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What is a business plan and why do I need one?

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posted Nov 14 by Sagar Sharma
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Organization is a key factor in achieving a successful business venture. New business owners must consider the location of the business, marketing strategies and strategies for growth. A business plan is an effective tool for business owners to help organize a company’s goals and objectives. Business plans are utilized by start-up companies and existing companies to present strategies to potential business partners and help focus goals.

Purpose
A business plan is a written document that details an organization’s objectives and steps taken to meet the company’s goals. Business plans aren't created only for newly formed businesses. Existing businesses use business plans to clearly define members of a target audience and detail financing options when entering different markets or adding a product line or division.

Contents
According to the Small Business Administration, a successful business plan includes an executive summary, market analysis, company description, details on organization and management, marketing and sales objectives, services or product lines, funding requests, financials and an appendix. A typical business plan includes charts and tables to illustrate trends and may even include research studies of potential customers in the business’s locality.

Usage
The Small Business Administration notes that a business plan is a tool with three basic objectives: communication, management and planning. Small businesses mainly use business plans to present to creditors to obtain financing for operations. However, business plans are also used by owners to solicit for partners for joint ventures and as a tool when selling a portion of or the entire business. In “Business Plans Made Easy,” the author notes that large suppliers and customers often request a business plan to ensure companies have the ability to pay before taking a large order.

Limitations
Business plans help owners define the objectives of a business; however, business plans are static in nature. An owner may develop a plan to obtain financing and increase business activity, but once those needs are met the initial business plan is outdated. A business plan should be revisited as the business grows and needs change. Furthermore, business plans report on current conditions, but the plans do not detail the owner’s response to unexpected changes in the marketplace. One constant factor in business is change; however, business plans do not account for risks and unexpected shifts in the market.

Produce a Plan
Preparing a business plan is an intimidating process. To overcome the initial hurdle of preparing a business plan, owners enlist the help of local small business counseling centers. In addition, the Small Business Administration provides a business plan template that helps owners start a business plan.

answer Nov 15 by Danial Rotwaski

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