5 Advantages And A Drawback Of Writing A Business Plan

A plan of activities for starting and developing business can hold great benefits for entrepreneurs, home business owners, and large enterp...

A plan of activities for starting and developing business can hold great benefits for entrepreneurs, home business owners, and large enterprise. However, it has disadvantages too. Consider knowing both sides of a business plan.

In our company, we live to develop business plans for entrepreneurs and businesses, but we believe that we always have to offer an objective view on things, and we do not pretend that a business plan is a panacea. 

5 Advantages And A Drawback Of Writing A Business Plan
We believe that it is a great tool, and that is why we will explain below those that we consider being its five main advantages. But we will also talk about a drawback. If you don't have a plan for your business, then read this article to get five major reasons to write today.

Advantage 1: Completeness

The preparation of a business plan obliges the entrepreneur to review all aspects of his business, and therefore to look at expenses or legal obligations that perhaps he had not contemplated in the first place. This allows a much more complete view of the project and its viability.

Advantage 2: Point of profitability

Break even is the time when income reaches the expense, and you start earning money. For the vast majority of businesses, it is critical that the entrepreneur knows how much he has to sell to generate profits. And to do it reliably, all data must be taken into account.

Advantage 3: Cash in Box

More than profitability, what often hurts and often condemns to death new businesses is the lack of liquidity. A business plan allows you to realistically estimate cash receipts and outflows, and to know how liquidity will evolve in a realistic scenario. A business can be profitable but not viable for lack of money in the box. Because profitability and treasury are two different things.

Advantage 4: Correct

On many occasions when we have made business plans for third parties, the entrepreneurs themselves have looked at the deadlock or the evolution of the Treasury and have decided to adapt their project, usually reducing the initial investment and the expected monthly expenses, being a little more savers in this sense. And it is true that the business plan allows you to adapt the project and increase your chances of success, adjusting elements such as investment or expenses. Thus, a larger mattress is available to deal with unforeseen events.

Advantage 5: Communication tool

It is one thing to be able to talk about a business project, another very different is to have a structured and illustrated document with financial accounts. The plan of activities allows you to explain a project in a much more professional and standard way. That's why it's no surprise that so many banks or investors ask for it to value a project.

The disadvantage: it is only a forecast

A business plan is an excellent tool, very useful if it is prepared consistently and thoughtfully. But in the end, it's just a prediction. In the section of costs and expenses is usually a fairly reliable forecast, but with sales does not happen the same. The products are not sold alone. The best project on paper may fail because its promoters do not know how to sell. A more strategic project can succeed because of the talent of the team in charge.

Read:

  1. 7 Basic Steps To Write a Business Plan
  2. Know Your Strengths Before Starting a Business
  3. 8 Reasons You Should Consider Becoming an Entrepreneur

That's why it's important to be aware of the limitation of the business plan. It is still a theoretical exercise. Very useful, but theoretical. Anyone who believes that a good business plan is the guarantee of success risks big disappointments.

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