Rachid Sefrioui on Venture Capital: What Are the Benefits of a ...

Creating a business allows you to identify potential problems and opportunities your business might face, avoid penalties, fines or other legal problems, adapt to changes in the marketplace and let you expand or contract from a position of objectivity. You can share a business plan with potential partners, advisers and sources of funding. The Small Business Administration suggests that a business plan be a work in progress you should keep current.

Aids in Obtaining Funding

Potential investors will have a variety of questions about your potential or existing business. A complete business plan not only provides them with answers, but shows that you are organized and have considered all of the marketing, legal, financial, human resources and other aspects of running a business. A thorough business plan will increase your chance of obtain venture capital and bank loans.

Helps Get Advice

Business professionals may be more likely to give you free advice about your business if they can comment objectively on numbers, rather than having to give you their personal opinion of your "great idea." Organizations such as the Service Core of Retired Executives will not only give you free advice on launching a business, but will assign an executive to read your business plan and offer suggestions for improving it.

Identifies Problems

A thorough business plan addresses all areas of starting and running your business plan. As you research the information you wish to include in your business plans, you may learn that suppositions you made about your marketing budgets, cost of materials, licensing and permitting, labor costs, real estate or leases and other critical aspects of your business are incorrect. Learning this before you launch your business gives you time to make adjustments before you have signed contracts and committed funds. Business plans include budgets that help you manage cashflow -- critical to keeping your business running.

Provides Exit Strategy

In addition to providing benchmarks for success, a good business plan sets realistic criteria for shutting down the business to prevent your throwing good money after bad. A business failure can be very emotional and business owners are often not objective in the face of that reality. Solid numbers that tell you the business is untenable will help you make the decision to shut down a failing business easier and will prevent you from losing more of your or your investors' money than necessary.

Source: http://rachid-sefrioui-venture-capital.blogspot.com/2012/10/what-are-benefits-of-business-plan.html

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