6 Reasons Your Small Business Needs a Business Plan
Writing a business plan takes time; and if you’ve recently started a new business, you might be asking yourself if writing one is worth your time and effort. But here is the bottom line: if you plan to apply for California business loans or take your business to the next level, then a good business plan is crucial for your growing company.
Related: 4 Small Business Loans for Women-Owned Businesses
If you’re planning to start your own business, you may have heard countless of business advice on every platform. Register your business, apply for insurance, licensing, or getting a tax ID – it seems like the list of things to do just doesn’t end. While these are important, there’s also one thing that you shouldn’t overlook – your business plan.
Whether you’re a startup or an existing business looking to expand, a comprehensive business plan is the foundation of your business and will serve as a guide to growing your business. Here are five additional reasons why your small business needs a business plan.
1. Acquire Additional Working Capital
If you need to borrow money for your business, potential lenders (and even friends and family) need a clear reason why they’d risk investing in your business. A detailed business plan can help communicate the vision you have for your business in a clear and compelling way. In a study carried out by Babson College, they discovered that within the first 12 months, start-ups with a business plan raised two times more capital than those without a business plan.
Moreover, a business plan will also provide potential lenders with details on how you’ll make your business profitable. They’ll evaluate every strategies you’ll use and whether or not it’s achievable. Essentially, they will determine whether your plans will generate enough income so they’ll have assurance that you’ll be able to pay back the loan.
Related: 8 Things Lenders Definitely Want to See in Your Business Plan
2. Reassure Investors
Business plans are formal documents that outline what you’re planning to do generate income in your business. When you’re looking for an investor or a partner, they will want to know what your plans are and make sure that it’s achievable. Presenting a well-written and formal one will also give them the impression that you’re serious about this opportunity. Moreover, it will show commitment and responsibility.
3. Generate New Ideas
As you map out your business, you’ll discover new ideas and different approaches in the process. An effective business plan is a flexible, dynamic tool that can help business owners think outside the box and come up with new solutions to challenges that come their way. For example, in the marketing strategy section, you will need to come up with and include effective marketing activities and strategies throughout the year, so fresh ideas and creativity are important.
4. Develop a Game Plan
When running a startup, execution is key. You have to assess your business’ performance, set priorities, and establish goals. As you create your business plan, you will need to have the answers to important questions such as:
- What are the features your customers are looking for?
- How can you retain customers?
- Will your target market buy or avail your new product or service?
- How much are they willing to pay for the goods or services you offer?
- How can you attract more customers in a cost-effective manner?
5. Ensure that Everyone Works Towards a Common Goal
Unless you’re Superman, scaling a business isn’t a one-man job. If you’re like a majority of start-ups, you probably have business partners who helped you launch your business in a faster, smarter, and more efficient manner then if you would have tackled it alone. If you don’t have partners, you’ll probably lean on your friends, family, and, or business advisers.
Working with a team requires each of you to be on the same page. You can easily achieve this by having a clear and well-thought of business plan.
6. Define Your Purpose
When starting a new business, you might get caught up with all the work and struggles that go into setting up an operation. As a result, you may lose sight of what’s really important. By having a business plan, you create and crystallize your mission and purpose for starting your business. This helps you to keep focusing when challenges present themselves to you.
California Small Business Loans for You
With a business plan, you can accurately take your business to the next level. If you want the exact details on how California business loans can provide the funding you need, having a prepared business plan is an essential tool potential lenders will ask and look for. Be as detailed as possible. The more information you provide, the better.