A business plan is a formal written document containing the goals of a business, the methods for attaining those goals, and the time-frame for the achievement of the goals. It also describes the nature of the business, background information on the organization, the organization’s financial projections, and the strategies it intends to implement to achieve the stated targets. In its entirety, this document serves as a road-map (a plan) that provides direction to the business.
Written business plans are often required to obtain a bank loan or other kind of financing. Templates and guides, such as the ones offered in the United States by the Small Business Administration can be used to facilitate producing a business plan.
Business plans may be internally or externally focused. Externally-focused plans draft goals that are important to outside stakeholders, particularly financial stakeholders. These plans typically have detailed information about the organization or the team making effort to reach its goals. With for-profit entities, external stakeholders include investors and customers, for non-profits, external stakeholders refer to donors and clients, for government agencies, external stakeholders are the tax-payers, higher-level government agencies, and international lending bodies such as the International Monetary Fund, the World Bank.
Business plans are decision-making tools. The content and format of the business plan are determined by the goals and audience. For example, a business plan for a non-profit might discuss the fit between the business plan and the organization’s mission. Banks are quite concerned about defaults, so a business plan for a bank loan will build a convincing case for the organization’s ability to repay the loan. Venture capitalists are primarily concerned about initial investment, feasibility, and exit valuation. A business plan for a project requiring equity financing will need to explain why current resources, upcoming growth opportunities, and sustainable competitive advantage will lead to a high exit valuation.
Preparing a business plan draws on a wide range of knowledge from many different business disciplines: finance, human resource management, intellectual property management, supply chain management, operations management, and marketing, among others. It can be helpful to view the business plan as a collection of sub-plans, one for each of the main business disciplines.
Business plans for start-ups
Typical structure for a business plan for a start-up venture:
- Cover page and table of contents
- Executive summary
- Mission statement
- Business description
- Business environment analysis
- Swot analysis
- Industry background
- Competitor analysis
- Market analysis
- Marketing plan
- Operations plan
- Management summary
- Financial plan
- Achievements and milestones
An externally targeted business plan should list all legal concerns and financial liabilities that might negatively affect investors. Depending on the number of funds being raised and the audience to whom the plan is presented, failure to do this may have severe legal consequences.
Non-disclosure agreements (NDAs) with third parties, non-compete agreements, conflicts of interest, privacy concerns, and the protection of one’s trade secrets may severely limit the audience to which one might show the business plan. Alternatively, they may require each party to receive the business plan to sign a contract accepting special clauses and conditions.
This situation is complicated by the fact that many venture capitalists will refuse to sign an NDA before looking at a business plan, lest it put them in the untenable position of looking at two independently developed look-alike business plans, both claiming originality. In such situations, one may need to develop two versions of the business plan: a stripped-down plan that can be used to develop a relationship and a detailed plan that is only shown when investors have sufficient interest and trust to sign a non-disclosure agreement.
Create goals and objectives
An organization depends heavily on the business plan to arrive at the description of business it performs. There are several areas that a company will focus on if it wants to realize its objectives, understand the market that it is planned to operate in and the strategy to achieve the goals.
Dedicating enough time for planning
A workable business plan cannot be created overnight. It is bound to take its own time to develop. So, a perfect business plan will attempt to spend enough time and hard work to achieve successful implementation. This should be one of the crucial stages in a business plan.
A business needs proper planning and control over the activities for enhanced performance. It will be an essential step towards achieving the long term survival of the organization as a whole. The business plan also comes with a financial part to it and used for comparing the actual performance with the estimated one.
Arranging financial resources
A business plan can be much helpful and instrumental in acquiring adequate business financing. Like we stated already, banks and lenders look for a proper business plan before lending you any sort of finance.
A business plan should be prepared in such a manner that the banks will have a clear understanding of the business perspective that the owner has. The lenders will be able to get to the root of the actual vision shared by the promoters and the methods of operation that will be employed.
Gauging business strategy and applying due correction
A Business plan is what would assist you in assessing the efficiency of your strategies for achieving business goals. In an ideal condition, a business needs to have the planned results with which the actual results can be compared, and the way forward is decided.
Keep your goals ’SMART’
No, we are not referring to SMART as in the word intelligent. We mean your goals in the business plan should be S-M-A-R-R-T (Specific, Measurable, Actionable, Realistic, and Time-Bound) to achieve success.
This will help you achieve the business goals as laid out in the business plan effectively and efficiently. It would be practical to have your team member analyze the goals set so that you will get back to a realistic approach.
Performing SWOT Analysis
SWOT Analysis is one of the best options you would want to go with when it comes to focus on an effective business plan. Having perfect knowledge of the strengths and weaknesses of your organization helps you come up with a better insight into the realistic goals.
The SWOT analysis also takes into account the opportunities and threats that the organization can come to face to face. This will assist you to focus on the positive factor and take corrective actions against the negatives.
Marketing forms an integral part of a business and so does with the business plan. This part of the business plan should be focussed on determining the potential of your product or service while letting the business owners know more about future customers.