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- Validation
You’ll hear objective feedback on your idea, have flagged any potential challenges you may face, and see if your plan is missing any essential information about your business idea that you may or may not have yet considered.
- To Prove that your Serious about your Business
A formal business plan is necessary to show all interested parties, employees, investors, partners and yourself that you are committed to building the business. Creating your plan forces you to think through and select the strategies that will propel your growth.
- To Better Understand Your Competition
Creating the business plan forces you to analyze the competition. All companies have competition in the form of either direct or indirect competitors, and it is critical to understand your company’s competitive advantages. And if you don’t currently have competitive advantages, to figure out what you must do to gain them.
- To Determine Your Financial Needs
One of the purposes of a business plan is to help you to determine exactly how much capital you need and what you will use it for. This process is essential for raising capital for business and for effectively employing the capital. It will also enable you to plan ahead, particularly if you need to raise additional funding in the future.
- To Attract Investors
A formal business plan is the basis for financing proposals. While investors will generally want to meet you in person before writing you a check, in nearly all cases, they will also thoroughly review your business plan.
- To Reduce the Risk of Pursuing the Wrong Opportunity
The process of creating the business plan helps to minimize opportunity costs. Writing the business plan helps you assess the attractiveness of this particular opportunity, versus other opportunities. So you make the best decisions.
- To Attract Your Partners
Partners also want to see a business plan, in order to determine whether it is worth partnering with your business. Establishing partnerships often requires time and capital, and companies will be more likely to partner with your venture if they can read a detailed explanation of your company.
- To Judge the Success of Your Business
A formal business plan allows you to compare actual operational results versus the business plan itself. In this way, it allows you to clearly see whether you have achieved your strategic, financing, and operational goals.
- To Position Your Brand
Creating the business plan helps to define your company’s role in the marketplace. This definition allows you to succinctly describe the business and position the brand to customers, investors, and partners. With the industry, customer and competitive insight you gain during the business planning process, you can best determine how to position your brand.
- To Uncover New Opportunities
Through the process of brainstorming, white-boarding and creative interviewing, you will likely see your business in a different light. As a result, you will often come up with new ideas for marketing your product/service and running your business. It’s coming up with these ideas and executing on them which is often the difference between a business that fails or just survives and one that thrives.
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