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Why is a Business Plan Important?

Nearly all business experts agree on one thing: the importance of drafting a business plan. Yet plenty of companies plunge into the competitive arena without a formal plan. Why? We’ve heard plenty of excuses posing as reasons.

A lot of new businesses are carried away and figure their passion and optimism are enough to build a successful company. Others say they were just too busy to develop a formal business plan. But operating without a plan can prove even more time-consuming in the long run.

The benefits of having a business plan

The time you invest in your business plan will pay off many times over. Some of the most obvious benefits you can gain from business planning include

  • An opportunity to test out a new idea to see if it holds real promise of success

  • A clear statement of your business mission and vision

  • A set of values that can help you steer your business through times of trouble

  • A blueprint you can use to focus your energy and keep your company on track

  • Benchmarks you can use to track your performance and make midcourse corrections

  • A clear-eyed analysis of your industry, including opportunities and threats

  • A portrait of your potential customers and their buying behaviors

  • A rundown of your major competitors and your strategies for facing them

  • An honest assessment of your company’s strengths and weaknesses

  • A roadmap and timetable for achieving your goals and objectives

  • A description of the products and services you offer

  • An explanation of your marketing strategies

  • An analysis of your revenues, costs, and projected profits

  • A description of your business model, or how you plan to make money and stay in business

  • An action plan that anticipates potential detours or hurdles you may encounter

  • A handbook for new employees describing who you are and what your company is all about

  • A résumé you can use to introduce your business to suppliers, vendors, lenders, and others

What can go wrong without a business plan

The many benefits of having a business plan should be enough to convince you. But in case you’re still wavering, consider what can go wrong if you don’t take time to plan. You risk

  • Running out of cash before you open your doors because you haven’t anticipated your start-up costs

  • Missing sales projections because you don’t really know who your customers are and what they want

  • Losing customers because your quality or service falls short

  • Becoming overwhelmed by too many options because you never took the time to focus on a mission and vision for your company

  • Going bankrupt because you don’t have a rational business model or a plan for how to make money

Take our word for it: Time spent putting together a solid business plan is time well spent. In fact, the more time you spend, the better prepared you’ll be. But don’t be overwhelmed at the prospect. The basic components of a business plan are fairly simple.

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