What is a Business Plan? What are the advantages, components for a plan of action?

By | 18.02.2017

The business plan is a detailed description of the business to be undertaken, is a dynamic project in which describes how to operate and develop such business during a given period.

What is a Business Plan? What are the advantages, components for a plan of action?

Definition of a business plan

The business plan is a roadmap that allows you to address the expected and unexpected opportunities. And obstacles that the future holds and to navigate successfully through the particularly competitive environment of that business, whether it is a new company, an expansion of An existing firm, a spin-off of a parent corporation, or even a project within the established organization. 

A business plan is a tool for reflection and work that serves as a starting point for business development. It is written by an enterprising person and in it shapes their ideas, how to carry them out and indicates the goals to achieve and strategies to use. It consists of writing, with method and order, the thoughts that he has in his head. 
The business plan evaluates the quality of the business itself. In the process of realizing this document, the business environment is interpreted and the results obtained are assessed by influencing it in a certain way, defining the variables involved in the project and deciding the optimal allocation of resources for Start it up. 
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The business plan is a formal written document that follows a logical, progressive, realistic, coherent and action-oriented process, which includes in detail the future actions to be taken by both the owner and the employees of the company. To use the resources available to the organization, to achieve individual results (objectives and goals) and at the same time to establish the mechanisms that will control this achievement. 

Origins of a business plan

This planning tool had its roots in the United States in the 60’s (twentieth century) in response to the need for corporations to invest their capital surplus, but it was from the late 70’s, following the development boom Business around technology, in Silicon Valley, when it became popular. 

Benefits of a business plan

A business plan helps you make the future of your business as close to what you want it to be and not to what “destiny” comes to you. Successful ventures identifies the following benefits:

  • Determine which are the most promising business opportunities for the company.
  • It allows determining with more precision the markets of interest for the enterprise.
  • It indicates how to participate more actively in those markets.
  • It provides the basis for deciding the type of products or services to be offered to customers.
  • It establishes objectives, programs, strategies and plans to follow, which allow better control over the future development of the company.
  • It creates a firm base to plan all the activities of the enterprise.
  • It stimulates a more rational use of resources.
  • It allows assigning specific responsibilities and establishing coordinated work programs.
  • It facilitates the control and measurement of results.
  • It creates awareness of the obstacles that must be overcome.
  • It provides a valuable source of information for current and future references.
  • It facilitates the progressive advance towards the larger goals of the company.
  • It keeps all members of the organization oriented towards profitability.
  • It allows evaluating alternative strategies.
  • It facilitates practical and useful reviews.
  • It allows elaborating more efficient strategies of sale from the real potential of sales of the company.
  • Creates the general financial framework of the company.
  • Determine which are the most critical areas to be controlled.
  • It allows analyzing the situation of the company on its most significant competitors.
  • It facilitates the determination of the things that must be done better and in a different way than the competitors do.

Steps to formulate a business plan successfully

Stately indicates the following methodology:

  • Define the activities of your business.
  • Determine the status that your business is currently in
  • Set the external market, the competition it faces and its market positioning.
  • Identify your goals for the period covered by the plan.
  • Formulate a strategy to achieve the objectives.
  • Identify risks and opportunities.
  • Outline a strategy to limit risks and exploit
  • Debug strategies until you get work plans.
  • Project costs and revenues, and develop a plan
  • Document it concisely.
  • Get the plan approved.
  • Apply it.

If you have set your mind for writing an action of the plan, I would recommend you to read this step by step guide to write an absolutely working plan of activities

Essential characteristics of the business plan

The main features of a good business plan are:

  • Prioritize the key factors of business success.
  • Answer potential investor questions.
  • It is crisp, does not leave ideas in the air and uses precise terms.
  • It is brief, usually, does not exceed 30 pages.
  • It is structured to allow a simple reading.
  • Its presentation is impeccable.

General structure of a business plan

The general fabric of a plan of activities could be as follows:

  • Executive Summary: offers a general impression of the project, contains the key data and highlights, it must provide the reader with all relevant elements, maximum 3 pages.
  • Description of the product or service: the business plan must begin identifying the need to be covered and the proposed solution that is no more than what is intended to be developed.
  • Management team: investors believe more in people with experience or who know the business very well, and are interested in the commitment of each member who works in the development of the project.
  • Market analysis: it must identify the market, dimension it, segment it, put it in geographical size, analyze the competition and the possible new entrants, not only direct competitors but substitutes and corresponding ones.
  • Marketing plan: define the strategies on the four P’s, always seeking to cover the needs of customers and even better to be above them.
  • Business system: describes the steps, the process, necessary to manufacture the product or offer the service, its interactions, and elements. It includes personnel planning, management features, development and organizational culture.
  • Timeline: shows a realistic planning of the project, defines the critical path and milestones of the project.
  • DOFA Analysis: Identify Weaknesses, Opportunities, Strengths and Threats, how to strengthen the positive aspects and how to develop strategies to counteract the negative ones.
  • Financing: This is a critical point, it should be a detailed analysis of the financial situation of the business, including funding needs, expected results, possible sources of financing and the generally used financial statements and ratios. It may include an initial valuation of the business through discounted cash flows. If what is sought is venture capital must propose alternatives to “exit” investors.

Conclusions: Highlights realistic key factors including risks.
Finally, we suggest the following article, in which entrepreneurs experts shares their knowledge about what a business plan is, what are the main mistakes made when wanting to make one and how it is structured, with what Which you will obtain an essential guide to elaborate yours. Success!

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