Why You Must Have a Business Plan

As much as he hated to do it, he knew he had to borrow some money from someone. When none of his friends could help him beyond a few hundred dollars, he approached his mother-in-law. "Well," she said, "I can do that for you, but I have one condition. I want to give me half an hour of your time to listen to why I think you need a business plan." David agreed. He was getting desperate.



Here's what she said:



• Almost half of small business startups fail in the first year.



• The main reasons they fail is because they lack management, lack

planning, have insufficient financing and lack marketing.



• You can address all those reasons with a business plan:



o Business plans help with lack of management with financial analysis, guide

your decision-making, and outlining specific goals.



o Business plans help with lack of planning by outlining the means to meet

specific goals.



o Business plans help with insufficient financing because financial institutions

and private investors won't lend you any money without one.



o Complete business plans include a marketing plan addressing lack of

marketing.



• There are other reasons for writing a business plan:



o Business plans help you monitor your progress.



o Business plans give you something to compare your end of period results

with.



o Business plans help identify weak areas where you can improve.



o Business plans help you avoid making the same mistake over and over

again.



o Business plans help keep you on track.



o A good business plan includes a feasibility study, so you should know

before you start whether your business can succeed.



o Many self-help books proclaim goals are more easily met if they're written

so business plans help you identify and reach your goals.



David was convinced. He accepted his mother-in-law's offer to help him write his business plan. After it was done, he went back to the bank and got his loan.



So, how is David's business doing? I'm not going to tell you anything today beyond that he's still in business, but I will tell you more, I promise. We're going to use David's business as a case study with more articles about him every month. Stay tuned for more stories about David's business and find out how he's doing.



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