7 Ways You Can Use A Business Plan for your Business StartUp
You have a business idea, but you don't have a business background. What do you do? You write a business plan.
If you are someone who wants to start a business, whether or not you have a business background, you need a business plan.
Did you know that there is more than one use for your business plan?
On my previous blog posts, I mention how a business plan can be used to get you from the business idea to a more concrete business model. Today, I wanted to show you the different ways you can use a business plan for your startup.
You can use a business plan:
As a Tool
To test the validity of your business
To get funding from a bank or investor
To Lease commercial space
To attract partner.
Join an incubator or accelerator program
Minimize risk
Use as a Tool
The first and probably most important way to use your business plan, using it as a tool. A tool it is used to implement a particular function. In this case your business plan is used to accurately portray the strategies and information you can use to start and grow your business.
Keep in mind that I am talking about a well-written business plan.
I have seen many badly written business plans that in reality, the only tool they can be used as is a paperweight or a tool to help you go to sleep, literally. They are long-winded and have very little useful information. I am definitely not talking about that type of business plan.
I am talking about a well-written, concise business plan with accurate, up-to-date information that will showcase your business concept in a clear way.
A well-written business plan will give you the information you need to understand where your industry is headed, what external factors can potentially affect your business, who your competitors are, who your customers are, and an overall understanding of your business.
Test the Validity of your Business
A business plan can test the validity of your business concept. By having the right information on your business plan you can see whether it will be a success or not.
The reason this is important is because you don't want to waste time or money with a service or product that may not work.
Starting a business is a risk, as an entrepreneur you need to understand that. Minimizing risk is important. So if you can minimize the risk by validating your business idea, would you do it? Of course you would!
By having accurate information within the different sections of your business plan, i.e. the industry, competitor analysis, the market, finances, etc., you will be able to see whether or not your business will be a viable one.
I’ll give you an example. Let’s say you want to open a limousine rental business. According to an article written by Brandon Gaille, the limousine industry is increasing but the competition from ridesharing companies like Uber, is causing limousine companies to struggle.
A business plan will not only show you the possible outside threats like ridesharing but whether or not something like that will affect your business. From there you would be able to test the validity of starting a company like this.
Keep in mind, there are going to be products and services that are no longer valid.
Just consider all those jobs that no longer exist. For example, back in the day before cell phones, there was a service where people would go around cleaning payphones.
A business like that is obsolete now. Therefore, obviously you're not going to start a business cleaning payphones.
So, it's a good idea to test the validity of your business before going all in and launching it.
Get funding from a bank or investor
Third, the business plan can be used to get funding. This is one of the main functions of a business plan. In order to start your business, you’re going to need startup capital.
So what do you do?
You take your business plan to the bank or to investors.
If you are going to a bank I would suggest going to a smaller bank, they tend to be better at working with you. I had a client who needed a $60,000 loan. Her bank was great at helping her get all the paperwork she needed to present submit her loan request. Part of the process was that she needed a business plan. Needless to say, she got the loan because along with the credit check and all the other paperwork she had a great business plan full of accurate information.
The thing you have to remember is that even though you are submitting your business plan to the bank, there is still a person behind that organization that is going to read the plan. It doesn’t get sent through a computer program or algorithm, it is read, subjectively and objectively by an actual person.
So the business plan needs to not only include all the viable information but also persuade the reader into seeing how feasible the business is and the potential for profit and loan repayment.
The same goes for an investor.
The business plan needs to be written with factual information and viability.
And an investor, is going to be focused on the business concept and the person behind the business. I’m going to use shark tank here as an example, just because it shows how investors react. There was an entrepreneur on shark tank who sold belts. He had a simple idea but man this guy could hustle. They were impressed with him, the entrepreneur. So this guy was from Utah and he went to New York to present his business idea of hole-less belts. But what impressed the investors was this guys hustle. While in New York he had time to spare so he went door-to-door selling these belts. The sharks knew that this entrepreneur was going to work hard and make his business a success.
A business plan is used to get funding.
Whether you are showing it to a bank, an investor, or even family remember they are people if they believe in your business and in your ability to repay them they will help fund your business.