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What is a Business Plan and Why Do You Need One?

Updated: Apr 5

Are you thinking of starting your own business? Wondering what all the planning and paperwork entails? You're not alone! In fact, according to the Small Business Administration (SBA), almost half of all businesses start with a plan. Planning is critical to ensuring a successful business, so we'll discuss the basic components of a business plan and help you start writing your own.

Here's what you need to know:

What is Business Plan?

A business plan is a document that outlines the steps a company plans to take in order to achieve its stated objectives. The document should be comprehensive, detailed, and specific. It should include a description of the company and its products or services, an analysis of the current market for these products, and a marketing plan to attract new customers and increase business revenue. It is also useful for planning the long-term development of the business and for evaluating the performance of the business against set goals.

Why do I need a Business Plan?

The purpose of a business plan is to help entrepreneurs identify the market for their product or service, how much money they need to start the business, and how they intend to obtain the money they need. It also helps investors decide whether or not to invest in the business and whether the company will be successful. For a business to succeed, it must have a long-term plan for growing revenues and increasing profits. Therefore, it is essential to create a business plan before starting a new business.

Let's use a practical example to explain this using our own service company as an example... If you were to start an office administrative service business without any formal plan in place would you consider it a success? Absolutely not.

Do you think any business that has grown over time and managed to stay in business is purely a result of pure luck? Of course not. So let's talk about a few main reasons why you should have a documented business plan for your business.

Reason #1

The first reason is planning your exit strategy. The most successful business owners know that in the long run, they eventually want to either sell or transition their business to a new owner. A written plan helps identify your ideal timeline for exiting the business and provides buyers with the information they are looking for during due diligence.

Reason #2

You will want to make sure that you have enough money to get your business up and running and that you need to make sure you structure your financing accordingly. This means knowing how much cash you have and how much it will cost to finance your business.

Reason #3

And last but not least you want to be able to accurately measure your success on a regular basis. This enables you to adjust where necessary to ensure that you are on track to meet your business objectives and make the most of your resources.

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Thank you for reading our article! In our next blog post, we are going to talk about how to write a business plan for a small business. If you'd like to share, comment on how you write your business plan!

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