Post date: Nov 25, 2010 7:51:29 PM
Planning is a vital ingredient in the success of anybusiness. Developing a business plan is not just arequirement, but a basic necessity for building one'sbusiness nowadays. It is an honest truth that every businessneeds a plan, starting from large corporations toentrepreneurs. Developing a business plan will help onebuild a framework that would push his business to his actualdestination. The business plan helps one develop workguidelines, map out strategies, understand one's targetmarket, measure performance, monitor progress, make futureplans and raise additional capital either for expansion orto boost operations.Quite often, the thought on the mind of most business ownersor investors is failure. The only way to overcome thisfailure is to address the common reasons why businesses failup front. Presently, the world is facing though economicchallenges, global economic meltdown, high cost ofcommodities, high rate of foreclosure and difficulties in
obtaining credit from banks, stiff competition, complicated
tax laws and high operational costs, etc.. All these
challenges faced by businesses today, even make it more
challenging for start-up businesses to survive. In today's
world, both small and large- scale businesses have come to
realize the need to evaluate their business potentials and
formulate strategies for the future.
However, inadequate planning has been the reason so many
businesses fail, and the rate at which they fail is
overwhelming. It is usually believed that most businesses
fail in their first year of operation and among those that
fail, 80% of them do not have a well researched plan. I t
has been observed that business failure is not only
connected with small businesses alone which I chose not
mention here , go down too. Though the rate of failure is
highly significant in small businesses, and it is the main
reason why a good business plan is needed. Probably for
raising additional cash and to provide potential investors
and lenders with the information required to make investment
decisions. This is the major reason of developing a business
plan. One's business plan has to stand out and his
projection has to be firm due to higher competition in
attracting funding for his business. Investors no longer
risk their money on businesses that do not prove to have
great potentials for them.
A business plan is like a road map, it shows one the route
to take, the pitfalls to avoid in order to reach his
destination, For instance, if one decides to travel by road
from one place to another, he would first need a road map
that shows him the route to take. He will need to determine
the distance and how much gas his car will need to take him
to his destination. Moreover, he will need to calculate how
much the journey will cost him, if he intends to raise
money, if he's borrowing, how he intends to refund the
money. Putting all this into consideration, he now has a
traveling plan that will take him to his destination. In the
same vein, that's what a business plan provides one with, the
strategies, the route, and a road map to success.
For one's set goals to be achieved, he must develop an
adequate business plan. Statistics has it that many
businesses fail due to inadequate planning. If one doesn't
know where he's heading to, any route seems to be the right
one. Most people make great mistakes by jumping into
business without adequate preparation and planning. A good
business plan helps one maintain focus on his goals and
execute the strategies that the plan assisted him in
creating. Just like a road, one's business plan has to be
consulted to make maintain his focus and not running
business in a layman's way.
Working with a business plan, it will prevent one from
entering unfamiliar territory. The plan becomes a working
map for him and his organization. I t spells out the things
to do and things not to do, the functions and how everyone
and every department should operate. It helps one become
more efficient, reduce waste and redundancy, channeling
one's resources to rightful place and being a guide to the
successful running of his business.
As a performance tool, it measures the progression of goals
in one's business by tracking, monitoring, as well as
evaluating, and can also be used as checkpoints in measuring
performance. The world today, is so dynamic that what applied
today might not apply tomorrow, and as a result of this
dynamism, a good business plan needs to be setup in order to
protect one against risks associated with business.
In addition to a performance tool, perfect business plan
should contain other necessary tools in its system, which
really make it a perfect plan. It must have a human resource
tool, a marketing and strategy tool, financial tool,
communication tool, and most importantly, an investor's
guide. A well-defined business plan attracts others to be
part of the vision. A good business plan specifies its goals
and objectives that would motivate potential investors to
join in the business. It should inspire teamwork and
creativity among its people and ensures everyone understands
the goals and objectives.
One's market target is also specified, alongside the people
that would buy his products, how to reach them, the
location, products, and price he intends to sell his
products. People- this defines the people involved in the
promotion one's goods and services. Product- this defines
what one's goods and services are. Place- defines the
location which also includes the means of delivering the
goods and services. The worth of one's products and services
in the marketplace can only be properly fixed through
analysis on his return on investment (ROI). A marketing and
strategy tool defines one's business strength, his weakness,
his opportunities and threats. It plots a graph that helps
one reduce cost while maximizing profit.
A financial tool in a good business plan enables one
understand his business financial position, develops his
budget and determine how his finances will be allocated. It
also calculates one's return on return on investment,
analyzes his income statement, cash-flow, balance sheet,
break-even point i.e. the analysis that tells one how much
sales needed in order to cover expenses, which gives the
basis for pricing his products and services, and at the same
time calculates how much that is needed to finance one's
business which helps in making his financial needs clear.
A good business plan communicates one's ideas to people,
communicates his mission, objectives, management approach,
responsibilities and demonstrates how one's strategy will
increase profitability and performance, identifying his
audience without overreacting his aims and objectives of his
business plan. A business communicates in two ways- Internal
communication and External communication. Internal
communication includes communication of corporate vision,
shared value, strategies, guiding principles and employee
motivation. External communication includes branding,
customer relation, marketing, advertising, media and public
relations etc..
A good business plan is used to attract funding from
investors. Most investors will look at a business plan as a
decision-making tool. There are certain things investors
look out for in a business. These include one's management
team, every investor will want to know a business owner's
managerial skills, passion, and his dedication to his
business. A comprehensive description of how one's products
or services should be discharged, his customer base, his
market and financial analysis. A business plan should have a
realistic financial forecast. Every investor will always like
to see his business associate's return of investment,
cash-flow and break-even analysis. Hence, a well prepared
business plan is the key to attracting investors.
About the Author:
Alfred C. Amaechi is an expert in Home Based Business. He's
been in the business for several years and has authored many
books on guide to starting out in Legitimate Home Based
Businesses. His considerable expertise has thrust him into
the limelight as he guides potential investors to the right
track. If you need a detailed information and FREE e-books
that would help Fast-Start your own Home Based Business,