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Business plan all the answers
What does it involve? Who is it intended for? How often should it be updated, if at all? And according to which parameters?
All the Answers:
What is a Business Plan?
A business plan is a “meta” document, which is designed to set-out a clear plan of action before executives, entrepreneurs and investors of an existing or future concern, for the long- and short-term.
More importantly, a business plan “forces” the owners of a company and/or its management to simply sit down and think! To consider whether the company’s direction is the right one; what options does the company have, and how might these be pursued, and, most importantly, anticipate the results that any actions may have on both a professional and financial plane.
What does a Business Plan include?
Essentially, a business plan is a document that summarizes all the variables related to the operation of a business, and their ramifications on financial results.
A business plan includes, among other things: a description of business operations, products and/or services, an analysis of the market in which the business operates, a description of the business’ relative advantages in the relevant market, a consideration of the ongoing advantages of the product and/or service, a detailed list of the milestones in the business’ development, an analysis of operating variables, a consolidation of business and marketing strategy guidelines, a description of the company’s organizational structure and human resources, a consolidated investment plan ,and in conclusion, a evaluation of how all these variables will impact the business’s forecast profit/ loss and cash flow over the next few years.
Who is a Business Plan intended for?
Generally business plans can be adjusted to the circumstances of their creation and their intended audience.
The main situations that give rise to the need for a business plan include:
1. Raising capital – directed at parties outside of the company
2. Modifying business strategy / improving results- directed at elements within the company
3. Operational business plan – usually intended for elements within the company
Business plans intended to help secure funding are generally directed at banks, “incubators”, private investors (“Angels”), venture capital funds, and other funding bodies.
Business plans that are intended to navigate changes in existing business strategy and operations and/or lead to improvements in financial results related to operations, are generally intended for share holders, and are motivated by a desire to understand/plan/build a more efficient business mechanism.
Is it necessary to update an existing business plan? And according to which factors?
In today’s rapidly evolving world of business and technology, products and marketing channels, it would be dangerous to rely on an out-of-date business plan. As in many other business situations, this is a matter of “innovate or die”. A good business plan must be dynamic. The variables considered when updating a business plan include a variety of factors related to the relevant business sector including: the entry of new competitors into the market, the development of new technologies, an analysis of the consumers’ changing preferences , or a shifting target audience for the product itself, features of the product , price , substitutions and/or complimentary products, updates, advertising, marketing and PR budgets and their influence on forecast revenues, expenses, and ,of course, macro-economic factors such as exchange and interest rates, and more.
When updating a plan it is necessary to examine whether the existing plan has stood up to the test of your expectations. If it has not, where did you go wrong? Have you maintained your market focus and continued to operate in the business sector you intended to? Or has your business activity, for whatever reason, “shifted” .
How often should I update my business plan, and who should do it?
It is best to update your business plan annually, and as part of your yearly or multiyear planning and/or budgeting. It is possible to update your plan independently, without outside assistance, as long as your original plan was designed to be flexible and allows for adjustments. However, it is recommended to seek outside consultation and have an objective pair of eyes look over your plan to neutralize any exaggerated forecasts, and provide professional advice, especially with regards financial matters.
The greatest damage is done to a business when we believe ourselves to be above questioning; when we make assumptions without investigating our conclusions, when we say “it will be alright” and simply hope for the best. Of course, luck and circumstance play an important role in the success of a business, however, long term success is based on solid foundations first laid in a professional business plan. To write a plan after the fact and assume things will just simple work out, is a primary cause of painful failures. The correct route to success involves thoughtful consideration of questions and reaching accurate and well investigated answers at every stage. The answer is not written in the stars, it’s written in your business plan!