Business Plan: Its Importance and Its Components

Are you planning to open a new business venture? Are you confused on how to do it right? Are you having trouble formulating your business plan? If so, you are one of those neophyte entrepreneurs who experienced difficulties in formulating the said document.

Opening a new company is not that easy because it entails lots of processes and hard work. Aside from sourcing out the needed funds to finance your operation and hire credible employees to help you manage your company, you also need to formulate your own business strategies.

It is important to companies because it serves as a compass that helps executives and stakeholders in whatever actions and decisions they pursue. It serves as a benchmark that guides shareholders, executives and workers.

Some businessmen and entrepreneurs fail to discern the significance of the document. To know more about importance, read this article.

Importance:

• For raising funds. If you want to obtain a loan from banks or financial institutions, it is one of the requirements of obtaining a hefty amount. They want to know how you can pay them, how profitable the company is and how you attract customers. Majority of them are hesitant to put their money into a company without seeing a convincing and effective business plan.



• Benchmarking. It serves as a map that directs stakeholders and executives to a common direction. It guides them to the right path and provides measures when they go astray. It ensures that all employees, executives and shareholders are on the same path on what they intend to achieve. Through it, they can evaluate progress and make projections based on the present performance of the company.

Components that you need to consider:

• It should include a concise information about the business enterprise, the industry where it intends to penetrate and business trends. You can need to conduct research and feasibility studies to get the need information you want.



• Mission statement. You need to detail the companies objectives and the product and services it offer. You also need to enclose your target market.



• Provide a detailed information about its stakeholders, owners, business advisors, managers and investors. Some firms even attach resumes of these persons.



• You need to provide a brief information of the company's operations. Describe the daily operations of the business, its suppliers, vendors, raw materials purchase, terms of payments with creditors and your customers.



• You should also enclose your start-up cost and cash flow. Most often, these amounts are shown in a ledger type report or spreadsheets.



• Provide a concise information about your product and services. Describe its attributes and what makes it unique from other products and services found in the market.



• Rival companies/competitors. Give a brief description of your competitors, their weakness and strengths and ways of competing with them.



• Marketing strategy and plan. Describe your tactics in attracting customers, boosting sales and establishing customer loyalty.

With all the ideas and suggestions mentioned beforehand, you can now create an effective business plan.