Why Are Business Plans Useful to Small Businesses?

Alternate titles:

  • 5 Reasons Why Your Small Business Needs a Business Plan
  • How a Business Plan Can Help Small Businesses Create Long Term Success
  • The Importance of a Business Plan for Small Businesses

Meta-description: Small business owners and entrepreneurs don’t always realise how important a business plan is. Here are five reasons why small businesses need business plans and how your plan can help you achieve long term success.

A business plan is vital for small business owners as well as entrepreneurs. It contains various key pieces of information about your business, such as your goals, your products or services, your business’ financial health, and more.

Often, small business owners believe that they don’t need a business plan. They believe that since they own a small business and deliver products or services within a concentrated geographical area, a business plan isn’t for them. But it’s not just corporations or big businesses. Small business owners also need to create business plans if they want to build a business that succeeds and endures.

These are the five reasons why your small business needs a business plan:

1. Outline Business Goals and Objectives

As you begin to write your business plan, you’ll need to ask yourself relevant questions about your business. Questions like

  • Why are you setting up your small business?
  • What products do you want to offer?
  • What services do you want to offer?
  • Why those products or services?
  • Is there a need in the market for what you have to offer?
  • Who is your target audience?
  • What are your long-term goals?

As you go about answering these questions about your business, you’ll need to do extensive market research and gather data on your industry. Through this process, you’ll gain clarity about the purpose and potential of your business.

2. Gain Key Insights

Analysing and making projections using the data you’ve gathered is an important part of making a business plan. Through your analysis, you’ll be able to spot both opportunities for growth, as well as locate areas where your business is falling short.

This is crucial, especially for small businesses that are just starting out. You can avoid missteps by using your business plan as a resource that helps you make better projections for the future.

3. Secure Funding

One of the most important reasons behind why your small business needs a business plan is that investors and lenders will ask to see it before they invest in your business.

Your business plan contains all the necessary information about your business’ finances, as well as your forecasts for the future. Among the financial details you need to include are

  • Balance sheet
  • Income statement
  • Expenditures
  • Net profit

This information easily relays to your investors and lenders all the information they need about your small business. It also inspires confidence in your small business and can aid in obtaining funds for your business more easily.

4. Come up with an Actionable Plan

Your business plan can help you reach your long-term goals. But in order to get there, you must have an actionable plan that includes your short-term goals.

You’ll be able to set your plans for future success and monitor how well you’re reaching your milestones. A business plan will help you measure your success as well. This is necessary, especially as you’ll need to adjust your plans should you find that you’re not effectively reaching your goals.

5. Make Important Decisions

A business plan is ultimately a useful guide that contains key details about your small business. As you grow your business, you will have to make big decisions. These decisions could be about your finances, your future projections, and more.

Your business plan already contains every detail about your small business that you need to know. This turns it into a valuable resource that can help you make big decisions in a more confident manner.

Consider that you need to decide if you should invest in new equipment for your business. Looking through your business plan, you’ll immediately find various crucial information about your business that can indicate whether your upcoming investment will add value to your business or not.

Take the case of investing in business insurance. A good business insurance policy can help small business owners, especially through tough times. You can study your business plan to gauge whether you should consider getting business insurance for your small business. If you want to learn more about business insurance, visit this site.

A good business plan is like a handy guide designed to help your business reach your set business goals and achieve success. By utilising the power of data, as well as analysing that data, you can make important decisions about your small business and its future.

Sources:  

  1. Gregory, AG, Updated November 4th 2018, ‘5 Reasons You Need a Business Plan for Long Term Success’, viewed December 23rd 2020, https://www.thebalancesmb.com/do-you-really-need-a-business-plan-2951567
  2. Gutierrez, AG, December 10th 2018, ‘5 Reasons You Need a Business Plan’, viewed December 23rd 2020, https://www.sba.gov/blog/5-reasons-you-need-business-plan
  3. Kosta, KK, posted in 2019, ‘8 Reasons Having a Business Plan is Important for Small Businesses’, viewed December 23rd 2020, https://articles.bplans.com/reasons-business-plans-are-important/
  4. Urbauer, TU, ‘Why Does a Business Need a Business Plan?’, viewed December 23rd 2020, https://smallbusiness.chron.com/business-need-business-plan-43294.html