A business
plan is a formal statement of business goals, and mechanism to achieve it, financial
status, and financial requirements of an organization. Business owners prepare
Business Plan to attract lenders and investors. It is wrong to assume that only
commercial organizations prepare business plans. Non-profit organizations too
prepare their business plans to expand their organization.
Types of Business Plans: We can broadly classify Business Plans into
two types namely Internal Business Plan and External Business Plan.
External business plans: These
are meant for external stakeholders such as financial stakeholders like
investors, lenders and donors. Here, lenders may be individuals, banks or any
other financial institutions. External business plans focus more on financial
details. For service oriented organizations, external stakeholders include donors,
government agencies, and international lending bodies such as World Bank, International
Monetary Fund (IMF), UNO, and Development Banks.
Internal Business Plans: These business plans focus more on goals and
mechanism to achieve goals rather than financial information. The goal may be development
of new product or service or re-engineering existing product of system.
Purpose:
·
To reveal status and direction of their operations.
·
To attract investors to invest in business.
·
To attract lenders to lend money to the
organization.
·
To attract donors to donate money or provide
financial assistance ( in case of non-profit organizations).
Business Plan Vs Project Plan: Project Plan is different from
business plan and it describes the goal of particular project. Project Plan is
also called Project Framework. It may even focus on the importance of current
project in the achievement of larger strategic goal of an organization.
Business Plan Vs Elevator Pitch: Business Plan is a wider document
as explained above while ‘Elevator Pitch’ is a short summary of executive
summary of business.
Content of Business Plan: Business plans prepared by profit
organizations focus on financial information such as financial status and profits
of last five years while their counterparts prepared by non-profit
organizations focus on details such as services they are rendering, number of
beneficiaries, and tax emption facility.
Prime Features:
·
Introduction of Organization
·
Business Concept
·
Goals and Objectives
·
History of Promoters
·
Vision
·
Mission
·
Industry Overview and Marketing Analysis
·
Marketing Opportunities
·
SWOT analysis
·
Customer Analysis
·
Competitive Analysis (Direct Competitors and
Indirect Competitors)
·
Competitive Advantage
·
Target Customers and Customer Needs
·
Business Strategy
·
Marketing Strategy & Marketing plan
·
Team and Management Structure
·
Annual Financial Reports
·
Assets and Liabilities of the organization
·
Revenue Model
·
Operating Cost
·
Operation Plan
·
Key Operational Process
·
Milestones
·
Management Team
·
Board Plan
·
Financial Plan
·
Funding Requirement
·
Use of Funds
·
Sustainability plan
·
Growth opportunity
·
Exit valuation/Exit Strategy
·
Contact Details
Limitations:
·
Estimations may go wrong. In most of the
business plans, organizations underestimate and understate expenses and
overestimate and overstate revenues.
·
A good business plan alone may not ensure
success of a venture. Success is a result of various other factors. However, it
enhances the chances of success.
·
While preparing external business plan, an
organization should be highly careful about legal concerns and accuracy of
financial liabilities which affect investor’s decision. Otherwise, he may face
severe legal consequences.
·
Business Plan is not open to everybody. Hence,
often, organizations expect their prospective investors to sign Non disclosure
agreements (NDAs) with third parties before providing them with business plan. Organizations
maintain higher degree of privacy and protection of trade secrets. Hence,
usually, organizations show their business plan to a few selected prospective
investors, lenders or donors in case of non-profit organization.
Is Business Plan open to everybody? In general, business plans are
considered confidential document meant for a few potential investors/lenders/donors.
However, some organizations make their business plan open to everybody with
unlimited audience. They usually publish their business plan in their official web
site so that it is available to everybody.
In some cases, organizations
reveal a part of their business plan by hiding confidential portion of the document.
If any external person shows interest in their business plan, they reveal hidden
portion of business plan if the organization firmly believes that concerned
person is a potential stake holder.
Written By: S. Chandrashekara Reddy.
Contact: chandrashekarareddys@gmail.com
