A business plan precisely defines a business, identifies a company's project, portfolio, and/or enterprise goals, and serves as a resume of sorts.
The basic components typically include a current and pro forma balance sheet, an income statement, and a cash flow analysis. It helps to allocate resources properly, handle unforeseen complications, and make good business decisions. Because it provides specific and organized information about a company and how a company will repay borrowed money, a good business plan is a crucial part of any financing application, whether debt or equity. Additionally, it informs sales personnel, suppliers, and others about a company's operations and goals.
The importance of a comprehensive, thoughtful business plan cannot be overemphasized. Much hinges on it: outside funding, credit from suppliers, management of operation and finances, promotion and marketing of the business, and achievement of company goals and objectives.
Despite the critical importance of a business plan, many companies and entrepreneurs drag their feet when it comes to preparing a written document. They argue that their marketplace changes too fast for a business plan to be useful or that they just don't have enough time. But just as a builder won't begin construction without a blueprint, eager business owners shouldn't rush into new ventures without a business plan.
In business plan preparation, these are the kinds of questions typically considered:
- What service or product does your business provide and what needs does it fill?
- Who are the potential customers for your product or service and why will they purchase it from you?
- How will you reach your potential customers?
- Where will you get the financial resources to start your business?
Similar to general business planning, strategic planning at the board, corporate, and business unit level is also an important enterprise planning activity.
Strategic planning is one aspecd of overall organizational feasibility, since the process is intended to at least assure and protect future cash solvency for an enterprise, and to seek competitive differentiation and consumer attractiveness to the organization's products and services.
