Is A Business Plan Necessary?

Ask any business expert if a business plan is necessary and they will quickly answer “Yes”. The term “business plan” was often used by bankers who required a written detailed in order to make an informed decision on loan requests from business owners. It still remains true today – go to any banker and discuss getting a business loan and you’ll often be asked for a copy of your business plan.

Although not the only determining factor, by reviewing who will manage the business, competitors, strengths and weaknesses, marketing plan and financials, the banker can justify whether or not he can move to the next level in the business loan process. Other factors can include the loan applicant’s personal credit score and if in business already a business credit score, debt-to-liquidity ratio, tax statements, financials and other important documents that will help the bank in making a decision.

Most small business owners have a difficult time in preparing business plans, because they allow the complexity of gathering the information and data needed overwhelm them. Also, most small business owners seem to think that they only need a business plan if they are seeking a business loan. So, it is often at the last minute that they try to put a business plan together. This in and of itself causes stress.

4 Reasons Why You Should Have a Business Plan

1. To give a vivid picture to an investor or banker that your business concept is viable and worth investing in or lending money to.

2. Use as a blueprint and starting point to manage the operations of your business. When certain functions are not working you’ll be able to track the problem and determine whether or not you were following the plan. You’ll also know whether additional research is needed in the areas of industry, marketing, competition and target customer.

3. Writing a plan for your business idea or concept will also give it life and encourage you to stay committed to your dream!

4. Your business plan can also serve as a guide in preparing a strategic plan and setting phases or goals that you would like to accomplish over a period of time.