The Importance of business plan in entrepreneurship is equivalent to, having a gps device that gives you directions and locations. It is a very important strategic tool for an entrepreneur.
While a business plan is consider as a very essential entrepreneurship tool, not every entrepreneur sees the need for it. Many are reluctant to have their plans written down. As you surf online, you will come across many articles indicating that the business plan is either death or irrelevant. But as entrepreneurs we should know that, this document is still very relevant.
If you intend to grow your business or get into partnerships with your venture, it is important you draft an easy to read and understand plan for your business. This plan should be able to speak for itself.
What is a Business Plan?
According to Shopify, a business plan is a document that describes your business as well its products and services. It is also the document that shows, how you will earn money from your business, the leadership and staffing of your business, and the sources of financing for your business..
In other words, Entrepreneurs.com see a business plan as a written description of your business’s future.
Your business plan is the document that explains everything about your business at a glance.
IMPORTANCE OF BUSINESS PLAN IN ENTREPRENEURSHIP
1. Your Business Plan Is Needed for Bank Financing:
For you to get financing from your bank, you will be require to show in clarity that, the money granted to you as a loan will be paid back. You are also require you to show your projected balance sheet (record of your assets, liabilities and capital), your profit and loss account as well as your cash flow account. This information can be presented over a period of three to five years, on your business plan. Thus, indicating the importance of a business plan. Other aspects that you should include in the business plan, is the founders and managers of your business.
You can read more of what bankers expect in a business plan here
2. Your Business Plan Is Needed For Strategic Partnerships:
If you intend to engage in strategic partnerships in your business venture it will be necessary for you to have a business plan. These partnership can be for the purpose of reaching new markets, developing new products, or creating common facilities that will help enhance your business.
Furthermore, partners always want to know more about a business before committing to any long-term agreements. It is also worth noting that a business plan is a useful tool, in convincing well-established retailer and distributor to make commitments to your business.
3. A Business Plan Explains Your Business:
In writing your business plan, you immediately detect shortcomings in your original business idea. These shortcomings can be overcome, by thinking through and plugging the gaps.
Your plan is a guide or manual to help you in business and strategy formulation.
4. Your Business Plan Is Needed To Source Equity Funding:
If you are looking forward to having venture capitalist or angel investor for your business, you have to put up a good business plan. They always like perusing through this document. This venture capitalist and investors use your business plan to gauge the risk involved and as well, forecast the growth prospects of your business.
Nevertheless, are their analyses limited to the business plan. But you have to note that this document will always remain, a very important reference point to investors.
5. Other Uses of Your Business Plan:
As entrepreneur you turn to seek finance and moral support from friends and family. Your business plan is a good way of presenting your business to your father, mother, wife, and colleagues. When they go through it, they get a better appreciation of what you are setting out to do.
The above points show you the importance of business plan in entrepreneurship. But note that writing a business plan can’t guarantee success but it can go a long way towards reducing the likelihood of failure for your business.
An article on; How to Write a Business Plan will be up shortly, to enable you better present or document your plan.
But while waiting, you can read our articles on Things to Know Before Becoming an Entrepreneur and Start-Up Your Business on the Right Foot
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