Effective business planning answers the important questions about your business.
Do you have a business plan? A business plan can help you internally discover and organize your infrastructure. Furthermore, it can provide insight in to your target market and competitors. If you are looking for funding, an investor should simply have to push one domino (i.e. write a check), and everything will fall in line.
Every time a question arises, it is another mental block against receiving your funding. Moreover, if your financials are clearly detailed and a projection is run, you are essentially giving investors the confidence to know exactly where their money will be used and how they will get a return.
A GREAT BUSINESS PLAN ANSWERS:
What does our market look like? Where is the competition? (Market evaluation)
Where are we going? What can we improve? (Future forecast)
Are we ready to answer questions from investors/banks? (Investor or bank presentation)