One of the first steps in a new venture is the development of a business plan. The business plan describes the product or service, market, people and financing needs.
A well-prepared business plan serves several purposes:
- For the new business, it helps the owner determine the feasibility and desirability of pursuing the steps necessary to start a business.
- For the company seeking financing, it is an important sales tool for raising capital from outside sources.
- For an existing company, the business plan forms the basis of a more detailed operational plan and thus becomes an important management tool for monitoring the growth of the firm and charting future directions.
A business plan should cover these five areas:
- Business Summary: The summary should be a brief, concise work that provides the reader with a good understanding of the entire business venture. It should cover – executive summary, objectives, mission statement and keys to success.
- Company Summary: It commonly includes a general description of the business, including the product or service and may describe the historical development of the business, company profile, location, legal structure, ownership, and business structure.
- The Product or Service: This is a detailed description of product or service lines, including the relative importance of each product or service to the company. Include pricing analysis if possible.
- Marketing Plan: Identify principal markets, run a market analysis, and complete an overall strategy for the business.
- Financials: This starts with providing name and address of key advisors, including auditor, legal counsel, and banker. Then providing financial statements and projections for next two to three years, which include: Income Statement, Balance Sheet, and Cash Flow Statement.