Creating a business plan allows you to identify potential problems and
opportunities your business might face, avoid penalties, fines or other
legal problems, adapt to changes in the marketplace and let you expand
or contract from a position of objectivity. You can share a business plan with potential partners, advisers and sources of funding. The Small
Business Administration suggests that a business plan be a work in
progress you should keep current.
Aids in Obtaining Funding
Potential investors will have a variety of questions about your
potential or existing business. A complete business plan not only
provides them with answers, but shows that you are organized and have
considered all of the marketing, legal, financial, human resources and
other aspects of running a business. A thorough business plan will
increase your chance of obtain venture capital and bank loans.
Helps Get Advice
Business professionals may be more likely to give you free advice
about your business if they can comment objectively on numbers, rather
than having to give you their personal opinion of your "great idea."
Organizations such as the Service Core of Retired Executives will not
only give you free advice on launching a business, but will assign an
executive to read your business plan and offer suggestions for improving
it.
Identifies Problems
A thorough business plan addresses all areas of starting and
running your business plan. As you research the information you wish to
include in your business plans, you may learn that suppositions you made
about your marketing budgets, cost of materials, licensing and
permitting, labor costs, real estate or leases and other critical
aspects of your business are incorrect. Learning this before you launch
your business gives you time to make adjustments before you have signed
contracts and committed funds. Business plans include budgets that help
you manage cashflow -- critical to keeping your business running.
Provides Exit Strategy
In addition to providing benchmarks for success, a good business
plan sets realistic criteria for shutting down the business to prevent
your throwing good money after bad. A business failure can be very
emotional and business owners are often not objective in the face of
that reality. Solid numbers that tell you the business is untenable will
help you make the decision to shut down a failing business easier and
will prevent you from losing more of your or your investors' money than
necessary.
