You have a great idea for a new product that you know would sell like hotcakes. All you have to do now is start up and new businesses selling your innovation and you will never have to worry about money again. Right? Entrepreneurs are often highly creative and passionate individuals that get caught up in their ideas and go to great lengths to see them become a reality. While creativity and innovation can contribute to a business’s success, level-headed planning is a key component of creating a successful company. A business plan is a document that lays out all of the important components of a business and serves as a road map to success. Creating a business plan is an important first step in the process of starting a new company.
What is in a Business Plan?
A business plan typically consists of several sections that outline various important aspects of a company. The first section of a business plan is an executive summary which is a concise description the company’s mission, objectives and how the company plans to fulfill its mission and objectives. For a new company, the executive summary may include information about an identified need in the market and a type of product or service the company plans to offer to fulfill that need. It may also include information about the owners such as the expertise that they bring to the table. Other common sections include a market analysis, a detailed description of company, a discussion of the organization and management structure of the company, a comprehensive description of products and services that the company plans to offer and section discussing financials, including funding requirements, cash flow statements and excepted profit. The market analysis identifies a target consumer, describes the current state of the market and competition in the market.
What is the Purpose of a Business Plan?
A business plan forces managers to think critically about how a business will actually operate and make profit. Just because you have a great idea for a new product, you aren’t guaranteed to have a successful company. A company can fail for all sorts of reasons even if it offers and excellent product or service, such as competition and high expenses. It is possible that in the process of creating a business plan, managers could discover that a certain business idea is not viable. For instance, if the cost of producing a certain new product is too high, the product might not be profitable. Finding a way to transform an idea into a viable business in the planning stage is essential to avoid costly mistakes.
A business plan can also act as a tool to help secure funding for a business. Investors and lenders may look at a company’s business plan when deciding whether to give the company money. A well-constructed business plan can be the difference that gives a company access to the capital it needs to launch new projects and grow.