Almost anything you do in life requires some level of planning prior to execution. Even if you are doing something as simple as driving to a couple destinations, you need to plan your path. Your planning may take into consideration elements such as route length, possible traffic, weather, and road conditions. In a similar manner, planning is an essential element of starting a business. This article explains what a business plan is, its purpose, and the areas that are necessary for inclusion.
What is a Business Plan?
A business plan is the formal document that is created from the planning process for your business. It contains all the necessary information on how you intend to develop your business in addition to expected timelines, your business team, and your financial expectations.
The business plan has two main purposes. These are:
• Forming a road map for your business – This is the more important of the two reasons as a business is more likely to experience failure if there is no sense of direction. Not only do you establish each element and how they work together by doing a business plan, but you also condition your mind through the development of your vision and mission.
• Financing – Some persons only do a formal business plan for this reason. The reality is even if you have a business idea, chances are you don’t have the kind of capital needed to get it off the ground. This means there is a need to seek financing from sources such as family members or lending institutions. Since you are essentially convincing people to believe in your business idea enough to put money into it, you must demonstrate that the venture is feasible. Completing a business plan increases your chance of gaining investors.
Elements of a Business Plan
A good business plan contains five key elements. Ensure that you thoroughly consider and document each area.
In the context of seeking funding, this may be the most important area of the business plan as many potential investors and lenders make their decision solely on what is in this section. This is where all the overview information is placed.
It gives some idea of who the writer of the business plan is, what the planned offerings of the business are, why the business is necessary, the objectives of the business, and its top selling points.
This is where you detail the main components involved in driving your operations. These components include your location, the facilities and equipment to be used, and the IT systems that are necessary to enhance your operations. Additionally, this is where you detail the processes involved in the product/or service you intend to provide.
Marketing and Sales Plan
This is the element that reflects the potential for your business to catch on with consumers. Within this element you must detail your intended customers, the market and customer behaviors that make your business ideal, the methods you intend to use in marketing, and you are even expected to give details on your existing competitors.
This is where the numbers come into play. This section of your business plan provides information on financial elements such as profit and loss forecasts and cash flows in and out of the business. All the accounting projections are placed under this section.
Finally, you must give details on your team. There needs to be information on your own qualifications and those of the people you intend to work with. The team must be able to keep the business afloat with the various abilities its members bring to the table.
Ensure all these elements form a part of any business plan you do for your own sake and for the sake of obtaining funding.