Importance of Business Plan in Entrepreneurship
What is the importance of writing a business plan? A business plan outlines your business goals and objectives and how you intend to achieve them.
Most people do not realize the importance of a business plan to the growth and development of a business.
They feel it is a waste of time and not necessary to do as they consider there are more important things to do concerning the business rather than taking out time to draft a good business plan.
They consider registering the company, acquiring assets, recruiting staff, advertising and promotion, and funding the business as more vital to the success of the business.
Little do they know that a well-crafted plan can help achieve or pinpoint other factors that will add value to their business.
Those who accept that a business plan can be helpful to a company or organization, do not appreciate its value and therefore do not dedicate enough time to making one.
The points below will go a long way in helping owners of businesses realize the need of creating and drafting a good business plan. A good business plan could be the difference between a company and an organization succeeding or failing in their business choice.
These six points below are some of the importance of a business plan when starting a business.
WHAT IS THE PURPOSE AND SIGNIFICANCE OF A BUSINESS PLAN TO AN ENTREPRENEUR?
#1. IT HELPS IN GETTING FUNDS FOR YOUR BUSINESS
This is one of the best purposes of the business plan for an entrepreneur. We all know how money is important to start or run a business. For a startup, your savings and personal funds may not be enough to start your business.
Also for those who are already in business and maybe wishing to expand or try out new things or innovations, money will be required for doing all these. You may need to approach investors to seek funds for your business.
Those who will want to invest in your business will need to see a plan of action to confirm if their investment will be worthwhile and if their money is in safe hands.
The major reason for investing is to make a profit, therefore investors are careful where they put their money. A good business plan shows them all they need to know about various aspects of the business and its potential.
#2. IT HELPS SPOT POTENTIAL PROBLEMS BEFORE THEY OCCUR
A good business plan helps you to forecast the future and look at trends that could occur that may help or affect your business.
When preparing a business plan for various parts of your business like accounting, marketing, and legal, among others, you may find out some mistakes you have done in calculating the cost for expenses, or you would have gone against laid down rules and regulations if you had gone ahead with a certain idea.
Knowing all these helps you avoid making costly mistakes, wasting money, breaking the law, and other offenses as with a business plan all aspects of the business are properly outlined.
#3. IT HELPS YOU STAY ON TRACK
When making a business plan includes planning for the future as well.
Targets are made for people to meet, which helps the organization to know if they are meeting their objectives. For example, in your business plan with proper advertising, your company is expected to have a 10% increase in sales within a year.
If within that period you have not met that target you can look into various aspects of your business to see what is wrong.
#4. IT HELPS MANAGE THE BUSINESS BETTER
With a good business plan, you find out that managing the business becomes much easier and better. The business plan makes you know what goes where and who is responsible for various duties.
Delegating responsibilities is easier with well-laid-out plans.
#5 STAYING ON A BUDGET IS MUCH EASIER
As we had said earlier, finance is so important to a business and is critical for its survival, so it will be such a shame if the money that took a lot to get is wasted.
A good plan allows you to plan how the money will be properly allocated to various aspects of the business.
When this is done you could find cheaper alternatives to what you want to buy, but most importantly it helps you stay on a budget and avoid unnecessary spending on the business which saves money that can be put back into the business.
#6. HELPS TO DECIDE WHETHER TO START OR CONTINUE WITH THE BUSINESS
This is not something people like to hear, but there comes a time a decision to start a business at all or continue with a business or shut it down will have to be made.
We often hear people say, “these figures are unrealistic; we can not afford it,” “it either we downsize or we are out of business”
A business plan lets you know when a business is not doing well, especially when targets in your plan are not met. This does not mean the idea or business is bad, but maybe a different approach is needed for the business.
So, do well to write a good business plan if you want to own a good business that will stand a taste of time.