What Is a Business Plan Used for?
Although normally associated with new business ventures, business plans can outline the intentions of a business and organize its ongoing and changing needs and operations. Ideally, the parts of a business plan are used like planning tools for managers and explain the functions of a business for stakeholders.
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Business Description
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A business plan is used to illustrate the nature and type of business you are in or intend to enter. The Small Business Administration recommends that your business plan communicate to potential investors or partners what specific need or market your business intends to serve or satisfy. Explain how your service, product or proprietary method creates value for the target client.
Management Structure
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A business plan clearly details the legal and managerial structure of the business. A business plan informs readers whether the business is a corporation, a partnership or owned by a single person. Additional information in your business plan includes who owns the business and who performs particular business and management duties. To supplement the management structure, discuss the backgrounds and qualifications of the management team to inform potential lenders and investors of the skills and competencies of the individuals responsible for the business.
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Market Analysis
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Business planning also includes an analysis of the market in which the business intends to operate. A thorough market analysis takes into account the specific kind of customer the business wants to attract. The SBA recommends a defining a narrow target market to make marketing efforts easier to manage. In addition, market analysis in a business plan is also used to inform readers of the type of industry the business is in, size of the market, outlook and prospects for growth in this particular industry and an evaluation of competing businesses.
Product
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A business plan is also an effective tool to explain the product or service a business seeks to provide. According to the SBA, a business plan describes your product from the perspective of your customers. Your product or service should ideally solve a particular problem for your target market. Your business plan should explain how customers benefit from the good or service your business provides.
Financial Analysis
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The financial analysis included in a business plan must detail past, present and potential financial performance. The financials in a business plan for an existing business include data from past years to establish expectations of future returns. Useful financial data includes cash flow, balance sheets, expenses, revenue and investments in the business. A business plan for a new venture should make realistic financial forecasts. Without detailed data and reasonable forecasts, creditors may consider your business too risky to qualify for loans or credit lines.
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