business-plans

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The meaning and purpose of business plans

A business plan sets out key aspects of a business and how the owners intend it to develop
The main aim of producing a business plan is to reduce the risk associated with starting a new business and help the owners raise finance
- Producing a business plan forces the owner to think about every aspect of the business before they start, which should reduce the risk of failure
- Having carried out research to support the plan, the business will be well-informed about the potential problems and chance of success
- They can use it to select the most appropriate source of finance based on this information
A well-written business plan can help a business obtain finance
- Lenders (e.g. banks) and other investors will be able to explore the plan and make an informed decision about whether the business is credible and worth the financial risk
- Investors (e.g., venture capitalists) will use the business plan to explore whether there is an opportunity to increase the value of their investment and make a worthwhile profit

A business plan should be a regularly-updated working document
- As the business grows plans are likely to change as it faces new threats and opportunities

This section provides an overview of the business idea, its unique selling proposition, target market, and financial projections
- It should be concise yet compelling enough to grab the reader’s attention

A description of the business mission, vision, and values
Information about the legal structure, location and any unique advantages or intellectual property the business may have

A thorough analysis of the target market, including its size, growth potential and key trends
Identification of target customers and their needs
A competitor analysis to understand their strengths and weaknesses

A detailed explanation of the products/services the business will offer, highlighting their features, benefits and any competitive advantages they may have

A description of the intended marketing and sales approach, including marketing channels, pricing strategy and promotional tactics
A description of how customers will be attracted and their loyalty captured

An overview of the organisational structure of the business and the key members of the team, including their qualifications, experience and responsibilities

A description of how the business will operate on a day-to-day basis, including the production process, stock management and any key partnerships or suppliers

A detailed financial forecast for the business, including cash flow forecasts
An outline of funding requirements and any existing or potential sources of finance

A consideration of the potential risks and challenges the business may face and the intended strategies for mitigating them

While business planning has numerous benefits, it should be weighed against a range of drawbacks
- A business plan is only as good as the research behind it and the individuals who produced it

Advantages	Disadvantages
A business plan helps owners and managers set aims and objectives Owners of business can use the plan to review ideas and see if they have the potential to make a profit Success can be measured by comparing actual outcomes to the plan, and changes can be made if necessary Plans can support applications for finance, such as bank loans	Uncertainty of what will happen in the future makes it hard to predict sales, costs and cash flows New business owners may lack the experience to write effective business plans, limiting their usefulness They take time and effort to put together, which may be difficult for small businesses to afford Opportunities can be missed if they are not in the business plan