BUSINESS PLAN

Business Plan

Business Plan

Purposes of preparing a business plan

A completed business serves the entrepreneurs as a blueprint like a map guiding the users to their destinations. Besides, there are numbers of other important benefits that can be obtained from preparing a business plan. First of all, the systematic analysis conducted when planning helps you avoid making mistakes in the marketplace, because if you do it would be on paper first, and thus it is easy to recognize the correct way of doing in real operation. For instance, a new entrepreneur who was collecting data for his business plan found out that a local competitor whom he thought was a one-man band turned out to be the pilot operation for a proposed national chain of franchised outlets. Thus he got to be able to draw up an appropriate and effective market entry strategy before it's too late (Baker 1993, 88).Also, a completed business plan helps the entrepreneurs feel more confident about their abilities to start and operate the business. 'It may even compensate for lack of capital and experience, provided of course that you have other factors in your favor, such as a sound idea and a sizeable market opportunity for your product or service.'

Furthermore, the business plan shows how much money is needed, for what it is needed and when, and for how long it is required. The two most important reasons why some new business activities have failed are under-capitalization and early cash-flow problems. And, of course, with a well prepared business plan where the financial calculations are thoroughly done, these risks of failure can be significantly reduced. Some basic and necessary calculations commonly conducted when drawing up a business plan include:

The sales forecast: a prediction based on an analysis of expected market conditions, best done on a monthly basis for a year.

Balance sheet: a method of periodically measuring of the growth and development of the venture, usually on a yearly basis.

Profit-and-lost statement: an accumulative record of how well the business is doing in terms of sales, costs, and profitability, usually pre-pared on a monthly basis but covering an accounting period of one year.

Cash-flow statement

Break-even analysis: with the calculation produced from above finan-cial statements, it shows the level of sales needed to generate sufficient gross profit to cover the overheads of the business to break even.

A business plan is a formal document written according to certain format and con-tent required to show the company's current status as well as the potentials of future development. Drawing up a business plan is perhaps the most important step in launching any new venture or expanding an existing one (Bhidé 2000, 12).

The aim of a business plan is normally to obtain business partners or investors with reliable and convincing presentation of the value of the business. It should include both short and long term goals for the enterprise, a description of the product or service to be offered and the market opportunities anticipated for them, and ...