This is a written document that highlights the objectives of the business and steps to be followed in order to achieve these objectives. It indicates where the business is, where it wants to move to, how and when.
Contents of a good business plan
- Name of the business
- The product to be sold or produced
- Personnel to manage the business
- Amount of finance and other resources required
- The market to be served (customers)
- Types of employees required
- Projection (level of achievement in future in terms of profit)
- Summary of the plan.
Need for the business plan
- A business plan is necessary to an entrepreneur for the following reasons:
- Avoiding mistakes-in the process of drawing a plan; mistakes that would take place in the business are identified and corrected in the plan. This helps in avoiding the occurrence of such mistakes in the business.
- Identifying strength and weaknesses-A business plan helps in identifying strengths or weaknesses and where weaknesses are detected, remedial actions may be taken early enough.
- Requirement by financiers-Financial institutions such as banks may require a business plan before they can accept to finance the activities of the business.
- Allocation of resources-It helps to determine the resources required and plan on how and where to use them. This ensures that resources are neither underutilized nor used for the wrong purpose.
- Facilitates business evaluation-A business plan helps an entrepreneur to assess the progress of the business and any deviation (difference) from the intended plan can be corrected in good time.
- It helps an entrepreneur outline competition-It helps the entrepreneur to be fully aware of the market she or he plans to operate in, understand important trends and know who her/his competitors are and their strengths and weaknesses. This information aids the entrepreneur to develop products that are better than those of the competitors.
- A motivating factor-A business plan is communicated to all employees in the business. This makes them aware of the direction to be taken by the business. This motivates them to work towards that direction.
- Adaptability-Normally, not all events occur as predicted in the business plan. However, a well drawn business plan should give room to accommodate any changes that might occur in the future.
- Tool for control-Planning involves setting of standards against which performances can be assessed. In case of deviation corrective measures can be taken.