Why is a Business Plan Important for a Small Business?
Business planning is critical to the success of every small business. In fact, according to the SBA, planning ability is one of the keys to small business success. (The others are sound management, industry experience, and technical support.)
For small businesses, three reasons to take the time to write up a plan really stand out. A written plan will help you
Analyze your resource needs before you commit to a business idea. One of the major reasons small companies go under is because they lack adequate resources to turn a good idea into a profitable venture. By writing a business plan, you detail your requirements for time, cash, and people and establish your equipment needs, location requirements, and the staff you’ll have to hire.
Together, these elements determine how much money you’ll need upfront and how long you’ll have to fund your enterprise while you wait for it to start turning a profit.
Develop the information necessary to make the case for a business loan. Unless you have a deep-pocketed relative waiting in the wings with a check to underwrite your business, you’ll probably need to get a loan or attract the support of one or several investors. That means you’ll need a convincing business plan. According to the SBA, a good business plan is a crucial part of any loan package.
Shape a successful business strategy. The business-planning process requires you to think clearly about your potential customers and your competitors. It also prompts you to assess your own strengths and weaknesses and the opportunities and threats that you face in your industry and marketplace. Your findings will lead to a business strategy that fits your market environment, builds on your business capabilities, and lays the foundation for your success.