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6 Reasons Why You Need A Business Plan In Entrepreneurship




 If you’re planning to launch your own company, one of the first things you should do is work on creating a business plan. It’s vital to have a business plan since it acts as a compass that points in the general direction that your company will go in the future.

A business plan is an important ingredient in the success of a start-up business. It will assist you in accomplishing the goals that you have set for yourself and contribute to the success of your company. A business plan will help you carefully consider the specifics of your company and its future.

As you continue to work on your plan, you’ll be able to deal with issues before they become a problem, saving both money and time. Writing a business plan in entrepreneurship will help you improve your chances of success and avoid making serious mistakes.

Having a business plan is essential if you’re looking for funding from investors for your company. Before taking a chance on your company, the majority of lenders and investors will want to ensure that you have a detailed business plan in place. It demonstrates that you’re serious about making your business a success.

If you intend to present your business plan to prospective lenders or investors, you must verify that your financial projections are correct to ensure that your plan will be taken seriously.

Launching a business is a significant undertaking, and you can use a startup business plan as a management tool to help you focus on where you currently stand concerning your goals for the company’s future. This will help you keep a good handle on the everyday chores you have to complete, and also assist you in achieving your long-term objectives.

#1. You’re trying to decide whether to start a business

You may be the only one who reads this plan, although you should have input from several other people with business experience. You need to ask yourself the following questions and incorporate the answers into your business plan:

· What does it take to succeed in this type of company?

· Do you have the skills and background necessary?

· Can you afford to take the risk? What effect would the business’ failure have on you?

· What is the growth potential for the business? Can it meet your financial expectations and requirements?

· Is there a large enough market for your products/services?

· Will you enjoy owning and managing the business?

#2. You want to jump-start your business

Whether you’re an entrepreneur doing business on the Internet, a stay-at-home Mom with an arts and crafts company, or a writer trying to break into publishing, a business plan acts as a guide to success.

Developing your business plan helps you determine your objectives and focuses you on the strategies and action plans necessary to accomplish those objectives. If you’re looking to boost your business, it’s time to answer a few questions in your business plan.

· What are your skill levels and talents?

· What are the goals for each month’s sales?

· What are your resources, time available, advertising and promotional budget, and website?

· Do you have the necessary equipment? If you don’t, how will you obtain the equipment?

· What barriers could you face?

#3. You want to better organize your company or improve its operations

This is a time- and task-oriented plan for internal use. It suggests actions that need to be taken and assigns responsibility. Here are some questions that need to be answered:

· How does our company compare to leaders in its industry?

· What are our management weaknesses? How can we make improvements?

· How can we increase sales, serve the customer better, improve manufacturing efficiency, and increase the gross margin?

· Do we have the necessary resources to make the above improvements? If not how will we obtain the resources? Do we need a bank loan or line of credit?

#4. You’re seeking a bank loan

Your business plan presentation can be used to inspire confidence in your banker and convince them that your business is a good credit risk. It is written very logically, with an emphasis on the financial projections and presentation of historical financial results.

Bankers who make bad loans get fired, so they like to err on the side of caution. A banker is looking for safety and a demonstration that the company can generate sufficient cash flow to pay the interest and the principal.

Bankers are not looking for a huge return on their money. They don’t want to take part in the management of your company or sit on the board of directors. Your business plan will need answers to these questions:

· Will the company’s cash flow be stable enough to make the payments on the loan?

· Are the long-term prospects of the business favorable?

· Does the company have a reasonably good track record?

#5. You need an investor or partner

Your business plan must demonstrate considerable upside potential for the business. The banker was content to get his money back plus, say, 10% interest. The investor may want a return of 30% to 50% or more.

This plan must be well written and keep the reader’s attention. Your business plan is competing with all the other plans submitted to the investor. Make sure you address the following questions:

· Can the company grow rapidly?

· Are the margins attractive?

· Have you succeeded in other business ventures?

· Is this a market that is emerging, with a large and bright future?

· How much of the company are you willing to give up, both in equity and management control?

#6. You want to sell your business

You must prove to a potential buyer that your company is worth paying a premium for. Sometimes this can be called a marketing presentation, an offering memorandum, or a valuation.

It is not strictly a valuation, as you’re trying to establish your sales price for the business, not determine a value. An impartial third party typically completes a valuation. You’re likely to be asked:

· Is there untapped potential for the business that a new owner could take advantage of?

· If the new owner had more capital, could the business grow more rapidly?

· Are there new markets that could be entered?

· Could costs be reduced and profits increased?

Every business should have a business plan. It’s the road map to success and is critical if your company is seeking financing. If you make the decision to operate your company without a strategic business plan, there’s a good chance that it will fail. While making a business plan can take a significant amount of time and effort, in the end, it will be well worth the effort.

 

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