We explain what a business plan is, its functions, and the benefits it provides. Also, what are its features and methods it uses?
What is a business plan?
A business plan is a written document that expresses a formal declaration of the objectives of the initiatives that a company has in the projection and evaluation phase.
These initiatives can be new projects within the company’s activities or the start of the company itself. Therefore, a business plan describes a series of interrelated activities aimed at achieving certain goals.
This allows a planning of the tasks and the evaluation of the resources that will be necessary to achieve those goals (for example, resorting to banks or investors for financing).
In addition, its function is to transmit to current or potential investors (investors, shareholders, financiers, etc.) how the investment will be recovered and the guarantees they have. It differs from an investment project in that a business plan is more focused on the strategies that will be carried out.
Characteristics of a business plan :
Business plans do not usually remain the same as their original version .
The intervention of new factors (investors, partners, suppliers, etc.) and a better understanding of the possibilities by the company can modify the structure of the plan.
Therefore, it is common for them to undergo constant renewal and updating.
A business plan defines goals and establishes economic viability.
The main function of a business plan is to define the model and the strategic actions to achieve the goals. Once defined, you must establish the economic viability of the project.
This requires analyzing the different areas involved , which allows supporting the project conceptually and observing it from all dimensions. But, at the same time, it shows a defined image of the company before third parties.
- It allows errors to be detected and difficulties to be anticipated before the start of the investment . In this way solutions can be planned.
- By including the economic and financial forecast of the business, it facilitates access to bank financing, as well as attracting new partners and collaborators.
- It allows the measurement of results of each stage, through short and medium-term goals that allow establishing measurement criteria.
- It allows detecting the most promising business opportunities in terms of markets of interest, products and services.
- It allows an evaluation of the company’s situation in the context of its competitors, and the identification of tasks and areas that need improvement.
- It facilitates the rational use of resources, including personnel, since planning facilitates the assignment of responsibilities and coordinated work .
- Once the goals of the company have been established, it allows evaluating various strategies according to their effectiveness .
- Establishes the financial framework.
The executive summary should not miss the needs and objectives.
After the cover and table of contents, the executive summary gives an overall impression of the project . For that, you must highlight the key data of the same and include all the relevant information .
Among this information should not be missing the needs and objectives of the business , the advantages offered by the product or service and the opportunity offered by the market, as well as the history of the company and its management team.
Most of this information will be expanded upon in the rest of the document.
Insertion in the market
The projected product or service must be described in detail and its possible insertion in the market explained. For that, it is necessary to make a comparison with similar products or services that already exist in the market.
The project arises to cover an existing need in the market, which is why potential consumers must be identified and what advantages or weak points they will find in the proposed product or service.
The relationship between the product and the market must include a SWOT analysis (strengths, opportunities, weaknesses, threats).
Potential competitors are identified in a business plan.
Once the market that will be the context of the business has been identified, said market is described in depth. This includes:
- Size, rate of growth and potential benefits offered.
- What segments does it include?
- Locate it geographically.
- Identify possible competitors, substitutes and complements.
- Define means of audience research.
It details who makes up the management team , but also the characteristics of the work team: how the company will be managed, the history of the personnel involved, the general experience of the company, the various areas of management, sales, stock control and quality.
Promotional strategies are described, taking into account “the four P’s” : product , price, advertising , points of sale.
Business system and schedule
The schedule specifies when to activate each of the passes.
All the necessary steps are described from the manufacture of the product to the moment of purchase or completion of the service. It includes the areas of human resources , sales, commercial, management and organizational culture .
The schedule must specify when each of the necessary steps will be activated (hiring or relocation of personnel, start of production, purchase of raw material , etc.).
A business plan must determine the management of income.
The accounting-financial area allows detailing the structure and composition of social capital , as well as calculating capital flows and valuing the investment.
Sources of income are analyzed and a plan is created that determines how profits and losses will be managed . If it is a search for risk capital, what are exit alternatives for investors should be included?
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