4.1 - Why Make a Business Plan? / Purpose and Content of a Business Plan

A business plan is a document which details the following:

• The businesses objectives
• Plans
• Strategies
• Financial forecasts
• The market in which the business will be operating

It's primary aim is to provide an overview of the company in order to secure financial backing and funding from financial institutions and prospective investors. A business plan is also used as an instrument of measurement to compare the actual performance of the business to forecasted figures. 

Business plans provide essential information on how the business is expected to take off and develop. It's also important to give achievable timescales for the goals that are set as unachievable timescales will make you look unprofessional. 

The business plan must also show how money invested intends to be properly managed and that there are adequate accountability measures in place. This gives the business a high level of credibility because any potential investor knows that in the near future, it will be reaping the rewards of investing in the business. 

The executive summary introduces the business plan and contains vital information needed to gain the attention of any potential investor. It should be precise and a maximum of two pages. 

The other key elements of the business plan should include:

• Description of the proposed business
• Business marketing and sales strategy
• Operations information (Location, production and infrastructure)
• Forecasts figures

The proposed business must be clearly explained in the business plan, including the activities of the business, and it's goals for the near future. It should include the following:

• The business start date
• Sector in which it should be categorized
• History of the business
• Legal structure

The product details and services offered need to be very clear on the following information:

• Unique attributes of the product
• Target market
• Relevant information on the sector
• Patents, trademarks, copyrights as applicable

Features of the market must be very clear:

• Market niche and basis for identifying such a market
• Competition in the marketplace and who the major players are
• Characteristics of the market including current issues affecting the market, development and size of market

Marketing methods, sales tactics and financial forecasts are crucial information which must be practical and achievable:

• How will potential customers be identified and targeted
• The methods of positioning the business to have a favourable competitive advantage
• Pricing policy - standard for all customers of flexible to adapt to different customers
• Distribution process for the products to reach customers
• Sales tactics to be utilised - face to face, website, telephone or others

Details of the financial figures and amount for starting up the business needs to be precise, accurate and very clear:

• Forecast on profit and loss which estimates the sales projections, the costs involved in production and expenses and business running costs or overheads
• Cash flow statement - with flow of cash in and out of the business for the first 12 months
• Sales forecast - anticipated income from the sales of products

Activity 13 - Outline what you would put in a business plan.