A business plan is much more than a project for your MBA or simply to attract investors– although investors often use business plans to gauge their involvement. A business plan helps you to manage risk, stick to your values, and create a durable business structure.
A formal business plan often increases business growth rate by 30%, and nearly 75% of high-performing businesses have a formal plan.
We’ll cover seven guiding principles for how business plans increase profitability, confidence, and longevity.
What is a Business Plan?
A business plan defines your business’s foundation and a path forward. While not everything will occur exactly as you plan, creating a formalized plan will help keep a clear direction, accountability, and trust.
A thorough business plan usually takes about 20 pages, covering a wide variety of information like:
- Objectives and supporting market analysis
- Operational plans from employees to facilities.
- Financial projections including cash flow, profitability, and more.
Since a detailed business plan covers many nuanced aspects of your current or future business, it’s a great idea to get professional help researching and compiling the data.
3 Reasons Business Plans Increase Profitability
With the basics of a detailed business plan in hand, let’s cover a few ways a business plan impacts the profitability and durability of your company.
1. Define and Maintain Your Identity
One of the surest ways to maintain profitability in an ever-changing market is to ensure you have a clear company identity. Your company identity will center around a few simple questions, like:
- What products or services do we sell?
- Who do we sell to?
- How do we provide something different than what is already available?
Steve Jobs clearly defined and maintained Apple’s identity with a laser focus. His clear company identity helped the company to stay true to the client base, focus on profitable innovations, and hire the best talent for the job.
2. Prove and Manage Proper Financing
Lack of proper funding or cash management dramatically contributes to business stagnation and failure. Clearly defining market share, profitability, projected cash flow, and non-financial resources like staffing, buildings, and production tools will help immensely.
Your business plan will incorporate reports like:
- Sales Forecast
- Cash Flow
- Balance Sheet
- Profit and Loss
- Expense Budget
Not only will your business plan help you prove to yourself that your business is viable, but to potential investors and financial institutions.
Investors can only gauge the viability of your business as an investment by understanding the financial landscape you are navigating. Financial institutions like banks and credit unions also want to protect their investments, using your financial projections to determine your worth.
Ensure that all your projections use reliable methodology and data to back them.
3. Avoid Mistakes and Prepare for the Future
Business owners constantly face new situations and challenges, particularly in the early or pivotal stages of the business. While your business plan isn’t a crystal ball, it will help you define critical aspects well ahead of their relevance.
Creating a business plan makes you think through surprises, kinks, and critical details. It will also ensure that you create a plan for the future. It will help you determine how you perform in the market, how to innovate to increase profits, and see your successes.
Looking for Hands-On Business Support?
At Relevate, we’re passionate about helping business owners maximize their efforts and create the business performance they know they’re capable of. And while we aren’t typical mentors, we offer hands-on support and powerful, applicable tips and tools for business success.
So whether you’re looking for a mentor, are interested in hiring a business consultant, or want to stay informed about actionable business tips, start a conversation with us today!
Let’s get your business performing up to its potential!