A well-defined and updated business plan as a business proceed will lead it to success. A business plan serves two main purposes:
- It serves as a business’s road map. Banker venture capitalists and other folks who see a lot of business proposals have discovered that viable ideas are important. The idea itself won’t make or break a business, the person behind the idea and the idea’s execution holds the key to business success.
- To attract capital through loans and investments. This points out why every business should have a plan even if you do not tend to solicit outside funding.
Pros and Cons of a Business plan:
- It helps understand financing by:
- Budget forecast
- Expected costs/revenues
- Break even output
- Manage risk
- Cash-flow forecast
- Increase chances of obtaining external finance.
- Allows closer inspection of the various business areas.
- For most business this is only a plan, reality likely to be different
- Who made the plan? Do they have business experience? This may lead to the danger of inflating revenues and deflating costs. Liquidity issues may arise.