Business Plan: Key to Entrepreneurial Success
The Importance of a Business Plan
A business plan is a document detailing information related to your business. This document can vary in length and detail. There isn’t a single model for a business plan; each entrepreneur should create their own, reflecting their unique ideas and decisions.
A business plan is fundamental to the success of entrepreneurs. It outlines a series of interrelated activities for starting or developing a business or project, with a planning system aimed at achieving specific goals.
The plan defines the stages of developing a business and serves as a guide for creation or growth. It’s also a communication tool for potential investors or to obtain financing. It reduces the learning curve, minimizes uncertainty and risk, and facilitates the analysis of feasibility.
The business plan must convey to investors and financiers the factors that will make the venture a success, how they will recover their investment, and the plan to end the company if expectations are not met.
The business plan must justify all future goals. For example, if an increase in market size and participation is forecast, explain the reasoning with logical and convenient information. It must be dynamic, updated according to current needs, and provide an overview of the market and the requirements of the new company, product, or service.
The plan can be developed for a new or existing company. When a company is operating and growing, a plan helps redefine objectives and seek additional investments. After a period of operation, compare the results with the original plan to identify deviations and take corrective measures.
Each business plan is unique, reflecting the personal touch of its creator and the size and rotation of the company. While most are similar, there isn’t a single format for all cases. The veracity of the information is vital to its success.
Investors and financiers should be aware of the projections used to estimate the predicted value, understand the assumptions, logic, and media used. For a more objective analysis, include historical information, comparative statistical data, and charts from the last five years.
Benefits of a Business Plan
- Proper planning reduces uncertainty and increases the chances of successful market positioning.
- It helps identify the market segment that demands the goods or services of the new company.
- It plans, organizes, and implements activities for the launch of the company.
- It prepares the budget of required economic resources and identifies funding sources.
- It allows for monitoring and evaluation of results, avoiding consequences that affect the stability of the company.
The business plan helps the entrepreneur to:
- Commit to the idea.
- Develop as an excellent administrator.
- Save money and time with proper focus and control.
- Convince other companies to form strategic alliances.
- Improve the ability to make sound decisions.
Disadvantages of a Business Plan
If entrepreneurs thoroughly investigate their ideas and draw up suitable business plans, they would avoid founding companies that later fail. Some situations that impede success in execution include:
- Misidentification in market research, potential customers, the right price, channels of distribution, promotion, and sales projections.
- Poor investment budget projection and funding sources.
- The projected schedule does not fit with the use of human, technical, and economic resources.
Errors in Developing a Business Plan
Common errors include:
- Thinking that success is guaranteed with enough financial resources.
- Assuming any product is marketable and can become a profitable business.
- Lack of clarity in forming the appropriate team.
- Estimating sales based only on production capacity.
- Failure to analyze and understand the target market.
- Trying to hide weaknesses in the business.
- Assuming figures without evaluating their effect.
- Adjusting financial statements to unrealistic projections.
- Sending the business plan to the wrong person.
- Exaggerating the business’s potential.
Reasons for Writing a Business Plan
- Provides information to convince the entrepreneur of the idea before making a financial commitment.
- Explains, justifies, expands, or reduces the reasons for a project.
- Registers the current and future state of the project, allowing for control and timely corrective actions.
- Serves as an assessment tool for investors, banks, suppliers, and customers.
Characteristics of a Business Plan
A business plan should:
- Define various stages to facilitate the measurement of results.
- Set goals for the short and medium term.
- Clearly define the expected end results.
- Establish metrics to know their achievements.
- Identify potential opportunities.
- Involve executives in its development.
- Appoint a coordinator for its implementation.
- Anticipate difficulties and possible remedies.
- Have programs for their realization.
- Be clear, concise, and informative.
Features of the Goals
Setting goals is essential to define the direction you want to monitor and evaluate. The main features of goals are:
- Consider ends and means.
- Be quantitative and measurable.
- Be specific, realistic, and consistent.
- Have a definite time for their achievement.
- Be determined by the participants.
- Be written.
- Individual goals should be related to the group.