Essential Elements of a Business Plan

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Introduction

In this competitive business environment a business plan acts as a roadmap for a successful business. To start a new business the most important document which is need at first is a business plan. It may be used for internal purpose as well as external purpose. Every business need a business plan before start it. Whether the business is large or small, profitable or non profitable, it require a effective business plan. Especially it is more require for a large business than a medium scale or small scale business because the function and structure of am large business is more complex than a small business. This study discuss about various field of business plan. The main part of this study consists of the definition of business plan, content of business plan, objectives of business plan, interested parties of business plan, how to write business plan, challenges behind business plan, common pitfalls of business plan, physical factor of entrepreneurship which is essential for a business plan. The success or failure of a business largly depends on an effective business plan.

Definition of business plan

A plan indicating the whole processes how a new business will achieve its objectives more effectively and efficiently is a known as a business plan. In other words, a formal statement of achieving goals is a business plan. Setting a business goal and achieving the goal is a business plan. Different types of information of a business including the nature of business, the function of business, available raw material, competitor of the business and target market of the business etc contains in a business plan. By seeing a business plan anyone get a clear idea of the whole business. That means it describes the whole business and achieving its goals. All operational, marketing, financial or managerial functions are detail described in a business plan. Business plan is also used for an established business when a changes occurs in it or it wants achieve its objective more effectively.

Content of business plan

A business plan is a written document that describes the products and services of business, required resources, the opportunity, threats, strengths and weakness of business, target financial returns, environment, and different strategy to achieve its objectives. A business plan always answers three basic questions. These are where we are now? Where we want to go? How we will go there.

The goals or objectives of business plan determined the context of business plan. Since business plan is a systematic way of achieving objectives of business. The process of setting objectives of a business , analysis the reason of why objectives is so important and taking different strategy to achieve those objectives all contains in a business plan. All information of a business contains in a business plan. It also indicates the required human resources to accomplish task. Human resources are the most valuable assets for every organization to run perfectly and achieving objectives. The business objectives of are mainly two types. One of these objectives is maximizing profits and the other one is maximizing growth of organization. The business plan concentrated on financial returns of investment when the business is run to maximizing profit. The business plan concentrated on increasing market share, its customer’s satisfaction and other factors when the objectives are to achieve the sustainable growth of the business. Thus the context of business plan largely depends on the objectives of the business.

Objectives of business plan

To drive the new business in right direction and keep an established business in a right way is the main objectives of an effective business plan. The alteration of perception as well as branding by customers or taxpayers is directed by a business plan. Shape the business and run the business smoothly is the primary objectives of a business plan. Besides this there are few other types of objectives such as alteration of perception and branding. Generally the process of alteration in perception and branding is known as marketing plan which is very important for every business success or failure. Every business is surrounded by a certain environment which influences business and give business competitive advantages. So the environment of business is an important part of business plan. The managers of a business consider business plan as an important decision making tools. Since there is no fixed context of business plan it varies depending the nature and function of business. So the nature, objectives and function of the business determine the nature and format of business plan. Effective business plans contain all the information which is required to achieve the goals of the business.

Importance of business plan

Business plan provide a overall summery of total plan, details of business, analysis of competition, different market strategy, development and design, financial operation and management of business which accelerate the success of a business. The important of business plan is given below:

  • A business plan clarifies the purpose and direction of a business. Business plan describe what the business is and where it want to go. Clarifying of a business consists of a simple description of a business as well as different product and services offered by the organization.
  • A business plan contains the details description of the business so the owner of the business can understand why this business is right for him than other professions. So it is a mental satisfaction for the owner of the business.
  • A business plan works as a motivating tool for the management. It is very important for motivating employee. Everybody is well informed about the objectives and goals of the organization. So every works properly to achieve those goals.
  • A business plan presents whether or not the business capability to make profit. A business plan contains different statistics, figures, and facts in details to present the strength or weakness of the business. It is a clear indication of whether or not the business will be profitable.
  • A business plan shows the capital requirement of the business. So the owner of the business takes different steps to obtain finance of his business. So the owner tries to convince the bank and other financial institution to finance for the organization.
  • A business plan helps to understand the need for merger or acquisition of the business. In the recent year it has become a very important tool for dominating market. Different statistical alliances help to get competitive advantages and run business smoothly.
  • A business plan helps a business in getting, maintaining, developing, and retaining human resources for the organization. Employs always make decision whether he join the organization or not by seeing organization’s business plan or its future.
  • A business plan helps to get large contract of the business. Because any party gets all information regarding the future financial position of the company by its business plan.

How to write business plan

Since business plan is a roadmap which guideline for the success of a business. The writing of a business plan is a very crucial task. The owner of the business can prepare the business plan when he has a good knowledge about the total business, products and service, operation strategy, financial condition, marketing strategy, target market etc. The business owners can get information from outsiders or interns. At recent times there are many consultants specialized in business plan. The business owner can take help from them as his requirement. By taking help from the outside specialist business owner cannot maintain personal commitment.

Interested parties of business plan

A business plan has a number of audiences as well as secondary uses. The interested parties of business plan include investors, suppliers, executives and lenders. The elementary purpose is to test idea and its probable effect on the organization and evaluating performance according to the goals. In time of serving operational people, marketing people or human resources of an organization, the business plan is not only an operational document. A business plan is generally presented to outside people in most of the time. When the owner of a business needs capital, he may present the business plan to the investors or the creditors. To attract new customer or retain the existing customer, sometimes business plan is presented. A business plan is presented to banks, non-bank financial institution, investors, capital providers, government agencies, managers, business partners and others party. The audiences of business plan and their interest may vary depending on the nature of business. In preparing a business plan, the owners must keep in mind the need of interested party. Otherwise the purpose of the business plan will be in fail. So the need of stakeholders must be kept in mind in preparing a business plan.

Common pitfalls of business plan

Unrealistic Financial Projections-Investors and lenders expect a realistic picture of business. But business plan contains an unrealistic financial projection because there is no explanation of projections. The plan is overly optimistic and may ignore many obstacles.

Not defining the goal- the goals of the business plan may vague. It is not measureable and has no clear idea. There is no time limit of achieving goal. A unrealistic evaluation of goal and lack of proper steps of goal achievement cause problem in goal achievement. The goal must be activity oriented to be successful.

Lack of commitment-To get commitment from others the owners must be committed to others. But in a business plan there is no commitment which creates problem in goal attainment. The investors and the creditors expect strong commitment from the owners.

Fail to anticipate problem-The business plan may fail to anticipate the problem in future. A business plan is always excessive optimistic. There is no alternative strategy for a business plan. The written document and its implementation is not same and the conflict of different parties is always ignored. It also fails in delivery date and the time of completing the project. The owner always faces some problem when he wants to implement the written plan.

Too much detail-The main purpose of a business plan is focus on the basic element of the business not to increase theoretical knowledge. A business plan consists all in detail of a business. It provides much unnecessary information. Instead of clear and concise, it may to much detail.

Lack of progress review- There is no progress review of a business plan. So the owners of the business do not know how he is doing well. So he is confused about his performance. If anything happening wrong he cannot know it which hampering in taking right decision. So the business may fail.

Failure to learn from experiences- The business owner can learn a lot from his experience. But generally business plan made for a new business has no scope of learn from experience. Since the business is new, all function of it is new. The business plan does not work properly if the outcome of the plan is denied. A mistake by the owner is a great source of knowledge for him.

Failure to revise goals-To adapt with all type of readers business plan must need to revise the goals. But there is very little change to revise goals. One of the most noticeable reasons of failure of a business plan is its inflexibility. If the environment of the business changes the business plan cannot be changed with the situation.

Common challenges business plan

Different type of challenges are faced by a new business so does its business plan. With the growth of business plan different situation demands the not for change which creates challenges for the business plan. The common challenges faced by a business plan described below:

Small size of the firm- Limitation of financial resources creates problem in marketing and financial operations. If the size of the business is small then it has very limited resources to implement its plan. So the size of business is a big challenge for business plan. On the other hand, for a big business, the complexity of work also creates problem for the business plan.

Newness of the firm- A new firm is unknown about its market, customers and other parties. No trust on abilities and offerings of new firm has to the customers. The owner of the business is very optimistic about his business and ignored different difficulties of it. No relation with customer and supplier and for other parties is found for a new business. It has no formal structure and process of completing its function. The new firm has no experience of making product or services. No record of success or failure is found in the basket of new business.

Uncertainty -Since a new business has no relation with customers, it has low prediction about market and marketing data. Limited information about market creates problem in marketing, planning and marketing decision. It is impossible for a business to need the demands of the market and become a leader in market. The relationship with the supplier, customer or distributer is uncertain for a new business. This uncertainty makes problem in decision making process which is a big challenges for business plan.

Spa business and business plan

This study focuses spa business in UK. A place where people participate in different activities to keep themselves healthy and fresh is known as spa. Different products and services are offered by a spa business which is used to amend customer’s health. The services and product of spa business are used for amendment of customer physical as well as mental health. A therapeutic powder with mineral water is called as spa. Health resort having water treatment plant under the supervision of spa physician is the component of spa plan. In north America, the health resorts where water re[resent a constituent in their treatment is known as spa. The product and services of spa business is for mental and physical health of customer. It focuses the individual requirement of the customer. For managing stress and getting renewal spa business develop their product and services. The main product of spa business include the fun, healthy and balance diet and exercise. The aim of spa business is to provide comfortable environment to the customer. Provide different tools to improve life and motivate customer to their work the main objective of spa business.

Physical factor of entrepreneurship

The reason why some people emerge as entrepreneurs than other people is given by this study. Many research conducted by different scholar has given the answer of this question which has focus as entrepreneurship as an important field of research. The personality character, creativity, innovation and other factors affect the entrepreneur.

Need for achievement-The need for achievement is noticeable among different psychological variables of the entrepreneur. To be an entrepreneur a person must have high need for achievement and strong desire for success. Strong desire for achievement makes the entrepreneur different from others people.

Risk taking propensity- Entrepreneurs always work under an uncertain situation. They have to take risk and face different difficulties. The future is always uncertain. So a good entrepreneur takes moderate degree of risk by calculating the objective to be achieved.

Power motivation-To be an entrepreneur a person must have the need for power. They always try to take the control of the situation which makes them as a good leader. To achieve this power person work more effectively and efficiently.

Creativity- Creativity is essential to be a successful entrepreneur. It means innovation, good analytical ability and problem solving ability which make an entrepreneur different from others people. By applying these entrepreneur becomes a successful entrepreneur.

Motivation for autonomy- Another factor a man wants to be an entrepreneur is autonomy. An entrepreneur always wants to implement his power. They like to work freely. So they start their own business to enjoy freedom and implement the power which makes them as successful entrepreneur.

Conclusion

A business plan is a roadmap and guideline of achieving goal of a business. A good business plan has a purpose of communicating a course of action so that it works as a support for the plan to implement. It contains the details of the business including its vision, objectives, marketing strategy, financial strategy, product, market segmentation etc. All of this information is essential to start a new business or develop the existing business. A business plan present the business to outsiders including investors, creditors, suppliers, government and others parties. Thus a business plan plays a crucial role in achieving the goals of the business more effectively and efficiently.

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