Importance of Small Business Plan

business study notes


Importance of Small Business plan


Before writing a business plan, it is important to consider two important factors of small business plan-

Who will the reader be?

For example, If am interested in raising capital, it is very likely that investors will be my target audience. If I am interested in partnerships or joint ventures, my potential business partners will be my audience.

What do I want their response to be?

Depending on my target audience, focus on the key message I want them to receive in order to get the response I want.


Here are 13 reasons why a small business need a business plan –



             i.        Grow existing business

Establish strategy and allocate resources according to strategic priority. For growing an existing business we need to make a business plan.

            ii.        Back up a business loan application

Like investors, lenders want to see the plan and will expect the plan to cover the main points.

           iii.        Seek investment for a business, whether it's a startup or not

Investors need to see a business plan before they decide whether or not to invest. They'll expect the plan to cover all the main points.

           iv.        Create a new business

Use a plan to establish the right steps to starting a new business, including what I need to do, what resources will be required, and what I expect to happen.

            v.        Valuation of the business for formal transactions related to divorce, inheritance, estate planning and tax issues

Valuation is the term for establishing how much business is worth. Usually that takes a business plan, as well as a professional with experience. The plan tells the valuation expert what business is doing, when, why and how much that will cost and how much it will produce.

           vi.        Sell the business

Usually the business plan is a very important part of selling the business. Help buyers understand what I have, what it's worth and why they want it.

         vii.        Deal with professionals

Share selected highlights or plans with my attorneys and accountants, and, if this is relevant to mine, consultants.

        viii.        Develop new business alliances

By using the plan to set targets for new alliances, and selected portions of my plan to communicate with those alliances.

           ix.        Share and explain business objectives with your management team, employees and new hires.

Make selected portions of my business plan part of new employee training.

            x.        Decide whether I need new assets, how many, and whether to buy or lease them

Business plan helps to decide what's going to happen in the long term, which should be an important input to the classic make vs. buy.

           xi.        Hire new people

This is another new obligation (a fixed cost) that increases risk. How will new people help my business grow and prosper? What exactly are they supposed to be doing? The rationale for hiring should be in business plan.

         xii.        Decide whether or not to rent new space

Rent is a new obligation, usually a fixed cost. Do my growth prospects and plans justify taking on this increased fixed cost? Shouldn't that be in my business plan?

        xiii.        Deal with displacement

Displacement is probably by far the most important practical business concept I've never heard of. It goes like this: "Whatever I do is something else I don't do." Displacement lives at the heart of all small-business strategy. At least most people have never heard of it.


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