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Why a business plan is essential when starting out

According to the Small Business Administration (SBA)* research, only half of all new small businesses survive for at least five years. That means that, sadly, the other half fail. One of the reasons that businesses fail is a lack of planning, which highlights how important it is to plan if you want your business to succeed. Of course, planning is not a guarantee of success, your business could fail anyway. But, without planning it is more likely to fail as you’ll have no contingency plans in place if things start to go wrong.

Having said that, thorough planning can alert you to many of the problems you may come across and, if you’ve planned well, you’ll have ways of dealing with them effectively.

What are the benefits of a good business plan?

A good business plan forces you to examine all aspects of your potential business – from choosing the name, right through to approaching the bank for money and, if it’s a really thorough plan, what you expect to happen five or ten years down the line.

It can help you make sure that you do not miss any important aspects of the business, such as insurances or licences you might need. A good business plan will, in essence, help you discover what you are going to do and how you are going to do it by helping you:

• reduce risk and the related stress
• provide targets and goals and show you how to achieve them
• reduce the element of uncertainty
• raise your confidence in your ability to run a business
• identify and avoid potential problems before they arise by giving you a framework to work to

What else can the business plan help with?

All of the above benefits are great. But, they’ll only be put into practice if you get the funding you need and that is where a business plan is worth its weight in gold. It’s the single most important piece of paper you can show to the bank manager or any other kind of investor you may need. It’ll show them that you have really thought about what you are doing and you’ve considered potential problems and the solutions to them. In short, it’ll show them that you are serious and what you are doing. In some cases, large suppliers and customers and professional advisers may also want to see it to reassure themselves that you are a fellow professional and hope to be around in the long term.

So, now you know why a business plan is so essential – not only when you are just starting out, but as your business progresses and expands.

If you’d like to learn more about starting your own business why not enrol on our course of the same name – Start Your Own Business. It’ll take you through the process, from thinking up business ideas right through to presenting them to your financing options.