Most small business owners start and operate their businesses without paying any attention to the importance or necessity of a business plan. They, however, realize the need for it at a later stage in the business especially when they require financial assistance such as a loan from a bank and other financial institutions. A business plan is a detailed outline of the structure of the business and vital activities that go into the operation of the business for its success. It answers questions such as what are the products of the business. What is the target market of the business? What is the competitive advantage of the business? What costs are incurred to start up the business? What are the strategies of the business in order to remain competitive? What is the structure of management? Who owns the business? It is critical for any business that wishes to survive to have a detailed and updated business plan. This is because a business plan is used to analyze and measure the potential of the business, for instance, by potential investors before investing their money into the business.
Secondly, a business plan is a tool for internal business analysis in that it allows the management of the business to set objectives; acts as a reminder of both the objectives and the position of the business. In short, the plan lists the business strategies and ways to achieve them effectively. Therefore, it acts as a map for the management to follow in their quest for success. Thirdly, a business plan acts as tool for communication. The entrepreneur may have a vision of the business in future. However, the employees and other external stakeholders may not necessarily be in tune with the entrepreneur. Therefore, the business plan is a means for the entrepreneur to communicate the vision or the idea to the employees and the external stakeholders such as the investors. Fourthly, a business plan is the fundamental tool in forming future or present relationships in the world of business. For instance, the business may want to merge with other businesses and the business plan is vital in explaining the position of the business and its structures, strategies, competitive advantage and its ownership.
The ‘Business Description’ section involves a summary of the company/business in terms of its products/services, the target market, the executive summary, the ownership of the business the start-up costs and the management summary. It serves to provide an overview of the business for introductory purposes. The executive summary in particular should develop interest of the intended parties at first sight. It should capture the most crucial aspects of the business succinctly. It should paint a clear picture about the business to the reader and stroke an interest to look at the details.
An executive summary offers a shallow description of what is the business plan. This includes marketing analysis, marketing plan, manufacturing plan, recent financial performance, company’s top management, company plans, and forecasts. It is imperative to recall that a business plan is not an internal document and that the reader may not have any information about the company. Finally, an executive summary should offer a clear hint as to why the business plan is prepared. This will ensure an interested party gets know the reason without having to look at the whole document. The reasons may range from merger, financial impetus to supplier partnerships.