Why Do I Need a Business Plan?

[? Music ?] [Treehouse presents] 0:00 [Quick Tips] [Why Do I Need a Business Plan? with Pasan Premaratne] 0:02 Hi, I'm Pasan. 0:05 In this Treehouse Quick Tip, we're going to discuss a question 0:07 that everyone asks. 0:09 Why do I need a business plan? 0:11 There are a lot of varying responses out there with most people 0:13 saying you don't need to have one unless you're applying for a loan 0:15 or financing your company in some way. 0:18 I disagree. 0:20 Writing a business plan has way more uses than that. 0:22 For one, when you get to writing your business plan, 0:24 you will really understand whether your idea is feasible or not. 0:27 Writing a business plan forces you to think about your ideas in detail. 0:30 Rather than having them float around in your head, 0:34 putting them down on paper allows you to map your company's future, 0:36 giving it structure and direction. 0:40 Once you're done with your business plan, 0:42 you will have a much better idea if the business will work, 0:44 and more importantly, if you want to undertake it. 0:47 For example, you could have an exciting idea 0:50 that seems like it would be really fun to work on, 0:52 but further research conducted when writing a business plan 0:55 reveals that there is an intense amount of government regulation 0:57 in this industry, which means tons of red tape and paperwork for you. 1:00 Do you still want to start the business? 1:04 Business plans can be written at any stage in the company's life cycle, 1:07 whether it's on day 1 or a year in. 1:11 Regardless of the timing, it should have the following basic structure. 1:13 Your business plan should define your product or service 1:18 and the market you will compete in. 1:21 It will also identify your management team, 1:23 where the business will operate, and your experience in the industry. 1:25 The plan should include a marketing study, 1:29 promotional strategies, any current and/or projected balance sheets, 1:31 income statements, and cash flow analysis. 1:35 You should outline if you will be obtaining financial support, 1:38 and if so, when, how, and what method of repayment you will use. 1:41 And finally, provide any operational information 1:47 along with details on where the business is now, 1:49 where it has been, and where you see it going. 1:53 Basically, cover every aspect of your business. 1:56 Hopefully by now you understand what I meant when I said 2:00 that writing a plan will make you really understand your business completely. 2:02 To summarize, why do you need a business plan? 2:06 For feasibility studies for you, 2:08 for anyone else to understand the business, 2:11 and to secure loans and outside capital. 2:13 Like individuals have resumes, your business has its business plan. 2:16 You will know your business so thoroughly that you can convince anyone 2:20 of its potential and infuse your enthusiasm 2:23 and energy into any employee or potential investor. 2:26 By providing a business plan, people will know 2:29 without a doubt that you have done your research. 2:32