A summary document that outlines how and why a new business is being created Show
What is a Business Plan?A business plan is a summary document that outlines how and why a new business is being created. New entrepreneurial ventures must prepare formal written documents to outline their long-term objectives and the means to be employed to reach said objectives. The business plan underlines the strategies that need to be adopted in order to reach organizational goals, identify potential problems, and devise custom solutions for them. In addition, potential investors look at business plans to evaluate the risk exposure of a particular entrepreneurial venture. Startups that try to attract employees and investors use business plans to solidify their claims regarding the potential profitability of a particular business idea. Existing companies may use business plans to deal with suppliers or manage themselves more effectively. Summary
Why Use a Business Plan?Owing to the following benefits of a well-researched and comprehensive business plan, preparing one is highly recommended, but not a mandate. 1. FeasibilityEntrepreneurs use a business plan to understand the feasibility of a particular idea. It is important to contextualize the worth of the proposed product or service in the current market before committing resources such as time and money. It helps to expand the otherwise limited view of a passionate innovator-turned-entrepreneur. 2. Focusing deviceFormulating a concrete plan of action enables an organized manner of conducting business and reduces the possibility of losses due to uncalculated risks. Business plans act as reference tools for management and employees as they solidify the flow of communication, authority, and task allocation. 3. ForesightThe process of preparing a business plan often creates many unintended yet desired results. It functions on the principle of foresight as it helps one realize future hurdles and challenges that aren’t explicit. It also brings a variety of perspectives on the forefront, eventually leading to a more comprehensive future plan of action. 4. Raising capitalA business plan is an effective way of communicating with potential investors, and the level of expertise and time used in preparing a business plan also gives professional credibility to entrepreneurs. It analyzes and predicts the chances of success for the investor and helps to raise capital. Features of a Good Business Plan1. Executive SummaryThe executive summary functions as a reading guide, as it highlights the key aspects of the plan and gives structure to the document. It must describe ownership and history of formation. It is an abstract of the entire plan, describes the mission statement of the organization, and presents an optimistic view about the product/service/concept. 2. Business DescriptionThis section presents the mission and vision of an organization. Business descriptions provide the concept of one’s place in the market and its benefits to future customers. It must include key milestones, tasks, and assumptions, popularly known as MAT. Big ideas are redundant without specifics that can be tracked. Fundamental questions to be answered include:
3. Market StrategiesThe market strategies section presents the target consumer group and the strategies needed to tap into it. It requires meticulous analysis of all aspects of the market, such as demography, cultural norms, environmental standards, resource availability, prices, distribution channels, etc. 4. Competitive AnalysisThe competitive analysis section aims to understand the entry barriers one could face due to other companies in the same or complementary sectors. The strengths of existing companies could be co-opted into one’s strategy, and the weaknesses of existing product development cycles could be exploited to gain a distinct advantage. 5. Design and Development PlanIt outlines the technical details of the product and its development cycle within the realm of production. In the sphere of circulation, it focuses on marketing and the overall budget required to reach organizational objectives. 6. Operations and Management PlanThe operations and management plan describes the cycle of business functions needed for survival and growth. It includes management functions such as task division, hierarchy, employee recruitment, and operational functions such as the logistics of the value chain, distribution, and other capital and expense requirements. The managers’ backgrounds must also be briefly included. 7. Financial FactorsThe financials section should include the company’s balance sheet and cash flow projections. Financial data is imperative to provide credibility to any assertions or claims made about the future profitability of the business. The aim is to provide an accurate idea of the company’s value and ability to bear operational costs and earn profits. Common Mistakes to Avoid While Writing a Business Plan
Additional ResourcesCFI is the official provider of the Financial Modeling and Valuation Analyst (FMVA)™ certification program, designed to transform anyone into a world-class financial analyst. In order to help you become a world-class financial analyst and advance your career to your fullest potential, these additional CFI resources will be very helpful:
What is a business plan identify its benefits for an entrepreneur?A business plan is a very important and strategic tool for entrepreneurs. A good business plan not only helps entrepreneurs focus on the specific steps necessary for them to make business ideas succeed, but it also helps them to achieve short-term and long-term objectives.
What are the benefits of a business plan?The Benefits of Having a Business Plan:. Increased Clarity. A business plan can bring clarity to the decision-making process regarding key aspects of the business such as capital investments, leases, resourcing, etc. ... . Creation of a Marketing Roadmap. ... . Support for Funding. ... . Helps to Secure Talent. ... . Provides Structure.. What are business plans used by an entrepreneur?A business plan is a document that defines in detail a company's objectives and how it plans to achieve its goals. A business plan lays out a written road map for the firm from marketing, financial, and operational standpoints. Both startups and established companies use business plans.
What are the 3 main purposes of a business plan?What is the Importance of a Business Plan? The 3 most important purposes of a business plan are 1) to create an effective strategy for growth, 2) to determine your future financial needs, and 3) to attract investors (including angel investors and VC funding) and lenders.
|