Benefits of a business plan
Entrepreneurship: Theory, Process, Practice
The entire business planning process forces the entrepreneur to analyze all aspects of the venture and to prepare an effective strategy to deal with the uncertainties that arise. Thus a business plan may help an entrepreneur avoid a project doomed to failure. As one researcher states, “If your proposed venture is marginal at best, the business plan will show you why and may help you avoid paying the high tuition of business failure. It is far cheaper not to begin an ill-fated business than to learn by experience what your business plan could have taught you at a cost of several hours of concentrated work.
It is important that entrepreneurs prepare their own business plan. If an entrepreneurial team is involved, then all of the key members should be part of writing the plan; in this case it is important that the lead entrepreneur understand the contribution of each team member. If consultants are sought to help prepare a business plan, the entrepreneur must remain the driving force behind the plan. Seeking the advice and assistance of outside professionals is always wise, but entrepreneurs need to understand every aspect of the business plan, since it is they who come under the scrutiny of financial sources. Thus the business plan stands as the entrepreneur’s description and prediction for his or her venture, and it must be defended by the entrepreneur- simply put, it is the entrepreneur’s responsibility.
Other benefits are derived fro a business plan for both the entrepreneurs and the financial sources that read it and evaluate the venture. Specifically for the entrepreneur, the following benefits are gained:
- The time, effort, research, and discipline needed to put together a formal business plan force the entrepreneur to view the venture critically and objectively.
- The competitive, economic, and financial analyses included in the business plan subject the entrepreneur to close scrutiny of this or her assumptions about the venture’s success.
- Since all aspects of the business venture must be addressed in the plan, the entrepreneur develops and examines operating strategies and expected results for outside evaluators.
- The business plan quantifies objectives, providing measurable benchmarks for comparing forecasts with actual results.