A business plan is a guide to help businessmen navigate a project, build a well-thought-out mechanism of action, and convince investors to invest in the company. It makes it easier to plan the budget, think through the development strategy, and monitor the pitfalls on the way to success. It is important to understand what items should be included in a business plan, what rules to follow and why it is worth studying the interests of investors.
What is a business plan
It is a program of action that describes the goals that a business (usually a startup) seeks to achieve and the detailed ways to achieve them. This program can be compared to an extensive subway map with financial, marketing, and operational lines. Business plans are needed to attract investors and successfully present themselves to companies. They also help them stick to their goals and stay on track.
A business plan is definitely necessary for startups, but it also comes in handy for mature companies. Ideally, it should be periodically updated and adjusted to new goals. It makes it easy to keep track of what tasks have been accomplished and what direction it’s worth moving in. A business plan also comes in handy for companies who decide to open new lines of business or projects. Opening them without a business plan is like coming to an unfamiliar city without preparation. The trip can leave a pleasant impression, or it can fail: a tourist can get into a dangerous area by mistake, where an unpleasant story will happen to him. Or spend all the money when there is still a week left before the end of the vacation. With a plan prepared in advance, a successful trip is not guaranteed, but its probability becomes higher. The same applies to a good business plan: it must outline all the steps, future costs and identify possible problems, as well as a description of the business itself, its ideas, prospects and comparison with competitors in the industry.
How a plan is useful
When a businessman, being new to the industry, launches a startup, it is not always easy for him to understand where to start his way. For example, there’s an idea to create a salon or open an atelier by the house, but there’s no clear understanding of how to arrive at that goal or whether the new business will be profitable. According to studies, about 17% of startups start without a thought-out business model, which becomes one of the reasons they fail. There are several key reasons why a businessperson should write everything down on paper.
A plan will help manage the project at the very start. It will serve as a navigator that will tell which way to turn and where the camera is, in front of which you need to slow down. The plan will help structure the business, lead it along the right trajectory and strive to achieve the goal step by step. It will show you all the key points and tell you which way to go if you miss the right turn, because a quality plan includes alternate paths of development in case the main ones fail.
It will help in making difficult decisions. A business plan is not a guarantee of a successful business, but it can help you assess your strengths. With its help, it is easier to decide how much to invest in what areas and whether to take credit for a risky project. It will show potential profits, risks and possible escape routes.
The plan should be short and informative. No investor will read a hundred-page plan. If the project has a complex structure, requires large funding, and the plan must be provided with supporting documentation, it is worth including in an appendix, which can be referred to at the request of the investor.
The plan should be clear. You need to be aware of what kind of investor you are going to. People who invest in research are not always familiar with scientific terminology. Likewise, investors who help youth startups may not understand the slang and interests of the new generation. The plan should be written in simple language that clearly explains what, how, and why.
Elements of the plan are worth testing. Test your idea before you go to an investor. Interview your potential audience and find out their opinion about the product, test different elements of the business, ask experts to verify your data and hypotheses. The better the plan is worked out at the initial stage, the higher its viability.
You need to define goals and objectives. Suppose you have the idea of setting up your jewelry store. Determine what your goal will be for the next 3-5 years. One store in a mall, a chain of stores, an online store, or entry into the CIS market. Concretization of the goals will help to show the investor what profit he can count on, and the company – to see its possible prospects and build step-by-step moves to them.
