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The Business Plan -> let’s understand it
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.
A major external purpose for the business plan is as an investment tool that outlines financial projections, becoming a document designed to attract investors. In many instances, a business plan can complement a formal investor’s pitch. In this context, the business plan is a presentation plan, intended for an outside audience that may or may not be familiar with your industry, your business, and your competitors.
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. Feasibility
Entrepreneurs use a business plan to understand the feasibility of a particular idea.
2. Focusing device
Formulating a concrete plan of action enables an organized manner of conducting business and reduces the possibility of losses due to uncalculated risks.
3. Foresight
The process of preparing a business plan often creates many unintended yet desired results.
4. Raising capital
A 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.
Features of a Good Business Plan
1. Executive Summary
The 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.
2. Business Description
This 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. Big ideas are redundant without specifics that can be tracked. Fundamental questions to be answered include:
- Who are you?
- What is the product or service, and what are its differentiating characteristics?
- Where is the opportunity located?
- When will you start implementing your plan and expects cash flows or profits?
- Why should customers choose your company?
- How do you plan to run the business in terms of structure and regulatory compliance?
3. Market Strategies
The market strategies section presents the target consumer group and the strategies needed to tap into it.
4. Competitive Analysis
The competitive analysis section aims to understand the entry barriers one could face due to other companies in the same or complementary sectors.
5. Design and Development Plan
It outlines the technical details of the product and its development cycle within the realm of production.
6. Operations and Management Plan
The operations and management plan describes the cycle of business functions needed for survival and growth.
7. Financial Factors
The 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
- The plan must not begin by stressing the superiority of one’s product or service, but instead by identifying a genuine problem faced by the consumer. The plan should then be presented as a way of bridging that gap between consumer expectations and industry offerings.
- A team’s expertise is displayed not by listing their academic achievements and employment history, but by stressing how the team’s experience is best suited for a particular industry sector or product. Often, teams with members who have failed in a past venture are successful in attracting capital.
- The most common mistake is to offer an excessively optimistic view of the opportunity. There is no market without competition and no venture without some degree of risk, and a business plan must portray the objective truth with sincerity.
