Business Plan: What it is, Why it is needed and How to do it

Last Updated on May 23, 2023

Every business before its launch must have a business plan. The vision of the business has to be planned out and put on paper, so as to not lose sight of it. The drawing board of a business is the business plan. This article will give a better understanding of what a business plan is and its general function and importance.

What Is a Business Plan?

A business plan is a document that outlines the goals, strategy, and financial projections of a business. It typically includes information on the business’s target market, products or services, marketing and sales tactics, financial projections, and management team. A business plan is often used to pitch the business to potential investors, lenders, or partners, and it serves as a roadmap for the business’s development and growth. It should be thorough, well-researched, and well-written, and it should be updated regularly to reflect the business’s changing needs and goals.

A business plan is an important document for a company’s external and internal audiences. For example, business plans are used to attract investment before a company has a solid track record. It also helps secure loans from financial institutions.

Additionally, business plans can be used to keep company management informed of strategic actions and the achievement of set goals.

They are especially useful for new businesses, but every business needs one. Ideally, the plan is reviewed regularly and updated to reflect achievements or changes in goals. New business plans are sometimes drawn up for established companies that decide to move in a new direction.

Read: What are the Top Funding Options for Startup Ventures?

Elements of business plans

The understanding is that no two business plans are the same. Nevertheless, they usually have the same elements. Below are some of the most common and important parts of business plans.

1. Executive summary: This is a brief overview of the business and its goals. It should include a summary of the key points of the business plan and provide a high-level overview of the business’s target market, products or services, marketing and sales strategy, and financial projections.
   
   
2. Company description: This section provides a detailed description of the business, including its history, products or services, target market, and unique value proposition. It should also include information on the business’s legal structure, operations, and partnerships.
   
   
3. Market analysis: This section should review the market in which the business operates, including information on competitors, trends, and opportunities. It should also include an assessment of the business’s target market and its potential size.
   
   
4. Marketing and sales strategy: This section should describe the marketing and sales tactics that the business will use to reach its target market and generate revenue. It should include information on the business’s pricing, packaging, and distribution strategies, as well as any marketing campaigns or promotions that the business plans to implement.
   
   
5. Service or product line: This section should provide a detailed description of the products or services that the business offers, including information on their features, benefits, and pricing. It should also include information on how the products or services will be delivered to the customer.
   
   
6. Financial projections: This section should include a detailed financial plan that outlines the business’s expected revenues, expenses, and profits over a set period of time. It should include a profit and loss statement, a cash flow projection, and a balance sheet.

Types of business plans

There are several types of business plans, including:

1. Startup business plan: This type of business plan is used by businesses that are just starting out and are looking to secure financing or attract investors. It typically includes information on the business’s target market, products or services, marketing and sales strategy, and financial projections.
   
   
2. Internal business plan: This type of business plan is used by businesses to outline their goals and strategies for internal purposes. It may include information on the business’s operations, resources, and capabilities, and it may be used to guide decision-making and resource allocation within the business.
   
   
3. External business plan: This type of business plan is used to pitch the business to external stakeholders, such as investors, lenders, or partners. It typically includes similar information to a startup business plan, but it may be more detailed and include information on the business’s competitive advantage, market analysis, and financial projections.
   
   
4. Strategic business plan: This type of business plan is used to outline the long-term goals and strategies of a business. It may include information on the business’s vision and mission, its target market, its products or services, and its financial projections. It may also include information on the business’s internal operations, resources, and capabilities, as well as its external environment and competitors.
   
   
5. Operational business plan: This type of business plan focuses on the day-to-day operations of a business. It may include information on the business’s processes, systems, and resources, and it may be used to guide decision-making and resource allocation within the business.

Overall, the type of business plan that a business uses will depend on its goals, needs, and target audience.

Importance of drawing up a business plan

A business plan is important for the success of a business because it provides a clear roadmap for achieving the business’s goals and objectives. A business plan helps to clarify the business’s target market, products or services, and marketing and sales strategies, and it provides a detailed financial plan for generating profits.

In addition, a business plan can help a business identify potential challenges and opportunities and develop strategies for addressing them. It can also help a business attract investors and secure financing by demonstrating how it plans to generate profits and create value for shareholders.

A business plan can also serve as a useful tool for managing and growing a business. It can help to focus the efforts of the business’s management team and employees, and it can provide a reference point for decision-making and resource allocation.

A well-defined business plan is essential for the long-term viability and success of a business. It helps to ensure that the business has a clear focus and direction, and it enables the business to adapt to changes in the market and take advantage of new opportunities as they arise.

How to draw up business plans

A business plan is a document that outlines the goals, strategies, and financial projections of a business. It is an important tool for entrepreneurs, as it helps them define their business, attract investors, and achieve their objectives.

To write a business plan, follow these steps:

1. Define your business: Start by outlining the nature of your business, its purpose, and the target market you want to serve. Consider factors such as the products or services you will offer, your target customers, and the unique selling points of your business.
   
   
2. Identify your target market. Research your target market to determine their needs and preferences. This will help you tailor your products and services to meet their specific requirements. Consider factors such as demographics, location, and buying habits.
   
   
3. Define your products or services: Describe the products or services you will offer, including their features and benefits. Consider how your products or services will meet the needs of your target market and differentiate them from those of your competitors.
   
   
4. Develop your marketing strategy: Outline the marketing tactics you will use to reach your target markets, such as advertising, social media, and public relations. Consider the most effective channels for reaching your target customers and the resources you will need to implement your marketing strategy.
   
   
5. Create a financial plan: Estimate your start-up costs, projected revenue, and expenses. Include a detailed budget and a projected profit and loss statement. Consider factors such as pricing, production costs, and overhead expenses.
   
   
6. Outline your management and organizational structure: Describe the management team and the roles and responsibilities of each team member. Consider factors such as leadership, decision-making, and communication.
   
   
7. Write an executive summary. This should be a brief overview of your business plan, highlighting the key points and objectives. The executive summary should be concise and easy to understand, and it should be written last so that you can include the most important information.

By following these steps, you can create a comprehensive and effective business plan that will help you achieve your business goals.

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