A business plan is a 15-20 page document that details how you intend to achieve your business goals and includes information about your product, marketing strategies, and finances. You should make one when you start a new business and keep updating it as it grows.

Small business entrepreneurs usually use business plans to guide them rather than putting themselves in a situation where they may need to seek for directions or even circle back and start over. This allows individuals to see the big picture, plan, make critical decisions, and improve their overall chance of success

6 Reasons Why You Need A Business Plan

You may be wondering, "Do I need a business plan?  It sounds like a lot of work, and I've heard they're out of date, and I prefer to figure things out as I go..."

The answer is that you do, in fact, require a business plan! "Going into business without a business plan is like going on a mountain trek without a map or GPS support—you'll eventually get lost and starve!" said entrepreneur Kevin J. Donaldson. Though it may appear tedious and time-consuming, business plans are essential for starting a business and ensuring success.

Here are Six (6) reasons why you need a business plan for your small business to highlight the importance of business plans and make the process seem less intimidating.

To Help Making Critical Decisions

The primary benefit of a business plan is that it allows you to make better decisions. Entrepreneurship is frequently a never-ending exercise in decision-making and crisis management. Sitting down and considering all of the implications of any given decision is a luxury that small businesses cannot always afford. That's where a business plan comes in.

Making a business plan allows you to anticipate the outcome of some of the most important business decisions.

To Avoid Making Big Mistakes

Only about half of small businesses have made it to their fifth birthday. While there are numerous reasons why small businesses fail, many of the most common are addressed specifically in business plans.

According to CB Insights data, some of the most common reasons for business failure include:

No Market Demand: There is no market need for what you're selling.

Cash flow issues or businesses simply running out of money are examples of a lack of capital.

Inadequate team: This highlights the importance of hiring the right people to assist you in running your business.

Tough competition: When you have a lot of competitors in your space, it's difficult to generate a consistent profit.

Pricing: Some entrepreneurs overprice or underprice their products or services, which can be disastrous.

The exercise of developing a business plan can assist you in avoiding these major blunders. Whether it's cash flow forecasts or a product-market fit analysis, every component of a business plan can help identify potentially critical errors before they happen. For example, don't be afraid to abandon a great idea if it turns out there's no market need for it. Be truthful to yourself!

You can also avoid these mistakes by reaching out to professionals today.

To Set Better Benchmarks And Objectives

Without a business plan, goals can become arbitrary, with little rhyme or reason behind them. A business plan can assist in making those benchmarks more intentional and consequential. They can also help you stay on track with your long-term vision and strategy, as well as gain insights into how your strategy is (or isn't) coming together over time.

 To Prove The Business Viability

Many businesses are founded on passion, and while this can be a great motivator, it is not a great proof point.

The most important step between concept and reality is figuring out exactly how you're going to turn that vision into a successful business. Business plans can help you confirm that your big idea is a good business idea.

The market research section is an important part of your business plan. Market research can provide in-depth information about your customers, competitors, and industry. It can not only enlighten entrepreneurs who are starting a new business, but it can also better inform existing businesses about activities such as marketing, advertising, and the release of new products or services.

To Be Financially Secure

Did you know that having a business plan increases your chances of getting funded? If you want to pitch to venture capitalists, borrow from a bank, or sell your company in the future, you'll almost certainly need a business plan. After all, anyone interested in investing in your company will want to know it's in good hands and will be profitable in the long run. Business plans are the most effective way to demonstrate this, and they are typically required for anyone seeking outside financing.

 To Have A Better Understanding Of The Broader Landscape

No business is an island, and while you may have a firm grasp on what's going on inside your walls, it's also critical to understand the market landscape. Writing a business plan can help you better understand your competition and the market you're in more broadly, as well as illuminate consumer trends and preferences, potential disruptions, and other insights that aren't always obvious.