Why are business plans a good idea? We’ve heard that one a few times…
Well a business plan can improve chances for success and help companies grow faster, according to research. Often when it is the beginning stages or extending a venture, the major concerns are often regarding finance and time.
The benefits of having a business plan
- You are seeking funds to help start your new venture; a business plan can convince investors to front the capital necessary.
- You are a current entrepreneur in need of some support. A draft plan can set the path for potential growth, whilst keeping track on the businesses aims and objections.
One study, found that planning improved business performance. Interestingly, this same study found that planning benefited existing companies even more than it benefited startups.
Another study found that companies that plan grow 30% faster than those that don’t plan.
To reinforce the connection between planning and fast growth, yet another study found that 71% of fast-growing companies have plans.
Investing for an Investment
Whether you are a startup or company or a company with the aim for growth, a business plan can keep the process detailed and organised. It can be used to seek funding within the negotiation stage with potential investors, offering an comprehensive opening bid for percentage of shares.
It is therefore a ‘must have’ as investors want to know where a business stands, what is unique about it, what are you forecasted to achieve in the first few years and where are the risks? Investors expect to see well informed and realistic financial projections that demonstrate how long it will take for the business to show a profit and for them to recoup their initial investment.
Why should I create a business plan?
Research, sales forecasts, market trends and competitive analysis allow a company to make educated predictions, maintain a focus on their strategies, track performance and make adjustments accordingly.
A study of 223 companies found that having a plan reduced the likelihood that a business would fail, essentially tracking the performance in order to reach aims and objectives. Another study shows a comparison of companies with a business plan to those without, and its impact on their attempts to secure a loan or capital investment. [http://bit.ly/1FyvRhw]
Why are business plans a good idea? Summing up.
Well informed business plans cover market analysis and an understanding of competitors performance. Companies are shown to grow faster and have a higher success when securing investment. A business plan is helpful to both startups and established companies, and can help attract capital investment. The answer as to why are business plans a good idea is simply that it maintains focus on aims and objectives, reduces chances of failure and can help attract capital investment.