June 29, 2010
Developing a Business Plan: Why Bother?
If youâ€™re looking to raise capital, youâ€™ll need a professional business plan. The trouble is, too many entrepreneurs agonize over their business plans for weeks, months â€“ even YEARS.
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Creating a business plan is not just a chore of due diligence to help you to score big money from valuable partners. It is also a golden opportunity for enlightenment. Here are three big reasons why you must develop a business plan â€“ and why it yields benefits greater than just funding.
Business Plan as Feasibility Study
If you have never conducted a formal feasibility study for your business, a business plan serves as one. You will be conducting research into your industry, customers, and competitors. You will discover where the industry in which you operate is large and growing; who your customers are, and what they need; and where your competition is strong and weak.
Looking at these factors while you prepare your business plan will give you invaluable insight as to whether your business is perfect as-is (it’s not), needs work (it does), or needs to be scrapped (it might not.) This saves you time, money, and heartache in the long run.
Business Plan as Financial Outlook
You will also find out, through through researching your business plan, how much capital you will need to raise to make your business viable. This allows you to create sharp, reasoned, realistic financial projections.
Investors need to know your projections are based on realistic assumptions and comprehensive industry research. This forces you to take a good, hard look at your business and plan for the future. Peace of mind begins with measurable data.
Business Plan as Strategy Development Tool
When developing a business plan, not only will you be looking outward to the market at large, you will also be looking inward â€“ at your management team, your operations, and of course your product or service.
You will discover which management holes to fill, and which ones to use as ballast. You will find out how to apply industry best practices to your business, so that you do not waste time â€œre-inventing the wheel,â€ as goes the clichÃ©. You will see how to adjust your product or service set to better meet market demands.
Make no mistake. The most important reason for a business plan is to get the cash and expertise of a lender or investor, so that your business can grow successfully and lead towards a profitable exit for you and your investing partners. But the intrinsic benefits of a business plan are just as valuable.
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