The Importance of a Business Plan

by | Aug 22, 2018 | Updates

Why is a Business Plan so Essential?

It may look like people starting a business have it all figured out, but the reality is that most of these small-to-medium-sized enterprises (SMEs) don’t even have a comprehensive and useful business plan. It’s not entirely the fault of these entrepreneurs. They usually already have a lot on their plate, such as generating sales, sustaining the operations and making sure that everything in the business is streamlined and smooth-running. But this doesn’t mean that it’s the wise decision for these businesses to ignore writing a business plan. It’s even safe to say that ignoring the benefits of a proper business plan may be costly. Here are some of the reasons why:

Preparing for the Future

Experts from Forbes would claim that while most traditional business plans don’t deliver their purpose, a right business plan could hedge a company against future losses. Why? Because a business plan can attempt to home in on the risks, losses, possible worst situations and the goals of the company. With a good business plan, you can get a better idea of how to budget your valuable and often limited resources, including time and willpower.

Sustaining Growth and Getting Funding

The goal of your business after its initial phase would be sustainability. This can be done by making sure that the sales targets of your operations are right on track. And one way to do this is to visualize the best way to generate the best leads from commercial channels. You are hard-pressed to do this without a good business plan. A good business plan can indicate where to get loans, acquire funding from local or foreign banks and show how to present the strengths of your business that make it worthy to be given credit. A good business plan should also be able to present in the most specific ways to generate cash flow and sustain it. Doing this enables you to stay relaxed and confident that your business is future-proof.

Cash Flow Management

A business plan may also play a pivotal role in the success of your business because it gives you a more accurate idea of how to manage your business’ cash flow. Many experts would suggest that one reason companies fail and become insolvent is because of lack of cash flow management. A business plan can offer the foresight needed for company owners to understand if they’re still in the safe zone. When you have a business plan, you can get a series of backups and other financial safety nets in case your business’ operations don’t pan out. You get better chances of being financially protected from ruinous risks.

Increasing Flexibility

Harvard Business Review (HBR) says that one real key to being able to sustain a business is flexibility and responsiveness to opportunities. Navigating the unpredictability of the business world is hard. And with flexibility, business owners can get better chances of dealing with such uncertainties that could derail their operations. A good business plan may be able to anticipate such possibilities and can better prepare the business for them.

Summary:

A business plan plays an immensely critical and cost-effective role in launching, growing and sustaining any business. Uncertainties in running a business can be overwhelming. With a good business plan, you get a better chance of dealing with the factors and setbacks that could bring a company down.