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What is a business plan, and what are its main parts?

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enotes | (Level 1) Valedictorian

Posted March 3, 2014 at 11:17 PM via web

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What is a business plan, and what are its main parts?

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sciencesolve | Teacher | (Level 3) Educator Emeritus

Posted March 10, 2014 at 6:36 PM (Answer #1)

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The business plan sketches out the services or products a company wants to sell, the targeted objectives, the marketing strategies and the business model followed, capital required and financial projections.

The successful implementation of the business plan needs to take in consideration the customers and the market competition. The important elements of a business plan are company description and strategy, business environment, action plan and financial review.

The company description must emphasize the special abilities (technologies, operations, services, finances) that the company has as an advantage over competitors.

The company strategy must present the marketing plan of the company. The marketing plan needs to contain specific details regarding the methods that company will use to sell the products or services.

The business environment presents the place of the company on the market, the customers needs, the competitors, the superiority of the company's products or services with respect to the available products.

The financial review must present the state of the company's finances, such as budget, cash flow, balance sheets and financial projections. The forecast of revenue and profit growth presented by the management team must be realistic.

The action plan presents the stages in implementation of the business plan in order to reach the targeted objectives presented in plan.

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sid-sarfraz | TA , Graduate | (Level 3) Honors

Posted November 27, 2014 at 5:07 PM (Answer #2)

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BUSINESS PLAN

Basically a business plan is the system of ideas, relationships etc to achieve a company's objective. In short a business plan is a systematic approach to achieve any goal or objective.

In its simplest form, a business plan is a guide—a roadmap for your business that outlines goals and details how you plan to achieve those goals.

WHO NEEDS A BUSINESS PLAN?

  • Startup business
  • Existing businesses for launching any new thing or expand their business etc

DIFFERENT FORMS OF BUSINESS PLANS

  • Start up plan

A startup plan, also called a feasibility plan, is a very simple business plan to discuss your options with potential partners and associates. 

It typically includes the following sections:

  1. an executive summary,
  2. a company overview,
  3. a mission statement,
  4. a market analysis
  • Internal plans

Internal plans will reflect the needs of the members of your company. Since the purpose of an internal plan is specific to the people directly involved with the company, it will most likely be shorter and more concise than a fully detailed standard plan that you’d take to the bank. Internal plans are not intended for banks, outside investors, or other third parties.

Types are as follows:-

  1. Operational plan or annual plan
  2. Growth or expansion plan
  3. Strategic plan
  • One - page business plan

A one-page business plan is exactly what it sounds like: a quick summary of your business delivered on a single page.

It serves two purposes:-

  1. It can be a great tool to introduce the business to outsiders, such as potential investors. 

  2. This simple plan format is also great for early-stage companies that just want to sketch out their idea in broad strokes. 
  • External business plan

External business plans, the formal business plan documents, are designed to be read by outsiders to provide information about a business.

The most common uses are:-

  1. To convince investors to fund a business
  2. To support a loan application.
Occasionally this type of business plan is also used to recruit or train or absorb key employees, but that is much less common.
  • Financial plan

is a critical component of nearly all business plans. Running a successful business means paying close attention to how much money you are bringing in, and how much money you are spending. A good financial plan goes a long way to help determine when to hire new employees or buy a new piece of equipment.

A typical financial plan includes:

  • Sales Forecast
  • Personnel Plan
  • Profit & Loss Statement
  • Cash Flow Statement
  • Balance Sheet

MAJOR GROUPS OF BUSINESS PLANS ARE AS FOLLOWS:-

  • The Miniplan. A miniplan may consist of one to 10 pages and should include at least cursory attention to such key matters as business concept, financing needs, marketing plan and financial statements, especially cash flow, income projection and balance sheet. It's a great way to quickly test a business concept or measure the interest of a potential partner or minor investor. It can also serve as a valuable prelude to a full-length plan later on.
  • The Working Plan. A working plan is a tool to be used to operate your business. It has to be long on detail but may be short on presentation. As with a miniplan, you can probably afford a somewhat higher degree of candor and informality when preparing a working plan.
  • The Presentation Plan. If you take a working plan, with its low stress on cosmetics and impression, and twist the knob to boost the amount of attention paid to its looks, you'll wind up with a presentation plan. This plan is suitable for showing to bankers, investors and others outside the company.

The big difference between the presentation and working plans is in the details of appearance and polish. A working plan may be run off on the office printer and stapled together at one corner. A presentation plan should be printed by a high-quality printer, probably using color. It must be bound expertly into a booklet that is durable and easy to read. It should include graphics such as charts, graphs, tables and illustrations.

  • The Electronic Plan. The majority of business plans are composed on a computer of some kind, then printed out and presented in hard copy. But more and more business information that once was transferred between parties only on paper is now sent electronically. 

PARTS OF A BUSINESS PLAN

Three primary parts of a plan are as follows:-

  • Business concept
  1. Discuss the industry,
  2. Business structure,
  3. Particular product or service
  4. How you plan to make your business a success
  • Marketplace Section
  1. Describe and analyze potential customers: who and where they are, what makes them buy and so on.
  2. Describe the competition and how you'll position yourself to beat it.
  • Financial Section
  1. Contains your income and cash flow statement,
  2. Balance sheet and other financial ratios, such as break-even analyses.
  3. This part may require help from your accountant and a good spreadsheet software program.

Breaking these three major sections down even further, a business plan consists of seven key components:

  1. Executive summary
  2. Business description
  3. Market strategies
  4. Competitive analysis
  5. Design and development plan
  6. Operations and management plan
  7. Financial factors

VARIOUS PLANS USED FOR SEPARATE PURPOSES:-

  1. Use your one-page business plan to quickly outline your strategy. Use this document to periodically review your high-level strategy. Are you still solving the same problem for your customers? Has your target market changed?

  2. Use an internal plan to document processes that work. Share this document with new employees to give them a clear picture of your overall strategy.

  3. Set milestones for what you plan to accomplish in the next 30 days. Assign these tasks to team members, set dates, and allocate part of your budget if necessary.

  4. Keep your sales forecast and expense budget current. As you learn more about customer buying patterns, revise your forecast.

  5. Compare your planned budgets and forecasts with your actual results at least monthly. Make adjustments to your plan based on the results.

Ten Characteristics of an Effective Business Plan

 1. Planning for business should be a process not an event. Even if it is designed to produce a tangible output like a business plan to be studied by potential investors, it is the process of planning which will ensure focus, commitment and understanding, not the plan itself. 

2. The process should be continuous, frequently reviewed and updated. A "once a year" formal meeting is likely to produce significant omissions, constrain creativity and invite people to switch-off from strategic and tactical thinking for the rest of the year.

 3. It should directly involve everyone accountable for implementing the business plan. It should also involve, whether directly or indirectly, everyone in the organisation at some stage. The purpose of involvement is to secure deep understanding and commitment.

 4. Business planning should be led but not constrained by strategy. Objectives and action plans are extremely difficult to set without an idea of their purpose and focus.

 5. To ensure communication is simple and action effective, business planning should define a few, harmonised priorities.

 6. When planning for business, organisations should have a good understanding of:

  • Clients, their current and anticipated needs and behaviour; how these may change 
  • The market within which the organisation operates and how it is likely to develop in the future 
  • Competitive forces and how they are likely to evolve in the medium to long term
  • Macro factors affecting the organization and their likely impact 

7. It should attempt to balance this analysis of the external environment with a clear understanding of its internal resources and competences 

8. The organization’s strategic purpose and intent should derive from decisions about how best to manage its resources and competences in order to prosper in the environment in which it operates

 9. The process should seek to capture what the organization has learned from its past, from its competitors, suppliers and customers, and from its own people 

10. Finally, planning and review should be lock-stepped together. This means defining plans in terms that are measurable, but also ensuring that frequent reviews examine progress, as well as the effectiveness of the plans themselves.

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