What is a business plan? It is a documented strategy for a business that highlights its goals and its plans for achieving them. It outlines a company’s go-to-market plan, business purpose, financial projections, market research, and mission statement.
And the purpose of a business plan is three-fold: It summarizes the organization’s strategy in order to execute it long term, secures financing from investors, and helps forecast future business demands.
So, let’s have a look what’s the purposes of a business plan:
(1) Legitimizing A Business Idea
A business plan is an aspiring entrepreneur’s way to prove that a business idea is actually worth pursuing. As entrepreneurs document their go-to-market process, capital needs, and expected return on investment, entrepreneurs likely come across a few hiccups that will make them second guess their strategies and metrics – and that’s exactly what the business plan is for
It ensures an entrepreneur’s ducks are in a row before bringing their business idea to the world and reassures the readers that whoever wrote the plan is serious about the idea, having put hours into thinking of the business idea and fleshing out growth tactics.
(2) Documenting A Company’s Strategy.
A business plan should leave no stone unturned. Business plans can span dozens or even hundreds of pages, affording their drafters the opportunity to explain what a business’ goals are and how the business will achieve them.
To show potential investors that they’ve addressed every question and thought through every possible scenario, entrepreneurs should thoroughly explain their marketing, sales, and operations strategies – from acquiring a physical location for the business to explaining a tactical approach for marketing penetration,
(3) Securing Financing from Investors
Since its contents revolve around how businesses succeed, break-even, and turn a profit, a business plan is used as a tool for sourcing capital. This document is an entrepreneur’s way of showing potential investors or lenders how their capital will be put to work and how it will help the business thrive.
All banks, investors, and venture capital firms will want to see a business plan before handing over their money, and investors typically expect a 10% ROI or more from the capital they invest in a business, need to know if – and when – they’ll be making their money back.
Conclusion
The business plan is a key to securing financing, documenting business model, outlining financial projections, and turning that nugget of a business idea into a reality. Business plans are a required tool for all entrepreneurs, business owners and business acquirers.
A business plan is simply an explanation of a business idea and the more detail you put into it, the more successful your plan – and the business it outlines – will be.
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