investors. If the idea is not feasible, the entrepreneurs can move on to explore other new and better ideas.
Regardless of the size, businesses certainly need investment. However, hardly anyone invests in a business blindly. Investors need to see a written and comprehensive business plan to make their investment decisions as the plan helps them assess the business potential both in the short and long-term. If convincing, business plans can raise money for the entrepreneurs.
A well-written business plan contains information about the mission, vision, aims, objectives, management structures, financial forecasts and other important information of a business. This abundance of information helps entrepreneurs make sound business decisions. This also helps stakeholders find answers to many of their questions.
An important part of a business plan is the overview of the business which includes but not limited to the information about the macro and the micro environments. A micro environmental analysis generates information about the strengths and the weaknesses of the business. Identifying weaknesses helps entrepreneurs devise remedial actions. A tool such as SWOT analysis is often used in micro-environmental analysis. The article ‘How to do a SWOT analysis’ explains how a SWOT analysis should be conducted.
A business plan provides a roadmap and timeframe for achieving the goals and the objectives set by the business. It identifies the priorities to be dealt with immediately which help entrepreneurs plan and get the jobs done accordingly. It in fact, sets milestones for them to work towards.
A business plan can work as a guide. Entrepreneurs can and should set the tasks to be done to achieve the business goals in line with the plan. A business plan is also a communication tool. Entrepreneurs can use it to delegate tasks and responsibilities and motivate people to work towards achieving the aims and the objectives of the business.
Business plans depict the whole business picture. Are the strategies and tactics aligned with each other? Are the objectives specific, measurable, achievable, realistic, and time-bound? What media to chose to take the business message out there? Is it too expensive to implement the business idea? How about the target market? These questions are extremely vital for entrepreneurs. And they can find comprehensive answers to these questions from the business plans.
We hope the article ‘Importance of a business plan (Benefits of business planning)’ has been helpful. You may also like reading How to write a business plan and How to manage our time effectively. Other relevant articles for you are:
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Last update: 28 July 2019
Further Reading:
Cremades, A. (2018) How to create a business plan, available at: https://www.forbes.com/sites/alejandrocremades/2018/07/24/how-to-create-a-business-plan/ (accessed 16 July 2019)
Finch, B. (2013) How to write a business plan, 4th edition, Kogan Page
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Author: Joe David
Joe David has years of teaching experience both in the UK and abroad. He writes regularly online on a variety of topics. He has a keen interest in business, hospitality, and tourism management. He holds a Postgraduate Diploma in Management Studies and a Post Graduate Diploma in Marketing Management.
M Rahman