Business owners in Maryland often ask, “Why do I need a business plan?” Stated another way, the question may be posed: “Who needs a Business Plan and Why?” The fact is that most people have a limited view of the purposes of a plan. Raising capital for a young business is not the sole purpose of having a plan although it is a good initial reason. In reality, every business needs a plan, whether it is a startup, a going concern seeking growth, or a solidly successful company whose owners seek an exit strategy. An experienced business law attorney is adept at keying business owners into the purposes and tools needed to draw up a business plan.
A Roadmap – Describing and Understanding the Business
In addition to financing, let’s look at some of the other important reasons for having an up-to-date business plan. One purpose is to provide a business roadmap to success. It lays out a long-term set of goals, values, and procedures that will guide the business forward. The owner also benefits from having it in writing, which includes the convenience of referencing the company’s game plan whenever the need arises. The current version of the plan will always be there to re-energize staff, management, and ownership to the fundamental purposes of the business and its stated values.
The plan describes the business and how it works. It explains the need for its services and/or products. It also describes the industry, the nature of the competition and the strategies for gaining profitable market share. Preparing the plan requires research and the developing of an in-depth understanding of the industry and its trends. It also lets the leaders of the company visualize how the working parts fit together and how expenses impact profitability. By having a more three-dimensional view of the financial dynamics, ownership can devise more effective and targeted funding efforts. The providing of sufficient capital to make the company’s growth strategy work is a benefit of the plan. Most businesses fail early due to insufficient capital, and a good plan brings capital needs into clear focus.
Charting the Company’s Future in the Plan
The business plan lets the owners and managers do away with the need for crystal balls and fortune tellers. In preparing a plan, the leaders will likely learn where alliances with other companies can be critical to growth. They may also develop cost-saving strategies for acquiring raw materials or outside products or services and other critical needs. The plan tells both new investors and the company’s founders about the company’s strengths and weaknesses and gives sound proposals for maximum progress. It is a roadmap into the future, identifying all the paths, detours and straightaways to follow or to avoid for maximum financial health and profitability. The plan’s rigorous foundation, in fact, keeps the owners reality-based and minimizes any tendencies toward fantasy or distorted thinking.
A business plan can set specific goals for managers and employees. It can attract new talent by planting sparks of enthusiasm for specified goals, compensation plans, and groundbreaking programs. In addition, specific planning issues can be raised and resolved, including expansion needs, new employee hirings, asset acquisitions, new technology and innovative equipment.
The Plan Sets the Financial Value of the Business
No matter what stage of forward progress the business has achieved, there may always be a need for ongoing financing from investors in Maryland and nationwide. The total business picture is highlighted for potential investors through the plan. There may come a day when the owners decide to sell a successful enterprise and retire on their hard-earned laurels. An exit strategy can be incorporated into the business plan. A business plan expresses the market value of the business and describes such important features as goodwill. In all cases, remember that the plan is a living organism that must be actively consulted, monitored and modified as the company’s future goals change due to new discoveries, technology, and changing needs in society.
Schedule a consultation with Maryland attorney Elsa W. Smith from the
Law Offices of Elsa W. Smith, LLC in Annapolis at 410-995-7719 or Laurel 301-358-4340.