What is a business plan
What is a business plan?
A business plan is the financial marketing and production requirements of a new business start up which includes the strengths, aims and strategies of the business.
What is the purpose of a Business Plan?
There are several purposes to writing a business plan these are: they show how a business can be run and expanded in order to gain financial help and or support as it helps to persuade lenders and or investors to give the entrepreneur finances as well as showing what the business wants to achieve and how it plans to do this, another purpose of a business plan is it helps the entrepreneur to clarify and outline the initial idea, it will also give other people from outside the business an idea of how it is already/ is going to be run, it will increase the chance of success and it also helps the individual to monitor and check the progress of the business.
Who needs a business plan?
Creating a business plan is very useful for any business and so it is recommended that anyone who is starting a business writes one as this makes the individual think carefully and look closely at what they are doing or what they are planning to do especially as there are many people who rush into setting up a business without actually thinking about what they are planning to do or really looking at their idea from every angle. By using a business plan you are able to look at the idea very closely and in quite a lot of detail from many different points of view, this can then lead you to being able to establish any problems that may arise in the setting up of the business or that may occur in the future and find solutions to these.
The entrepreneur can be helped quite considerably by the business plan as it helps them to clarify what needs to be and when it needs to be completed. Also by writing a business it can then be shown to other employees within the organisation or potential employees in order to help them understand what it is the business is trying to achieve and how they are planning on achieving it..
Other advantages to using a business plan?
A business plan can also help an individual or business as it enable the firm to measure its success against it plan objectives and goals. The plan can also be shown to any potential investors and or lenders as they will be able to see what the firm hopes to achieve. By looking at the financial projections the lender will be able to see if the business
would be able to repay the loan or not, which is a very important assessment for any lender.
Should the plan be updated?
It is very important that business plans are revisited and updated so that the business can always have an idea of where it is heading, as well as being able to monitor if the goals and objective that are set within the business plan are being achieved and so that they are able to set new targets for the future. In order for the business plan to be relevant due to changes within laws, economy, the competition and customer tastes it is extremely important for the business plan to be updated.
What goes into a business plan?
A business plan has several sections that all needed to be completed honestly and as accurately as possible. Here is a basic outline of what should be covered within the business plan:
The first section is the business aims and objectives this should cover both the short and long term as well as why the business was or is being set up, personal aims of the individual setting up the business. This section should be short and to the point but should establish what the business needs to achieve.
The second section should cover the marketing plan such as the product, explaining what it is or what the service is that will be provided and well as who is expected to purchase it and why. The purpose of this is so that people know what it is. This section should also cover the market so there should be some information about test marketing and how this was done and who responded. This should establish what people want and who the customers are/ will be. There should also be some information about the competition within this section such as research on who it is as this indicates how successful the business could potentially be and the problems they may encounter by having this competition. There should also be some information on pricing included within this section such as how you propose to make your money, what you’ll do to make a profit and how much things with cost. This shows how much the individual will need in order to survive. The final sub section that should be included here is about promotion this should state how the individual plans to do this, what methods of advertising will they use it should be remembered however a business shouldn’t grow too big too quickly!
The third section within the business plan is about production, this should include how the individual plans to do this, where it
will be done and if they will need any help such as employing extra people. This will enable the individual to know the process.
The fourth sections should include information on resources this should include exact information on extra funding that will be needed for the business, and personal assets the individual has or the business already has as this provides security for lenders, personal financial backing that you intended to put in as this shows commitment to the business and the individuals idea. There should also be some information on what is needed for the business to run successfully here to as well as information on any patents, copyright and trademarks that will be needed for the business.
The final section is the financial plan this should included a profit and loss account, a cash flow forecast and a balance sheet as the minimum. This will enable the individual to show income and expenditure, when money is expected to come into the business as well as when it is expected to leave the business and the assets and liabilities connected with the business. These will all act as guidelines for the business and should try to be as accurate as possible as well as accounting for illness, holidays and time off.
The above is just a simple outline of what is expected to be seen within a business plan.
What are the limitations of a business plan?
The biggest limitation to any business plan is that it is all based upon predictions and therefore none of it can be guaranteed. Also many of the financial figures and predictions within most business plans are inaccurate due to limited research and are therefore unreliable. Market conditions can be affected significantly by many changes such as changes within the economy, new competitors, or even losing some competitors. Therefore it is important that entrepreneurs understand the limitations of their business plan. However this doesn’t mean a business plan isn’t important or a waste of time as it can still highlight many key issues and problems with the initial idea.
How can I make the business plan as accurate as possible?
There are several steps that can be taken so that the individual can make their business plan as accurate as possible these include using whatever relevant secondary date that exists and undertaking your own primary research where it would be most useful and cost effective. Using any expert advice that you can get such as any government agencies and the bank (the bank can offer you a great source of information, there may be a small fee or it could even be free). Try talking to others within the industry you want to operate in as they will be able to share their knowledge with you. Tyr looking at similar products and business to what you are trying to create and learn from them try asking questions and finding information out about them.
Although try not to spend too long planning and miss the opportunity of setting up the idea as someone else may then find it and beat you to it!
Conclusion
A business plan is a very important tool for any entrepreneur and their business as it helps them to analyse their idea and the factors that are likely to determine the actual success of the business.
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