A detailed business plan is one of the key things many successful companies have in common. Research shows that writing a business plan doubles the startup’s chances of success. Whether you are looking for startup funding or looking to expand your existing business, a business plan is a powerful tool that can take your company to the next level.
Here is a closer look at how to start a business plan that helps you achieve your growth goals:
Plan Your Finances Down to the Last Penny
Writing a business plan helps you plan your finances accurately and determine how much funding you need both in the short-term and long-term. Your financial plan includes the forecast for the next five years with details on cash flow, forecasted income, capital expenditures, balance sheets and budget.
A financial plan with charts and data not only gives you an idea of how much capital you need, but helps in preparing an effective pitch to seek funding.
The more detailed and exhaustive your financial plan, the better your chances of securing the funding you need. It is important in developing your financials to anticipate revenue as well as the costs incurred per unit sold or transaction. This includes the costs related to customer acquisition, labor, raw materials, shipping, marketing and so on. Unit economics forces an entrepreneur to better understand the core of the business like:
- How will they make money
- What the costs are
- Whether your business model is viable to allow you to make a profit
Get the Funding You Need
A 2019 study by Startup Genome found that nine out of ten new ventures eventually fail while the Bureau of Labor Statistics cites that two out of ten startups fail within the first year. Apart from poor market fit for the product, a key reason for startup failures is their inability to secure funding to sustain and grow the business. In fact, a U.S. Bank study found that 82% of startup failures are linked to cash flow issues. Twenty seven percent of businesses surveyed by the NSBA said they are unable to secure the funding they required.
Author-entrepreneur Alejandro Cremades notes in a Forbes article that while securing funding can be a lengthy process, the factors that affect the amount of funding you receive include:
- Detailedness of the business plan
- The quality of your pitch deck
- Strength and depth of data
When your business plan is detailed, thorough and professionally crafted, it can help you not only secure funding, but obtain the right amount of funds. A business plan also forces you to examine the market fit for your product, gather relevant data and analyze market competition. As a result, a carefully crafted business plan helps avoid the common pitfalls that lead to startup failures.
Align Your Teams With the Company’s Vision
A well-crafted business plan is not only essential to start a new business but is the crucial foundation for growing an existing one. A comprehensive business plan helps you set milestones and formulate the action plan for achieving them.
Another way that business plans provide tangible benefits is by aligning your teams with the company vision. This, in turn, has a positive impact on corporate executive satisfaction. In a McKinsey survey of 800 corporate executives across industries, 79 percent of executives said the strategic business planning process played a key role in shaping strategies. These executives were also satisfied with their company’s approach to business strategy.
Successful B2C entrepreneurs leverage the business plan to understand product economics and to optimize marketing strategies to reach their ideal customer. For B2B companies, the business plan helps determine the pathway of growing their user base while gaining clarity on customer acquisition costs.
One of the most compelling reasons to write a business plan is that it helps you identify your businesses’ strengths and weaknesses. A detailed business plan helps you evaluate problem areas and take the necessary steps to mitigate weaknesses.
A Harvard Business Review article by researchers Francis Greene and Hopp found that a business plan boosts the chances of success for startups. The likelihood of achieving viability is 16 percent higher for entrepreneurs with formal business plans as compared to non-planning entrepreneurs. High-growth oriented entrepreneurs and those with disruptive and innovative business ideas, as per this survey, were more likely to write a formal business plan.
Writing a business plan makes all the difference in terms of realizing startup success. Professionally written business plans support the conversion of the entrepreneur’s vision into detailed, tangible actions.