Many people start a business but unable to get the required results from their business or industry. The reason behind the failure of a business is not having a proper business plan. Business plans are essential to a small business’s success. Without one, many banks and other financial lending sources will not even look at an application from any new business startup.
However, writing a business plan is not something for the faint of heart, nor should it be expected that a well-prepared business plan will bring in thousands of dollars in outside funding. For most fledgling business owners writing a business plan is the first step toward getting the cash they need to get the business going. The following are the main benefits of having a business plan before starting a business.
It is best for funding
In order to write a great business plan you will need to do some homework on what financial institutions are looking for in a business plan before you submit yours. One thing that you can do is to contact your local bank or credit union and see if they have any programs for small business loans or small business investment. Most banks have internal plans that they use when they are assessing a business’s qualifications for a loan. If you are able to find an internal plan that will meet the requirements for a specific loan that will save you the time and trouble of finding one yourself. It’s much more likely that the bank will be impressed with your business plan and be willing to offer you outside funding if it does fit their guidelines.
You can provide a good picture of your business
One of the main benefits of a business plan is the ability to provide a good picture of your company’s future growth and profit potential. To do this you will need to provide financial projections. These will show how much money your company will make over a certain period of time. The projections can be provided in the form of both monthly and annual numbers. The quarterly financial projections are best for those who are operating on a tight budget and can only afford monthly figures. In this way, you can represent your business efficiently and professionally.
You can deal with your budget easily
To help with budgeting, a small business owner’s budget can be used as a guide. A budget will allow the owners to see where the bulk of their money is going and will also allow them to know how to spend it best. Budgets should not be used as a final piece of material when designing a business plan. Budgets must be based on fixed costs, which include fixed salaries paid to workers and equipment and supplies purchased. It must also be based on variable costs, which include growth, expenditures for expansion, and investments. A final budget will be needed when it comes to paying lenders and getting credit. The last thing a bank wants to see is a large budget that was not carefully planned for and presented to them.