A business plan is essentially a road map of your business which details how the business will operate, and it sets out the goals and objectives that you want to achieve.
It usually includes information around the legal status of your business, your target audience, what your marketing strategy is and it identifies the risks to avoid. Your business plan is subject to change as your business evolves and takes shape. Writing one should not be daunting and it does not need to be a 30 page document!
It can be argued that you do not need one to start your business, as there are a number of successful businesses that did not create one prior to launching. People often associate creating a business plan with starting a new business, applying for funding or securing an investment. However, it can be used to simply assist with the day-to-day the running of the business.
A business plan can do the following:
- Outline different areas of the business such as legal status, staff, risk, stock and suppliers.
- Provide structure and a vision for the business.
- Help to set goals and objectives.
- Identify strengths and weaknesses.
- Detail the business income and expenses.
- Assist with securing funding.
- Support growth and succession planning.
If you want to apply for funding, bid for contracts or attract investors, it is worth creating a detailed business plan and a cash flow forecast. A cash flow forecast is a projection of the businesses income and expenses usually over a 12 month period. It will allow the lender to review how viable and profitable the business is.
If you have ever watched ‘Dragons Den’ on BBC Two you would have noticed it often does not matter how unique or innovating the idea is, the investor will always ask detailed questions about the financials of the business, including the price of the product, expected and actual turnover, profit and sales projections. If an investor feels the numbers do not add up, they simply will not invest. This shows the importance of completing the financial section of a business plan.
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In fact, a business plan is much more than that: It's a tool for understanding how your business is put together. You can use it to monitor progress, hold yourself accountable and control the business's fate. And of course, it's a sales and recruiting tool for courting key employees or future investors.