WHY PREPARE A BUSINESS PLAN.
Perhaps the most important step in launching any new venture or expanding an existing one is the construction of a business plan. Such a plan must include your goals for the enterprise, both short- and long-term; a description of the products or services you will offer and the market opportunities you have anticipated for them; and finally, an explanation of the resources and means you will employ to achieve your goals in the face of likely competition.
“ To prepare a business plan
Preparing a comprehensive business plan along these lines takes time and effort. You will need many hours and depending on the nature of your business and how much data you have already gathered. Nevertheless, such an effort is essential if you are both to plan and to focus your ideas, and to test your ideas about entering or expanding your business. Once completed, your business plan will serve as a guide to follow, which, like any map, improves the user's chances of reaching the destination.
There are a number of other important benefits you can expect to gain from preparing a business plan. These include testing your ideas, building your confidence, understanding your financing needs, and giving you planning experience.
a To Test Your Ideas
A systematic approach to planning enables you to make mistakes on paper, rather than in the real world. A potential business person made the discovery while gathering data for his business plan that the business he thought was a small business was in fact the open store for a large national chain of retail outlets. This cause him to change his plan.
Other planners have found out that, by during their home work, they may be looking at the wrong type of business and if they went into this business the chance of making a profit was ifity at best. To recover expenses or break even would take years. This was found out while preparing a business plan.
b COMPLETING A BUSINESS PLAN
TO completed, a business plan will make you feel more confident in your ability to set up and operate the Business It may even help off set for lack of capital and provide you a course action that will bring other people in your program with sound ideas and good marketing skills.
c HOW MUCH MONEY IS NEEDED
You need to know how much money is needed . The business plan will show how much money is needed, what it is needed for, and when and for how long it is required.
Because little or no money and early cash flow problems are two important reasons why new business activities fail, it follows that business people with a soundly prepared business plan can reduce these risks of failure. They can also check out a range of different strategies and so work on options that make the best use of scarce financial resources.
It would be un wise to say that your business plan is the gateway to sources of money. It will, help you show your business skills and managerial ability in the best light and to communicate your ideas to others in a way that will make it easier for them to understand and to appreciate the thought behind your ideas. Your audience could be bankers, potential investors, partners, or government agencies. Once they know what you are trying to do, they will be better able to help you.
d THE EXPERIENCE OF PLANNING
To prepare a business plan will give you an insight into the planning process. It is this process itself that is important to the long-term health of a business, and not simply the plan that comes out of it. Businesses are not strait . No one expects every part of a business plan to occur as predicted, but the understanding and knowledge created by the process of business planning will prepare the business for any changes that it may face, and so enable it to adjust quickly.
Despite the many benefits, many would-be business owners still attempt to start without a business plan. The most common among these are businesses that either appear to need little or no capital at the start. People who have funds of their own;think that in both cases it is believed unnecessary to expose the project to harsh financial appraisal.
The former myth is usually based on the easily exploded myth that customers will all pay cash and that suppliers will wait for months to be paid. In the meantime, the owner has the use of these funds to keep the business running. In any event, two important market rules still apply: either the product or service being offered fails to sell like hotcakes and eventually has to be financed, or it does sell like hotcakes, attracting financially stronger entrepreneurs into the market. Without the staying power that adequate financing provides, these new competitors will rapidly kill the business off.
Would-be business people with funds of their own, or l borrowed from friends and relatives, tend to think that the time spent in preparing a business plan could be more usefully spent looking for offices, buying a new car, or installing a computer. In short, anything that stop them from immediate action is viewed as a waste of time.
Most people's initial thinking of their business venture has flaws in some way. Flaws can often be found out in advance when setting up a business plan; they are always discovered in the real world, at a much higher cost, this could cause the business to fail.
