It’s no secret that starting a small business can be an uphill battle, and sometimes success has little to do with the underlying product or service being offered. Instead, a lack of adequate planning can doom a company before the first sale. Creating a solid business plan can help business owners anticipate challenges and opportunities with plenty of time to spare. Keep reading to find out why business plans are worth their weight in gold.
What Goes Into a Business Plan?
Your elevator pitch isn’t a business plan. Instead, you’ll need to do considerable research to determine the business landscape that will confront your new enterprise. A business plan:
- Describes the product/service and its benefits
- Identifies key stakeholders
- Looks at competitors’ strengths and weaknesses
- Lays out a marketing plan
- Delivers financial projections
- Discusses the business’s long-term goals
Business Plans Can Help Secure Financing
Most entrepreneurs will need some source of outside capital when starting a new business. Regardless of whether that funding comes from investors, banks, or SBA-secured loan programs, a solid business plan can be essential for positioning a new business as a worthy risk.
Having a business plan that leaves nothing to chance can show potential lenders and investors that the business’s founders have done their due diligence. An educated entrepreneur can be a more attractive prospect than someone with unrealistic expectations. If lenders see that you’ve come to them with a well-considered plan, they may be more likely to view your company as a sound investment.
Give Your Business Room to Succeed
Part of creating a business plan is determining how much money you’ll need to get your company up-and-running. Underestimating your financial needs can cause the firm to run short of resources before it has the chance to turn a profit.
If you have a realistic view of the funds necessary to keep your business growing, you’re less likely to be taken by surprise down the road.
Know Your Competition
Researching your new business’s competitors is part-and-parcel of creating a business plan, but it’s also a very useful exercise in-and-of itself. Being aware of what you’re up against can help you position your company in a way that can give it a competitive edge. For example: if the market is crowded with luxury offerings, underselling may be a sound strategy. On the flip side, if the bargain market is over-saturated, positioning your offerings as an upscale alternative may help you appeal to an untapped market.
It’s possible that your biggest competitors aren’t even on your radar yet. Extensive competitor research can help you figure out if the “other guy” is down the street, across the country, or halfway around the world.
Formulate Your Marketing Strategy
It doesn’t matter how innovative your business is if no one knows it exists. In drafting a business plan, you’ll formulate a carefully considered marketing strategy that can help your business reach prospective customers. A company that manufactures scooters for elderly people may find social media campaigns to be a waste of time, opting instead for traditional print ads, for example. Finding the right audience can be critical to achieving success.
Some business ideas seem plausible, but don’t hold up under the cold light of financial projections. Others are validated when their financials are subjected to scrutiny. Plotting out your next business venture’s potential can help you realistically evaluate its chances for success.
The results of your analysis may be disappointing, but not nearly as upsetting as losing tens of thousands of dollars on a failed business venture. Conversely, financial projections that stand up to close examination can give you just the push you need to commit to pursuing the dream of starting a small business.