While every business is unique, all businesses (regardless of size) have one thing in common: they all need a business plan. You’ll read this in every business startup guide: you need a business plan. So, why is a business plan so important and will it make a difference? According to Harvard Business Review, writing a formal business plan gives you a 16% chance of business viability versus those without a plan. Furthermore, the resource claims that high-growth-oriented startups are more likely to launch a business with a plan because of its benefits.
However, writing a business plan alone won’t guarantee success for entrepreneurs and business startups. It is how you write your business plan that truly differentiates your business viability over other similar startups.
This guide delves into the importance of a well-crafted business plan for startups and how to make one.
Importance of Business Plan for Startups
A well-developed business plan benefits entrepreneurs but is especially beneficial for startups for the following reasons.
1. Clarify Your Business Goals and Vision
A business plan is the written statement of your entrepreneurial vision. Putting your vision and goals into paper allows you to visualize and realize its possibilities. You can easily break down your vision into actionable steps and delve into more detail about what products or services you want to offer your potential customers.
Writing a business plan makes your business idea feel more viable as you transform the idea into something concrete. Furthermore, you can use this opportunity to write down the steps to get where you want to be.
2. Expand Understanding of the Market and Competition
Writing a business plan is essential for startups as it provides valuable insights into your industry, market and competition. Internal factors like your vision and goals are crucial to your business success. However, external factors such as market conditions and competition are equally important.
Writing your business plan allows you to evaluate and examine the factors that directly impact your business. It invites you to research the industry, market, and competition to know how to introduce your products and services. This approach is essential for startups that want to penetrate a saturated market. You need more planning to identify potential roadblocks and challenges. The more prepared you are, the better you can succeed as a startup.
3. Assess the Viability of Business Idea
A business plan is an excellent opportunity to assess the viability of a business idea. When researching the market, consumer trends, and competition, you can determine if there is a demand for your products or services within your target area.
Therefore, creating a business plan is essential as it allows you to look ahead into the future of your business. And if there is enough opportunity for your business to take root and flourish, to begin with.
4. Secure Funding and Investments
A business plan is when you write the roadmap to secure funding for your business idea. This document contains a list of potential funding options that are viable for your business, whether a business or a venture capitalist. Therefore, you need a written business plan to determine how much funding you need to launch your business and where to get that funding source.
5. Devising Priorities and Strategies
The ultimate goal of a business plan is to strategize on the goals and objectives to get your business from idea to reality. It begins with identifying the product and services you will offer and the required talent or expertise. From there, you will identify the training and development you need for your talent or the processes required to create products. If you’re involved in creating products, your business plan must include potential suppliers.
As you become closer to launching your startup business, you can fine-tune your plans. For example, to establish an eco-conscious or vegan business, focus on finding suppliers that align with your brand. It will make it easier to source products and materials that achieve your goals and objectives for the business.
Potential Risks of NOT Having a Business Plan
What are the potential risks associated with not having a business plan? Here are reasons to make business planning a priority.
- You will have insufficient funds for your startup business because you did not allocate the costs of sourcing materials and hiring talent.
- You lack direction in resources due to a lack of clarity in objectives and goals.
- You cannot attract potential investors and venture capitalists because you did not showcase organization and professionalism with the business idea.
- Your business is bound to fail since you are unable to assess its viability or due to a lack of market research.
- You failed to make a profit because you did not account for the time, talent, and resources required to make your products.
What You Need in a Well-Crafted Business Plan for Startups
A well-crafted business plan contains various elements that serve as a roadmap to your success – from launching to growing your business. Here are the essential elements to create a well-crafted business plan for startups.
1. Executive Summary
This section is the most crucial in a business plan. It provides a concise yet detailed overview of the business plan, which describes the problem you will solve and why it needs to be solved right now.
2. Market Analysis
The Market Analysis section is where you will discuss your marketing and advertising strategies to attract potential customers. It is also where you will identify your point of differentiation from other similar businesses. It must consider the current and forecasted market trends, industry insights, and overall competitive landscape.
3. Marketing Strategy
In this part of the business plan, you will write down concrete marketing strategies as informed by the market analysis. It should provide a more detailed insight into how you plan to execute your marketing and advertising ideas.
The products and services section is the heart of the business plan. It must be able to showcase what distinguishes your products and services in the industry and why you’re an expert.
5. Financial Plan
This detailed part of the business plan provides potential operational expenses and profitability projections. It is also where you will outline your potential funding sources.
6. Business Objectives
No business plan is complete without outlining your business objectives and goals. You must outline potential roadblocks and how to overcome these hurdles to grow your business. For example, if you are starting a medical spa in New Orleans, you must provide a vision statement of where you want your business to be in five or ten years. In this case, you want to become the top-rated medical spa in New Orleans, particularly in cosmetic surgery and facial services.