Why a Business Plan is Critical for Startups?

94% of the startups fail in its first year of operation and the most common reason being it's inability to raise funds. No business can run without sufficient capital.

A well-written business plan is absolutely critical for the early-stage entrepreneurs to raise funding, if they intend to succeed and grow their venture.

A business plan crystallizes:

• Why you're in a particular business?

• What would you do for the customers (product/service) and how is it unique?

• Finally, why should customers do business with you?

Below are few great reasons, to have a well-written business plan:

1. Firstly, a business plan is critical to raise money or funds It helps to communicate your vision to your investors. According to a study by Babson College, start-ups with a well written business plan raised twice as much capital, in the first 12 months itself.

2. A business plan helps in developing an strategy or execution plan to build your company. Ideas are great, but remain worthless until they're executed well. In fact, many promising startups have failed, due to poor execution of the ideas (however unique they may be).

3. A business plan provides an direction or clarity to the Startup. Remember, you're not doing this alone; you've your team, employees, investors and partners, etc. A well written business plan puts everyone, on the same page.

4. A business plan helps you to circumvent critical mistakes. It helps you to find out gaps in i.e. is my business model viable and competitive enough to flourish, how much capital do I need to raise, to succeed and grow consistently, what resources (manpower) and strategic partners would I need, and what should be their skills and capabilities? Particularly, as an early stage entrepreneur if you get off on a false start, the above gap/s can doom you, from the very begining.

5. Finally, a business plan allows you to take an objective overview and take timely corrective actions.

One of the serious mistake, early stage entrepreneurs often do, is they simply download the template from the web and fill it with the business overview, without any reasonable milestones or road map, on how to achieve them.

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