Understand Business Plan Basics Before You Regret

A business plan is a written description of business’s future. It is a document that a describes what we plan to do and how we plan to do it....
Business Plan Basics
Business Plan Basics

A business plan is a written description of business’s future. It is a document that a describes what we plan to do and how we plan to do it. It is practical to say that a business plan is a combination of what and how aspects.

Business plans can help us to perform a number of tasks. They are used by investment-seeking entrepreneurs to convey their vision to potential investors. They may also be used by firms that are trying to attract key employees, the prospect for new business, deal with suppliers or simply to understand how to manage their companies better.

So what is included in a business plan, and how do we put one together? Simply stated, a business plan conveys our business goals, the strategies we use to meet them, potential problems that may confront our business and ways to solve them, the organizational structure of our business (including titles and responsibilities), and finally, the amount of capital required to finance your venture and keep it going until it breaks even. A good business plan follows generally accepted guidelines for both form and content.

There are three primary parts to a business plan:

The first is the business concept, where we discuss the industry, our business structure, our particular product or service, and how we plan to make our business a success.

The second is the marketplace section, in which we describe and analyze potential customers: who and where they are, what makes them buy and so on. Here, we also describe the competition and how we will position ourselves to beat it.

Finally, the financial section contains our income and cash flow statement, balance sheet and other financial ratios, such as break-even analyses. This can be done with the help of financial modeling which is prepared by combining both subjective and objective inputs/assumptions.

Breaking these three major sections down even further, a business plan consists of following components:

  • Executive summary
  • Management team and capability & skill set
  • Business description
  • Market strategies
  • Competitive analysis
  • Design and development plan
  • Operations plan
  • Financial plan- projections of cash flow, profitability and valuation apart from exit plan

“How Long Should Your Business Plan be” is a very debatable question. Depending on what we are using it for. Much will depend on the nature of our business. If we have a simple concept, we may be able to express it in very few words. On the other hand, if we are proposing a new kind of business or even a new industry, it may require quite a bit of explanation to get the message across.

The purpose of our plan also determines its length. If we want to use the plan to seek funds in seed capital to start a risky venture, we may have to do a lot of explaining and convincing. If we are just going to use the plan for internal purposes to manage an on-going business, a much more abbreviated version should be fine.

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