A Business Plan sets out the Objectives of the business

A business plan is a document that states what the owner(s) want to do and how they intend to do it. There are several reasons for writing a business plan before starting a business:

• The main purpose of a business plan is usually to get financial backing for the business. A business plan shows the financial risk involved in setting up the business – this is important for potential lenders or investors who may want to help finance the start-up. Banks and venture capitalists will want to see a business plan before they will think about investing.
• Setting down all the plans for the business in a report helps the entrepreneur to assess the business’ strengths and weaknesses, and allows them to see whether their idea is actually realistic. It also helps them to identify areas that they need to think about and plan more thoroughly.
• The business plan is an important management tool – it gives details of business objectives, which the entrepreneur can compare with the actual performance of the business once it starts trading in order to track its progress. It also reminds the owner of the ideas they had before the business started.

Business Plans are Divided into Sections

Most business plans contain the following sections:

• Executive summary – this is a general overview of the business which contains the key points from all the other sections. It’s really important because if potential investors aren’t impressed by the executive summary then they might not bother to read the rest of the business plan.
• Business summary – what type of business the entrepreneur wants to set up, what product(s) or service(s) the business intends to provode, why it wants to provide them and what gives it a competitive advantage. It also includes the legal structure of the business, and the entrepreneur’s vision for the future of the business.
• Production plan – this sets out how many products the business intends to produce, and how it will go about producing them.
• Marketing plan – the entrepreneur defines the market for the business and explains who its main competitors are, who the target customers are and what the product’s unique selling point is. It includes details of any market research that the entrepreneur has done, and any promotions that they intend to run.
• Human resources plan – outlines the relevant qualifications and experience of the entrepreneur and other people involved in setting up the business. It also sets out how many employees the business intends to take on, and how much it intends to pay them.
• Operations Plan – gives details of where the business will be located, whether the business will own or rent property and machinery, etc.
• Financial Plan – covers all of the financial forecasts for the business, e.g. how much capital they need to start the business, howe they are going to finance the business, and their break-even calculations. It also includes a cash flow forecast and an estimated profit and loss accounts and balance sheet for the first year. The financial information explains how the business will survice in the start-up period.

It’s Difficult to produce an Accurate business plan

• Business plans are never 100% accurate because it is impossible for a business to get accurate information about costs, revenuws, etc. before it has started trading.
• Just because the business plan plan says that the business shpuld be making a profit of £2000 a month doesn’t mean that that’s what will actually happen – there is no way of knowing for definite what will realy happen, so there is always risk involved in setting up a business.
• However, producing a thorough business plan reduces the risk of the business failing.

Entrepreneurs can get Advice on creating a business plan

• The business plan is really important, so entrepreneurs need to get it right.
• Entrepreneurs can get free help and advice on writing a business plan from a government organisation like Business Link, or from a Small Business Advisor at their bank – they can give entrepreneurs sample business plans or CDs that guide you through the process of writing a business plan. Some websites also provide sample business plans free of charge, which entrepreneurs can adapt to their own business.
• Entrepreneurs can also get expert guidance and advice from business consultants or accountants, but this is a more expensive option.

Establised Businesses produce business plans too

• Business plans are not just for new start-up businesses – it can sometimes be very useful for established businesses to write a new business plan.
• If a business is planning to launch a new product, creating a new business plan can allow managers to see whether it’s likely to be profitable. If not, they might decide not to go ahead with the launch.
• A new business plan can also be useful if the business is planning to expand (e.g. if the owner of a successful restaurant decides to open another branch in a diffrent town) especially since they might need to find external finance to do it.