Why Your Startup Needs a Business Plan

While a business plan is a necessity for startup businesses that must raise outside capital, it also can be useful for more modest, mom-and-pop ventures.

If you are an entrepreneur launching an ambitious business venture that will require large amounts of startup capital, you will need a thorough, well-thought-out business plan for two reasons.

First, lenders or investors will demand it. They will want to have enough information to judge the odds that their financial support for your business is likely to pay off, including a clear description of your product or service, the size and growth prospects of the market you plan to address, your competition, your detailed financial projections, your marketing strategies and your management team.

Second, a business plan can be an invaluable road map as you face the challenges of getting your startup off the ground and it can help you set goals and measure progress relative to expectations as your business grows. At the same time, your business plan should be a living document that you review and update periodically as your business expands and changes.

If your startup is less ambitious, the need for a business plan may not be as obvious. For example, let's assume that you have retired and plan to start a one-person business marketing your homemade ginger cookies. You've been selling them successfully on weekends at the local farmers' market and want to expand your sales to include local supermarkets and specialty stores.

Given the relative simplicity of your venture, you may feel that a business plan would add little value relative to the time it would take. After all, you believe that your product will sell itself, helped along by positive word-of-mouth, and you expect to fund your business yourself.

While all of those things may be true, taking the time to think about your business in a more formal way could help you avoid future problems and improve your odds of success by forcing you to answer important questions about your business, including:

-- What business structure should your choose?

-- What market will you target and how large is it?

-- Who are your competitors, what are their strategies, and what is your competitive edge versus them?

-- What furniture and equipment will you need?

-- Where will you work?

-- Will you need to hire employees and, if so, will you use outside contractors, part-time help, seasonal workers, or full-time employees?

-- How will you market your business? Word-of-mouth is fine, but you may need to consider other options as well.

-- How much startup capital and working capital will you need for at least the first year and where will you get it?

-- How will you price your product or service?

-- How much revenue do you project and how long will it take for the business to turn a profit?

By answering these questions ahead of time, you will be able to start your business with a clear-eyed view of what your goals are and how you plan to achieve them.

In short, not matter how ambitious or modest your business goals, a well designed business plan can be an important tool that will you will improve your business's chances of success.

Sources:

http://www.sba.gov/content/why-do-you-need-one, Why Do You Need One?/SBA.gov

www.sba.gov/category/navigation-structure/starting-managing-business/starting-business/writing-business-plan/essential-elements-good-busines, Essential Elements of a Good Business Plan/SBA.gov

More from this Contributor:

http://www.associatedcontent.com/article/7750636/choosing_the_right_business_structure.html?cat=3 , Choosing the Right Business Structure for Your Small Business Startup

http://www.associatedcontent.com/article/5991358/the_many_ways_a_lawyer_can_help_a_small.html?cat=3 , The Many Ways a Lawyer Can Help a Small Business

http://finance.yahoo.com/news/First-Person-5-Things-I-Wish-ac-582320536.html?x=0

First Person: 5 Things I Wish I Had Known before Starting My Small Business

http://www.associatedcontent.com/article/7779920/choosing_a_retirement_plan_for_your.html?cat=3 , Choosing a Retirement Plan for Your Small Business