Three Basic Questions About Business Plans Answered
A business plan is a staple part of any new business trying to find investors, startup funding, or additional financial assistance during times of economic trouble. In the modern business structure, there are some companies who are straying away from a traditional business plan, but that may not be the best way to serve your new startup business. Let’s dive into why a business plan is still so important for companies today.
What is a business plan?
In simplest terms, a business plan describes all parts of your business, financial and operational, and how your business is going to find success over a period of time. These plans are very detailed; they shouldn’t be vague in any way. The plan needs to include operating costs, the cost of insuring and paying employees, project gross and net incomes, and much more. It should also discuss when you are expecting to turn a profit and what you will do in the event of set backs. In other words, leave no stone unturned.
Why does a new company need a business plan?
The purpose of a business plan is to organize your company’s financials and growth plans to show potential investors or financial institutions. Without presenting this vital information to the people with money to invest in your business, you won’t get very far in securing funding. Investors and the like want to see how you will get them a return on their money or how you will pay back a loan. It is just as important for them to see your plan in case of financial strife. The more details you present as part of a business plan, the more likely you are to receive funding.
What is a business plan not?
A business plan is not a pitch deck, though the documents and presentational aspect of them are similar. A pitch deck is more about the internal workings, structures, and products. A pitch deck is probably better suited for companies that have been in business for at least a year, since it should also include product reviews, customer demographic research, and marketing plans. A business plan is more detailed than an executive summary. An executive summary works like a cover letter, meaning it acts like a brief summary placed chronologically before a business plan.
Business plans are a necessary tool to help you as a new business owner gather the needed knowledge and tools for long term financial success.