Prior to the beginning of a business, there is a need to make a stride back and plan on its execution. During the time spent arranging, there is a need to record the reviews and thoughts built up. The thoughts are documented, and this document is referred to as a business plan. A business plan is defined as a generally written document that gives relevant details on the internal and external elements that affect business and ideas for starting new ventures.
An entrepreneur must have a business plan which deals with all aspects proposed new business. Planning is an ongoing process in any industry or business or business enterprise. It is more important for a new business. The business plan integrates the functional strategies of different segments of the organization, such as finance marketing, production, and human resources. The business plan is also referred to as “the road map or game plan of the organization.” In preparing a business plan, an entrepreneur takes the help of experts in different fields such as finance, legal, marketing, technical consultants, etc. for necessary inputs.
The entrepreneur prepares a business plan and is a written document showing where the firm is, where it is going, and how it proposes to get there. The plan also indicates if the proposed Business is worthwhile. The business plan should be made known and available in all concerned.
Use of a Business Plan
The business plan serves two primary purposes;
- As a useful aid to management it:
- Shows the future objectives of the Business.
- Gives a framework for decision-making.
- It provides a yardstick against which actual future performance of the business can be measured.
- Communicate to outsiders about the goals, objectives, and activities of a business
- The plan also helps explain the Business to an outsider, especially banks and other lending organizations, when a business needs to raise funds.
Benefits of a Business Plan
- Enables a business visionary to set up objectives and destinations for their proposed organizations
- Aids potential business visionary to evaluate the reasonability of their business opportunity on paper
- It helps with perceiving the prospective clients, advertising openings, estimating procedure, limited time exercises, circulation technique and the severe conditions required for business achievement
- It arranges the number of necessary representatives, the abilities they ought to have, the undertaking they will perform and the techniques for compensation to be received
- It spreads out the money related needs of a business and proposes the potential wellsprings of financing
- It assists with recognizing necessary variables for useful section and development of a business in a given commercial center
- It opens business visionaries to be the entire arranging, planning, estimating and announcing methods process essential for beginning or growing a business
There is no single correct format from business plans for all Businesses. The plans vary depending on the nature and purpose of each Business.
Components of A Business Plan
A business plan includes details under the following main sections
- Executive summary
- Business description
- Marketing plan.
- Management plan
- Production/production plan
- Financial plan
- Expected performance
- Action plan
- Appendices
- Executive Summary
This is a short section summarizing the critical points out of the plan. It explains, in brief, the whole plan, and it should obviously be written after the writing of the entire plan is completed.
- Business Description
For an already existing business, the details would include;
- Business from and ownership.
- When started.
- Past performance, success, and failures.
- Reason for the required Assistance
For a new startup business, it will include;
- Goals of the new Business.
- Reasons for wandering into Business
- Justification of achievement right now
- What advancement work has been finished to date?
- What are your items or administration? Portray them, including patent, copyright, or trademark.
- What is the area of the Business and your explanation behind picking the area?
- Are you fabricating new? On the off chance that it needs remodels, express the expenses of the redesign.
- Is the structure rented or claimed? (Express the terms).
- What will office hardware be required? Will the equipment be obtained or rented?
- What experience do you need to help you effectively actualize the marketable strategies?
- Marketing Plan
The marketing plan is based on the market data received in the market research activities. The marketing plan describes the market conditions and strategies proposed and promotion policies. It will include;
- A description of the goods and services being produced or to be created and their uses
- The present market situation for the products
- Target market and the expected market share
- Advantages of your product against competing goods or services proposed rice and distribution channels
- Expected future market growth
- Management Plan
It gives details on;
- The owner/manager and other key people in the Business
- Their qualifications, skills and past experience
- Their role ability to successfully carry out the proposed Business or any training required.
- Their salaries and benefit
- Production/Operation Plan
It gives details of the manufacturing process and operations of the proposed venture. It indicates what items to be subcontracted, the cost, and the time frame. it also provides the production details such as the physical plant layout, the technology, the requirements the equipment, raw materials and the cost of manufacturing
In the proposed new venture is not manufacturing type but service-oriented, in that case, the operational plans are made. The operational plans describe in detail the chronological steps involved in the business operations.
Questions for the production plan include: –
- While the new venture is responsible for all or part of the manufacturing operation.
- If some manufacturing is subcontracted, who will be the subcontractor? (give names and address)
- On what basis will sub-contractors be selected?
- What will be the layout of the production process?
- Which raw materials will be needed for production? And which are critical?
- Who are the suppliers of the new materials, and what are the appropriate costs?
- What are the costs of manufacturing the product?
- What is the future capital equipment need of the venture? And why?
- Financial Plan
The financial plan gives the projections of critical economic data that determines the ability of the venture and financial investments required for the enterprise. The entrepreneurs draw social figures from forecast sales and production. It also indicates the projected balance sheet giving the economic conditions of the process, giving the details of assets and liabilities investment by entrepreneurs and financiers. What is included here are.
- The estimated cost of the proposed Business
- Purchase of fixed assets including any building and machinery
- Working capital including the purchase of stocks, raw materials; running costs, wages, power, transport, etc
- Proposed sources of required funds
- Amount to be contributed by the owners
- Required loan/grant.
- Suspected Performance
This section should show the expected future performance of the Business in profits and increase or decrease in the business assets. This section should be prepared with the help of an accountant or consultant.
- Action Plan
This section gives details of the actions to be taken in implementing the business proposal allowing:
- What is to be done
- When
- By whom
- How long will it take?
- Appendices
This is an attachment of the necessary documents in support of the information contained in the business plan. This may include:
- Projectile income statements, cash flow statement and balance sheets
- Copies of past performance records
- Copies of plot maps, title deeds, allocation letters, building plans, etc.
- Copies of C.V. certificates etc.
Tips for the development of a business plan
- Develop your plan solely towards the targeted audience.
- Conduct a thorough research/investigation on the market to get ideas for a business to plan.
- Take note of the various competitors involved.
- Despite concentrating on the significant factors in planning also consider the minute details.
- Get the financial information right
- Make an executive summary convincing for any interested investors who wish to partner or fund the Business.