What is a Business Plan? – Origin, Benefits of Developing, and More
Table of Contents
What is a Business Plan?
A business plan assesses the quality of the business itself. It is a roadmap that allows you to address the expected and unexpected opportunities and obstacles that the future holds and successfully navigate that business’s particular competitive environment.
Whether it is a new company, an expansion of an existing firm, a spin-off from a parent corporation, or even a project within the established organization, a business plan is a tool for reflection and work that serves as a starting point for business development.
It consists of writing, with method and order, the thoughts you have in your head. In preparing this document, the business activity environment interprets.
The results that will obtain by influencing it in a certain way evaluate, the variables involved in the project are defined, and the optimal allocation of resources for starting it up.
Origins of a Business Plan
This planning tool had its origins in the United States in the 60s (of the 20th century) due to corporations’ need to invest their surplus capital.
From the late ’70s, as a result of the development boom business around technology, in Silicon Valley, it became popular.
What are the Benefits of Developing a Business Plan?
A business plan helps you make your company’s future as close to what you want it to be, not what “fate” throws at it. Borrello identifies the following benefits:
Determine which are the most promising business opportunities for the company.
It allows determining with greater precision the markets of interest for the company.
And also, it indicates how to participate more actively in those markets.
It provides the basis for deciding the type of products or services that should offer to customers.
And also, it establishes objectives, programs, strategies, and plans to follow, which allow better control of the company’s future development.
Establish a firm foundation for planning all business activities.
It encourages a more rational use of resources.
It allows for assigning specific responsibilities and establishing coordinated work programs.
A plan facilitates the control and measurement of results.
Raise awareness of obstacles that must overcome.
A plan provides a valuable source of information for current and future reference.
The plan facilitates progressive progress towards the most important goals of the company.
It keeps everyone in the group focused on profitability.
It allows the evaluation of alternative strategies.
The plan enables applied and valuable reviews.
It allows the development of more effective sales strategies based on the actual sales potential of the company.
Create a general financial framework of the company.
Determine which are the most critical areas to monitor.
It allows analyzing the situation of the company concerning its most important competitors.
It makes it easier to determine what should be done better and differently from how competitors do.
What are the Characteristics of a Business Plan?
The main characteristics of a good business plan are:
Prioritize key business success factors.
Answer possible questions from investors.
It is sharp, leaves no ideas in the air, and uses precise terms.
It is also short, usually not longer than 30 pages.
And also, it is structured to allow easy reading.
And also, its presentation is impeccable.
General Structure of the Business Plan
The general structure of a business plan could be the following:
It offers a general impression of the project, contains the critical data, and highlights them.
And also, it must provide the reader with all relevant elements, maximum of 3 pages.
Description of the Product or Service
The business plan must begin by identifying the need to be covered and the solution proposal that is nothing more than what plan to develop.
It investors believe more in people with experience or who know the business very well.
It is also interested in the commitment of each member who works in the project’s development.
It must identify the market, size it, segment it, put it in a geographical dimension, analyze the competition and possible new entrants.
It not only direct competitors but substitutes and complementary ones.
It defines the four P’s strategies, always seeking to meet customers’ needs and even better above them.
It describes the steps, processes necessary to manufacture the product or offer the service, interactions, and elements.
And also, it includes personnel planning, aspects of management, development, and organizational culture.
And also, it shows realistic planning of the project, defines the critical path and milestones.
It identifies Weaknesses, Opportunities, Strengths, and Threats.
How to enhance the positive aspects and how to develop strategies to counteract the negative ones.
It is a crucial point, must be a detailed analysis of the financial situation of the business.
It includes the financing needs, the expected results, the possible financing sources, and the generally used financial statements and ratios.
And also, it can include an initial valuation of the business through discounted cash flows.
And also, if venture capital requires, alternative “exit” alternatives should propose to investors.
Highlight realistic, vital factors, including risks.
Steps to Formulate a Successful Business Plan
Stutely indicates the following methodology:
Define your business activities.
Then define the current state of your business.
You must define the external market, the competition you face, and your market positioning.
Define your goals for the period covered by the plan.
And also formulate a strategy to achieve the objectives.
Identify the risks and opportunities.
Map out a strategy to limit risks and exploit the
Refine strategies to work plans.
Project costs and revenue and develop a plan
Document it concisely.
Get the plan approved.
And also, apply it.
The business plan is a formal document prepared in writing that follows a logical, progressive, realistic, coherent, and action-oriented process.
It includes the future actions to be carried out by both the owner and the company’s collaborators, using the organization’s resources.
And also, it seeks the achievement of specific results ( objectives and goals ) and, at the same time, establishes the mechanisms that will control said achievement.