It goes without saying that anyone in or getting into business should have a business plan. But what, exactly, is a business plan? What is it for? Whom is it for? How is it used? What goes into it? Many people setting out to make a business plan get sidetracked by the format and neglect the content. They believe that a business plan must contain volumes of words and mountains of data, forgetting that it’s the thinking behind the words and numbers that counts. The result is often a business plan that is neither intelligible nor useful.
What is a business plan?
A business plan is a document that puts down the goals of a business and the steps to be taken in order to achieve those goals. Think of it as a roadmap that points out where the business wants to go and how it intends to get there.
What is a business plan for?
The main purpose of a business plan is to quantify the goals of the business and define what precisely each component of the organization has to do to meet those goals. It is made to determine the viability of a new business, or the growth of an existing enterprise.
Whom is a business plan for?
Essentially, a business plan is an internal document to be used by management in devising and approving projects and plans. At other times, special business plans may be made for investors and financial institutions in order to raise capital for the business. Specially-structured business plans may also be made for key customers in order to secure contracts or cooperative ventures.
How is a business plan used?
Above all, a business plan is used by management to develop strategic plans and as a yardstick against which to measure the value of every major business recommendation. Individual operating units will use a business plan as the basis in creating their respective operational plans and project plans.
What goes into a business plan?
There is no “official” format for a business plan. What goes into it is determined by the goals and the audience for which the plan was written. The business plan for a startup will traditionally contain the following:
- Cover page and table of contents
- Executive summary that is a concise description of the entire business plan
- Business description and analysis of the business environment
- Industry description with an analysis of the market and competition
- Product plan describing variants and mix
- Marketing plan with sales, advertising and media plans, traditional and digital
- Operations plan including logistics and distribution plans
- Financial plan
Plans of the different business components like Marketing, Operations and Finance are supported by appendices with the corresponding data and evaluations. For ongoing operations, some portions like the business description, industry description and market analysis are usually compressed or eliminated unless there have been significant changes for the period the plan covers.
It’s the thought that counts
A business plan is just a collection of words and data unless it’s backed up by solid, intelligent and creative thought. To help managers and investors evaluate business plans various tools have been developed. For example, Steven N. Kaplan of the University of Chicago Graduate School of Business has developed the IMPACTS approach to guide angel investors and venture capitalists. Pearson Education has come up with a Business Plan Evaluation Guide. Prentice-Hall has published a Business Plan Evaluation Scale assigning scores to a business plan based on 12 key factors. These tools, and many others, will prove helpful in determining how much thought went into a business plan.
About the Author: Lewis Edward is one of the owners of TheOfficeProviders. He is a real estate investor with many interests in other sectors. Lewis researches and contributes various written features for TheOfficeProviders in areas regarding real estate, including office space for rent and serviced offices, and general business and economy matters. Lewis is experienced in the inner workings of both the traditional and flexible workspace industries and has developed close links with various figures in real estate circles, as well other circles.