What’s the first notion that comes to your mind when you hear a “business plan”? A big lengthy heavy file which has the potential to make anybody who reads it, sleepy.
Well it is not. It is as simple as it gets, a crystal clear picture in writing of the business you are interested in and it holds every imaginable aspect of the business you have in mind, it is the decision making tool.
Of course, it has to be formal in writing as it lays down plans, strategies and methodologies to reach a certain target in a limited time. In other words, these are guidelines in written form that needs to be followed to meet the goals.
Your business goals may transform over time with multiple revenue streams as the business grows and has many business plans if there are various objectives. It assists in the startup process and has to be written carefully prior to the pitch deck and explaining it to the investor.
Studies observe that, potential entrepreneurs who pen down their business plan are 2.5 times likely to follow through and actually venture into a business, it also improves business skills. There are several other findings that forge that notion better that proper planning leads to greater success including the authors of Business plans for dummies, Steven Pearson & Paul Tiffany quoted a study(late 1990’s) of 900+ small businesses which experienced 50% higher profit & revenue growth with detailed written plans than those without.
Is a Business Plan that Important?
One is ignorant till one is knowledgeable. When it comes to spending and making money, infrastructure to resources that that may cost up to billions in some cases, there has to be transparent planning which clear any financial and resource leaks.
Investors always look for crisp data on expense budgets, partners, employees, sales forecasts, marketing/competitive strategies and finally milestones, such conclusions are rooted from disciplined thinking.
There are several key reasons why a business plan is vital, these are as follows:
1. Crystal Clear Picture
From beginning to expansion, there are a great number of factors such as base location, capitalisation, resource allocation etc. For many, rather than a strong foundation in their venture the lure of money leads to blindsiding of minute details leading to systematic breakdown over short/long term. A well written plan averts such a scenario, with goals set and targets met.
2. Brings in the Required Investments
To every business individual looking for better return of investments, clear goals and methods to achieve it increase the profitability of investing with revenue generation. With a great pitch deck and comprehensive plan your end goals.
3. Analysis Based on Data
Data is always invaluable, precise data attracts investors that are interested your venture. It saves them time and makes decision making much easier. The higher the investors perceive profits on their investments, higher the investments they allocate to your venture.
4. Identifying Potential Problems in the Venture
With every venture there are pros and cons, clarity of present and potential problems make work much easier, a business idea does exactly this. Any potential problem can be identified early on and corrected by experts in the written plan before actually starting up.
5. The Go to Guide
Initially, to the many stages during growth it is vital to refer and improve your business plan, as it helps you and your team to stay on track focused, with your temporary goals distracting, end goals can be addressed at once or in long term.
6. Feasibility of the Venture
As you go from nothing to the future projections of your venture, a plan can save loss of time and capital early on if the planned venture is unfeasible. This usually happens during the marketing analysis, when one concludes of a saturated market, high competition, lack of unique value in product/service.
Such research is vital, as many potential business owners are disillusioned about their product/service. Higher the market awareness of competitors, prospective customers higher is the success rate.
7. Management Plan
A clarity in hiring required talent, expertise makes a great management structure. If particular skill set is required in your team, it has to be clear and visible in plan and how to effectively utilise such individuals and retain them.
8. Operational and Financial Plan
Your budget outlines your startup capability, the capital break down makes it clear if your require additional external funding, loans, in terms of debt financing or equity from venture capitalist, angel investors, investment firms. An operational plan without any loopholes including supply requirements, inventory, equipment’s and facilities is the foundation. Research including suitable business location and required supply chains forms the core of the operational plan.
Components of a Business Plan
There are an array of components in a business plan, however there are core components as follows:
1. Overview or Summary
A comprehensive plan must contain every detail of the company, its mission statement, market overview, objectives, financial resources and ROI’s. A clear cut description of a business is key such as its aims and introduction. Such a summary has to be compact enough for a page or two, describing every aspect of the venture.
2. Market & Competitor Analysis
The above stated elements are key to survive and flourish in every sector. Therefore, a detailed plan must contain strategies such as market forecasts, public relations, deadlines, projected timelines and milestones, advertising. Competitor analysis reviews and dissects your product/service in comparison to your regional, national and global competitors, such research brings out your unique value proposition.
You need not have critical research with enormous data in the business plan but a broader picture of the potential scheme of things.
3. Resource Management and Financial Projections
Operations, management personnel and financial projections have a mutual co-relation and each effects the other drastically. The management team such as managers and senior executives oversee day to day to annual operations and make sure financial projections are achieved. They assess crucial risk factors as the markets and investors have a keen on such aspects. A highly experienced team coupled with clear communication can handle any deadline and avert potential crisis, resolve risk factors.
Who Requires a Business Plan?
Every individual or group initiating a venture or expanding into a new phase of business require a business plan as it describes the required resources in term of money, energy or time and expect a return of investment of their hard work.
An individual keen on materialising their idea is a potential entrepreneur probably writing a business plan seeking funds to launch their venture. Many books on business planning are aimed at startup enthusiasts, the only reason being they are open to open to guidance and help while inexperienced. Yet it is not only startup owners but also business owners with expansion plan at every stage that look to improve with funding and reinvest surplus liquid capital.
The other individual/group focusing on business plan is businesses that are expanding, looking for funding and trying a new concept. It helps in allocating resources and labor without wastage of funds/resources to the core venture. Such plans may renew a saturated market leading to a new phase of innovation and improving competition.
Business Plan and Entrepreneurship
History in every aspect has described that before execution, planning is vital, business planning is also included in it. Entrepreneurship in itself is a notion of learning, planning, executing while balancing many risks hence planning is crucial.
A venture idea is great but still a thought, its execution is maybe completely different. As one goes onto building their dream venture, they come across several unforeseen obstacles and have to act accordingly. Growth and expansion go hand in hand with profit and loss.
Entrepreneurship thrives on frugal investment with great outcomes, with calculated financial moves such as loans, repayments, profit/loss percentage a business plan is bound to make wonders to your potential venture with right objectives, strategies’, and clear path towards a desired goal with successful & effective entrepreneurship.