Are business plans useful or not?
The business plan is important to a new and existing businesses as it gives the business a sense of purpose and direction. It sets out the resources required by the business such as finance, the number and skills of workers needed, and how the goods and services will be marketed to consumers. The objectives and financial forecasts provide the business with targets to aim at and enable the business to monitor its progress.
This document is often used to persuade lenders to finance a business proposal. It is used to also reassure financial lenders such as banks, microfinance providers and venture capitalists that the entrepreneur has comprehensively researched the business idea and has given solid reasons to support his business venture. Therefore, it helps financial insitutions to make a more objective judgement regarding the firm’s likely success and hence its ability to repay the loans.
Preparing a business plan is not just something a business needs to do only at the start-up stage. A business plan is also important for the planning and development of existing businesses. A current business plan may also be needed when a business wants lenders or investors to provide finance for expansion, or other long-term projects.
A good business plan includes a list of product features and benefits to help improve sales revenue. If you know the benefits of your products, you can improve your sales by telling customers how your products make their lives easier or more enjoyable. Remember that features are mostly the physical properties of products or services (e.g. material, color, size, weight, etc.), and some other properties such as style and quality. But benefits are the positive effects of these features on the customer.
A good business plan also identifies who your best customers are. It describes in details who would buy your product and why, and describes them in terms of age, gender, income, how they spend their time, what they enjoy doing, what other products they consume, etc. All these details describe the lifestyle of your customers. The features and benefits of your product must suit the lifestyle of your customers.
The business plan can also be used by other stakeholders such as investors (shareholders) to conduct Investment Appraisal – to assess the potential gains from their investment in the business. Investors will assess both quantitative and qualitative opportunities and risks that may be reflected in a business plan before making any decisions to invest. They will also look for potential problems with the business venture, even if these are not outlined, or are hidden, in the document.
A business plan plan also identifies the main competitors of your business. It explains the way in which each of these businesses tries to be competitive. It answers questions for each competitor such as what are their strengths? Or, what do they do well? What are their weaknesses? Or, what do they do badly?
Can you outline any other benefits of having a business plan?
You can find more resources about business plans by visiting U.S. Small Business Administration.
