What Is A Business Plan And Why Do You Need One?

In the tough competition of the modern time, it can be pretty difficult to get your startup off the ground. If you are a part of a larger company and looking to start your own business, a certain level of planning needs to be done before you jump in. 


The most important thing is that you didn’t give up too soon! Failure rates for new businesses have consistently been hovering around 70%, which means that when three out of every four startups fail, it doesn’t matter if you had the best idea or if your product was perfect. A business plan must include a detailed outline of what the company will do to succeed.


A simple definition of a Business Plan

A business plan is a formal statement of the company’s business goals and strategic plan of action to achieve those goals. Some of the best well-constructed business plan examples should include descriptions of the following:


1. Mission Statement – States the company’s mission in broad terms that set the course for all future decision-making.


2. Company Description – This is a general overview of the company, including its legal structure, organization chart, key personnel, marketing strategy, and financial statements (as well as past performance).


3. Products/Services Description – Describe products/services in detail, including target market, total addressable market size, price points, and competition (including substitutes). You can increase or shorten the list based on the number of products you offer.


4. Marketing Strategy – The marketing strategy includes sales, advertising, and distribution strategies. It should cover pricing, channel selection, customer service, and promotion (in-house or outsourced).


5. Sales Forecast – You show volume and pricing forecasts by year for each product in the portfolio. You also make your predictions and set a goal for sales in the upcoming year. 


6. Financial Forecast – Include Pro-forma income statements and cash flow statements by year for each of the next three years, and then summarize them into a three-year table of financial data. Review the level of capital required and where it will come from.

7. Management Plan – In this section, you describe your management team, including key executives, board members, shareholders, and advisors, and how they will help achieve business goals through their respective areas of responsibility.


Why do You need To Make A Business Plan?

Business plans are designed to help attract investors and provide a professional expression of the company. This is done to help management make informed decisions about strategic planning for the company. It should also serve as a document that can be used to reference when preparing annual reports, securities filings, and SEC statements.


In addition, when you are preparing a business plan, you should consider establishing some type of record-keeping system so that each year’s plan will reflect all important changes in the business. You can lay a foundation for the future of the business and help it reach better heights by working on it.

A business plan can often appear to be a lengthy, complicated, and drawn-out task, but it is actually fairly simple and can easily be completed in hours. There are many templates and worksheets that you can purchase online that will enable you to create a complete business plan on your own.

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