Reviewed by Aug 27, 2020| Updated on
What is meant by Business Plan?
A business plan means a document which is a written detailed description of how business, usually a new one, will achieve its goals. A business plan sets out a written plan from a financial, marketing, and operational viewpoint.
Business plans are crucial for a company to lay out its goals and draw investments. Alternatively, they are a way for companies to be on track in the future. Even though they are particularly useful for new companies, every company must have a business plan.
Ideally, a company would look back into the plan regularly to check if goals are met; they may have changed and evolved over time. Sometimes, a new business plan is developed for an established business which is moving in a new direction.
Business Plans Explained
A business plan is a basic and vital tool that any startup business must have in place prior to beginning its operations. Normally, banks and venture capital firms make a feasible business plan as a necessity before investing funds in a business.
Even though it may work, functioning without a business plan is not a good approach. Very few companies can persist without one. There are surely more benefits to creating and adhering to a business plan which includes exploring ideas without spending too much money and finally losing in the end.
A good business plan must outline all the costs and the downfalls of each resolution a company makes. Business plans are rarely identical, even among competitors in the same industry.
But all of them tend to have the same elements. These include its services and/or products, an executive summary of the business, and business description in detail. It also declares how the business plans to achieve its goals.
The plan should cover at least an overview of the industry of which the business forms a part of, and how it will differentiate itself from its potential competitors.
Types and Elements of Business Plans
Business plans aid companies to identify their objectives and stay on track. They can help companies begin and manage themselves, and to help run and develop after that. They also act as a way to get people to work with and invest in the business.
Although no business plans are termed as right or wrong, they can be classified into two categories as a traditional or lean startup. The most common one is a traditional business plan, according to the Small Business Administration. They are conventional, with much more detail in each segment. These usually are much longer and require a lot more efforts.
On the other hand, lean startup business plans use a standard structure, although they are not as regular as in the business world. These business plans are short, maybe one page having very little detail. If a company uses this plan, they are expected to give more details when an investor or lender requests it.
Some of the common and most essential parts of a business plan are listed as follows:
- Executive summary
- Products and services
- Market analysis
- Marketing strategy
- Financial planning