The Importance Of A Business Plan – What You Need To Know
Have you ever thought of why a business plan might be important to your success? A business plan is a crucial and strategic tool for anyone who wants to start a business from scratch. It helps them stay focused on the steps they need to undertake to achieve their goals, and keeps any business goal achievable from the very beginning.
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Starting a business is not easy, and there is usually plenty of advice out there from registering your business, obtaining a Tax ID or VAT number, and making sure that you do your market research before launching your startup.
While these are all important to get your business started, a business plan is key to growing and developing your small business. Now, let`s take a deeper look at a business plan and why it is important for your business’s success.
What is a business plan?
A business plan is a written blueprint created by an entrepreneur to briefly outline the internal and external strategies for starting and running a business.
A business plan has to do with what you are planning and how you want to run your business. It allows you to take your idea into a more professional format for presentation to stakeholders, lenders, and investors.
A good business plan includes ideas, core values, competitors, markets, projects, costs, management, products, services, strategies, distributions, and target customers.
Types of business plans
- Mini Plan: This type of business plan is short and straight to the point. It is the most preferred type of business plan amongst recipients because it can easily be downloaded and read quickly. It is used for small businesses and usually in highlighted points.
- Presentation Plan: This plan involves a PowerPoint presentation on the system. It’s a type of business plan that is usually interesting and short but might be hard to present and equally technical too. People lose sleep over an upcoming presentation, especially one that can play a vital role in the future of their business. This type of plan can be used for both small and big businesses.
- What-If Business Plan: The what-if type of plan comes in when you want to solve a major challenge in business or when you face an unusual circumstance in business. A what-if plan can help you think about the future which can include your business space, equipment, and products so you can make good plans and decisions accordingly.
For example: what if you raise the price? What if we increase the production of our product? A what-if plan helps you weigh the pros and cons of your present and future business development. Other types of business plans include:
- A working plan,
- One-page plan,
- Lean plan,
- And feasibility plan.
The purpose of a business plan
The main purpose of a Business Plan is to identify, describe and analyze a business opportunity underway. More precisely a business plan helps:
- Set specific goals and objectives that describe how you want to achieve and implement them in your business.
- To spell out how your product and services will be produced and sold.
- To create an effective strategy for your business growth and development.
- To determine your present and future financial needs and more.
Planning out your actions in advance is the first step to success. With a good business plan, you can define the goals and objectives of your work in advance, which will help you to decide which way to go and what activities need to be completed.
Make a business plan with the 5-W`s tip
- Who: Who are the potential target customers for your product?
- What: What products or services will your business provide for your potential customers?
- Where: Where is your business located concerning your customers?
- When: When will you launch or expand your business or product?
- Why: Why are you in Business?
Clearly understanding the answers to these 5 questions is important for creating an effective business plan.
Having a business plan in place allows you to have a template, which will save you time and help you prepare for many different situations in your business. With a business plan, investors will be more confident in the decisions they make with your company. Don’t you want that to be the case?
Your business plan is a crucial tool that will help you convince others to work with you or invest in your business. These and many more are the purposes of having a business plan and that takes us to the next important point, the strategy. Business is all about strategy. Let’s learn more.
The strategies to create a business plan
Business plans are created to guide you all through your business journey to remain focused even when faced with negativities. To do this, keep the following in mind and be very clear on them:
- Set realistic goals, aims, and objectives,
- Understand your business and your target customers,
- Focus on customers satisfaction,
- Always be independent and innovative,
- Build a strategic marketing plan and implementation,
- Constantly review and work on your plan,
- Research a lot about your business and target clients.
Pay attention to these points and you will find them handy because a good business plan guides you through each stage of starting and managing your business. If done correctly, you will use your business plan like a GPS for how to structure, run, and grow your new business. It’s a way to think through and detail all the key elements of how your business will run smoothly.
The main components of a business plan
Yes, business plans need components. Most business plans need to include background information about the individuals, organizations, or teams who will translate the vision into reality. Do not underestimate this part.
Now, pay attention to the following so you can make your business plan a decision-making tool.
Who is your target market?
Who are your products and services for? Who are your customers? Your target markets are potential customers to whom you intend to market or sell.
For example, if you want to sell make-up products, you know that your intended target market will be likely females from age 18-60 rather than males. To avoid business inefficiencies, you need to collect enough information about your demographics and target market.
Your demography may be members of the African diaspora community, Chinese Americans, or people of European origin, which are not exactly the same as your target market. So, make sure you pay attention to the differences.
Do you know your competitors?
You need to define your competitors and know their strengths and weaknesses. If you know why they are different, you can model after them to encourage and enhance creativity and innovation in your business.
In every business niche, there is always a unique and top brand that stands at the top chart because of its creativity and ability to serve its customers well. For example, indomitable noodles have increased brand visibility even after other different companies have modeled after them in the Nigerian and West African markets.
Indomitable is one of the best business brands to admire. They hit their targets right and top the chart with their creativity by bringing other flavors to life like:
- Chicken noodles,
- Onions noodles,
- Egg noodles, and much more.
All these help them give their clients a choice of what they want and prefer.
What is the executive overview in a business plan
The executive overview is an important section of your business plan. This is a one-page document that entails a business vision, and purpose, all of which should be embedded and spelled out in the business tagline. Take the MTN Nigeria region as an example.
They have the slogan “everywhere you go”. The MTN network is truly everywhere, so you can prove that their slogan fits their business plan perfectly well. They are quick and reliable. In a nutshell, your summary should include everything you want to achieve in your business.
Do you understand how vendors will work with you in your business?
You need to understand if you need an internal or external vendor or even both. You also need to talk about the number of supplies you use or put out regularly.
Vendors are people who sell your products. It is very important to include them in your business plan because how they market your product, will determine your level of sales and the potential customers you can maintain.
Usually, vendors are responsible for providing goods at a lower price if the prices of their goods become too high. So, you need to understand how this will work for your business.
Consider including marketing in your business plan
The marketing strategy section of your business plan should outline the approach you plan to take to provide products or services to your customers. It explains, at a high level, what you are going to do to reach your target market and grow your business.
A marketing plan is a compilation of the marketing tools and techniques that help to determine how to present a product or service to the ideal customers. It includes channels, messages, and media types.
In your business plan, do not forget the human resource
This is about your employees and what you intend to achieve with them and your products. These include what you will pay them, how much experience they need before working with you, and what skills they need before they can access your products and your business.
HR professionals help set the tone and values of your company to make sure everyone feels they are a part of something worthwhile. They then support executive teams in making decisions that will allow their business to grow and be successful. So, this is an important part to add to your business plan.
Finance is a key part of your business plan
The finance section is one of the most important aspects of any business plan because it can help you make decisions about your company’s financial future.
This part of a business plan requires careful review and implementation. It deals with the amount you need to run the business daily, weekly, or yearly. It also allows you to control how you spend and how much you earn. All these help you understand how much money you will need to start and maintain your company.
There are two types of financial statements: the balance sheet and the income statement. The balance sheet is a snapshot of a company’s assets, liabilities, and equity at a given point in time. The income statement is a record of all the revenues and expenses of an organization over a given period.
Your business plan needs to explain the operational strategy
Operations are related to how the business runs: time, day, and hours. Putting these in your business plan helps you review the best time to sell and the most efficient way to get the job done.
For the success of your business, make sure you have a plan, a clear plan, and stick to its implementation for your business accomplishment.
Your key takeaways the importance of a business plan
In this article, we talked about the importance of a business plan in growing and developing your small business. You understand that there are a lot of things to cover in your business plan, from what is even a business plan, the purpose of a business plan, and types of business plans to the main components of a business plan.
Pay attention to every single part of them as you prepare your business plan. If you have any questions, share them in the comment section below, and talk to you in the next article.
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