Regardless of the nature of a business or the size thereof, a sustainable and well-templated business plan is a necessity for survival in the long run.. A business plan, in simple words, is a description of the business, its stated objectives, and the way it would run to achieve those objectives.
The plan also lists down the resources available with the business like land, plant and equipment, and the technical resources in the form of the management team and employees.
Contrary to the widely-held belief, a business plan is not only a requirement for obtaining loans from banks and financial institutions, but it is also a necessity for running a successful business because it serves as a roadmap for conducting operations of the company.
How to make a viable business plan?
There are several requirements for a viable business plan. They are listed chronologically in the below article
Defining the business
You must write down about what your business is. Defining the business operations is necessary since it allows you to set your goals accordingly and further clarify your targets towards the achievement of the overall objective. While representing your business, you should also be able to list down all your strengths and weaknesses.
It must also contain the essentials if you have a unique selling position. It is prepared by merely stating if your business is in a unique place to fulfill the need or the desire of a person.
The benefit of this statement is that through it, you can easily convey to the reader how your product/service stands out in the crowd and if there are close substitutes of your product/service readily available in the market.
Unfortunately, most business owners are completely unaware of how their businesses should be defined. Consequently, they are unable to allocate the right resources in the right place.
For example, a car repair shop that also sells used cars may classify itself as a repair facility even though it generates more revenue through selling old cars. The owner, under the wrong impression, that he is running a car repair facility will spend more of his time and resources on repairs without realizing that if allocated the same resources to procuring and selling old cars, he would be making more money.
It is why defining the true nature of your business is necessary.
Determining your customer base
A business plan is incomplete if it does not identify and define your customer base or clientele. You may be producing goods that appeal to a wide range of people, but you still need to pinpoint that segment of the market, which is your forte.
You must know who these people are and how to reach them and communicate with them to increase your sales.
Your customer base may determine through the demography to which they belong or the geographical location where they reside. You must decide if your product is gender-specific? Does it cater to the needs of a specific income group? Is your product available in a particular location?
By answering these questions, you may determine the common factors among your customers and then divide them into segments.
It will narrow down your target market, allowing you to keep your energies focused on the most viable group pf prospective customers. You may choose to target several segments at the same time, but it can be costly and time-consuming.
Understand and factor that affect the business
Several factors affect your business in various ways. Some of those factors are under your control while the rest aren’t.
The external factors that you cannot control include your competitors, new entrants in the market, new similar products, fluctuations in the purchasing power of the customers, and variations in the prices of your raw material.
You must have an understanding of these external forces, how they impact your business, and how you can mitigate their impact.
If you produce goods that require regulatory approval, you will have less to worry about new entrants within the market. But, by that same token, you will need to worry more about the compliance matters regarding the same products.
A business plan not only covers the knowledge of your own business, products, and operations; it also includes all the external factors that affect your business.
It also takes into account the legal issues and even political matters that can harm the operations of your company at any point in time.
Creating business viability
The business plan must be able to show how your business can establish and maintain its competitive advantage.
To sustain your competitive advantage, you must also keep the focus on your ability to lure new customers. The business plans take this into account and discuss strategies for increasing revenue. It will show how you plan to market your product, and how you will compel people to spend money on it.
The business plan must discuss these issues at length.
Analyzing and Projecting the Financial Performance
In the end, the success and failure of every business depend on their financial performance. For example, if you are looking for bad credit business loan options, you will still need to have a business plan to share with prospective lenders.
The business plan must have a projection that shows your financial expectations from the business. It would first discuss the costs associated with the company and the profitability that you are expecting.
You must also have an idea regarding the expenses that your business will incur. These would include the cost of goods sold and administrative costs.
You must keep in mind that for a running business, cash flow is significant. If cash is scarce, you will never be able to run the operations of the company smoothly.
The financial projections should be presented to display a favorable view of your business. It will always be suitable for investors and lenders.
While preparing a business plan, the financial projections of the business should get plenty of time. It is perhaps the most critical aspect of the project because everybody interested in your business will gauge the prospects of your market through these projections.
The Final word
Most young and energetic business owners think that they have it all tied down within their heads, and there is simply no need to develop and write a business plan.
This thinking may not be right because a business plan in black and white would allow business owners to keep their businesses on the right track at all times.
It is not just enough to develop a business plan; it must be updated at all times to incorporate changes in internal and external factors that would sooner or later start affecting your business.