By Yhordan Serpentini | August 26, 2022
One of the biggest and most crucial reasons small businesses tend to fail is because entrepreneurs and small business owners tend to lack a business plan, or fail to have one at all. You might be wondering why this is the case. Here are four simple reasons why having a business plan is crucial to your success.
1. Market Research
The first reason why having a business plan is important to the growth and success of your company is because it allows you to research and analyze the data of your target market. Market research is detrimental to your company’s success as it lets you know the basics of who your target audience is, what they want, what the current trends of your target market are, who your competitors will be, the type of pitches you’ll make, what solutions you could create, what services you could sell—so on and so forth.
If you don’t have a business plan, you won’t have the proper knowledge and research done to know how your business can uniquely stand out from your competitors, how engaged your target audience will be, and how adaptable your company could be to current or future problems.
2. Structures an Effective Growth Plan
Just like market research builds the framework for who your business will target, and who your competitors will be, a business plan will also act as a framework for its future growth. What do you want out of your company? What are the objectives you hope to achieve? What are the strategies in which you will use to accomplish these objectives? Do you have a brand in mind? A brand personality? How will you advertise your business to your target market?
These are all very important metrics that you, as a small business owner and/or entrepreneur, must plan an approach for. Otherwise, it will be like trying to shoot an arrow in the dark. Usually, you’d want to plan ahead about one or two years into the future. Where and how do you want your company to be or look? What will you do to reach that point?
3. Creates A Spending Plan
Having a spending plan is very important, and without one, your business is doomed to fail economically. A spending plan, or budget plan, is a blueprint for what or where your profit and cash flow will go to. It will help you manage your profits efficiently and effectively, monitor financial performances, determine potential room for cuts or surpluses, and simply improve your ability to make economic decisions.
When creating your business plan, you still haven’t started your company yet, so determining a spending plan will be more of estimated guesses until you have sufficient data to base your estimations off of; however, having a business plan will make creating your spending plan, regardless of it being guesses or sufficient estimations, significantly easier, as well as it will reduce potential risks and help you on your business’s financial growth.
4. Attracts Access To Capital
One of the other crucial benefits of having a business plan is that it will look great in the eyes of investors, banks, and loaners. If you have a mapped out plan for what your business is, the objectives you want to accomplish, the strategies in which you hope to achieve those goals and make your business adaptable, what makes your business stand out, and a financial plan for what you estimate you will likely need funding for, investors and loaners will have a much easier time considering your business as an investment.
Additionally, if you sought other means of capital like crowdfunding, family funding, credit cards, etc., having a business plan will make it much easier to persuade people to invest in your company versus relying entirely off of your word, alone.
Sources:
- sba.gov. (2018, December 10). 5 reasons you need a business plan. Retrieved August 26, 2022, from https://www.sba.gov/blog/5-reasons-you-need-business-plan
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