The Importance of a Business Plan

There are many reason to write a Business Plan, but the most important is: established your short and long term business goal, and describe how you are going to achieve them. A BP is a tool that every single business must use; regardless of their size. It is roadmap of your business, and like every roadmap it must be check it periodically to know if we are going to the right path, or if we need to take alternatives routes to arrive to our destination.

Here there are some examples of why we need a BP:

• Startup capital needed
• Increase your market share
• Ask for financial resources: working capital, new equipment acquisition
• Development a new product or services
• Expand to new segments markets
• Establish your market segments
• Increase revenue
• Bring in a new partner

Established and accomplished business goals have direct effects on your business resources, and the way your manage them.
What to include in the BP?

There are different outlines, however the essential part that all BP’s must have:

• Competitive Analysis
• Market Analysis
• Marketing Plan
• Strategy Plan
• Financial Projections

Most of the BP plan are written, because we need to ask for business loans, and having a BP is a requirement. However it should not be the only reason for have a BP. The advantage of writing a BP goes beyond that. As a tool it can be used as internal document to state our plans, strategies, tactics, and who and how we are going to manage the company; and it has to be discussed and approved for the company’s board of directors or for you if you are the only owner.

When it is presented to external people, such as bankers or future investors, it should include the pertinent information, for example: when we ask for money to add new equipment which will increase the production, we have to demonstrate that there will be enough demand (sales) to justify the investment, or if we need to replace old equipment for one that will reduce costs we need to demonstrate that the savings will improve our gross margin; making our company more profitable.

In the case that the BP will be presented to future investors, they need to know its IRR, to make a decision.

If you have a business idea, and want to create a company, the BP has to demonstrate the there is a market for your product or services, and the market is enough to make money in other words it has to demonstrate that the project is  feasible. The BP must calculate its investment needs, describe the experience of the people that will manage the business,  the marketing plan which include the strategy plan, the market research- targets segments, and the forecast financial statements such as cash flow and P&L.

Whatever is the case, a BP is a great tool that will allow a business to organize, plan, and control its goals, functions, strategies and tactics to grow.