WHAT IS THE OBJECTIVES OF A BUSINESS PLAN?
Besides, why I need write a business plan, I always been asked by entrepreneurs what are the real objectives of writing a business plan.
Well, wish I could tell them surely there is a reason for you or your subordinates for having found myself as a business plan consultant.
As an entrepreneur myself, I sure you too very much concerned with every aspect of your business and need to have clear goals in mind for your company. This is where a business plan assists all of us to focus on prime reason for the establishment.
What is A Business Plan?
We have discussed this briefly on our Business Plan Services pages.
Just to recap a business plan is a tool for internal and external communication that provides a statement of where a business intends to go mostly next 5 years. The documents that outline goals and details how you plan to achieve those goals of your business organization.
The business plan can be in several formats. While the structure and length may vary from format to format, there is one common central theme regarding the development of a business plan: it is absolutely necessary.
Without some form of plan, a business is doomed to almost certain failure.
Why should a potential business owner go to the trouble of creating a written business plan?
Business plan objectives are all very well, but even when you have turned them into SMART objectives , what do you do with them?
Here are some examples of objectives:
- Increase sales volumes by 18% in the next year
- Increase profits by 35% in the next year
- Reduce expenses by 17% in the next year
- Settle BAC Bank loan within the next twelve months
These objectives are not always finance related, but much more than that.
Once a business plan has been written, it is no good pushing into a file and ignoring it. It is only useful if it continues to live, be maintained and developed.
A business plan is vital to helping you get finance.
The business plan also serves as a written document to communicate effectively to potential future stakeholders such as investors (family, friends, angel investors, etc,) partners and managers.
For investors and for the founder of the business, valuation of the pre-startup business is a difficult task; in contrast, it is much easier to arrive at the valuation of an operating business—annual revenue, annual profits/loss, units sold, inventory, cash, brand recognition/loyalty, supply and distribution networks, etc. can be used to arrive at the valuation of the business for new or additional investment in the business.
In the case of a pre-startup investment, when there is no business in operation, the business plan becomes the single biggest input in arriving at a mutually agreeable valuation before an investor could invest in return for ownership in the business (Example: $100,000 dollar investment would get 10% ownership in a startup valued at one million dollars); remember, “no valuation→ no investment.”
- It is a living document that it is constantly improved and refined.
- In the process of developing the business plan using unfamiliar decisions, the entrepreneur becomes aware of the uncertainties facing the startup before implementation/execution.
- It can serve as a useful road-map in the initial Execution Phase of the startup.
A business plan can help you prioritise
A complete, thoughtful business plan is one of the most valuable tools in helping you reach your long-term goals. It gives your business direction, defines your objectives, maps out strategies to achieve your goals and helps you to manage possible bumps in the road.
Preparing a business plan will help you work out the goals you want to achieve, and the strategies to achieve them. This means you can focus your resources and energy on what you need to do, rather than spreading yourself too thin.
The planning process also helps you to consider possible bumps in the road and put a plan in place to better manage them if they do come up.
Once you’ve got a business plan in place, it’s a good idea to regularly review and update it to:
- remind yourself of your goals and priorities
- assess whether your strategies are working
- adapt to any new changes in your environment
- make the most of new opportunities as they come your way.
A business plan can give you control over your business
Developing your business plan helps you to step back and look at what’s working in your business and what you can improve on.
If you have employees, the planning process can be a good opportunity to seek their feedback on possible ideas and improvements. Your employees will value this opportunity to contribute to the business.
Taking the time out of your business to plan will give you a sense of control about the future of your business and pay off in the long run!
Business planning can seem overwhelming and time-consuming, but many successful businesses look at it as an opportunity.
The planning process helps you learn about the different forces and factors that may affect your success. If you’re already in business, it helps you to step back and look at what’s working and what you can improve on. Instead of worrying about the future, a business plan helps to give you a sense of control over your business and your livelihood.
Writing and researching for your business plan gives you the chance to:
- learn about your industry, market and competitors
- write down exactly where you are in the market and where you’re headed
- identify challenges you may come across and work out strategies to avoid or overcome them
- understand your business finances, including managing cash-flow and determining your break-even point
- set specific goals, timeframes for achieving them and how you’ll measure performance
- make sound business decisions that focus your activities, maximise your resources and give you a competitive edge.
Be prepared to make unfamiliar decisions
Naturally, the business plan includes the anticipated financial results of the business model implemented and functioning over a three or five-year period; it projects sales, revenue, all major costs, and anticipated profits. Estimation of costs, revenue, and profits forces the entrepreneur to make numerous unfamiliar decisions in the preparation of the business plan.
Dealing with these unfamiliar decisions while developing the business plan, prepares the founder of the business for the reality that lies ahead when the business gets off the ground.
Why not formalize it?
If you have ever jotted down a business idea on a tissue paper with a few tasks you need to accomplish, you’ve written a business plan, or at least the very basic components of one. Why not formalize it?
At its heart, a business plan is just a plan for how your business is going to work, and how you’re going to make it succeed.
suggested further reading : How to Make your Business More Profitable?