Before launching any new venture, the first step is to draw up a business plan. This applies to existing business as well as newly established ones.
1.1 Use of a Business plan
- A business plan is a complete description of a business and its plans for the next 1 – 5 years. Business planning is a powerful tool for evaluating the feasibility of business ventures. A plan is a valuable tool for communicating your visions, goals and objectives to other managers and key employees in your firm.
- The ideal business plan can be thought of like a road map – you define your destination (in order words, your objectives) and the plan then acts as your route plan for getting there.
Putting it in writing
Why write a business plan?
- A written business plan will help you clarify your ideas and objectives and demonstrate that there is a market for your product or service.
- A well-researched plan will show the strengths and weaknesses of your business idea as well as provide a structure from which you can mark the progress and the growth of your business.
- Use the plan to check your progress against your goals – it will help to alert you if you need to take any corrective action to put your business back on course.
1.2 The plan will explain:
- What the business does (or will do);
- Outlines who will buy your product or services and why;
- Includes financial forecasts; and indicates how much money (if any) is needed.
In order words, the plan provides a blueprint for running the business and a benchmark to check your progress against. You should, therefore, revise your business plan each year, set targets and prepare financial forecasts.
…but what if I don’t write a business plan?
You may survive in the short term, but the long term consequences could be severe.
- THE TWO MOST IMPORTANT REASONS FOR PRODUCING A BUSINESS PLAN.
a. To enable the owner/manager effectively plan the development and monitor the progress of the business.
The plan will be invaluable as a tool for managing and monitoring business development and growth. A thoroughly researched business plan, used constantly as a tool, will provide the basis of a sound business; alerting the manager to potential problems thereby supporting a controlled expansion of the enterprise.
b. To secure financial backing for your business idea.
Any lender or investor will be worried about the risk involved with their money and will have to be satisfied that they have a good chance of being paid or getting a good return on their investment. The entrepreneur will have to prove that there is a good market for his/her product or service and be able to convince investors of his ability to manage the business.
- Your completed business plan presented to the financier or investor speaks for the business. Financiers will naturally conclude that if your presentation is unsatisfactory that your presentations to customers will equally be unsatisfactory.
- Get it right the first time, know your business, be logical, consistent and realistic, above all be professional.
2.3 Who should do the plan?
…You, of course, it is important to undertake the research and compilation yourself with assistance from enterprises agencies, accountants or consultants. The research and compilation of the plan will enhance your knowledge and understanding of proposed business and also how business works.
2.4 Content and length of plan.
The more money you are looking for, the more comprehensive your plans need to be.