Aids in Obtaining Funding
As potential investors will have a variety of questions about your potential or existing business. A complete business plan would not only provide them with answers, but also show that they are organized and have considered all of the marketing, legal, financial, human resources and other aspects of running a business. A thorough business plan should increase your chance of obtain venture capital and bank loans.
Identifies Problems
Thorough business plans will address all areas of starting and running your business plan. When researching the information that you need to include in your business plans, you may learn that allegations you made about your marketing budgets, cost of materials, licensing and permitting, labour costs and other critical aspects of your business are incorrect. Learning this before you launch your business gives you time to make adjustments before you have signed contracts and committed funds. Business plans include budgets that help you manage cash flow- this is critical to keeping your business running.
Provides Exit Strategy
In addition to providing benchmarks for success, a good business plan sets realistic criteria for shutting down the business to prevent your throwing good money after bad. Solid figures that will tell you the business is untenable can help you to make the decision to shut down a failing business easier and can prevent people from losing more of their own or their investors' money than necessary.
However, although there may be numerous advantages to creating a business plan, there are also various disadvantages to creating one. These are:
Discouragement
It is often comforting to have something on paper that will help determine whether or not your business will be successful. However a lot of people may get so discouraged by what is revealed in the business plan they give up before they even give you a chance.
Investing resources unwisely
Many business plans fail because those involved do not spend the time or energy, or have the expertise, necessary to make the plan comprehensive enough to have true value. An incomplete business plan could lead you to invest resources unwisely and cause a financial collapse.
Time
Coming up with a business plan does nothing to directly sell a product or service. Therefore, many may consider the time it takes to develop a business plan as a big disadvantage, and it could be. Coming up with a comprehensive business plan could take many man hours.
Expense
It can be very expensive to write a business plan. However, some companies specialize in helping you write a business plan. In this, a consultant will meet with you, get the details of what you hope to do and where you hope to do it, conduct all the rest of the research necessary and then write a plan for you. Depending on how detailed and effective you wish this plan to be, it can be a very expensive option.
Conclusion
In the end, choosing whether or not to write a business plan or have one written is a choice you, as the business owner, can make. While there are some disadvantages to a business plan, you may have no choice but to have one in the long run. If you can self-finance the business, this becomes less of a necessity, but very few people can do it.
by
stealthrunner (student)
