A business plan outlines the future formal description an entrepreneurial organization. It is usually written down and formalized to all the stakeholders of the business organization. Also, the plan is the statement that outlines the goals, plans laid down to make sure they are attained clearly, and reasons why the organizations have faith on their actual attainment (Hisrich, Peters, & Shepherd, 2013).
Apparently, a business plan possesses some ideas on its projected state, suggestions on the target implementers such as organizations, and information about the associated stakeholders. These details are important within the plan because all linked parties will take roles towards achieving the business goals as outlined within the planning document.
Business plans are categorized into two types. This categorization is done according to the people that have these plans directed to them. The business plans are either focused externally or internally (The U.S Small Business Administration, 2013). Business plans directed externally are those whose audiences are stakeholders of the commerce coming from the external end. These include shareholders from the public, investors, donors, and customers of the business. Internal plans direct the departments and stakeholders within the organization towards reaching the goals stated in the written documents. In this type of business plan, the steps to be followed in introducing new products, improved services and restructuring of departments within the firm are highlighted.
Business plans are crucial and necessary for the success of a business firm. It is known as the strategy that makes most businesses competitive and successful. For entrepreneurs, a business plan is one tool they should never omit. It is advisable for those coming up with new ventures to formulate their strategies and procedures through such planning before starting their operations.
The Scope and Value
When writing down the business plan, the issues and needs that concern all the stakeholders of the organization should be considered. This implies that the management, shareholders, customers, suppliers, and employees will have their interests addressed. Furthermore, it shows the big scope covered in the plan.
A business plan is vital to the entrepreneur since it makes sure there are goals and objectives for the business venture that the organization or entrepreneur is targeting. This is crucial since it will help to keep the business on focus. The business plan also gives guidance on the planning to be initiated for the implementation of the identified ventures. It is also valuable because it helps in checking the viability of a business venture to an organization or entrepreneur. This is useful because investors pay attention to the relevant ideas in the business. In addition, the planning is essential when getting the information required to get funding and approval from the management (Berry, 2013).
There are many reasons as to why one should have a business plan for his/her small or big firm. Many small businesses do not identify the needs of making these plans which explains their increasing closure attributed to sustainable strategies. On the other hand, organizations and persons insisting on having business plans for their entrepreneurial ventures end up being successful in most occurrences. The following paragraphs comprise the importance of the business plan.
Management having Specific Objectives
A business plan states all objectives of the organization where the managers have specific aims to achieve among them. This is beneficial to the business because the organization will be able to assess the performance of the managers easily by checking the strategies they have implemented to achieve the identified goals. The presence of these specific aims is also important to the managers since it enables them in setting strategies that can work best, and also track their own performance to ensure provision of the best for the business (Hisrich, Peters, & Shepherd, 2013).
A business plan acts as a vital motivational material to the entrepreneurs and firms. When the interested parties have it with all the set objectives to be achieved written down, they can keep checking if the goals are being achieved in a timely manner. If the stakeholders of the business are able to notice that some of the objectives set have been attained or are almost being achieved, they get the morale to keep on working towards achieving all goals within a specified period. This motivates everyone involved in attaining the goals of the organization to keep working efficiently as the goals are actually attainable.
Keep Stakeholders on Track
In the business plan, there are indications of the goals and identification of the strategies to be followed. This suggests that all the stakeholders and members of the organization will know what part they have to play towards achieving the business goals. Therefore, it will be easy for these entrepreneurs or stakeholders to check if they have moved away from the goals of the business and get back on the right track (Berry, 2013).
One crucial benefit of business plans is that it brings all the stakeholders of an entrepreneurial organization together when working towards attaining the goals. Once the objectives are set, they will have to be worked on jointly by the management and all the other employees for effectiveness in achieving them. The coordination of all the employees of the firm, starting from the top management to the lowest employee, will be an added advantage to the business over its competitors. Teamwork makes the goals easily attainable.
Create Investments for the Business
Investors are usually particular when picking a business to invest their capital. They have to be certain that their investments are safe. To be sure of this, the investors first insist on checking the business plan of the venture they want to put their money into. Therefore, entrepreneurs with well stated business plans stand a high chance of getting financial assistance from investors and other financial institutions.
Most Important Section of the Business Plan
A business plan has sections in which it is presented. The first part addresses the formation and ownership of the company/business. There is also a section that highlights the product to be introduced by the business idea and the market that is targeted. The other part deals with the finances related to the business. Some of the pertinent sections in a business plan are highlighted in the following paragraphs.
The statement of cash flow is among the most vital section of the business plan determining the operations on income generation. For effective running of a business, there must be cash in the organization for it to meet the requirements and pay for expenses incurred while implementing the plan. This entails planning for the cash available to be used in the venture and representing the budget to potential investors. Monitoring cash flow is crucial when assessing the performance of the stakeholders in trying to attain the business goals. Factors like the balance sheets, losses, and profits are important in gauging the performance of the business plan (Hull, 2013).
The part where the strengths, opportunities, weaknesses, and threats of the company are analyzed is also necessary for the business set up. These opportunities and strengths are responsible for making the progress of the business viable. The opportunities make the business have something good to present in the market while the strengths enables the business to face competition in better ways (Hull, 2013). In a business plan, the threats and weaknesses of the company are also analyzed. This is important because the stakeholders get to know what might pull the business down and strategizes on the ways to fix it.
Reasons for Business Plans Failing
Not all the business plans used by business organizations end up being successful in attaining the objectives of the plan. Some of these business plans fail because of misplaced ideas or improper evaluations.
Lack of Long Term Goals
Most companies concentrate on short term goals and forget about the business future when making their plans. This has seen organizations getting stranded after a short period of working on their business plans because it reaches a time when they have no direction or guide. Consequently, the objectives of the business plan end up not being achieved (Lavinsky, 2013).
Failure to Indicate Ones Unique Factors of Success
Different business firms have their own unique factors that put them ahead of their competitors and therefore make them competitive in the sector. Attributes like having a highly qualified management team and getting into a partnership with important companies put an entrepreneur at a better position of succeeding. When these success factors are not indicated in the business plan, the stakeholders in charge of implementing the plan forget to take advantage of them and beat their competitors.
Lack of persistence
For most businesses, it becomes tough when seeking investors to invest their cash in the business ideas they possess. Their business plans can be ignored by many investors due to fear, but giving up remains the last option for an entrepreneur who targets success in his or her ideas. Firms with no persistence would drop their business plans while the ones seeking success will press on until an investors agree to take their ideas (Mastermind, 2013).
The establishment of a business plan is vital to mark the trading progress and inform about the successes as well as failures. It is a strategy of identifying the areas that require changes in order to reach the targets. This research paper, therefore, recommends that all businesses should plan before initiating a progress of any form. In this way, the outcomes of implementing it will have greater chances of being successful than when there are no directions to follow. Moreover, capital wasted due to mismanagement and losses will be lower allowing many investors to gain interest on the business performances within a specified region. However, if an area has a history of failure, the investors will not have the confidence to allocate funds for the business operations in it. This history will not only boost the economy of the host nation, but also provide income to the employees and stakeholders.
Berry, T. (2013). 10 Business Plan Benefits You Might Be Forgetting. Web.
Hisrich, R., Peters, M., & Shepherd, D. (2013). Entrepreneurship. Boston: McGraw-Hill/Irwin.
Hull, P. (2013). 10 Essential Business Plan Components. Web.
Lavinsky, D. (2013). 4 Reasons Business Plans Fail. Web.
Mastermind. (2013). Why Most Business Plans Are Doomed to Fail. Web.
The U.S Small Business Administration. (2013). Create Your Business Plan. Web.