Why i need a Business plan

Someone once said, ‘If you don’t know where you are going, how will you know when you get lost?’

It has been said many times over that many businesses especially in Africa today rarely survive to their 5^th birthday. The reasons for this failure include; having the wrong reason for starting the business, poor management; insufficient capital, and lack of planning.

I have noticed the great reluctance by many to go through the planning process. We tend to imagine we have it all set in our mind and normally feel like a business planner is ripping us off for doing something we assume is easy to do.

Contrary to common belief, developing a business plan is an opportunity to achieve your business goals as it helps you focus business activities giving you more control over your finances, marketing, daily operations and helps you raise the capital you need.

A business plan is essentially a map to your targeted destination. It gives you a clear idea of the obstacles that lie ahead and points out alternate routes.

Here are the reasons why you must have a business plan:

A written plan is mandatory if you want to attract outside financiers. Outside financiers could be people who are bringing equity into the business; the plan will be helpful to make them know as much as possible about how the business will operate and how their investment will be spent.

You business could be growing and requires financing to go to another level. The plan will help to show that you have met your past growth goals and illustrate why you need additional funding.

A plan is very useful for determining your financial needs. That is what Joe discovered rather late. Joe had an idea of starting a manufacturing business and to raise the capital for the venture he sold off his house. He used the money from the sale to pay a long term rent for premises, buy equipment and inputs and purchase a fleet of trucks for distribution.

By the time Joe came to see me he was in big distress. The market was demanding for his products but he did not have working capital to purchase inputs. After discussing Joe came to the conclusion that if he had spent time and money to first write a plan he would have not made partial payments for 3 trucks but instead applied the money he had to pay for raw materials and hired trucks in the initial phase.

A plan is useful for testing if your business ideas will work. Writing the plan and outlining each aspect of the business is very helpful for determining the viability of your business idea.

A client who wanted to put up a big building for its business discovered in the process of developing the business plan that it was wiser to put up smaller buildings which it could finance from internal resources and to also invest in equipment and personnel to make the investment in the building viable.

A business plan is a useful tool for monitoring the business. The plan helps to set realistic milestones; where the business will be in six months, one year or three years. These milestones are useful for the owner of the business, for managers and staff and for outside financiers.

The plan helps you to learn about the market. Researching, analyzing, and writing about the market not only provide you with an overview for the business plan, but gives you greater insight into the overall market.

What are competitors not doing that you can take advantage off, what marketing strategy or channel will work for your business are some of the advantages for writing that plan.

Finally the business plan can help to devise contingency plans. While business plans often include some contingency plans, by virtue of having the document available, you can see how and where you can make such changes relatively quickly if, and when, necessary.

The bigger contingency to plan about is when the business succeeds what will be your exit strategy? Will you for instance sell it off to another owner, will you invite other people to become co-owners or will you list on the stock exchange.