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A business plan isn’t just about getting loans but it is a big part.
It doesn’t matter if you have just started a business or you’ve been in business for a while but you’ve probably wondered if you need a business plan. The answer almost always is yes.
The reason for this is that according to GoSmallBiz.com, the number one reason to have a business plan is to grow your existing business. And, that is a goal of almost every business (I say almost because I’ve actually heard from a few business owners that say they do not want to grow. I suspect, though, that it was a ploy to get rid of me).
A business plan can become a guide for you to follow to increase sales while maintaining costs. This doesn’t mean you make a plan and never change it.
A business plan is an evolving document. You should review it quarterly to check if you’re meeting your goals. When you see a trend that is not in the plan, you can adjust.
Another reason is if you are looking to rent or lease space. After salaries, office space is the largest expense a business will have.
You don’t want to just lease now and a few years down the road find that you’re bursting at the seams in your current place. This will put you at a disadvantage when you’re looking for your next office space. A business plan will show your growth and you can anticipate your next move and negotiate better rates.
The third reason is to back up a business loan application. This is a requirement on most applications. Bankers want to know what your cash flow is and what collateral you have. This is information that you will gather in your business plan.
Your plan can also give you a good idea of when you may need to borrow money ahead of time so you can plan for it rather than being surprised. Bankers want to make money on your money. They want to lend to businesses that are close to their financial goals and not businesses that are in dire need.
The fourth reason to have a business plan is if you’re seeking investors for your business. If you are a startup or just feel you need a partner to help your business grow, you’ll need to show your prospective investor your business plan.
You’ve seen it on the television show Shark Tank. Investors, like the banks, want to see your track record and your projections. And, it better be realistic.
The last of the reasons on this small list would be life events. What I mean by this is, things happen in your personal life that can affect your business. Things like divorce, deaths, accidents and of course taxes. You’ll need to know the valuation of your business when things like this happen. Just make sure you update your business plan at least yearly.
There are many other reasons to have a business plan. The Small Business Administration has a good business plan guide to get you started with yours. The SCORE Association will help you for free in most cases and there are also companies that will help you for a fee.