A startup business plan is one of the key documents needed if you wish to successfully launch your own company one day.
In fact, starting a venture is indeed a great idea: You get to manage your own business and enjoy complete control over its future. You also get the opportunity to be your own boss and escape the monotonous routine of a regular nine to five job.
However, creating a successful startup is quite challenging, as more than 90% of all new businesses end up failing.
But there are several steps you can take to maximize your chances of success. One of them is creating a solid, professional, and reliable startup business plan.
Before we get started, you might be interested to check out our industry-specific Ready-made Business Plan Templates with pre-written text and automatic financials which you can easily customize and adapt to your own project, no financial expertise required.
How can a business plan help your business? Let’s find out.
A Startup Business Plan Helps you Take your Business Seriously
Many individuals dream about launching a startup. Very few of them end up making this happen. And among those who do end up launching their new venture, the vast majority write a business plan. The reason is simple: A business plan is the first practical step in the process of translating the theoretical business idea that exists in the mind into tangible reality. In other words, a business plan helps you become serious about your venture.
A Startup Business Plan Sets your Objectives and Key Milestones
Your business will not grow without a clear vision and defined goals. It needs to be driven towards certain objectives and go through certain milestones before it reaches success. And that’s why you need to formulate your objectives, targets and milestones, all of which can be detailed in a solid and reliable business plan. By setting these goals, your business plan becomes your roadmap to achieve business success.
A Detailed Business Plan Helps you Develop Accountability
Another benefit you get from creating a business plan is that it helps you become more accountable. This is a natural consequence of being serious about your business and having a step-by-step roadmap you need to follow. The key point here is that you now need to follow the plan you have laid out and compare your performance against the targets, milestones and objectives. You are now responsible for achieving these business results. The success or failure of the action depends on you.
A Business Plan Helps you Understand the Market and your Competition
A good business plan has a detailed section dedicated to analyzing the market in which you operate and your competition. This allows you to better understand the various market dynamics that affect your business as well as the competitive landscape. Important topics such as market demand, consumer trends, pricing, competitive advantages, regulatory framework, taxation and many others are all detailed enabling you to properly position your value proposition for growth and profitability.
A Business Plan is a Tool to Prioritize Tasks and Stay on Track
Since the business plan has all the goals and steps you need to follow, it can act as a great tool you can use to prioritize the various activities, stay on track and ensure everything is working as planned. It helps you focus on the duties that matter and delegate the admin work and other technical tasks that should be outsourced. Entrepreneurs often get lost in the day to day activities of building and managing a startup. This usually creates a sub-par productivity which can delay the progress and even take the business into dead-ends. A business plan allows you to avoid these pitfalls by listing down the key actions that unlock the highest amount of value.
As Startup Business Plan Helps you Assess the Feasibility of your Project
Not all business ideas are feasible. But many are, and the creation of a robust business plan actually demonstrates how you will be able to take an initial theoretical concept and translate into an achievable and sustainable business model. A compelling business plan describes all the actions you will take to make your business idea a reality.
A major part discusses the market statistics and lists potential strategies you will employ and the achievability of their execution. Is there enough demand for this product or service? What is the best way to serve the market demand? What can we learn from the latest consumer trends and how can we benefit from them? How should we position the brand and our offering?
Another important section usually tackles the economic feasibility of your project by providing financial forecasts and revenue projections. Will this project make money? What is our expected revenue growth rate? What expenses are we incurring on an annual basis? How much money does it need to take off and how much return on investment is it expected to generate?
A good business plan answers all these questions, and if you do it properly, this helps prove that your business idea is feasible.
A Robust Business Plan Helps you Estimate your Startup Costs
A business plan allows you to determine the amount of money required to be able to launch your business. Most businesses require some initial startup investment that cover the expenses of your venture prior to any revenue generation. For example, you might need to setup a website, print business cards, conduct an initial market study or travel to a certain location.
Sometimes, startup costs might be much higher. For example, you business might require you to purchase fixed assets such as a car or machineries.
In all cases, a business plan is extremely useful to be able to assess the various startup expenses you must pay upfront to be able to launch the business.
It Plan defines your Sales and Marketing Plan
No business can grow and thrive without a clear and effective sales and marketing strategy. Sales and marketing are one of the main drivers for business success. Without revenues, you cannot pay salaries, rent or any other vital expenses needed to stay in business, let alone generate profits.
A good business plan has a dedicated section detailing your go to market strategy and the various sales activities you plan to undertake to generate a solid and growing revenue. It usually mentions the sales tactics you will employ and the various promotional channels, media and technologies you plan to utilize.
A Startup Business Plan Defines your Hiring Plan
People are the very livelihood of any company, and your startup is no exception. A business plan usually includes a section detailing your hiring needs. It usually lists all the key positions you plan to hire including the expected salaries, bonuses, and other employee benefits as well as potential hiring dates.
The hiring plan allows you to not only understand the key positions needed to make your company operate properly but it also allows you to forecast the annual manpower and personnel expenses. This is a major recurring expense that can have a massive impact on your bottom line and hence you need to have an excellent grasp of it.
A Startup Business Plan Helps you Appraise your Business
When it comes to understanding the value of your business, a business plan constitutes a reference document allowing investors, partners and other stakeholders to make educated decisions.
Thanks to the financial forecasts usually part of any serious business plan, investors will be able to appraise your business using various valuation methods.
You can even include a valuation section within the business plan if needed. More on this topic in this article.
It Helps you Persuade Serious Investors
After seeing your investor deck, investors usually ask for more detailed documentation about your business as part of their due diligence before deciding to invest in your venture. This is where the business plan becomes handy.
A business plan includes a sizeable amount of vital information that can influence how potential investors perceive your venture.
In addition to the financial data, investors also use the other business plan sections to learn key insights about your value proposition, the market you operate in, your various sales and marketing tactics, the growth potential of the opportunity as well as potential exit strategies should they decide to invest.
A Startup Business Plan is Needed When Seeking a Bank Loan
If you wish to get a business loan from a bank to finance your startup, you will almost certainly need a business plan to be able to submit your application. Virtually all financial institutions list a detailed business plan as part of their list of required documents to get your loan approved. They will need to see how you plan to use the funds and most importantly how you will be able to pay back the initial capital plus any extra interests.
A Startup Business Plan Helps you Establish a Legal Entity
Once you have a good business plan, you are now ready to approach company setup agencies or business lawyers and start the process of opening a legal entity for your startup. Most authorities require a business plan to be able to issue a trade license or company registration document. So be prepared before initiating the process of registering a company, having a ready-made business plan can save you a lot of time and hassle.
It Helps you Manage your Cashflows
A business plan enables you to forecast how you will spend and manage your cash. Understanding the cash movement is very important for any startup. It is crucial to understand the cash situation on a monthly basis, especially during the first year. This makes it easier to see what assets you can purchase, what debts you need to repay and so on.
It is also paramount to understand how much cash you have on hand and how long you can last without seeking additional funding. A business plan thus allows you to understand key cash concepts such as your cash burn rate and your cash runway.
A Startup Business Plan Helps you Manage Potential Risks and Prevent Crises
By writing your business plan, you will discover a number of risks that your startup might face. What if the government regulation suddenly changes? What if business is disrupted because of a force majeure? What if a competitor copies our business model? What if a bad customer experience blows out of proportion on social media?
Running a business doesn’t come without risks. The key here is to devise a contingency plan to mitigate those risks and prevent the risky situation to evolve into a full-blown crisis.
A solid business plan openly discusses the potential risks your business might face and offers practical and actionable solutions to reduce their negative impact.
It is a Living Document that Evolves With Time
Finally, keep in mind that a powerful business plan is not written in stone. You don’t write it once during the launch phase. No, a business plan is an ever-evolving roadmap for your company success. Most companies and multinationals write a business plan on an annual basis. It often includes important info such as the yearly budget, target sales, strategic changes…etc.
The key point is that you need to continually update your plan based on the latest real inputs and changes you face in your actual business practice. Thus, the importance of a dynamic business plan is that it provides the latest roadmap – based on many past iterations and real inputs – which you can use to make accurate decisions and reliable projections for the future.
Conclusion
Is it possible for a business to exist without a business plan? Sure, but it’s not recommended.
There are many valid reasons why you must create a business plan for your startup. In addition to providing key information needed by investors and external parties such as banks or registration authorities, a business plan is also a reference document needed for internal purposes.
It summarizes your value proposition, explains how you are creating value for a specific target audience chosen in a certain market, under certain conditions. It also explains your hiring, operating and marketing plans and provides a detailed blueprint for business execution.
Finally, a good business plan provides financial forecasts and important statements such as the income statement, the balance sheet and the cash flow statement. These projections demonstrate the economic viability of your project and reveal key metrics and ratios (such as profit margins, revenue growth rate, ROI…etc.) often used by managers to measure success.
