A business plan is a document that is prepared by the entrepreneur, which describes all the relevant internal as well as external information that is required in starting a new business. It is a combination of the functional plan like finance, marketing, human resource, and manufacturing plan related to business activity.
Importance of Business Plan
A business plan is a step by step process to convert a business idea into a successful business. It involves the following details-
- Identifying innovative ideas;
- Research of external environment for opportunities as well as threats involved;
- Identifying strength and weakness;
- Assessing the practicality of the concept;
- Allocation of resources in a proper manner;
- It gives direction to the vision expressed by the entrepreneur;
- It evaluates the prospects of the business;
- It monitors the progress;
- It convinces others to join the company;
- Its helps in taking loans from Financial Institutions;
- It facilitates the decision making progress.
Who needs a business plan?
Any person starting or extending their business which can consume resources like money or time should draft a business plan for smooth functioning.
Start-ups
The main reason for a start-up to have a business plan is because start-up focuses mainly on the idea and not on the execution of those ideas.
A business plan will help start-ups to have proper management by setting up objectives and tracking down those. If they work according to their business plan, it will help them to achieve their targets in a more organized manner.
Cash inflow and outflow and future requisites can be monitored if you have a full-proof plan.
Established firm
The business plan will help the firms to develop a strategy and allocate the resources according to their strategy.
A business plan helps you in keeping a look on the valuation of the business. Companies can use a business plan to set new targets.
What are the ingredients of a Business Plan?
A business plan consists of three segments which are mentioned below-
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What are the types of Business Plan?
The business plan is divided into six types-
Start-up business plan
This type of business plan includes sections that describe the kind of company, purpose, product and service that the start-up is going to provide. The investors will require the financial analysis[1] with spreadsheet providing detailed information about financial areas not limited to income, benefit and cash flow projections.
Internal business plan
It is drafted to target the specific group of people within the business, like the marketing team which needs to analyze a particular project. An internal business plan describes the current position of the company, which includes operational costs, profitability, and calculations during the project.
Strategic plan
The strategic business plan is a plan laying down the foundation of a company. It varies from company to company. The company includes the following five elements in its strategic business plan-
- Vision;
- Mission statement;
- Success factors;
- Objective achieving strategies;
- Implementation schedules.
Feasibility plan
Feasibility Business plan describes the need for product or service the company is offering and capital required. This type of plans recommendations for further growth.
Operational plan
These are the internal plans which describe the elements that are related to the company operations. This summarizes employee responsibility.
Growth Plan
These are the in-depth description of proposed growth, that is drafted for the internal as well as external purpose. It includes a complete description of the company. The plan provides detailed information to the potential investor.
What is the business plan process?
The business plan process is as follow-
Generation of idea
It is the first step in the business planning process. It distinguishes entrepreneurs from the usual business. Sources of new ideas that entrepreneurs can get are from-
- Customers
- Existing companies
- Research and development
- Employees
- Dealers and retailers
Environmental scanning
The next step is to scan the factors that will affect the business ideas. The elements are external and internal environment surrounding the business
- External environment includes-
- Socio-cultural appraisal
- Technological appraisal
- Economic appraisal
- Demographic appraisal
- Government appraisal
- Internal environment includes-
- Raw materials
- Production
- Finance
- Market
- Human resource
Feasibility analysis
It refers to conduct a detailed report on every aspect that is relevant to the business. The analysis includes-
Market analysis is undertaken to calculate the demand and market share of products and services in the future.
Technical and operational analysis is conducted to assess the functional ability of the proposed business enterprise
Project report preparation
It is a document which describes step by step strategies involved in running the business.
Evaluation, Control And Review
The company operates in a dynamic environment, so it has to monitor and review strategies as well as policies to compete in an existing market.
What is the content of the project report?
- Cover page
Cover page of the project report contains the title of the project, name, address so that the person reading the report can quickly contact the entrepreneur if there are any queries of the report.
- Table of contents:
Table of content consists of topics covered in the project report along with the page number.
- Executive summary:
It has to be written after the completion of the project report as it gives brief gist of the project.
- Company information and industry:
The ownership form of the company, which contain the reason for forming into the proposed plan and It can also consist of the SWOT analysis of the company
- Technical plan:
The critical aspect is analyzed during the technical feasibility. This report should be highlighted. The choice of the product and service that is to be offered should be justified.
- Marketing plan:
This plan should focus on the industry and market feasibility that is conducted at an earlier stage. It describes the pricing policy, market research, product to be offered by the company, marketing strategy promote the product and target customers.
- Operations plan:
It explains the innovative idea that is involved in the process of production, which makes it better when compared to existing competitors.
- Organizational plan:
It provides information about the management team who are part of the company. It focuses on the technical skills possessed by the employees in the company.
- Project timeline:
It includes the network diagram, which illustrates the time duration required for the project. The graph shows the various activities in the project, which are organized and the time duration required for the execution of the project.
- Critical risk and assumption:
It explains the various assumption made during the creation of the company like considering the previous sales forecast. There can be multiple risks involved in the product and kind of service company is planning to offer
- Social plan:
It explains how the company project will benefit society. It should highlight how a company will generate employment opportunities and lead to skill development, provision of goods and services, utilization of resources etc.
- Exit strategy:
It is a negative aspect of the business. Still, the company should explain how they would close down the business if the company is not able to earn the expected profit, the investors will be keen to know how their investment can be recovered.
- Financial plan:
It is an essential part of the report which will contain brief content all the sections with monetary terms. It explains the financial composition of the company, sources through which the company has acquired finance, the total expenditure incurred by the company.
- Conclusion:
The report should be ended on a positive note so that the readers develop a positive image of the report.
Final thought
Every business needs to have a plan for attracting investors and to provide business with a direction. A business plan plays a vital role in the success of the business. It contains detailed plan budget and objective being set for the business.
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