Last updated: May 29, 2020.
What is a Business plan?
A business plan is a written statement of what an entrepreneur proposes to take up. It is a guide frost or course of action of what the entrepreneur hopes to achieve in his business and how is he going to achieve it. It is a road map to reach the destination determined by the entrepreneur.
Businesses large and small can benefit from drafting business plans before beginning operations. A business plan is a description of a business’s projected future, and this document will spell out exactly what a business owner plans to do and how he or she will put that plan in motion.
Forbes says that entrepreneurs can benefit from business plans because the process of developing them will help business owners understand which type of business he or she would like to create and the type and amount of funding and other resources that will be needed to get the business functioning.
Although business plans may be optional, one instance in which they are often required is when entrepreneurs are seeking funding.
That’s because lenders often require business plans to weigh the risks and benefits of investing in potential business.
The benefits/ Significances of a business plan:
- It helps to reduce anxieties and tensions in running an enterprise
- It helps to get funds from outside sources like banks
- It is a road map that gives the direction of the enterprise
- It helps to avoid the failure of the business
- It forces an entrepreneur to view the venture critically and objectively
- The business plan quantifies objectives providing measurable benchmarks for comparing the forecast with actual results.
The Components of a Business Plan
A business plan consists of several sub plans. Entrepreneurs can use templates to draft business plans and then fill in specific details. Here are some components to include in the plan.
Executive summary: This is a synopsis of the entire plan with all of the essentials briefly discussed. Include the reasons why the business will be successful.
Business description: In this section, entrepreneurs can provide a profile of the company. Information can include location, size, planned operations, and the target market.
Industry analysis: Here business owners discuss the market in which the business will be competing, including how large the market is and whether there are any trends that are affecting this type of endeavor.
Marketing, products, and sales: In this portion of the plan, owners mention the products or services being offered. Strategies for branding, marketing, and how the product/services will be sold also are included.
Operations: The operations portion of the plan will detail the processes the business needs to address on a daily basis to be successful.
The team: In the business plan, entrepreneurs should also identify the person who will be helping to run the company, including why these people are qualified for the job.
Also, the following are the components of a business plan;
1) Cover page, title page, and table of contents
2) Executive summary; it gives a brief overview of what is to follow, helps put all of the information into perspective and it should be no longer than two or three pages.
3) Business Description
- General description of the business
- Industry background
- Goals and potential of the business and milestones
- The uniqueness of a product or service
4) Marketing research and analysis
- Target market(customers) identified
- Market size and trends
- Estimated market share
5) Marketing plan
- Market strategy-sales and distribution
- Advertising and promotions
6) Operations plan
- Identifying location
- Proximity to supplies
- Access to transportation
7) Management plan
- Management team
- Legal structure (stock agreements, employment agreements, and ownership)
- Board of directors, advisers, consultants
8) Financial Plan
- It involves financial forecasting of
- Profit and loss
- Cash flow
- Break-even analysis
- Cost controls
- Budget plans
9) Critical risks analysis
- Potential problems
- Obstacles and risks
- Alternative courses of action
10) Harvest strategy
- Transfer of asset
- Continuity of business strategy
- Identify successors
11) Milestone schedule
- Timing and objectives
- Deadlines and milestones
- Relationship of events
12) Appendix or Bibliography
Business plans are helpful for entrepreneurs.
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