Considering the amount of unpredictable variables for a startup business – from unforeseen expenses to time-consuming compliance regulations – some business owners perceive a business plan as unnecessary. The reality is, unless they’re encountering some excellent luck, it’s very difficult for a startup to “wing it” successfully without a business plan.
A more pertinent question for startups to ask would be: how large and specific should my business plan be? While a business plan is recommended for any serious business, it doesn’t always have to be some lofty opus. For some businesses, a lean business plan can make a world of difference.
So, how important is a business plan for startups? Keep reading to find out.
Investors Appreciate It
While some investors may wish to throw out your business plan entirely in favor of their own once they’ve invested, it’s always worth showing to investors that – as a business owner – you are forward-thinking and prepared to face any obstacle that arises. This is what a business plan for startups shows. It also provides potential investors with up-to-date financial data – including financial needs, pending loans, and credit reports – so they can gauge their investment with confidence, ultimately resulting in a better partnership that will drive the business to success.
Serious investors also have a variety of businesses they’re monitoring at once, so it always helps to have a business plan immediately available for them to view, especially with a relatively unknown startup. This preparation will increase their chances of investing more (and even investing in the first place). Investors recognize that a business plan is a live peek at your business, since it’s a constantly changing document that reflects a business’ very current going-ons.
Everyone’s on the Same Page
Beyond investors, a business plan for startups can create more cohesiveness among the business’ current employees. While business plans are useful for funding, they’re also very helpful for co-workers and contract hires. Financial advisors, lawyers, and business coaches will almost always request a business plan, which will provide more clarity and make their services as effective as possible. Additionally, sharing a business plan with employees ensures that everyone is on the same page in regard to what the company’s goals are for the current quarter or year.
Scenarios Become Accounted For
What happens if a miscue in regulatory compliance costs your business thousands? Or, on the more positive end, what area would you invest in if an investor provided a boost to your budget? Another biggie is: how much is my company currently worth? With a business plan, you will be able to answer these questions promptly and confidently, which is useful for everyone from investors to lawyers to you yourself; the business owner.
Competitors Are Analyzed
Although competitor analysis should be done regardless of a business plan, but having a plan certainly aids in the comparative process by clarifying certain specifications – like number of employees, projected quarterly growth, and overall vision – that business owners should monitor, in regard to both their own business and competitors of all sizes. By analyzing both new startups and established leaders within an industry, you will have a better grasp of where your business stands in relation to them.
So while not every business needs a business plan that reads like a lengthy novel, having some semblance of a business plan for startups will result in more attention from investors, improved cohesion with employees and contractors, educated foresight, and useful competitor analysis. These are all benefits that can aid a startup business tremendously. A business plan may be painstaking to create, but its advantages make the process well worth it.