Business plan: concept and format

The essentials

A business plan is a written document that describes a proposed or existing business, its goals, and the strategies for reaching them. It answers three broad questions: Where is the business now? Where does it want to go? How will it get there? It is useful to the entrepreneur as a guide and to outsiders such as banks, investors and partners who want to judge the venture.

Purposes of a business plan:

• To clarify the idea and test whether it is feasible.
• To set goals and measure progress against them.
• To raise funds from banks, angel investors or venture capitalists.
• To coordinate marketing, production, finance and people.
• To anticipate problems and prepare responses.

Key points

A common format of a business plan:

• Title or cover page: name of the business, address, contact details of the promoters.
• Executive summary: a short overview of the whole plan, usually written last but placed first.
• Business description: the product or service, the industry, the mission and objectives.
• Market analysis: target customers, market size, competitors.
• Functional plans: organisational, operational, production, marketing, financial and human resource plans.
• Risk assessment: possible problems and how they will be handled.
• Appendix: supporting documents such as surveys, quotations and résumés.

Exam tips

• The executive summary is the part most investors read first; it must be brief and persuasive.
• A business plan is not fixed for ever; it should be reviewed as conditions change.

Common mistakes

• Thinking a business plan is needed only to obtain a loan. It is also an internal guide.
• Placing detailed financial tables in the executive summary; detailed data belongs in the financial plan or appendix.