A business plan is a written document prepared- usually for a new business -that lays out the goals for a business and how it’s going to achieve them. It lays out the marketing, operational and financial goals for a business. A business plan allows the organizations to stay on track and also helps in bringing in capital from investors. Although business plans are prepared for new companies, it’s also essential that a company revisit their business plan to see if they have met their goals or need to add some new ones/modify the existing goals. Some already established companies create new business plans if they’re looking to move their business in a new direction.
Importance of a business plan
Even though a company may work without a business plan, it is still very essential and an important tool to have before starting a business. It’s not a good idea to start a business without a business plan since many companies fail to last long due to not preparing one. A good business should identify all the costs involved and how any decision can lead to a downfall of the company. Even for companies in the same industry, each participant should have their own business plans as it states how each company is going to differentiate itself from its competitors.
What’s inside the business plan?
The elements constituted are all the same for every business plan and I’m going to list down some of the most common and important elements involved.
- Executive Summary: It is like a separate document in itself that states concise details about the other sections in the business plan. It includes the mission statement and details about the company’s leaders, employees, operations, and locations.
- Business overview: Business overview offers a description of the business including the legal structure, business formation history, the type of business, location and means of doing the business.
- Operations plan: This heading explains how the business will operate, including the physical arrangement and how each task will be assigned.
- Products and services: In this section, the company outlines its products and services and other details including but not limited to product pricing, product lifespan and how it will benefit the customer and the society. Different products and their classifications can also be written here along with production and manufacturing processes and the technology and patents etc. that the company would require. Any other information like Research and Development (R&D) should be included as well.
- Market analysis:This area of a business plan outlines the target market and how it will affect the company and the competitors and how to function in the market using its strengths and weaknesses. It can include graphs and charts and data to explain what the target audience will be and how they will be catered to.
- Sales and marketing strategy: This section will outline how the company will attract its customers and form a customer base. It will include how the company plans to reach its customers through different channels. Regarding sales, this will also include the pricing and sales information, and how the company will advertise and sell their products. The selling strategy has to be mentioned here, including the rationalizations of how and why the customer will buy their products.
- Competitive analysis: Here the company will analyze the strengths and weaknesses of their competitors and how they can manage to gain a competitive advantage over their competitors.
- Management team: Details about people involved in the management team and what each of their roles will be are mentioned here.
- Financial planning: For an already established business, financial statements can be included here along with other financial information from startup costs to balance sheet. Amounts that are needed to keep the business running along with any additional funds needed have to be mentioned here. Also, how the business plans to use the funds must be mentioned in this section as well.
- Budget: Like any other successful company, a budget is needed here. Any and all expenses associated with the business have to be mentioned. Recommended read: Our introduction to budgeting – find out what a budget really is and get some useful tips.