Business plans for small businesses: How essential?

Writing your business plan is not the end of your business planning process because business planning is a never ending process. However, it’s an important intermediate stage (failing to plan can mean planning to fail). This article examines the need for business plans for small businesses.

If you are just starting a business, having a well-written business plan shows that you have really done your homework. And if you are planning to expand an already established business, it demonstrates that you have carefully considered the pros, cons and odds; and focused on the development of the business.

If you are risking your capital, time, resources and effort to start a business; then you certainly need a business plan to help you mitigate against the risk involved.

If you are already a business owner but you started out without a business plan, then you definitely need to invest in getting a business plan; especially if you want to take your business to the next level.

If you would need to obtain financing from third parties either now or in future, then a business plan is indispensable, as it sells your idea and elucidates the opportunities it presents.

It arranges strategic alliances, attracts key employees, boosts your confidence, and helps you remain focused. From the table of contents to the financial tables, business plans for small businesses cover a lot of ground.

A formal business plan is just as important for an established business, whether small or big, as it is for a startup. And it serves the following critical purposes:

* It helps you clarify, focus, and research the prospects of your proposed startup or expansion idea.
* It provides a considered and logical framework within which your business can develop and pursue business strategies over the next few years.

* It offers a benchmark against which you can measure and review the actual performance of your business.
* It serves as the basis for discussion with third parties such as creditors, investors, shareholders, agencies, etc.

Just as no two businesses are alike, so also are business plans; some aspects of a plan will be more relevant to some businesses than to others. So, it is very important to tailor the contents of a business plan to suit individual circumstances. Nonetheless, most business plans follow a well-tried and tested structure, and general advice on preparing a business plan is universally applicable.

However, your business plan should be a realistic view of your expectations and long-term objectives for your startup or small business. It provides the framework within which it must operate and, ultimately, succeed or fail.

For you and other entrepreneurs seeking third-party support, the business plan is the most important sales document that you will need to raise finance for your start-up or small business. Although preparing a solid, comprehensive business plan will not guarantee success in raising funds or mobilizing support for your business, lacking one will always result in failure.

Traditional business plans for small businesses format

Executive summary

This part of the buisness plan briefly explains introduces your business idea and why it is bankable. it includes your mission statement, product or service, and the team behind the idea. It should also have total projected cost of the agribusiness.

Company description

Provide detailed information about your company. Explain the problems your idea will solve, your method of doing this, and your prospects.

Explain the competitive advantages that will make your business a success. Do you have the right expers on your team or will you outsource? Is your location of advantage to your idea?

Market analysis

A good understanding of your industry outlook and target market is required here to analyse your strengths, weakenesses and demonstrate what makes you stand out.

Organization and management

Provide a clear leadership, oraganization and management structure in a chart.

Service or product line

Describe what you sell or what service you offer. Explain how it benefits your customers and what the product lifecycle looks like. Share your plans for intellectual property, like copyright or patent filings. If you’re doing research and development for your service or product, explain it in detail.

Marketing and sales

There’s no single way to approach a marketing strategy. Your strategy should evolve and change to fit your unique needs.

Your goal in this section is to describe how you’ll attract and retain customers. You’ll also describe how a sale will actually happen. You’ll refer to this section later when you make financial projections, so make sure to thoroughly describe your complete marketing and sales strategies.

Funding request

If you’re asking for funding, this is where you’ll outline your funding requirements. Your goal is to clearly explain how much funding you’ll need over the next five years and what you’ll use it for.

Specify whether you want debt or equity, the terms you’d like applied, and the length of time your request will cover. Give a detailed description of how you’ll use your funds. Specify if you need funds to buy equipment or materials, pay salaries, or cover specific bills until revenue increases. Always include a description of your future strategic financial plans, like paying off debt or selling your business.

Financial projections

Supplement your funding request with financial projections. Your goal is to convince the reader that your business is stable and will be a financial success.

If your business is already established, include income statements, balance sheets, and cash flow statements for the last three to five years. If you have other collateral you could put against a loan, make sure to list it now.

Provide a prospective financial outlook for the next five years. Include forecasted income statements, balance sheets, cash flow statements, and capital expenditure budgets. For the first year, be even more specific and use quarterly — or even monthly — projections. Make sure to clearly explain your projections, and match them to your funding requests.

This is a great place to use graphs and charts to tell the financial story of your business.  

Appendix

Use your appendix to provide supporting documents or other materials were specially requested. Common items to include are credit histories, resumes, product pictures, letters of reference, licenses, permits, or patents, legal documents, permits, and other contracts.

I hope this article has been able to provide insights to the question, Are buisness plans for small businesses an essential part of your planning stage?

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