What Is a Business Plan?
A Business Plan is a document that contains certain information about the current state of the business and its foreseeable future. This includes the nature of the business, the strategies that will be implied while accomplishing its plans, and the financial background for those plans. The purpose of the document is to set in written form the goals of the business, describe the ways those goals will be achieved, and set the approximate time period for achieving those goals.
The financial background of a Business Plan is supposed to project the possible profit and loss of the business during the processes described in the document. It also includes the financial requirements which need to be accomplished.
A typical Business Plan outline provides directions for the future development of the business. With a well-developed document, a company is more likely to achieve its goals and avoid potential difficulties on its way to its end result. Another type of plan that a business should develop is a Business Continuity Plan. It will provide instructions, as well as preventive and recovering measures for situations when a company is under threat or in an emergency situation.
How to Write a Business Plan?
Writing a Business Plan is a complicated process, however, it is easier to accomplish it with guidance from a specialist that has comprehensive knowledge on the topic. A document should contain the following section:
- Executive Summary. In the first part of the document, the filer should give a brief description of the business and the purpose(s) it will serve.
- Market Analysis. The document should include information on the market, its demands, offers, and main competitors.
- Products and Services. Individuals use this part to clearly describe what kind of products or services they are going to produce.
- Marketing Plan. In this part of the document, the filer must prove how they are going to make it happen, designating who will conduct the distribution, advertising, and sales strategy.
- Competitive Analysis. The analysis is presented as a result of thorough research of potential business competitors and how to compete against them.
- Management Organization. The filer should present an organization system that they have developed for the company;
- Financial Analysis. In the last part of the document, the filer should state the financial forecast for the business.
Depending on the business idea that is going to be executed, the filer can change the structure of the document to form a better picture of their business.
What Are the Three Main Purposes of a Business Plan?
In addition to all of the things mentioned above, a thorough Business Plan is supposed to serve three main purposes:
- Creating a roadmap for the future of the business. For successful development, it is necessary to establish goals and the way they will be carried on. The plan should also include milestones, steps on the way to achieving success, and a detailed description of how to get there.
- Attracting investors. Regardless of whether the business has just begun or has been around for a while, steady financing will always be a major concern. Before making a decision, investors will want to see the business plan, to understand if the business is worth investing in.
- Finding likewise management. For any business, it is important to find executives that will share the same picture as the business owner. Before hiring a top management team, they should research the business plan to understand whether they are ready to work with the same goals and strategies as the owner does.
Other than that, a good Business Plan is supposed to reduce the risk of following the wrong direction, push the research of the market where the business will operate, help realize the company’s staff needs, etc. Its role cannot be underestimated since it is the backbone of the business.
Why do Business Plans Fail?
Even though no business owner wants to think about it, there is always a risk that their business plan will fail. It is tied up with common mistakes that they make while writing a business plan, such as:
- Unpopular ideas. Being unique does not always mean it is profitable. Even if an idea looks good on paper, it does not mean that there is a market for it. Before investing in it, it is better to do research and make sure there is a demand for a product or a service the business is going to produce;
- Internal conflicts. Conflicts are unavoidable in every situation where there is more than one person making decisions. To solve this, a document should contain instructions on how to handle potential internal conflicts;
- Well-defined finances. Numbers are considered to be the most important part of a Business Plan. Everything should be accountable, including prospective profits, losses, investment, etc.
There can be many more reasons for a business’s failure, depending on the nature of the product they are trying to market. Each situation is different in its own way, however, with all of these ideas taken into account, a business has a chance to succeed.
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