What is a Business Plan? – Definition, Structure, Benefits, and More
Business Plan Definition
A business plan is a formal approach to an idea, project, or business initiative with a set of objectives, which constitutes a projection and evaluation phase.
It is used internally by the administration for the planning of the tasks, and it used to go to banks or potential investors to request financing or to invest in the business.
In the business plan, the investment required to finance your project and the solutions to solve the problems that may appear must be detailed.
It is a graphic structuring of what the business is or will have to be.
It is also considered a synthesis of how a business owner, administrator, or entrepreneur will try to organize a business task and carry out the necessary and sufficient activities for it to be successful.
What is the general structure of a business plan?
Any business plan consists of the following parts, which we will detail below.
- Firstly, the executive summary synthesizes the entire business project, giving the main points.
- In it, a brief description of the business must always appear, the reasons that drive us to start it, the estimated investment required. The viability of the project, in short, justify the profitability of the project.
- It used to describe what products or services we are going to offer, including the name of the business and the geographical delimitation of the project.
- And also, In the same way, we must establish the objectives we have in mind and how we are going to try to achieve them.
- Publicize the organization chart of the business. It is about explaining how the company will work based on a structure with the differentiation of functions.
- The areas or departments, the positions and functions, the personnel requirement, the personnel expenses, and the information systems included in this sector.
- In this study, we must define the target audience or ideal client to establish the market niche in which the business will develop, as well as its main characteristics.
- And also, We must also analyze future direct and indirect competition, analyzing demand, and the marketing plan.
Investment and financing study
- It is where the detailed investment calculations that we will need to start the business and how to assume the expenses go, mainly until sufficient income achieved so that the company is maintained autonomously.
- And also, the need for external financing is exposed if necessary.
- It is to describe the physical space required for the operation of the business, the production process, the infrastructure, and the size of the premises, the production capacity, and the plant layout.
Study of income and expenses
- This section should include a sales estimate, the projected cash or cash flow budget, and the projected operating budget or profit and loss statement.
- It is the last part. In it, a financial plan for the future business must appear, in which it must look when we can amortize the investment as well as the profitability indicators that we have used.
- It is a tool for studying the situation of a company, institution, project, or person, analyzing its internal characteristics and its external location in a square matrix.
- We analyze the real possibilities of those who are going to implement the business.
What benefits can the business plan have?
The business plans have the following utilities, which we will detail below.
It constitutes a tool to adequately plan the start-up of the business before the start of the investment.
Facilitates obtaining bank financing. It contains the forecast of economic and financial statements of the business. It adequately informs about its viability and solvency so that it can be instrumental in this direction.
- Facilitates negotiation with suppliers to obtain better conditions.
- It can help attract investment, partners, or collaborators.
- Facilitates financial planning.
- Set specific and general goals.
- And also, Clearly defines the expected results.
- Establish measurement criteria to know what your achievements are.
- Anticipate any difficulties that may arise and possible corrective measures.
- Identify possible opportunities to take advantage of in your application.
- Involve the executives who will participate in its application in its preparation.
- Name a coordinator or person responsible for its application.
- And also, It has programs for its realization.
- It is clear, concise, and informative.
We know that a business plan can have different levels of complexity and that it requires time. Still, it will help you to have a clearer vision of the challenges that you will have to face.
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