Why do I need a business plan?

Yes, it's true that it takes a lot of time to prepare a business plan. Not only that, it's not always an easy job either. But after reading this article, you'll know exactly why a business plan is indispensable if you want to grow your business.

What is a business plan?

Very simply put, a business plan is a kind of road map. You describe the goals you want to achieve with your business and how you are going to achieve them. Among other things, you tell about the organization, your ideal team composition, your product, the market and market potential, the revenue model, your marketing and financial projections.

All the things that may already be very obvious to you write down in your business plan. By the way, this does not immediately mean that it has to be a huge story. Short and sweet often works just as well, in some cases even better. And on top of that, your business plan is also a kind of working document. It grows, just like your business.

3 reasons why preparing a business plan is necessary

Writing a business plan has all kinds of advantages. Below we list 3 key benefits for you.

1. Creating a business plan provides focus

If you want to grow, it's important to put your spare time and energy into the right things. This is already difficult when you are working on your own, let alone when you are growing and need to manage multiple team members. In that case, a business plan can provide focus. By always falling back on the goals you have chosen and written out in the business plan, you can check that you are still doing the right things. It is also a perfect document to show your staff what you have in mind.

2. It is necessary to get funding

To grow, you usually need investors. You need to convince banks, business angels, venture capital parties and other investors to invest in your business. They will only put money and time into your business if you give them confidence that your business is going to be successful and profitable.

A good business plan helps with that. It shows that you are serious about your business, that investors can understand your vision and what you expect in terms of profits and income streams.

If you want to use a business plan to win over investors, try to put yourself in your reader's shoes as best you can and adjust the tone and style accordingly.

3. You keep a grip on your liquidity

An important part of the business plan is the liquidity forecast. Here you put together projected income and expenses for the next 36 months. This is a perfect tool to keep an eye on whether you are still on the right track. If, for example, you see that your income is lagging behind your forecast, you need to make adjustments.

Making a business plan: this should not be missed

If you are going to create a business plan, remember that an incomplete business plan is virtually worthless. Therefore, make sure you at least consider the following questions:

• Are all competencies present in your team?
• What is the customer need and how does my product address it?
• What is the market you will serve and what is the potential?
• Who are your competitors and where do you stand out?
• How are you going to generate revenue?
• How will you approach potential customers?
• How is the connection to the market? Is there traction?
• Who does what, when and at what cost?

Finally, you look at the financials. The liquidity projections, income statement and balance sheet projections for the next three years.

Examples of pitfalls when writing a business plan

Before you get started writing a business plan, we want to point out some mistakes we see regularly. Here are some examples.

Too optimistic

Of course your business will be a huge success. But watch out for unbridled optimism. You can't grow upward in a straight line. You will face financial setbacks. Above all, don't forget to factor in a financial cushion and, if necessary, include this in a funding application.

Don't underestimate the competition

You won't be the first to underestimate the competition. And when that happens, you can be sure it will have huge implications for your business and the credibility of your business plan. Be realistic.

Your written business plan hangs together like loose sand

And that kills credibility and readability. It is important that there be a link between the various chapters in the business plan. For example, if you describe in the first chapter that you are going to expand the organization, this should be reflected in the financial projections. If you say that you are going to invest in the development of your product, but there is nothing about this in the finance chapter, then you are missing the point. A useful tool for writing out your business plan is the Business Model Canvas example.

Become investor ready?

A business plan is indispensable when seeking investors. Want to know what else you need to do to become investor ready? Then download our white paper!