Why should you write a business plan?

The business plan is the blueprint and key ingredient for a fully functioning and successful business. As the business develops, the plan will need to be adjusted to adapt to the strategic expansion of your business. Reviewing the business plan can also help you see what goals have been accomplished, what changes need to be made, or what new directions your company’s growth should take.

Here are reasons why a business plan is needed before embarking on the journey to entrepreneurship.

Map the future of your business

A business plan is not just required to secure funding at the start-up phase. This is the vital tool to help you manage your business more efficiently and effectively. The more you understand your business and your market, the easier it will be to ensure your long-term success.


Support growth and secure funding

Many businesses fail due to lack of funding or insufficient cash flow. Having a business plan gives you a much better chance of getting the money you need to keep operating or to expand. Whether you’re a first-time entrepreneur or a seasoned business owner, there a multitude of options when it comes to funding. Some of those options include:

  • Venture Capital- According to MoneyTree statistics, the VC ecosystem deployed $58.8 billion across the United States in 2015, marking the second highest full year total in the last 20 years.
  • Small Business Administration Guaranteed Loans- (SBA’s) Microloan program provides direct loans to qualified nonprofit intermediary lenders who, in turn, provide “micro loans” of up to $50,000 to small businesses and nonprofit child care centers. In 2016, Microloan intermediaries provided 4,493 microloans totaling $60.8 million. The average Microloan was $13,539 and had a 7.5% interest rate.
  • Crowdsourced Funds- According to crowdexpert.com, we’re expecting 75-100% growth in the US equity crowdfunding volume of capital raised in 2016, approximately $3.5 to $4 billion.
  • Angel Funding- Angels (private money) invest in 55,000 startups each year versus 1,500 companies by VC (venture capital) funding.Keep in mind that every loan source will require a concise, detailed, and accurate proposal/business plan and other financial documents. These documents may include and are not limited to the following:
    • Projected or actual profit-loss statements
    • Business history, tax returns, bill of sale, and more
    • Formal plan and structured presentation, short summaries


Help manage cash flow

Are you profitable? Are you ready to expand? Do you need a loan to support the expansion of your business? Cash flow management then becomes more vital when businesses pursue investment opportunities where there are significant cash outflows, in advance of the cash flows coming in. Your business’s cash flow projections give lenders substantial financial data that they can use to assess any risks in the lending process.


Develop and communicate a course of action

A business plan helps a company assess and strategize future opportunities that commit to a specific course of action. This gives you the opportunity refocus your energy on key strategies that will exponentially grow your business.


Support a strategic exit strategy

Every investor and big or small business owner needs to have an exit strategy in place. Important questions that you need to ask yourself:

  • How are you going to get your money out of the business?
  • Who am I going to transition my business to?
  • How much money are you going to get?

Answering these questions before assuming your exit strategy will give you control over the future of your business. Here are some common exit strategies to explore:

  • Initial Public Offering (IPO)
  • Merger & Acquisition
  • Family succession or sell to a friendly individual
  • Make it your cash cow
  • Liquidation and close

Links and resources:

  1. https://www.sba.gov/starting-business/write-your-business-plan
  2. http://articles.bplans.com/how-to-write-a-business-plan/
  3. https://www.business.gov.au/info/plan-and-start
  4. http://www.discoverbusiness.us/business-plans/
  5. http://bizcentralusa.com/services/business-development/business-plan/
  6. https://www.thebalance.com/business-plans-the-basics-of-creating-a-business-plan-1794264
  7. https://www.lawdepot.com/contracts/business-plan 

AFEUSA is not an attorney or law firm and we do not provide legal advice. We recognize that some information we may provide might fall within the parameters of legal subject matter, such as a link to a public website that may provide or disclose legal information. However, we do not advise you of your legal rights or seek information on any specific area that would create an attorney-client relationship.