A key factor in determining the success of an entrepreneur is the ability to plan. Preparing a formal business plan is crucial to the ultimate success of an enterprise. A business plan evaluates the viability of the venture, assists an entrepreneur in establishing goals and objectives and guides him in selecting the appropriate methods of achieving the goals and objectives.
In this introductory chapter, we will give the meaning and importance of a business plan and its components. Qualities of a good business plan will be analyzed. The chapter ends presenting how a business description can be written.
DEFINITION OF A BUSINESS PLAN
A business plan is a written document that describes the goals and objectives of the business and lists the steps that will be taken to achieve those goals and objectives.
IMPORTANCE OF A BUSINESS PLAN.
A business plan is useful in the following ways:
- It is a financial tool
A good business plan should provide more information than merely what is required to secure a loan from financial institution. A separate loan package will not therefore be required. It should be objectively prepared for it to be accepted a financier.
- A business plan is a blueprint
A business plan serves as a blue-print for starting, expanding and/or operating a business. Just as a builder draws plans before starting the construction of a house, a businessman should plan his business operations prior to implementation.
- A business plan reduces fire fighting. Many small business persons spend time solving small problems and they never have opportunity to do anything else. By preparing a business plan, problems can be anticipated and decision as to how they should be avoided can be determined.
- A business plan forces owners to justify their plans of action
Often, a decision is made to do something because it ‘sounds’ or feels’ right. Alternatively, something may be done because traditionally that is the way it has always been done. Preparing a business plan forces owners to prove the validity, or explain the reasoning of the plan. The ability of management is-demonstrated. All management is involved in the planning, the budgeting, forecasting and reporting process of repairing the business plan
- A business plan tests ideas on paper
It is much better to do a business plan and find Chat the business is likely to be. Unprofitable than to start a business and find out the same thing (i.e. that it fails).
- A business plan indicates the owner’s ability and commitment
A well prepared business plan is an important document. It shows outsiders such as loan officers, potential partners and suppliers that the owner understands the business. The fact that the owner has spent time to prepare the business plan shows commitment to the business.
The business plan has many uses. By analyzing the industry market and the firm, the owner will become aware of many important issues. These issues can be put into a clearer perspective through the preparation of a written business plan. The business plan can provide guidance to employees in the firm. The documents can also be used with banks, investors and management consultants.
Qualities of a good Business plan
One of the reasons why you may be compelled to prepare a business plan is when you want to get a loan either from a bank, a non-bank financial institution or any other lending institution.
To you, your business is of supreme interest and importance to a bank or fund manager, your plan is just like any other document that he finds on his desk. You must win his approval and keep his interest while reading it. For it to do this, your business plan should have the following qualities:
- Simplicity and clarity
- Be backed up with figures whenever possible