JFK, the 35th President of the United States of America said, “Efforts and courage are not enough without purpose and direction.” This is the crux of why business planning is so important.
It doesn’t matter how passionate you are or how important your product or service is to your community. Without an over-arching goal and plan for your business, it lacks direction and daily activities become haphazard and reactive. Here are the top 5 reasons a firm needs a business plan.
1. FUNDING
Most businesses require external funding either during the startup phases or to fund an opportunity for growth. Either way, this highly competitive market requires prospective lenders to submit the company’s recent Income Statements/Profit and Loss Statements, along with an up-to-date business plan. Statements show the companies past while the Business Plan gives a window into the businesses future.
2. OUTLINE COURSE OF ACTION
This window can be seen by all involved in the business. A Business Plan helps you commit your thoughts by putting it on paper. These written points help you manage your business better because it charts a specific course of action that’s needed for long-term success. Clearly outlined objectives and goals can do this.
3. FUTURE ROAD MAP
Business planning helps a company assess future opportunities and decide on a course of action. A plan committed to paper is one that can be followed, understood, managed and monitored effectively. Collaboration is also easily attainable for all participants if clearly defined direction is given.
4. MANAGE CASH FLOW
Proper cash flow management is fundamental for business to be successful. Many companies fail because they have become insolvent, which means that they are unable to pay their debts. Once a company is breaking-even it will consider investment opportunities. If you have a positive cash flow you will be able to make the most of opportunities for growth that arise as and when they come.
5. STRATEGIC EXIT STRATEGY
Considering a possible exit out of the business in advance assists with present decision making. Decisions throughout the life of the business will vary depending on whether you considering merging, family succession, management buy-outs or competitor acquisition as an exit.
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