In order for a business to be successful and thrive, as well as take a profit to ensure its survival in a competitive marketplace, the owners must have a firm understanding of their customers, their company's strengths and weaknesses, and those of the competition.
To optimise your business's chances of success, there should be plans in place for future expansion or development of the business, as well as a demonstration of an understanding of the business's current and future financial needs.
This is particularly important, as virtually every business requires some sort of start-up capital, as well as expansion or development funds, and failure to acknowledge and plan appropriately for these financial needs can lead to difficulties later.
Writing a business plan is an essential part of any business, as it requires the business owner (the person who should be writing the business plan) to stand back and look at the business in a critical and objective manner.
Objectivity is vitally important to a new business, as it can help to highlight errors or gaps in the business idea early, which can help prevent costly mistakes later on, and thus improve the business's chances of success.
A business plan is also key to obtaining financial support from banks and/or investors, which again could determine the future success of the business.
Statistics indicate that ninety percent of businesses fail in the first two years of trading.
This failure is often because of a lack of thorough planning, which can result in a poor understanding of the market and customers needs and wants, which in turn means a business can be missing opportunities for success, leading to failure.
A business plan sets out the way the business intends to operate - what it will sell, who to, and how.
In it the business owner demonstrates how their product or service is different or better than what the competition currently offers, the precise demographics they will be aiming to sell their products or services to, and how they will market and sell their products and services.
Getting these specifics written down can help to clarify understanding of where the business needs to go next, and can make it easier to get things moving.
Another reason for writing a business plan is that six months down the line, you can look back at it and measure your success so far, based on the projections you made at the time.
You can then make adjustments to the business model as necessary, or conduct more research into your market or product line in order to adapt and improve quickly.
Regular analysis of your business compared to your business plan can prevent you going off track with your business, wasting valuable time and resources on irrelevant or impulse decisions that have little to do with where you want to take your business long term.
This keeps you focused on your business goals, and supports growth and success.