What is a business plan and what purpose they serve?

What is a business plan and what purpose they serve

A business plan (also known as a business project or business plan) is a document that describes and explains a business that is going to perform as well as different aspects related to it, such as its objectives, the strategies they will use to achieve those objectives, the production process, the investment required and expected returns.

Business plan is a complex task for which it is necessary to gather a wealth of information and do thorough research; but the truth is that it is a task that anyone who has very clear goals want to achieve with the plan and know its structure, can perform.

What is a business plan and what is its usefulness?

To develop a business plan there is no defined structure, but we can take the best fit according to the objectives we want to achieve with the plan, but always making sure that it will order and make it easily understandable for anyone read it.

A common structure that includes all parties should have a business plan is as follows:

  • Executive Summary: The executive summary is a summary of the other parts of the business plan, including a brief description of the business, the reasons for its implementation, the team, the required investment and profitability.
  • Definition of the business: in the definition of business the business and the products or services that will be offered, business objectives and strategies for achieving those objectives described, and basic business data indicated, such as name and location. Visit, ANGEL INVESTORS
  • Market: in the market study describes the main characteristics of the target audience and future competition, and demand forecasting and marketing plan are developed.
  • Technical study: the technical study of the physical requirements necessary for the operation of the business, the production process, infrastructure and size of local production capacity and plant layout are described.
  • Organization: The organization’s legal and organizational structure of the business described, areas or departments, positions and functions, the requirement of staff, personnel costs and information systems.
  • Study of investment and financing: in this part of the investment that will be required to launch and operate the business during the first production cycle, and external financing to be searched if any notes.
  • Study of income and expenses: in this part projections of revenues and expenditures of the business are developed, including the budget sales, intended to cash or projected cash flow and the operating budget or profit and loss projected.
  • Project evaluation: Finally, this part of the financial evaluation of future business is developed, which includes calculating the payback period of the investment and the results of the profitability indicators used.

It is usually thought that a business plan is only made when starting a new business; but the truth is that this is also often developed when there is already a going concern and, for example, is launching a new product to market, venturing into a new market, or enters a new category of business.
It is often also thought that a business plan is something that only is responsible for large companies; but the truth is that no matter whether it is a large or small business, developing a business plan is a stage that every entrepreneur should spend the time to start, especially today, where because of the high competition, the chances of bringing up a new business are not very favorable.
The reasons why it is important to always prepare a business plan, are basically three:

Administrative reasons

A business plan serves as a guide to implement and subsequently manage a business, to serve as an instrument of planning, organization, coordination and monitoring and evaluation.

It serves primarily as a planning tool because it allows us to plan the use of resources, strategies and courses of action or steps, and be more efficient in the implementation and subsequent management of the business, reduce uncertainty and minimize risk But also serves as an organizing tool as it allows us, among other things, determine who will be responsible for carrying out the activities required for the implementation and management of the business, as an instrument of coordination as it helps us coordinate these activities, and as an instrument monitoring and evaluation as it enables us to compare the results with those planned.

Feasibility reasons

A business plan also allows you to check the feasibility or feasibility of a business; ie whether it can be carried out or is necessary to find new ideas.

For example, market research, allows us to know if the product or service that will be offered will or not be well accepted by consumers, or if we have the resources and capacity to cope with competition existing.

Also, the calculation of investment and projected income and expenses, allows us to know the profitability of the future business, so you know, in addition to whether or not the business is not viable, if sufficiently attractive in terms of profitability as to be carried out or is better to look for other alternatives.

Reasons financing

Finally, a good business plan can prove to others the viability of a business and its attractiveness of this and therefore helps to get financing.

For example, in case you want to get a loan, it allows us to prove to a bank, financial institution, or lender (including family and friends who doubt lend money) that our business will be profitable and that we will be able to pay the debt on time, and so we can convince them that we grant.

Or, if seeking an investor or a partner for our business, allows us to demonstrate the attractiveness of our idea, the seriousness of our project and the future profitability of the business, so we can convince them to invest or partner with us.

To learn how to develop a business plan, we invite you to read our guide: how to develop a business plan step by step.

Other resources that may be helpful:

6 Ways Digital Marketing Services Help To Scale Up Your Business

The Uber for X Business Model: A Guide for Entrepreneurs

5 Outbound Sales Tips For Gradual Business Growth

Create Personal Branding To Get Business Ready

Top 10 Ways to Make Your Small Business More Visible on the Internet