What is a business plan?
A business plan/business proposal is a document that presents an investment idea in writing. It gives a step-by-step outlay of the activities to be undertaken. It is a formal statement of business goals, reasons they are attainable, and plans for reaching them. 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.
Composition of a business plan?
Executive Summary: It gives a brief description of the whole business idea.
Background Information: It gives a brief overall history. It talks about the origin or dynamics in the growth of the business and the industry.
Project concept: What entails the business activity? It talks about the projects and gives project details regarding the; Why, when, where and how
Technical Aspects: It explains the type and specifications of the machinery that will be used for production and whether or not the firm has the required technical capability in relation to operating the machinery.
Raw Materials and Other Inputs: The basic production components i.e. what goes into producing the final product?
Organization and Management: Explains the organization structure and management and how effective they are.
Marketing and Market Analysis: Plans to create demand for the product.
Sales Strategies: How to achieve desired sales by satisfying the demand.
Funding Requirements: The capital required to start and run the business.
Financial Projections: Estimates of the future financial performance of the business.
Economic Analysis: It is an analysis of the economic impact of the business venture on the other businesses and the general society around it.
Risk Assessment: What are the chances of failure, or the opportunities available?
Environment, Social and Gender Issues: The impact of the business on the environment, corporate social responsibility and the inclusion of both gender.
Users of a business plan?
- The entrepreneur who are intending to start a business venture.
- Financial institutions. To determine the funding requirements and the proposed funding utilization strategy in order to determine the credit worthiness of the borrower.
- The company management. Acts as a guide for the implementation of the project.
- Potential investors or business partners. Evaluate the business and decide whether to invest or not.
- Company employees. Helps the company to have a sense of direction.
Purpose of a business plan
When establishing a new business: The plan is used to establish the right steps to starting a new business, including what you need to do, what resources will be required, and what you expect to happen.
Grow your existing business: Help establish a strategy and allocate resources according to strategic priority.
It is a tool to secure funding: Banks and most of the credit offering facilities will consider offering you a business loan only with a properly done business proposal (mostly in manufacturing).
Know if, when, and how you are making money: The business plan indicates when income and expenses are expected. This makes it easier for an investor to plan for limited operational finances.
Share and explain business objectives with your management team, employees, and new hires: Makes selected portions of your business plan part of your new employee training.
A map for the future: Business plan gives a detailed description of all that needs to be done in order to get to the set destination. There is a sequence of activities.
The business plan shows strategic ways to market the product or service being offered: It enables analyzing the market which in turn helps set up strategies on how to induce demand.
A guide for decision making: A business plan can prevent you from making a hasty decision that leads you astray. This helps to avoid time and resource wastage.
Recruitment: A business plan helps you identify the employees’ requirements hence enabling fill the gaps.
Manage Company: A business plan conveys the organizational structure of your business, including titles of directors or officers and their individual duties. This enables everyone to have their targets outlined properly.
Help manage bootstrapping financing: Help start-up a business from scratch and build it up with minimal outside investment and finances.
Sell your business: Usually, a business plan is a very important part of selling the business. Help buyers understand what you have, what it’s worth and why they should it over it.
Valuation of the business for formal transactions related to divorce, inheritance, estate planning and tax issues: Valuation is the term for establishing how much your business is worth. Usually that takes a business plan, as well as a professional with experience. The plan tells the valuation expert what your business is doing, when, why and how much that will cost and how much it will produce.
About the Author
Thank you for reading this article. The author, James Ndambiri is an avid Business Advisor and Consultant: A Tax Surgeon, Proficient Accountant, Skilled Auditor, a Guru in Financial and Investment management, Expert in Business Strategy Formulation, Business Transformation Wizard, Family Business Advisor, Lecturer, Business Coach and a Family Man.
James is the Founder, Team Leader, CEO & Managing Partner of MNC Consulting Group. MNC Consulting Group is your most trusted and respected professional business consulting firm recognized by our clients for delivering excellent business advisory and consulting services that create value to their ventures. With our focus set on value addition, we offer our clients the highest quality professional services in Accounting, Audit and assurance, Tax, Business Transformation, Investments and Financial Advisory, Family Business Advisory, Company Secretarial Services and Property Management that addresses their business needs through attracting, recruiting and retaining knowledgeable and passionate professionals who enable us to deliver superior results while contributing positively to the community in which we live and work.
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