Business Plan: Meaning and Purpose

A business plan is a written document that describes all the steps that you need to open and operate a successful business.

Writing a business plan is one of the most important and difficult task that each and every successful entrepreneur has to do. One you know what business you are going to start and have planned all the details, you need to pen these down. This will not only help you sell your idea to convince your investors but also help you visualize all the aspects of the business.

A good business plan must:

  • Describes what your business will produce, how you will produce it, and who will buy your product or service.
  • Explains who will run your business and who will supply it with goods
  • States how your business will win over customers from competitors and what your business will do to keep customers
  • Provides detailed financial information that shows how your business will succeed in earning a profit

The business plan serves three important purposes.

1. A business plan explains the idea behind your business and spells out how your product or service will be produced or sold. To convince investors that your business idea is solid, you will need a completely new product or service or one that is better or less expensive than products or services that already exist. You will need to identify who your target customer is and show how your company will be able to obtain and keep customers.

2. A business plan sets specific objectives and describes how your business expects to achieve them. A good business plan includes sales projections for the short term (the first year), the medium term (two to five years after startup), and the long term (five years in the future). It describes what products and services will be introduced over the next five years and sets forth future business plans, such as expansion of the business.

3. A business plan describes the backgrounds and experience of the people who will be running the business. Banks and other lenders make financing decisions based on how well they think a company can meet its objectives. If you provide information on the background and experience of the people who will be running your company, the bank or investor will be more likely to invest money in your business.

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