Why do I Need to Write a Business Plan?

Congratulations! You’ve found your perfect business idea and now you want to move on to the next stage – the business plan. However, you might be at the crossroads of wondering where to start and why you need to write one. In truth, understanding what a business plan is will be your first step to secure funding and being able to grow your business.

So, what exactly is a business plan?

Essentially, it’s a detailed description of what your business is, along with everything it encompasses. Writing a business plan is vital to setting up a new start-up. Plus, it’s somewhere you can develop your ideas in a concise way so you have a clear direction of where you’re going. However, it can appear intimidating when you’re not sure of how to set it out or what you should include.

That’s why I’ve written this article to to help you answer any doubts you have and clear up any confusion about where to start, and to help get your business off the ground.

So, let’s get started!

What is a Business Plan?

A business plan will clarify, in detail, how your business works and outline your business why. Whether you’re a sole trader or limited company, it should provide in-depth information describing who you are (mission statement) and what your intentions are in relation to the growth of your business.

It should contain a range of subjects relating to:

  • Business long and short term goals
  • Measure your objectives
  • Products/services
  • Industry, customers and competitors
  • Marketing strategies
  • Sales forecasts
  • Financials and funding

It should also highlight any foreseeable problems you think will arise, and the solutions you may have in place to combat them.

All of these aspects of the plan should fall into specific time frames and these will have to be outlined accordingly. For example, your financial projections for 3-5 years, monthly product goals, etc.

Reasons you need a business plan

Anyone wanting to start out on their own, writing a business plan is crucial to track milestones for how goals are achievable and measuring success. It also gives you the opportunity to see if your idea is actually viable. After all, what’s the point in starting a business if you have nothing concrete to prove it’s profitable?

  • It’s a common factor that many people don’t initially have the cash to set up their business. Therefore, having a business plan ready means you have something solid to show any potential investors how serious you are about your business.
  • A business plan should outline revenue projections based on performance and as such, is an essential tool for the day-to-day running of your business.
  • Creating a business plan will give you better insight into understanding both your customers and your competition. Both are critical to understanding how you develop your products/services.
  • Equally, it will also help you define your knowledge of your market industry and the most important trends. This is extremely useful for determining your brand to potential customers or investors.
  • Most importantly, a business plan will give you a rigorous overview as to whether your venture is feasible. Detailed research can give rise to new ideas and the knowledge to improve success.

Things to consider before writing a business plan

  1. Be real – ultimately, writing a business plan will define whether your new venture is feasible. As a result, you won’t be kidding anyone (but yourself) with super-inflated profit figures or untrue predictions of business success. While we all want to be optimistic about a business idea, set achievable financial goals and expectations to ensure credibility, especially when it comes to showing banks or potential investors your plan.
  2. Audience – a major consideration before writing your business plan is to decide who the plan is actually for. For example, potential business partners, investors or simply as a reference for you to develop your business. If it’s written with the idea of securing funding, then it should include in depth financial information as this is of particular interest to them.  Sections can be adapted according to a specific audience, so you should always write it with them in mind.
  3. Market research – this is where you really have to do your homework! Whoever your business plan is aimed for, market research is crucial to your success. Factual data, such as graphs and charts, is a must when it comes to deliver your finished plan. However, this will take time to collate research in relation to customers, competitors, industry and financial analysis. If you don’t incorporate strong Market Analysis content, it’s likely anyone won’t take you seriously!

About Anita Forrest

Anita Forrest is a Chartered Accountant, spreadsheet geek and money nerd helping financial DIY-ers organise their money so they can hit their goals quicker.