Benefits of Writing a Business Plan
What Is a Business Plan?
A business plan is a written statement that describes and analyzes your business and gives detailed projections about its future. A business plan also covers the financial aspects of starting or expanding your business how much money you need and how you’ll pay it back.
Writing a business plan is a lot of work. So why take the time to write one? The best answer is the wisdom gained by literally millions of business owners just like you. Almost without exception, each business owner with a plan is pleased she has one, and each owner without a plan wishes he had written one.
Why Write a Business Plan?
Here are some of the specific and immediate benefits you will derive from writing your business plan.
Most lenders or investors require a written business plan before they will consider your proposal seriously. Even some landlords require a sound business plan before they will lease you space. Before making a commitment to you, they want to see that you have thought through critical issues facing you as a business owner and that you really understand your business. They also want to make sure your business has a good chance of succeeding.
Helps You Decide to Proceed or Stop
One major theme of the book may surprise you. It’s as simple as it is important. You, as the prospective business owner, are the most important person you must convince of the soundness of your proposal. Therefore, much of the work you are asked to do here serves a dual purpose. It is designed to provide answers to all the questions that prospective lenders and investors will ask. But it will also teach you how money flows through your business, what the strengths and weaknesses in your business concept are, and what your realistic chances of success are.
Lets You Improve Your Business Concept
Writing a plan allows you to see how changing parts of the plan increases profits or accomplishes other goals. You can tinker with individual parts of your business with no cash outlay. If you’re using a computer spreadsheet to make financial projections, you can try out different alternatives even more quickly. This ability to fine-tune your plans and business design increases your chances of success.
Improves Your Odds of Success
One way of looking at business is that it’s a gamble. You open or expand a business and gamble your and the bank’s or investor’s money. If you’re right, you make a profit and pay back the loans and everyone’s happy. But if your estimate is wrong, you and the bank or investors can lose money and experience the discomfort that comes from failure. (Of course, a bank probably is protected because it has title to the collateral you put up to get the loan. See Chapter 4 for a complete discussion.)
Bookkeeping and Accounting
This book discusses the numbers and concepts you as the business owner need in order to open and manage your small business. You have the responsibility to create bookkeeping and accounting systems and make sure they function adequately. (Some suggestions for setting up a system are contained in Chapter 6.) One of the items generated by your accounting system will be a balance sheet. A balance sheet is a snapshot at a particular moment in time that lists the money value of everything you own and everything you owe to someone else.
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