Do you really need a business plan? Is it worth the investment of time and resources? Can’t you just wing it and skip the whole planning process?
Good questions. Here’s everything you need to know.
1. It’s essential if you’re seeking a loan or investment
If you’re asking a bank, angel investor, or venture capitalist for funding, they’re going to want to know that you have a good handle on your small business’s trajectory.
You don’t need to write a 200-page document, but you will need something to hand to your banker or investor that shows that there’s a market for the problem your business solves and includes your key financial statements and forecasts.
Your business plan should make it simple for potential partners and supporters of all kinds to understand your business model and financials. It’s even better if you’re able to present data visually through charts and graphs.
LivePlan makes this easier by walking you step-by-step through the process of setting up and forecasting your financials—without complicated spreadsheets—so you can present your numbers feeling confident that you’ve put them together correctly. It’ll even create all the charts and graphs you need automatically so you can create an impressive plan, even if you’ve never done it before.
2. Business planning is proven to help you grow 30 percent faster
Writing a business plan isn’t about producing a document that accurately predicts the future of your company. The process of writing your plan is what’s important. Writing your plan and reviewing it regularly gives you a better window into what you need to do to achieve your goals and be successful.
Business planning is about regularly setting goals, tracking your progress toward those goals, and making changes to your business as you learn more about your customers.
You don’t have to just take our word for it. Studies have proven that companies that plan and review their results regularly really do grow 30 percent faster. Beyond faster growth, research also shows that companies that plan actually perform better. They’re less likely to become one of those woeful statistics on businesses that fail, or that experience cash flow crises that threaten to close them down.
3. You’ll make big spending decisions with confidence
As your business grows, some of the best problems you’ll have are figuring out when to hire new employees, when to expand to a new location, or whether you can afford a major purchase.
These are major spending decisions, and if you’re regularly reviewing the forecasts you mapped out in your business plan, you’re going to have better information to use to make your decisions.
4. You’re more likely to catch critical cash flow challenges early
The other side of those major spending decisions is understanding and monitoring your business’s cash flow. Your cash flow statement is one of the three key financial statements you’ll put together with your business plan. (The other two are your balance sheet and your income statement (P&L).
Reviewing your cash flow statement regularly as part of your business plan review will help you see potential cash flow challenges earlier so you can take action to avoid a cash crisis where you can’t pay your bills.