In recent times, there has been a lot of controversy surrounding business plans. There is a section of people who don’t believe in them. They would prefer diving into the business and figuring out things later as they go. Another section thinks that it is cliché to always write a business plan in the startup process. Thus, the question arises, does it add value to write a business plan in the startup phases of a business? This article will present the research on this matter and will justify why writing a business plan makes your startup more likely to succeed.
A plan generally seeks to answer the 5 W’s and H factor in business. This entails:
- What is to be done?
- Who will do it?
- When will it be done?
- Where will it be done?
- Why will it happen?
- How will it happen?
The questions above can be likened to those interesting persuasive speech topics. When they are answered, intricate details about the business are revealed. These include the resources, goals and objectives and opportunities to be seized.
1) The Earlier you Write, the Better
Statistics show that when a startup owner writes a formal business plan, they are 16 % more likely to be successful in securing business viability than those who don’t. Research shows that those who started this process earlier were much better off as they established legitimacy for their business. Establishing legitimacy would involve engaging with potential clients or looking for financiers.
It has also been established that early planning reduces the likelihood of failure when the business embarks on marketing efforts later on. It also enhances the initial customer contact since it will set the tone for conversations with potential customers.
2) It Increases the Likelihood of Starting the Business
All entrepreneurs have dreams about big business. They are always thinking of how to improve a service, an existing business and how to solve problems that continue to plague consumers. These thoughts and dreams can be actualized by writing a business plan.
Research shows that entrepreneurs who create business plans for every idea and thought they have for a business are 152% more likely to start that business. It has also been established that these entrepreneurs are 129% more likely to push that business from its budding stage to a fully grown business. In the same light, those entrepreneurs are 271% more likely to close down the business. This might seem nonsensical, but it makes practical sense. When the entrepreneur writes the business plan, he/she is able to see if things are likely to go as planned. When the projections of a business plan are not in tandem with the market needs, then the business is not viable. It then makes practical sense to close it down.
Therefore, if you really want to start a business, writing a business plan should be a starting point.
3) It is Vital for External Funding
If you would need external funding or your business, then it is crucial to write a business plan for your start-up. Investors and lending institutions use the plan to gauge whether you have a viable business idea. They use it to ascertain whether there is a return on investment for the business. Thus, when you write the business plan, you are actually building confidence among these investors. You are also, reassuring key stakeholders that you are serious.
4) Challenges that you are Likely to Face
Writing a business plan comes with some challenges so it is best to be prepared to tackle them head-on. Some of these challenges include:
5) Filling out the Financial Projections
Many people find it hard to write the financial section of the business plan. It is quite expected as it is hard to project financial figures for a totally new business idea. However, to overcome this challenge, try to see the financials of an existing company that’s in the same field. This will give you a rough estimate of what to project in your financial section.
Setting Workable Goals
Many people often write over-ambitious business goals in their business plans. This greatly affects the business in its take off and startup phase. For you to actualize your business plan, the goals have to workable and realistic. They should also be clear so that every concerned party sees the vision of the business plan.
Writing a business plan is indeed beneficial to businesses. The research findings stated above indicate how it impacts your business in the startup phase. Therefore, if you want to make your startup successful, write a business plan and you are sure to achieve it!