What is a business plan?

In its simplest form, a business plan is a guide—a roadmap for your business that outlines goals
and details how you plan to achieve those goals.

If you’ve ever jotted down a business idea on a napkin with a few tasks you need to accomplish,
you’ve written a business plan—or at least the very basic components of one. At its heart, a
business plan is just a plan for how your business is going to work, and how you’re going to
make it succeed.

Who needs a business plan?

If you’re just planning on picking up some freelance work to supplement your income, you can
skip the business plan. But, if you’re embarking on a more significant endeavor that’s likely to
consume a significant amount of time, money, and resources, then you need a business plan.

If you’re serious about business, taking planning seriously is critical to your success.

Unfortunately, many people think of business plans only for starting a new business or applying
for business loans. But business plans are also vital for running a business—strategic planning—
whether or not it needs new loans or new investments. Existing businesses should have
business plans that they maintain and update as market conditions change and as new
opportunities arise.

Every business has long-term and short-term goals, sales targets, and expense budgets—a
business plan encompasses all of those things and is as useful to a startup trying to raise funds
as it is to a 10-year-old business that’s looking to grow.

What is the purpose of a business plan?

A business plan has two primary purposes. First, and foremost, it should be used to help run
your company with a more cohesive vision. It is your roadmap. By truly analyzing your plan for
marketing, sales, manufacturing, website design, etc., you greatly improve your chances for
success.

The second purpose of a business plan tends to be the reason most clients request plan advice
from SCORE. That is, a financial institution or other lender will not invest in your company
unless you can demonstrate that you have a roadmap to success. Banks want to mitigate their
risk of default and private investors, such as Angel’s, want a realistic forecast for when they will
be reaping a return on their capital.
Why Business Plan is Important?

A business plan is a very important strategic tool for entrepreneurs. A good business plan not
only helps entrepreneurs to focus on the specific steps necessary for their to make business
ideas succeed, but it also helps them to achieve both their short-term and long-term objectives.

If you fail to plan, you are planning to fail

- Benjamin Franklin

Venture capitalist and Silicon Valley pioneer Eugene Kleiner once stated that writing a business
plan forces you into disciplined thinking. An idea may sound great, but when you put down all
the details and numbers, it may fall apart.

While a business plan is absolutely essential in entrepreneurship, not every entrepreneur sees
the need for it. Many are reluctant to have their plan written down. In fact, there are numerous
articles online claiming that the business plan is dead or irrelevant. Of course not everyone
agrees with that.

A large number of business funding experts, agree that having a good business idea is not
enough. Even excellent business ideas can be totally useless if you cannot formulate, execute
and implement a strategic plan to make your business idea work.

If you're looking to raise funds from institutional investors and lenders, keep in mind that
having a good business plan is extremely valuable. You should aim to have a well documented
business plan that speaks for itself. It needs to be clear and easy to read and understand.

Unless commitment is made, there are only promises and hopes; but no plans

- Peter F. Drucker
Here are 4 reasons why you need a business plan:

1. To raise money for your business

Potential investors or lenders want a written business plan before they give you money. A mere
description of your business concept is not enough. Instead, ensure you have a thorough
business and financial plan that demonstrates the likelihood of success and how much you will
need for your business to take off.

2. To make sound decisions

As an entrepreneur, having a business plan helps you to define and focus on your business
ideas and business strategies. You not only concentrate on financial matters, but also on
management issues, human resource planning, technology and creating value for your
customer.

3. To help you identify potential weaknesses

Having a business plan helps you to identify potential pitfalls in your idea. You can also share
the plan with others who can give you their opinions and advice. Identify experts and
professionals who are at a position to give you invaluable advice, and share your plan with
them.

4. To communicate your ideas with stakeholders

A business plan is a communication tool that you can use to secure investment capital from
financial institutions or lenders. It can also be used to convince people to work for your
enterprise, to secure credit from suppliers, and to attract potential customers.

Creating a business plan involves a lot of thought. You need to consider what you want to do,
and use that as a starting point. It doesn't need to be complicated. At its core, your plan should
identify where you are now, where you want your business to go, and how you will get there.

Writing a good business plan, the Ernst and Young Business Plan Guide adds, can’t guarantee
success, but it can go a long way toward reducing the odds of failure. This is also according to
multiplestreams.org, even if you aren't looking for investment, your entrepreneurial plans will
fall flat quickly without a plan to guide them.