A business plan is essential:Three points owners can take

The exciting news is, according to the U.S. Census Bureau, new business starts are trending upward, with 5.5 million new business applications filed in 2023 alone.

The more sobering news is that only 50% of those startups will survive the first five years.

Small businesses fail for various reasons, including inadequate capital, poor management, limited marketing demand, intense competition and economic downturns. However, a thoughtful, well -defined business plan significantly increases a new business’s success. Below are three easy points as to why a business plan is essential.

1. Strategic guidance: A well-crafted business plan serves as a roadmap, providing a clear and strategic direction for the company. It outlines the business’s goals, mission and vision, helping entrepreneurs make informed decisions aligning with their objectives.

2. Risk mitigation: By conducting a thorough analysis of the market, competition and potential challenges, a business plan enables entrepreneurs to identify and mitigate risks. Understanding potential pitfalls in advance allows for proactive measures and enhances the business’s resilience in the face of uncertainties.

3. Access to funding: Whether seeking investment from lenders, venture capitalists or angel investors, a compelling business plan is often a prerequisite. Investors want a well-structured plan demonstrating the company’s growth and profitability potential, increasing the likelihood of securing funding to fuel the business’s development.

In short, while the increasing number of new business applications is an encouraging sign for economic growth, the reality is that many startups face significant challenges in their initial years. The statistics underscore the importance of a well-prepared business plan as a critical tool for success.

A business plan provides strategic guidance by outlining goals and vision and is a robust risk mitigation tool. Entrepreneurs can proactively address issues by thoroughly analyzing the market landscape, competition and potential challenges, increasing the likelihood of long-term survival. Moreover, a well-structured business plan enhances the prospects of securing crucial funding supporting the business’s growth and development.

In a landscape where only half of startups make it past the first five years, a thoughtful business plan emerges as an indispensable asset, steering entrepreneurs toward sustainable success. Let us help!

Check out the following resources: SBA’s Business Planning Guide is easy to use with templates to follow, and the “How to Write a Business Plan” course, offered through the SBA Learning Center, shows viewers how to plan, outline, and develop a business plan. And, of course, an SBA resource partner is standing by a more hands-on option. Learn more at sba.gov. Onward!

Angela R. Burton is district director of the Small Business Administration’s Lower Rio Grande Valley District in Harlingen.