All Of The Following Are Reasons For Formulating Plans Except How Important Is The Business Plan?

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How Important Is The Business Plan?

Your Roadmap to Business Success.

Now, more than ever, a well-thought-out business plan is considered a necessary tool for building a viable business. Whether you are seeking financing from a lender or planning to approach the Small Business Administration for a loan guarantee, having a well-thought-out plan of action to file the formalities of your proposed venture is essential. In today’s highly competitive market, a formal business plan can mean the difference between success and failure.

What is a business plan?

Simply put, a business plan is a written statement that describes how you plan to run your business in the future. Although most new business owners have a general idea of ​​how they want to run their business, these intentions are usually not formalized. As the business grows and new challenges arise, the owner often needs to involve others in the venture. This is a time when the owner is under pressure to create a plan for future growth. Unfortunately, this time frame allows the least amount of time for planning.

The following are compelling reasons to create a formal business plan.

Roadmap to success

Very few entrepreneurs achieve their goals without a well-thought-out plan of action. Any responsible entrepreneur will spend the time necessary to register his exit from business. Good planning ensures readiness for the future, reducing challenges to their lowest denominator. Reducing the challenges means less risk and a higher probability of success. When risking time, money and resources, it is simply wise to plan ahead.

Predetermined checkpoints to measure progress toward goals

Just as a traveler embarks on a journey and plans when to reach his destination, a business plan also acts as a guide. Once the business plan is in place, the owner can set checkpoints at which progress can be measured and adjustments can be made. As each step of the business plan is reached, an assessment is given. Additional funding can be requested for physical expansion, equipment upgrades, or increased staffing. When each goal is completed and the activity cycle is complete, it means the beginning of new goals. New goals mean extending or reassessing the plan.

A business plan is a tool for involving others in the enterprise

Even if there has been no need for employees, a reliable business plan creates a basis for involving new people in the enterprise. This ensures that everyone understands the company’s goals and what is expected of them. Quite often, an owner thinks they can commute with their small staff only to find out that their staff doesn’t understand the overall plan. A business plan gives everyone the guidance they need to stay on track. The planning process also helps to bring the achievement of goals to the employees and reduce the possibility of unplanned crises.

The importance of preparing a loan application

Before obtaining financing, the lending institution requires a good business plan. Evan, if you want to apply for the Small Business Administration, the loan must be approved by the lending institution first. The SBA guarantees up to 80% of the loan, but the lender still requires proof of capacity. The question is, are you capable of running a business? The lender will ask for proof of experience, collateral and a statement of how you intend to repay the loan if the venture fails. Even if the lender is your friend, your relationship is strictly business because they require certainty of repayment. You need to give them enough confidence that you know what you are doing and how you are going to do it.

The business plan provides for:

A picture from a previous experience

A plan for the future

Makes financial needs clear

Identifies possible threats and offers reasonable solutions

Acts as a communication tool

Determines direction and sets company goals.

Don’t take anything for granted. Be prepared for anything that might happen before it does. If you put it off until something happens, it will interfere with your ability to preform. Every part of the business plan should be considered. First, agree on your legal description, name, product or service, and logo. Then find a good location and bring everything together with your business plan.

Here are some things a business plan should include.

Business

A. Company Description

Form of ownership

Location

Products or services offered

History of past experiences

Which is the niche served

Need for niche – demand

Growth potential

Service Product Longevity

B. Marketing

Clients

Competition

Products

strategy

C. Management/Staff

Financial data

A. Pro forma cash

Details by month in the first year

Details by quarter, second and third year

Notes for clarification

B. Pro forma balance sheet

Revenue forecast (profit and loss)

Details by month, first year

Details by quarter, second and third year

Notes for clarification

D. Funding Requirements

E. Insurance Requirements

All payouts should be taken into account when writing a business plan. Project one year, five years and ten years. Divide each segment into the lowest denominator. If you want to make x amount of dollars, how many sales does it take and what does each sale consist of? Find the answers and put them on paper.

Plan to be productive and successful. Think of all the possibilities, good or bad. Consider the “what if” factor. Get professional advice and don’t sell yourself short. Self-employment is not for the faint of heart. It’s a hard road. You have to work hard, put in long hours and endure a lot of rules and regulations. This is not the answer if you are looking for freedom from your employer. Being a self-employed person drains your energy, but if you plan it right, you’ll be able to spend some time with your family in a few years.

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