The importance of a business plan

Whether you're just starting out or are looking to grow your business and make the most of a buoyant building economy (or simply survive!), a well-thought-out business plan is a great resource to help you achieve your goals. Here are ten key reasons why you should have an up-to-date business plan.

To monitor your business: A business plan should serve as an ongoing business tool that you can use to monitor your progress. It is also important to regularly complete S.W.O.T Analysis (Strengths, Weaknesses, Opportunities, Threats) which is a timely reminder of the various risks your business faces. From this, you can develop strategies to mitigate this risk.

To outline each area of the business: A plan will provide an overview of all aspects of the business. You will be able to detail the who, what, where, when, and why of your day-to-day business operations, costs, and projected profitability.

To set up milestones: By forecasting where your business will be in six months, one year, or five years, you are not only letting potential investors know your plans, but also setting up realistic milestones for yourself and your employees. It is important to be able to celebrate achieving those milestones.

To attract top-level people: Your business plan will give talented people an overview of your business and enable them to understand expectations and that you are serious about the future.

To learn about the market: Researching, analysing, and writing about the market not only provides you with an overview for your plan, but gives you greater insight into the overall market and it’s potential.

To see if your business ideas will work: By writing a plan and outlining each aspect of your business, you can determine if your ideas are actually viable.

To determine your financial needs: The process of writing your business plan will force you to analyse your financial picture. It will also enable you to understand the business cycle you are working in and when to expect things to be tough.

To secure additional funding or loans: Your business plan can demonstrate that you have met goals and illustrate the company’s growth and need for additional funding, if required. This will assist with banks having confidence in you and your business.

To devise contingency plans: While business plans often include some contingency plans, by virtue of having the document available, you can see how and where you can make such changes relatively quickly if, and when, necessary.

To attract investors: Before investors can decide whether or not to back your business financially, they will need to know as much as possible about how the business will operate/perform and what their investment dollar will be used for.

It is important when you are preparing your business plan to ensure it is clear, focused and realistic.

by Michelle Turfrey
Partner at Crowe Horwath