There is a lot of debate recently over whether it is really necessary for an entrepreneur to write a business plan to be successful. There are some good arguments on both sides, but the truth is that yes, you really do need a business plan. Here is why.
Grounding and Vision
It is easy to get excited about starting a new business and forget about little things like how to get a business loan, whether or not the idea is really practical, and whether or not your expectations are realistic. Not to burst any bubbles, but there has to be a moment, if the vision is ever going to become reality, where there is some grounding. A business plan can be very grounding. It forces you to put on paper exactly what you expect, how you intend to execute the plans in your head, and do some research to determine what is going to work and what is not. You may be surprised in several different ways, and it is better that any surprise, whether positive or negative, come sooner rather than later.
A business plan forces you to make predictions based on actual research. This is imperative for making both large and small decisions. If you have projected financial statements based on market research that included demand, location, competition, etc., then you can better know what to expect when it comes to income. Of course projections are just that, projections. They are not a guarantee of what your profit will be, but they can give you a better idea than if you had no projections at all. A business plan allows you to make decisions based at least on educated guesses rather than flying blind.
One of the first answers to the question of how to get a business loan is to have a professional business plan ready to go. Virtually every lender will want to see that you have put in the effort to pull together the information needed to answer their questions in the form of a well put together, written business plan. Having one is no guarantee, but it certainly goes a long way toward approval. It tells the lender much more than what is written between the pages. A business plan can communicate your passion and your seriousness about the project as well.
Having a business plan may not be required to start a business, but it is certainly helpful.