Oops! Can you imagine a human being without a skeleton? How would he appear and what would you term him in your words? Creation error? Lolz. The Creator is a Perfect Man. That is how a business without a written plan appears. Monstrous. The skeleton gives shape, bears the weight of the body, and gives directions to the growth of the human body. Such is a plan to a business.

Let’s journey through this vital information about business planning.

• What a business plan is
• Features of a business plan
• When a business plan is required
• Users of business plan
• Risk tendencies in business planning
• Benefits of a business plan
• Structure and components of a good business plan
• Disadvantages of poor planning in business

What Is a Business Plan?

A business plan is a document that spells out the goals and objectives of a business clearly outlining how and when they can be achieved. A business plan provides business goals, objectives, growth path, strategies, and risks of business opportunities. Plans enable the evaluation of the feasibility of a business idea in an objective, critical, and unemotional way.

With the aid of a well-written plan, you can assess the market situation, skills required, financing needs and possible sources, communicate the idea to others, etc. Planning is vital in a number of ways and has various parts that shall be delved into.

It’s pertinent to state here that writing a plan for any business requires adequate research to totally eradicate any guess and give the idea feasibility. It requires time.

Features of a Business Plan

A good plan must have features that enable precision and clear direction for whoever reads it. The vision and strategy must be fully spelled out without complications. Some of these features are below.

• Simplicity – easy to read and understand
• Accuracy and consistency – make upfront research to ensure precision.
• It must reveal the strength of management.
• It is driven by the market and not the product.
• It must reveal the uniqueness of your brand.
• It qualifies the competition.
• It must be subject to review.
• It must present the projections.

When Is a Business Plan Required?

Planning is a business is not as many have mistaken it to be. You have a plan at the startup stage that does not make it overall. Continuous evaluation, expansion, and retargeting make it necessary to have a proper plan. Instances, when you need a plan are as follows;

• Startup planning – before starting a business, planning is the first step. This is what helps you to determine the feasibility of the idea.
• When adding a new product –every product has a definite market therefore, before adding a new product; you must necessarily visit your marketing plan because every product has a target market.
• When expanding a business – every expansion should be as planned. Expanding a business without a written plan is merely building a skyscraper on a shallow foundation. It will collapse.
• When entering a new market – going into a new market requires an evaluation of strategy and development of a new one where necessary. This means a review of the marketing plan.
• When changing a production technique – production techniques require planning. You must remember that your production processes determine your output quality. Any change made in the technique of production may or may not affect output quality, but before such changes are made, plan carefully to reveal the probable outcome. Therefore, your business plan should be reviewed.
• When changing products – when changing products are required.

A plan is the instrument of strategy development and implementation. At every point where the business is undergoing transition, there is a need to revisit the plan.

Users of Business Plan

Business plans are prepared for both internal and external uses. If it is designed to be presented or sent to an external organization, it is formal. Such kinds of plans are the proposals for funding, feasibility reports for starting a business usually submitted for fundraising. The internal plan is the one that is not allowed for external use. Users of business plans are;

• Entrepreneurs
• Management
• Business consultants
• Investors
• Donors
• Creditors and suppliers

Risk Tendencies in Business Planning

There is no sure way to ruin a multi-billion dollar business other than neglecting the usefulness of planning. In the first place, it cannot grow beyond hand-to-mouth business. Furthermore, it is ruinous to neglect potential failure hubs in the planning processes. The factors below are potential risks to businesses that may arise due to improper planning.

• Poor understanding of financial information
• Lack of specific and detailed strategies
• Failure to evaluate potential risks and management strategies to handle such
• No updated financial dealings to reveal the position of the business at present
• Rough sketch and mental planning
• Unrealistic assumptions
• Delegating the planning to someone that is not grounded in the knowledge of the business
• Delegating planning to one who is not in the company

Benefits of a Business Plan

Planning is vital in all spheres of life ranging from personal life, career, corporate, business, etc. Failing to plan is a plan to fail. At all points, plans are made. Like every other plan, a written business plan has a number of advantages to success.

• It provides direction for every activity.
• It is a useful tool for the communication of business goals.
• It’s a reference point for management decisions and control.
• Helps to ascertain costs and potential sources of financing
• Provides the basis for performance evaluation
• Enables the evaluation of potential risks and identifies opportunities
• Helps to determine profitability and return on investment

Structure and Components of a Good Business Plan

There are no hard and fast rules for structuring a business plan. However, this provides essential guides to how you can structure it. What matters is that it should capture the essential components in a clear, concise and easy to understand manner.

A comprehensive plan combines various sub-plans, including management and human resource plan, production plan, marketing plan, and financial plan. These components will make any business plan easy to use.

Let’s structure it into sections for simplicity. The order is according to the Comprehensive Business Plan available. The marketing plan is in-depth and far more elaborate than it is contained in the comprehensive plan.

Section One: The Business Description

• Business Description
  • Contact Information
  • Organization
  • Mission Statement
  • Business Overview
  • Overall Goals
  • Short Terms Goals
  • Long Terms Goals
• Products/Services
  • Trend, Present Situation, and Positioning
  • Production and Process Description
  • Raw Material Required and Sources
• Marketing Plan (Abridged)
  • Target Market/Location
  • Marketing Strategy
  • Competition Analysis
  • Comparative Price Analysis
  • Competitive Advantage (Unique Selling Propositions)
  • Market Situation Summary
• Management and Operations
  • Environmental Plan
  • Human Resource/Personnel Plan
  • Legal Standing and Agreements
  • Estate Plan and Will
  • Insurance Plan
  • Retirement Plan

Section Two: Financial Plan

• Cost of Projects
  • Cost Requirements
  • Preoperative Expenses
  • Cost Breakdown
• Projected Financial Statements
  • Income Statements
  • Cash Flow Statements
  • Statement of Financial Position (Balance Sheets)
• Break-even Analysis
• Sources of Funds

Section Three: Appendix  

Historical financial statements, tax returns, reference letters, personal financial statements, facility diagrams, purchase orders, contracts, etc. are other supporting documents that can be added as supporting documents, if available. These are not part of the business plan, but supporting documents.

Just as stated earlier, there are no fast and hard rules about the structure of a business plan.  The sub-plans (components) are full plans covering different levels of skills in different fields of endeavor.

This reveals why it is obsolete to have a business owned and run by one person running around the value chain –sole proprietorship. Planning aggregates different skills and resources into the interaction to determine or create values that are offered at a cost.

 Disadvantages of Poor Planning in Business

There are several disadvantages of poor planning. In fact, the list will continue to run inexhaustibly including the ones you have in your mind. Here are some disadvantages.

• Stunted growth – the business growth will be restricted.
• Poor management decision –plans are tools of management decision. Where there is no proper planning, the management decision will be poor.
• Inability to measure success – the outcome of a business is measured by the goals clearly spelled out in the plan. Failure to plan effectively will truncate the ability to measure success.
• Misguided financial decision – the decision to spend or accept a loan facility is predicated on the ability to determine a clear outcome. This can be lead to misappropriation.
• Inability to obtain funding – no investor or bank will grant a loan or funding to a business without a clear plan.
• Business failure – failure to measure costs and benefits of every opportunity and inability to clearly state breakeven can cause even bankruptcy.

Planning is essential to every aspect of human existence. There is no doubt that you can tell decide what a good business plan by the features when it is required, users of a business plan, benefits of having one, structure, and dangers of improper planning. You are good to go.