One thing I find common among entrepreneurs in Africa is that we hardly write our business plans before starting a business. We are only compelled to write a business plan only when we are seeking for business loans from a bank or any other financial institution as it is usually one of the requirements. We often see business plan as only a business fund sourcing tool.
Some who draft out business plan when they are starting their business, do not go back to the business plan periodically to review it. The business plans are dumped immediately they get their start-up funds or once the business is in operation.
A business plan is more than a loan seeking tool. It is important at all stages of your business. It is the roadmap for your business journey. Which driver do you know that throws away the roadmap for their journey once they have started the journey?
I have explained below 12 vital reasons why you need a business plan for your business.
1. A business plan helps you to check the feasibility of your business ideas
Almost everybody has business ideas. Many of these ideas are not best suited to our environment, proximity to source of raw material, our training, our target market, funds at our disposal and our skill. However, the only way we can put these ideas on paper to the test is by writing a business plan on each of the ideas. When we do this, we can effectively judge the workability of our business ideas and know if there are worth pursuing or not. Through your business plan, you test the validity of your business assumptions, like your expected revenue, your expected market, expected break even period etc. Simply put, a business plan refines your business ideas and helps you to separate the wheat from the chaff.
2. A business plan serves as a roadmap for your business
I have observed that many entrepreneurs do not have a full understanding as to the direction of their business. When you ask many business people what stage their business is, they will be staring at you! This is because they don’t have a business plan or they just used it to seek for loan and dumped it after they got the loan. A business plan helps you to pre-determine what you are going to do with your business, the steps you are going to take to achieve your business objectives, the human and financial resources you will need, and helps you to track your progress during the course of the business. It helps you to track where you are coming from, where you are and where you are going to in your business.
3. A business plan helps you to know your mission and business objectives
Writing your business plan helps you to know your business purpose and objectives clearly and enable you to communicate same to others. For example, the purpose of Myafribusiness.com is to inspire Africans to do successful businesses that will create more jobs and thereby improve the economy of African countries. We seek to do this by providing valuable business education and information to African entrepreneurs and celebrate successful African entrepreneurs. By writing your business objectives you get more focused and motivated to pursue your business objectives.
4. A business plan helps both your present and future staff to be in alignment.
Without writing and defining your business plan and objectives, your staff may not be fully aware of the direction of the company and this will affect the success of your business. For your business success, it is important that every member of your business team is on the same page as to the business missions, goals and objectives and a business plan defines this.
5. A business plan helps you to attract and keep your best staff.
Quality staff are attracted to purpose driven companies. When your business model is clear your team can see this and help you to achieve them. They are motivated to put in their quota to achieving them as the company will be more poised to grow and as the company grows, they staff know that they will also grow in their carrier. Companies that are not focused or have lost focus tend to have more staff turnover.
6. A business plan helps you to be focused and avoid distractions.
When your business objectives are well spelt out in your business plan, you get more focused and prioritized. You don’t major in minors. You don’t pursue the wrong opportunities no matter how appealing they may appear because you know what your core priorities are.
7. A business plan helps you to surmount the discouragements encountered during business start-up stage.
Every entrepreneur experience challenges especially during the early stages of a business. Most businesses are more likely to fail within the first 5 years of the business. Many of these failed business statistics are caused by lack of a well-articulated business plan which would have taken care of, if you carried out a SWOT (Strength Weakness Opportunities and Threats) analysis of the business idea before embarking on the business.
8. A business plan helps you to set and track milestones for your business.
You are always happy and motivated when you achieve your business milestones. An example of a business milestone may be to attain a certain amount of revenue per annum or to employ a certain number of employees after a certain age of the business. You can track your business operational and marketing milestones and ensure that you achieve them and know when you achieve them via a business plan. A business plan can help to set, track and know when you have attained the milestones that your business had defined.
9. A business plan helps you to evaluate your business financial needs and help you to seek for funds needed for the business.
Every business has financial needs including start-ups. You are going to need both start-up and subsequently operational and expansion funds. Hardly will any financial institution give you a business loan if you don’t have a well-articulated and defined business plan. Your business plan increases your chances of getting a business load because, it helps the banks to assess the profit potentials of the business. You attract investors who are willing to risk putting funds into your business if they can see from your business plan that your business has a good chance of yielding profits. I stated that Venture Capitalists and Angel Investors can be a good source of capital for your business in my article how to raise start-up capital for your business. Before these group of investors can put in funds into your business, they need to be adequately convinced by your business plan that your business will yield the profits and income they desire.
10. A business plan helps you to properly understand your target market.
Without a proper understanding of the right target market for your product, you will not adequately and effectively satisfy the needs of the market. A business plan gives you a deep understanding of what your customers need, how they need it, the right price they are willing to pay for the product and what your competitors are offering them. A detailed market survey and analysis in your business plan will help you to effectively get ready to meet the needs of your target market.
11. A business plan helps you to evaluate your business present and future staffing needs.
A well-developed business plan should be able to give you an idea of the number of staff that your business needs at any given stage. If this is not defined from the start, your company risks being either understaffed or overstaffed, both of which are not good for your business.
12. A business plan helps you to understand your competition and how you can add uniqueness to your brand in order to beat them.
A wholesome assessment of your competitors gives you an edge over them. It gives you an insight into what your competitors are missing in their quest to satisfy the target market and this gives you the right competitive edge over them. As a newcomer in a business, without properly assessing your competitors you will not have the competitive advantage over them. A business plan helps you to fully study your competitors and plan how you can beat them.
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