What Is A Business Plan and What It Is Used For | Business Management | Business Tips


A business plan (also known as business project or business plan) is a document which describes and explains a business that is going to perform as well as different aspects related to it, such as its objectives, the strategies they will use to achieve those objectives, the production process, the required investment and expected return.

They often think that developing a business plan is a complex task for which you need to gather a wealth of information and do thorough research; but the truth is that it is a task that anyone who has very clear goals you want to achieve with the plan and know their structure, can perform.

To develop a business plan there is no defined structure, but we can take the best fit according to the objectives we want to achieve with the plan, but always making sure you order it and make it easily understandable for anyone read it.

A common structure that includes all parties should have a business plan, is:

  • Executive Summary : The executive summary is a summary of the other parts of the business plan, which includes a brief description of the business, the reasons for its implementation, the team, the required investment and the profitability of the project.
  • Business Definition : the definition of business the business and the products or services that will be offered, business objectives and strategies for achieving those objectives described, and core business data indicated, such as the name and location.
  • Market : in the market study describes the main characteristics of the target audience and future competition, and demand forecasting and marketing plan is developed.
  • Technical study on a technical study the physical requirements needed to run the business, the production process, infrastructure and the size of local production capacity and plant layout are described.
  • Organization : to organize the legal and organizational structure of the business described, areas or departments, positions and functions, the personnel requirements, personnel costs and information systems.
  • Study of investment and financing : in this part the investment that will be required to start and run the business in the first production cycle, and external financing to be searched if any notes.
  • Study of income and expenses : in this part projections of revenues and expenditures of the business are developed, including the budget of sales, intended to cash or projected cash flow and the operating budget or profit and loss projected.
  • Project evaluation : Finally, in this part of the future financial evaluation business is developed, which includes the calculation of the period of payback and results of the profitability indicators used.

They often think that a business plan is only made when starting a new business; but the truth is that it is also often develop when there is already a going concern and, for example, is launching a new product to market, venture into a new market, or enter a new line of business.

It is often also think that a business plan is something that only is responsible to large companies; but the truth is that no matter whether it is a large or small business, developing a business plan is a stage that every entrepreneur should spend the time to start it, especially today, where because of the high competition, the chance to push through a new business are not very favorable.

The reasons why it is important to always prepare a business plan, are basically three:

Administrative reasons

A business plan serves as a guide to starting and running a business then, to serve as an instrument for planning, organization, coordination and monitoring and evaluation.

It serves primarily as a planning tool because it allows us to plan the use of resources, strategies and courses of action or steps, and be more efficient in the implementation and subsequent management of the business, reduce uncertainty and minimize risk .

But also serves as an organizing tool as it allows us, among other things, determine who will be responsible for carrying out the activities required for the implementation and administration of the business, as a coordination tool as it helps us coordinate these activities, and as an instrument monitoring and evaluation as it enables us to compare the results with those planned.

Feasibility reasons

A business plan also allows you to check the viability or feasibility of a business; ie whether it can be carried out or is necessary to find new ideas.

For example, through market research, it helps us determine whether the product or service that will be offered will or not well accepted by consumers, or whether we have the resources and capacity to deal with competition existing.

Also, through the calculation of investment and projected income and expenses, allows us to know the profitability of future business, and thus know, in addition to whether the business is not viable, if sufficiently attractive in terms of profitability as to be carried out or is better to seek other alternatives.

Reasons financing

Finally, a good business plan can prove to others the viability of a business and the attractiveness of this and, therefore, helps to get financing.

For example, in case you want to get a loan, it allows us to prove to a bank or financial institution or lender (including family and friends who hesitate to lend money) that our business will be profitable and that we will be able to pay the debt on time, and so you can convince them that we grant.

Or, if seeking an investor or partner for our business, it allows us to demonstrate the attractiveness of our idea, the seriousness of our project and the profitability of future business, so we can convince them to invest and partner with us.

business plan and its importance