A business plan, sometimes called a business proposal, is a series of documents about your company, but you may need to know why you should write a business plan. This plan is one of the best and easiest ways to provide prospective investors with information about your company and why they should invest with you. The proposal that you write can also help you source money from others and keep your business on track.
Inform Investors
Entrepreneur points out that one of the reasons why you should write a business plan is because it will help you raise all or most of the start up capital and upfront money that you need. Depending on the size of your business, you may not have enough cash on hand to start the company on your own. Investors will ask for a copy of your business plan to get an idea of the costs that you face right away and any future costs you might face as well as your overall profits and general information about what you want to sell. They use that information to decide whether to invest in your company.
Keep Yourself On Track
Writing a business plan can also help you and any investors or employees stay on track in the coming months and years. The proposal should include at least one section on what growth you expect to see. You might write down when you hope to move your company to a new building, when you’ll bring in new workers and even when you expect to turn a profit. As you reach each of those milestones, you can adjust the business plan to show whether you completed each step on time or past your deadline.
Get Extra Money
Investors can include angel investors, professional investors and even your family and friends. Instead of relying on the cash that investors give you, you can use your business plan to get extra money from other sources like the government. The Small Business Administration (SBA) offers grants to women, minority business owners and others, but you will need a copy of your business plan to apply for those loans. Many banks, credit unions and other financial institutions also require a business plan from those applying for small business loans.
Know What the Future Holds
Another reason why you should write a business plan is because it helps you see what the future holds. Around half of all new companies fail within the first year, and a small number fail within the second year. Knowing what to expect can help you make adjustments to keep your business successful. Use sections to write down how you hope your business will grow over the next six months, 12 months, 18 months and so on. While you can revise that plan in the future, this will give you an idea of what the future holds in terms of the number of employees you have, how long your current building will meet your needs and how long it will take for your business to turn a profit.
Related Resource: Small Business Advisor
A business plan/proposal is a series of documents that lists what you sell, the expenses associated with your business and other important information. Some of the top reasons why you should write a business plan include getting money from investors and having knowledge about the future.
