From the Nolo Business & Human Resources Center
Why You Need to Write a Business Plan
Learn why writing a business plan is important -- even
if you're not trying to raise money.
Just as a builder uses a blueprint to ensure that a building will be
structurally sound, the process of creating and writing a "blueprint" for your
business -- called a business plan -- will help you determine whether your
business will be strong from the start. Without a business plan, you leave far
too many things to chance.
A business plan contains a description of your business, including details
about how it will operate, a section on market research and marketing
strategies, an evaluation of your main competitors and several financial
forecasts.
Reasons to Create a Business Plan
Writing a well-thought-out and organized business plan dramatically increases
your odds of succeeding as an entrepreneur. The benefits of a business plan
include:
- determining whether your business has a chance of making a good profit
- providing an estimate of your start-up costs, and how much you'll need to
invest or finance
- convincing investors and lenders to fund your business
- providing a revenue estimate (by defining your market -- who your customers
will be -- and the percentage of the market you can expect to reach)
- helping your business make money from the start by devising a effective
marketing strategy
- helping you compete in the marketplace (through an analysis of what your
competition lacks), and
- anticipating potential problems so you can solve them before they become
disasters.
If You Need to Raise Money
If you need to raise funds for your venture, it goes without saying that
you'll have to write a solid, formal business plan. Business owners who want to
borrow money or attract investors will be successful only if they have
well-written, well-researched business plans. All of your potential lenders or
investors will want to understand as much as possible about how your business
will work before deciding whether to back it financially.
The Importance of Financial Forecasts
Predicting and planning your business finances can show potential investors
that your business idea will fly. But preparing financial forecasts is a good
idea even if you don't need to raise start-up money.
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