Business Planning
What is a Business Plan?
A business plan is a valuable tool that provides both a reality check and framework for starting or expanding a business. It will provide you with direction, information, and answers. By developing a business plan, you will learn more about your business idea (including your target market, industry, and competitors), as well as your financial, operational, and management needs. It will help you assess the viability of your idea or project. Through this planning exercise, you will also develop a marketing strategy and set goals and objectives. You will also learn more about the opportunities and challenges that could impact your business idea.
Why You Need a Business Plan
Business plans are not just application forms that you submit to the bank or other organizations in order to get financing for your business. While financial lenders use the business plan to help evaluate your loan application, you — the entrepreneur — will benefit in many ways from developing a business plan.
A business plan will:
- Help you assess whether or not your business idea is viable. You may have a great idea for a business, but how profitable or feasible is your business idea?
- Help you to be focused and be a better decision-maker.
- Help you assess your management skills and identify areas where you need to improve or need assistance with (for example, you may determine you need to hire a bookkeeper).
- Identify potential risks or threats that affect your business (e.g., industry challenges, competition, market size, etc.). By identifying potential barriers to success, you will be able to pro-actively identify solutions to avoid these problems or minimize the risk if these problems cannot be avoided.
- Help you to set and achieve goals and objectives (both short- and long-term). You can also measure the progress of your business by comparing your company's actual performance to the projections and goals you set in the business plan.
- Help you determine your business needs (e.g., personnel, working capital, equipment, renovations, etc.) and your financial requirements.
- Another way of understanding the importance of business planning is to look at reasons why businesses fail.
Reasons for Business Failure Include
- Poor market research or poor choice of target market
- Underestimated/overstated financial goals
- Poor understanding of industry and competitors and failure to gain a competitive advantage
- Failure to learn industry standards and regulations
- Undercapitalization
- Poor pricing and marketing strategy
- Project overruns
- Poor partnership or lack of management skills
- Poor location
A Guide to Business Planning
Download a copy of a business plan guide prepared by Enterprise South East and the CBDC Westmorland Albert to help you with your business planning.
- Components of a Business Plan (56 KB PDF)