Definition & Introduction:
A business plan is considered to be an important device for any business. It is a document in writing which illustrates in detail the nature, objectives and financial position of a business, particularly a new one and the way it will achieve its objectives. A business plan can also be prepared for an established business which is changing its area of operation or applying for a business loan or funding request.
Types of Business Plan:
Business plans can be basically of two types:
Formal Business Plan: A detailed document mainly prepared for the purpose of ensuring outside finance for the business.
Informal Business Plan: A rough plan which may contain hand-written notes helping the owners in the daily functioning of a business and planning for expansions.
Basic Components of a Business Plan:
A formal business plan should state that the business will produce sufficient revenue to meet up the expenses and will generate a mentionable profit for the investors. The basic components of a business plan are briefly discussed below.
Executive Summary: It focuses on the objectives of the plan and the selling proposition in less than two pages.
Summary of the Company: It provides an accurate illustration of the company, its ownership, and the historical background.
Products or Services: This part gives a brief description of the products and/ or services and their merits or strengths.
Analysis of the Market: It gives a summary of the existing customers, market size, competitive landscape and probable growth of the market.
Marketing Strategy and Implementation: This section explains the marketing strategy of the products and/ services and its implementation and future possibilities.
Summary of the Management: This part briefly summarizes the background, experiences and key achievements of the management team.
Financial Projections: This section consists of financial statements such as balance sheets, income statements, cash-flow statements and funding request (if required).
Objectives of a Successful Business Plan:
A successful business plan has the following objectives:
- Providing a clear business concept written in an understandable and precise language.
- The business plan should have a logical structure.
- Explaining the management’s capability to achieve success.
- Showing profitability so that investors will be interested to invest in the business.
Ways of Creating a Business Plan:
A business plan can be created by following any of the following ways:
Appointing a Professional:
You can appoint or hire a qualified professional consultant who will prepare a business plan for your business. You still have to understand the plan properly and have to modify it if necessary. You have to discuss with the consultant about it and make sure that the plan clearly defines your business concept.
Buying or Downloading a Book:
There are various good books available in the market or online from where you can buy one or download some. You can get a good idea of creating a good business plan from there.
Using Business Planning Software:
Nowadays different business planning software is available. You can select a suitable business planning software package which will provide you the format of a well and professional business plan which will save your time and energy.
Merits of Creating a Business Plan:
Creating a business plan serves a business with the following merits:
- Provides assistance while applying for a business loan.
- Helps in raising equity funding.
- Sets and defines objectives and design program to attain those objectives.
- Provides a scope for regular modification of the plan and business review.
- Clarifies agreements between partners (if any).
- Defines the value or principle of a business for sale or legal processes.
- Analyze the scope for promotion and expansion of the existing business.
A business plan should be dynamic in a sense that it will grow and change with the growth of the business as well as with the requirement of time and technology. An effective business plan and its proper implementation can lead a business to the success. So a business owner should be very careful while creating a business plan that it properly defines its objectives and effectively helps to achieve those.