Business Planning Process and Importance of Business Plan
The term “business plan” has different meanings for different people. Banks that release their planning guidelines consider formal business loan applications to be synonymous with business plans.
Venture capitalists see them as investment proposals, purely fundraising documents. Corporate managers think of them in terms of departmental budgets and financial forecasts (Touchie, 2005).
For every action that is taken whether as an individual or group, there is a plan. A plan is systematic and scientific. Before the launching of the business, you logically organize the process you want to adopt to achieve the set business objectives.
The organized procedure is planning. Therefore, in this unit, you will learn the procedure to take to organize your startup.
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According to Kuratko and Hodgetts (1998), the business plan describes to investors and financial sources all of the events that are likely to affect the proposed venture.
Details are required for various projected actions of the venture, with associated revenues and costs outlined.
A Business Plan describes a business opportunity. It is like a road map because it tells you what to expect and what alternative routes you can take to arrive at your destination. Planning helps you to work smarter rather than harder.
It keeps you future-oriented and motivates you to achieve the results you want. Perhaps most importantly, the process of completing a
Business Plan enables you to determine what commitment you need to make to the venture (Department of Trade and Economic Development, 2010).
Components of a Successful Business Plan
Importance of Business Plan
When you think about what a business plan is your mind probably goes right to the bank and the process of applying for business financing, as that is the most common use for business plans. But if you are creating this valuable tool only as a part of a required financing package, you are overlooking its most important function: planning (Cagan, 2006).
Whether you are new to the world of entrepreneurship or a seasoned veteran, a properly crafted business plan can help solidify your vision. And when you are remaking an ongoing venture, a written strategy (business plan) can help ensure its success.
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Taking cognizance of that, particular events spur the need for a full-scale business plan.
According to Cagan (2006), they include the following:
- You plan to launch a new business.
- Your business has grown substantially.
- You want to expand your existing business into new markets.
- You want to add a new product or product line.
- You are thinking about buying a business.
Other reasons why a business plan is necessary according to the Department of Trade and Economic Development (2010) are to:
- Control future risks
- Prepare for future uncertainty
- Control business environment
- Control business growth
- Avoid sales crises
- Avoid liquidity crises
- Avoid succession crises
- Ensure people development
- Ensure workspace is available
- Avoid stock buying crises
According to Timmons and Spinelli, (2004), developing a business plan is one of the best ways to define the blueprint, strategy, resource, and individual requirements for a new venture.
A good business plan must be developed to exploit the developed opportunity, develop the opportunity and determine the resources required, obtain those resources, and successfully manage the resulting venture (Hisrich, Peters, and Shepherd, 2008).
Writing a business plan is time-consuming and a financial waste.
Writing Business Plan can be laborious and financially demanding, but it is worth the trouble. A good writing business plan will enable an entrepreneur to control future risk, prepare for future uncertainty, control business growth, and take charge of organizational growth and development. It allows for consistency in decision-making.
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