To start up your business in this competitive market, a good, structured, and detailed business plan is needed.
According to (Gleeson, 2010), the following 5 reasons show the importance of a business plan:
- To map the future: Secure funding at the start-up phase; help manage the business more effectively. A formal document helps everyone to understand the business better.
- To support growth and secure funding: Most businesses need further investment at some point. Lenders require Income/Profit and Loss Statements to indicate past records and a current business plan to indicate the businesses future.
- To develop and communicate a course of action: A plan helps a company assess options and choose a course of action. The plan can assign milestones and help managers to monitor progress. The plan can be disseminated quickly, promoting discussion and securing commitment.
- To help manage cash flow: Management of cash flow is fundamental for all businesses. Many businesses fail, not because they are unprofitable, but because they ultimately become insolvent (i.e., unable to pay their debts as they fall due).
- To support a strategic exit: Common exit strategies include: Initial Public Offering of stock (IPOs) acquisition by competitors; mergers; management buyouts. Any one of the following would require planning in order to support the businesses transition.