At The Startup Garage, we’ve helped a wide variety of entrepreneurs who want a business plan to get their strategy together or raise money. We’ve also helped many who think they might need a business plan, but they don’t really know what they’ll use it for, other than “getting everything down on paper.” With them in mind, here are the Top 4 Uses of a business plan:
1. To Create a Complete Strategy: When starting a business, it is easy to focus on some aspects of the company and forget others, especially if you are very strong in one area but weak elsewhere. For example, if you’re experienced in marketing, but unfamiliar with manufacturing, oversights and missed details in the manufacturing process may result when launch time comes. However, when you write a complete business plan, you are forced to examine all areas of your business and build strong strategies in all areas, which will prepare you for successful execution when launching.
2. To Enroll Partners: Many entrepreneurs realize they won’t be able to succeed by themselves, and look for skilled partners to jointly build their business. However, this can be easier said than done. Most well-qualified entrepreneurs will have many questions that must be answered before signing on. You may or may not be prepared to answer all these questions. However, with a business plan in place, you’ll be able to communicate your high level vision, clearly articulate your strategy and show any potential partners where they fit into it all. Having this well prepared written document will also boost your credibility tremendously.
3. To Manage your Business: Unfortunately, there are a lot of entrepreneurs out there who write a business plan, launch their business, and put their plan in a drawer never to be seen again. However, once you launch, your business plan is still useful. Revisiting and updating your plan every few months will help you apply what you’ve learned through operations to your strategy, and stay focused on your high level goals.
4. To Raise Money: This is one of the most common reasons that entrepreneurs write a business plan- to get those scarce investment dollars from banks, angel investors, venture capitalists and others. While you may be certain that your business is going to change the world, these people see your business as an investment…one of numerous opportunities presented to them. Before betting on you, they want to learn as much as possible about your business. A business plan is an effective, and often required, tool that you can use to give investors all the information they need, and to demonstrate that you are a credible entrepreneur who is poised to succeed.
There are many businesses out there that have gotten started, and ended up succeeding, without writing a business plan. However, if you’re interested in maximizing your chances of success, a business plan is a great way to make that work. Also, if you’re interested in getting help from outsiders, such as partners or investors, a business plan is an essential tool for establishing credibility and getting them to believe in you and your business.