A business plan is a document that provides detailed information about a business, including its description, location, objectives, financial projections, and direction from the beginning stage to its future vision.
Writing a business plan accurately, briefly, and clearly is an essential business skill. This is because writing, particularly in a business context, fulfills four important roles:
- It conveys information by communicating intentions, objectives, opinions, ideas, ongoing developments, and future plans. Written material — in any format — can also be conveniently filed and stored as a permanent record.
- It clarifies information by helping eliminate misunderstandings. Writing forces the writer to think carefully about and clarify the subject being discussed. Ideas tend to become more organized and strengthened when they are written down.
- It reflects seriousness on the part of the writer. Committing a project to writing demonstrates intent, dedication, and commitment.
- It holds people accountable. Poor communication is often blamed for problems such as:
a) credibility issues,
b) incompetence, and
c) differences in beliefs or expectations. These situations can often be avoided through the use of clear and concise information. Writing also provides a guide that can be used to measure progress, compare ideas with others, and evaluate future results.
Why Write a Business Plan?
When one considers that the number one reason why many new businesses fail is a lack of planning, the importance of writing a business plan becomes obvious. Do not try to avoid the time and effort required to prepare a comprehensive plan.
A well-researched business plan makes it possible to:
- define and refine a business concept,
- maintain focus on objectives,
- identify and correct weaknesses before they become major problems,
- recruit personnel by defining required roles and skills,
- create a roadmap that guides the business through challenging environments,
- convince investors that the business idea is viable,
- convince lenders of the entrepreneur’s ability to repay loans,
- convince potential customers that the business will serve them reliably, and
- obtain necessary permits and licenses.
The main purpose of a business plan is to compare the potential sales of a product or service against its expected expenses. Put another way, a business plan is not a platform for an entrepreneur to boast about how creative or wonderful an idea may be. What matters more is what potential customers think about the product and what market research reveals.
As discussed in business research, the purpose of market research is to:
- Determine who will buy the product or service,
- Find out how many people are likely to buy it, and
- Discover whether the market is strong enough to sustain future sales.
For example, a business planning to sell ice cream needs to know how much it will cost to produce, sell, and store the product. This includes the cost of raw materials, equipment, licenses, utilities, transportation, labor, and other operating expenses.
Final Thoughts
A business plan is very important both before and after establishing a business. You should prepare it carefully and accurately after conducting proper market research and developing the right attitude and commitment toward the business venture.