In this article we answer the question: ‘Why is a business plan important?’ In other words, find out how it can shape a business and drive its success.
A carefully crafted business plan is a key element of any successful business – including franchises. Business plans should outline the business’ strategies and your intended method of achieving company goals. It should be a declaration of targets and financial forecasts and include details about you, your background and experience. In developing it, you should think about the types of obstacles and opportunities that you could encounter when running the franchise. But exactly why is a business plan so important? Let’s find out.
Why is a business plan important?
1. Helps you make important decisions
Business plans organise all of your ideas in one place. They highlight where your priorities are and so less important ideas can be left out, saving time and money.
The reality of being an entrepreneur is that it involves making tough choices, considering all the possible ramifications and effective crisis management. As a result, one of the most useful purposes of a business plan is that it helps you make smarter decisions.
Before you start your business, it’s wise to sit down and think about all of its main components, for instance the products and services you will offer and your marketing strategy. A business plan helps you make sure your business idea is feasible by outlining how it will materialise over the coming years. You might find that when writing up your ideas into the structure that it isn’t realistic and that you need to head back to the drawing board.
2. Shows you if your business is feasible
Lots of businesses are born out of passion, but you need to make sure that your idea can turn from concept to reality successfully. Business plans are a great way to prove that your business idea is financially viable and realistically likely to succeed.
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3. Sets clear objectives and benchmarks
You can set goals and discuss how they will be achieved in your plan. It’s important to look far into the future, including the financial return you are expecting to make. Setting objectives also helps you to be accountable for your long-term vision and realise if you are actually achieving what you set out to.
4. Highlights any gaps in your business strategy
Creating a business plan involves asking yourself lots of tough questions and spending time coming up with the answers. Once everything is organised in an easy-to-read structure, it will be quicker to notice any gaps or factors you haven’t yet considered. Even if you hardly use the document once it has been completed (this is quite unlikely) just writing it up is a very helpful way to iron out the kinks, see how realistic your vision is and decide if they is anything missing in your strategy.
Without this, there’s a chance that problems will arise further down the line, and after investing so much time and money into your new venture this is the last thing you want. Especially if it can be so easily avoided by taking the time to iron out your ideas in the early stages.
5. Gain a deeper understanding of your competition
Even if you think that you know your own business model inside out, it’s just as important to know what’s going on in the broader landscape. Creating your business plan should help provide valuable insights into your competition and the market terrain.
6. Significantly reduces the risks
There’s no denying that starting a business comes with some level of risk (considerably less when investing in an existing franchise), but this is much easier to manage when tested against a well thought-out business plan. Writing down your revenue and expense projections, understanding your market and devising operational plans can massively reduce the risk that is in some way inevitable with entrepreneurship.
7. Helps to secure funding
Lots of banks will want to see a detailed business plan with clear objectives, that answers their questions about profitability and revenue generation, before they decide if and how much they want to invest. As, ultimately, anyone that is considering contributing money to your venture will want to feel confident that its viable for many years to come.
Having a clear action plan will be invaluable in your start-up phase. It will guide you through this critical period and be referred back to frequently. Don’t be afraid to adapt the business plan whenever you feel necessary. It’s better to have an up-to-date business plan at all times so you can showcase the most accurate representation of your business to lenders, partners, recruits etc…
A strong business plan is an essential part of building your franchise business. The good news is that there is plenty of help out there. You can request a template from your franchisor or even download one from a business website.
Business planning software can also help, but the entrepreneur community is split as to whether it is worth investing in costly software.
Write your franchise business plan today
Now you’ve got a better understanding of why a business plan is so important, you might be interested in the key elements of the living document. We also have sector specific advice for constructing business plans, including for a hair, beauty or cosmetic franchise and a sports, fitness or gym franchise.
If you haven’t already decided which franchise opportunity you’d like to invest in, we have over 200 that you can browse in our UK franchise directory. Just don’t forget to spend plenty of time working on your business plan before you approach investors. Some banks even prefer to you make your own unique structure rather than using a template, as they think it means you’ve put more thought into it, so that’s something to keep in mind too.
Becky Martin, Point Franchise ©