What is the Importance and Purpose of a Business Plan? Lyle Hollar November 22, 2016 Business Without a business plan, it would be difficult to know what a business is all about or what it intends to become. One needs to lay out the details of the business in a document. This can be anything from 15-20 pages. This does not mean that a 1 page document does not count. To understand the importance and purpose of a business plan, one needs to have the following in mind: Clarification of direction The purpose of a business plan is to inform the direction in which the business will take. It defines course of action, description of business, products and services. Vision of the future Growth trends, market changes and innovations are all projected in the vision encapsulated in this document. Get funded Very few (if any) business would get funded today without a credible,documented plan. One needs to show facts, figures and statistics which project on potential profitability. Partnerships Find people to partner with is much easier when they see documentation of the business as this will help bring on board employees, supplier and executives. Management structure The plan will create a structure that will help in the management of a business. Why would an entrepreneur need a business plan? The Importance and Purpose of a Business Plan to an entrepreneur cannot be overemphasized. How else would other people know that you are serious about the business? If put it formally on paper, you will be able to convince apart from yourself, investors, employees and partners. Setting milestones One needs milestones in order to achieve success in the business. One milestone for instance would be the achievement of targeted revenue in your annual turnover. Analysis of competition Warding off stiff competition in the business environment takes tenacity. This can only be achieved through competitive advantage. Improved customer understanding The business plan will help you carry out a deeper analysis of customers in regard to what they buy, why they buy and when they buy. Explanation of assumptions In business, there are many assumptions made which are hypothetical. The only way to test them to test them in real life is to put them down on paper first. Feasibility of the venture How viable is your venture? The success of any business is dependent on research of its viability in a real business environment. A business plan helps you to carry out research and validate your plans over a given opportunity. Revenue model documentation Investors would want to see the model and challenges that are related to revenue inflows and outflows. Analysis of financial needs How would you know that you need extra capital to expand if there is no document to determine this? For you to employ capital in your business, you need a viable financial plan. Brand positioning The role of a business plan in a given business environment is to help define your brand. There are of course many reasons but these ones give one the picture of why one needs a business plan. About the Author: Morris Edwards is a content writer at Singapore Company Incorporation Consultants Pte Ltd, where he writes most content on the site, and also writes the articles for Company Registration in Singapore Blog.