Making a business plan before you start a business should typically form an essential part of the business startup. However many entrepreneurs do not follow this step. But the ones that do swear by its usefulness and credibility and say that the business plan played a pivotal role in the success of the business. Statistics reveal that 60% of the people who used a formal business plan and this includes the small business owners say that it made a major difference to the success of the business.
One general opinion that you would get to hear often is that you only need a business plan when you are trying to raise money for business. Although it is true that a business plan is almost always required when you are looking for funding from banks and other lending institutions, a business plan serves many other purposes as well. A business plan helps you to define your business goals and objectives. As important as making the business plan, is the process involved in doing it. Going through the process of making a business plan helps you identify some common setbacks and potential problems that you might have otherwise ovelooked. A business plan does not guarantee success but it can help you avoid some common problems of business failures such as under capitalization and lack of market research.
As you research and develop your business plan you will be adding able to identify several weak spots. Identifying these weak spots arms you with the potential to find solutions beforehand as well.
So what really is a business plan? A business plan conveys your business goals and strategies and how you are going to use them in the future to reach potential customers, make sales, avoid potential problems, visualize the future of your business, how it’s going to develop and grow, what kind of structure and shape is going to take, what people are going to be involved and the roles they are going to play and also the amount of money that you’re going to finance the venture and keep it going to need till breaks even.
All this may sound intimidating but it really is not. But taking a systematic approach to making a business plan is needed do so effectively. In this section we will deal with the various steps required to make up business plan. There are three primary categories of a business plan.
The first one is known as the business concept where you discuss the industry you are going to operate in, your business structure, your product or service that you sell and how do you intend to make your business a success.
The second part is the marketplace section in which you describe, research and analyze a potential customer as well as the strategies that you are going to use to deal with the competition and target your customers.
The third section is the financial section which contains your details about the finances required, your potential income, cash flow requirements, balance sheets and other financial issues such as the breakeven analysis. Making the financial part of your business plan may require assistance from your account.
Furthermore these three sections can be broken down into six major parts.
- Executive summary.
- Business description.
- Market strategies.
- Competitive analysis.
- Design and development plan.
- Operations and management plan.
- Financial factors.
In addition to these sections a business plan also contains a short summary and a title page along with a table of contents. The summary or the introduction of a business plan is usually a quick summation of what the business is all about. It can also be an inspirational message that can be used by yourself and the employees of the company to seek motivation from time to time. It is not uncommon for businesses to use the summary of the business plan in the office as notices on soft boards etc. to keep employees motivated.
Importance Of A Business Plan
While many entrepreneurs tend to ignore this step, the majority of people who have used a business plan as a start up tool claim that it has been elemental in their success as entrepreneurs. A business plan consists of many parts starting with an executive summary and moving on to the financial plan, marketing plan etc. Each step if followed properly can lead to the creation of a guide for your business. Making a business plan can help you discover features, shortcoming and requirements of your business that might otherwise have overlooked. The process of making a business plan is equally important as the finished product as this process is extremely effective in making you examine all aspects of your business. If you include other people involved in the business such as employees, business partners etc., you will probably receive some very valuable input about the future potential of the business. A business plan is essential in planning the start up of yo your business as well as to determine its future growth. A business plan will help you realize important facts about it such as the amount of capital required now as well as for future sustenance, the competition faced, the marketing strategies that need to be employed future growth potential etc.