The business plan is an important management tool. The document can and should be used by entrepreneurs who are structuring the creation of a new business or by entrepreneurs who are planning new business units. Check out in this article the importance of a business plan and how to do it.
What is a business plan?
According to the John Labunski definition, a business plan “describes in writing the objectives of a business and what steps must be taken to achieve these objectives, reducing risks and uncertainties.”
The business plan will help the entrepreneur to know if the idea is viable. In addition, it will also assist in the search for more detailed information about the sector, products and/or services that will be offered, customers, competitors and suppliers. One of the main benefits of writing a business plan is discovering the strengths and weaknesses of this new idea.
How important is a business plan?
The entrepreneur should think of the business plan as a tool that will help in the planning process. Therefore, there is only reason to plan if it is clear where you want to go. It is important to think about how the company will be in 5, 10, 20 years.
The growth objective for the future of the company can be related to different areas: number of customers, revenue, market share, profits, among others. But to reach the goal, you need to plan each step.
Where to start?
The business idea is the starting point for any venture. But just the idea is not enough for good planning. You need to think about what your main products or services will be, who your customers will be, what profit you expect to get from the business and how long you expect to receive the return on investment.
It is important to note that some points should not be overlooked when creating a new business or planning a new business unit. As, for example, the professional experience and attribution of the entrepreneurs. And also the definition of the legal form of the company, the tax framework, the share capital and the source of resources.
Then, it starts with a market analysis where customers (characteristics, interests, behaviors), competition and suppliers will be studied.
The marketing plan must also already be inserted into the business plan. Here it is important to focus on the description of the main products and services offered, prices and promotional strategies.
Another key part of good business planning is financial analysis. It is necessary to think about the estimate of fixed investments, working capital, estimates of the company’s monthly invoicing, material and raw material costs, marketing costs, fixed costs, etc.
After finalizing the business plan, it is recommended that the entrepreneur simulates different values and situations for the company. These simulations should be both pessimistic (fall in sales) and optimistic (income growth). From there, one should think of actions to avoid adversities or to enhance favorable situations.
With the business plan completed, the entrepreneur must then go on to manage the company. From now on, the process can be extremely dynamic and the steps must be reviewed at any time. It will be up to the entrepreneur to review and update the business plan periodically.