What is a business plan and how to start a business?
Updated: Oct 6, 2022
Before turning a business idea into a business and starting your own business, you need to have a business plan. A business plan is a summary description of all the company's short-term and long-term goals and ways to achieve them. Creating a business plan is considered essential for effective operations, as it simplifies a seemingly complex process by presenting it through 9 stages, each of which is briefly presented below. Starting a business may seem difficult at first glance, because in addition to financial investments, professional approaches are needed. According to Investopedia, 67% of businesses fail in the first 5 years. The reasons for failure vary, mainly depending on the lack of vision. In this case, it is important to seek professional advice during proper business planning.
Basic principles of business plan
As in any business, the most important condition before starting a business is the accurate assessment of demand and supply and the identification of customer needs, therefore the fundamental principles of a professional business plan are detailed market research and financial planning.
Use facts based research and factual data
Be more realistic than idealistic. Too often, business plans focus too much on what the product or service could be, rather than what it actually is. Although having a vision is important, your plan should be based on research data, as this stage can be of key importance for further activities, it is advisable to use business efficiency consulting services.
Register the business and choose the right legal entity type
Legalize your business idea. This way you avoid wasting time or money by leaving the idea on paper. Online business registration is available through e-register.am. First of all, you need to register on the website, as well as have an electronic signature, as it will be required during registration. After registration, the first step is to choose the organizational and legal type of the new company, as it will determine further obligations.
Business plan structure
Of course, business needs are always changing, but your business plan should provide a clear picture of how the business will operate in the short and long term leading to business process optimization. Making a business plan will help in further business management.
The business plan of a company should clearly reflect how and by what means you will achieve the business goals, solve all the problems and clearly reflect your action plan. All of this is summarized through the 9 stages listed below:
1. Brief description This section reflects the organization's mission, vision and values, on which the company is built and the path to success, also it reflects company's goals and action plans. It should also include a brief description of the product or service offered and the sales channels.
2. Business model The business model section presents the company's business idea, profit-making plan and field of activity. It defines the range of products or services the business is planning to sell and the corresponding target market and any expected costs. Business models are important for both new and established businesses.
Here is provided information about the product/service being sold, such as what you sell, what benefits customers receive, how long the product life cycle is. Your product or service is the core of your business idea, this section is used to detail your product or service throughout its life cycle, including who it's for, what it costs, and what competitive advantage it has.
4. Market and competitor analysis
Conducting thorough market research can help you understand the nature of your industry, as well as how to differentiate yourself from the competition. Market description, development trends, expected sales volumes, target market profile and needs are presented here.
5. Growth strategy and implementation plan
This section of the business plan defines the organization's strategy, development paths, and management responsibilities. The business plan explains how you will operate and manage your business. It also refers to business activities that are not directly related to providing goods or services to customers.
6. Organization and management
The organizational and legal structure of the business and the resulting management profile are presented in the Organization and Management section. The necessary human resources and qualification requirements are described in detail. This section should include relevant information about your management team and other key employees, including each relevant individual's ownership percentage and degree of involvement, depending on the type of entity.
7. Implementation plan
The implementation plan includes the location of the business, the equipment, the expertise of the necessary specialists, the requirements for the inventory of goods and suppliers, a description of the production process, as well as any other necessary details. For a business, the implementation plan plays a crucial role in the development and implementation of an idea, project or methodology.
8. Marketing strategy This section includes the sales strategy, pricing policy, as well as the promotion plan for products and services through various sources. Marketing and sales plans outline the steps your business will take to achieve its financial and sales goals.
9. Financial analysis The Financial Analysis section presents a cash flow report, financial forecasts, break-even analysis. The purpose of this stage is to demonstrate business viability and investment attractiveness. This part is perhaps the most crucial and needs to be discussed with business solutions consultant.
Advantages of business plan
Essentially, a business plan describes the business in detail, including its goals. First of all, you need to understand the business plan definition and business plan goals in order to make the right business plan.
Listed below are advantages of a business plan.
Defining the goals and objectives of the company
Goals and ways to achieve them are defined in accordance with the developed action plan. Strategic, long-term and short-term goals are defined, through which it is easier to check the performance of the activity plan, that is, how close we are to the realization of the goals set before us.
Assessing the current situation and identifying gaps
Since there is already a clear division regarding the implemented actions, performance indicators and norms are defined, which makes it possible to evaluate the current situation and understand the hindering circumstances, to understand how well we are implementing the plan set before us. Perhaps one of the most important features is that the achievements of the company and the ways to achieve it become clearly visible.
Involvement of financial sources
Apart from the direct participants in the business, the business plan is a primary source for investors, and for most businesses, the main beneficiaries of the business plan are the investors themselves. The business plan answers the question of what funds need to be invested to ensure the given project, what level of return will be ensured and what resources will be required, according to which the investors will decide whether it is worth investing in the given project.
Business plan outline example
Download and use to build your new company business plan template free download
It is necessary to understand the main elements of the business plan, which should serve as a basis. Basically, a business plan should answer two questions: why your business and why now?
Investors want to know why your business is entering the market, that is, what problem it solves and how it differs from existing businesses. They also want to know why now is the right time for that type of product or service.
However, depending on the field of activity and business goals, the requirements of the business plan change, so it is necessary to seek business efficiency consulting services and create a professional business plan.