12 Key Reasons Why Your Startup Needs a Business Plan

 | 
June 23, 2021
UPDATED: 
June 27, 2021
12 Key Reasons Why Your Startup Needs a Business Plan

Anyone hoping to get their business off the ground needs to understand what they really want and figure out how to achieve their goals. For doing that- a solid plan needs to be in place first and foremost. 

A business plan is crucial to take your startup to success. It acts as a guide and converts your vision to a reality map; it outlines your ideas, forms strategies, analyzes the strengths and weaknesses, attracts investors, and maps out its road to success.

If you are thinking of embarking on your business venture, you should understand the importance of a business plan. We have business leaders here to outline all a business plan can do for your startup.

1. Removes the Unknown

“One of the major reasons that I believe a business plan is important is that it removes a lot of the unknowns that would otherwise be present. The first time I tried to start a business, I didn't bother with a business plan (that would have otherwise included learning how social media worked), and I made a ton of mistakes. I didn't know how to market myself and my business properly, and a lot of unexpected issues kept cropping up. All of this could have been fixed had I had a business plan. A well-thought out business plan, while never perfect, can help you plan for a lot of situations that you wouldn't have thought of otherwise.”

Tony Martins, Founder at Profitable Venture

2. It Provides the Foundation for Your Business

“I always like to refer to a business plan as the foundation for your business. You may use this document to build your business. It contains important details about what your business does, analysis on its target market and industry, information about the company's leadership, and financial projections detailing the cash flow of the business. Drafting a business plan allows you to start setting goals for your business and timelines for how you may reach each goal. You may also revise and edit your business plan as the company grows and you gradually reach short- and long-term goals for the business.”

Deborah Sweeney, CEO MyCorporation.com

3. Attracting the Right Investors

“A business plan is necessary for attracting the right investors to your business idea. An intricate business plan has to illustrate the realistic operations as well as the financial mechanics and scalability of your business so investors will see your vision and will be inclined to back you financially. This also can be a method to project milestones which will ultimately make or break the investor's final decision and will influence your ability to acquire more funding in the future.”

Gerald Lombardo, Co-Founder of The Word Counter

4. Increased Likelihood of Success

“Finalizing a business plan can provide several important benefits, but most valuable among these is your increased likelihood of success. Studies show that when you write down your goals, you are 42% more likely to accomplish them. This same relationship holds true for business plans as it does for more general goals.” says John Ross, the CEO of Test Prep Insight.

Ross explains this enforces self-commitment to your goals, “By memorializing all of the plans, expectations and limitations for your business in writing, you increase the odds that you will follow through with your business plan and accomplish the business goals you set out to achieve. This highly detailed document helps you to stay focused on accomplishing everything you laid out for your fledgling business, as well as keeping from drifting astray. In short, the simple process of writing your business plan down will likely help you be more successful.”

5. Provides a Path For Growing for the Business

“A business plan can help provide a path and structure for growing your business. During times of tremendous growth, you can fall back on your business plan to help you stay on track with your companies' missions, financial goals, and even the day to day operations.” 

Forrest McCall, personal finance expert and owner of the entrepreneurship blog Don’t Work Another Day

6. Helps Gauge the Legitimacy of the Business: 

Forrest McCall explains a good business plan can also bring in the investors, “A business plan can also be used by early investors to gauge the legitimacy of your future business. For those with a well-defined business plan that includes a great deal of information- you’re much more likely to get the funding you need to start your business.”

7. Helps You Visualize the Future of Your Business

“In my opinion, a business plan allows you to visualise the future of your business, and to avoid mistakes that may crop up along the way. According to some reports, 95% of startup businesses don’t live to see their fifth birthdays. Even though the startups fail for different reasons, it mostly comes down to a lack of business plan execution. A good business plan helps the business to avoid common startup mistakes, even before the business starts running.” explains Alina Clark, Co-Founder & Marketing Director of CocoDoc, a software development company.

Simply having good ideas isn’t enough; Clark says forming a business plan is needed to test the viability of your ideas, “A good business plan acts as a reality check for business plans out of passion. Working on a business plan is just like undertaking some form of virtual stress testing. One needs to test the viability of the business. Businesses are often created out of existing passions. With such businesses, the likelihood of overlooking the non-viability of the business is a real thing. Building a business plan gives the reality check- one gets to know whether the passion can turn into a proper business.”

8. Establish Feasibility

“One reason why a business plan is important is to establish the business's feasibility. Numerous companies are founded on passion, and although this might be an excellent motivator, it is not an excellent proof point. The most critical stage between idea and reality is probably figuring out how you're going to transform that idea into a profitable company. Commercial plans may assist you in determining if your grandiose concept makes business sense. The market research element of your business strategy is crucial. Market research may provide valuable information into your consumers, rivals, and industry. Not only can it educate entrepreneurs considering establishing a new company, but it can also help current firms improve their knowledge of marketing, advertising, and launching new goods or services.”

Jennifer Foster, Managing Editor and Career/Life/Relationship Coach, Authority Astrology

9. To Establish More Precise Targets And Benchmarks

“Without a company strategy, goals often become arbitrary, without any rhyme or rationale. A company strategy may assist in making such standards more deliberate and impactful. Additionally, they may assist in holding you responsible for your long-term vision and plan, as well as provide insight into how your approach is coming together (or not) over time.”

Mike Chappell, Founder Formspal

10. Defines the Target Market

“A business plan clearly defines the company’s target market, making it easier to create products and marketing content based on their characteristics. The business plan should include information about their interests, social media activity, demographics, and spending habits. When businesses clearly define their target market, they can create products that the market would want and run campaigns that would likely encourage prospects to make a buying decision.”

Marina Vaamonde, Founder & Commercial Real Estate Investor at PropertyCashin 

11. Reduces the Chance of Mistakes

“It reduces your chances of making mistakes, especially in the creation of your business. Laying out a plan can help cover all the big questions and insure that you have “ticked” all the boxes. Should there be any problems in your idea or in the execution of your idea, the business plan should help you avoid them before it’s too late.”

Jonathan Cohen, Co-Founder at Cohen & Winters

12. Gives Direction to Your Goals

“It gives direction to the company and your goals. Having a plan gives you the opportunity to set up landmark points for the business. This helps you to better see where the business is doing well and where it could use some help as the years go by. It is always important to keep track of data and figures in your business in order to reach goals.”

Antti Alatalo, CEO and Founder of Smart Watches 4U

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