This chapter describes the purposes, principles, and the general concepts and tools for business planning, and the process for developing a business plan.
Business plans are developed for both internal and external purposes. Internally, entrepreneurs develop business plans to help put the pieces of their business together. Externally, the most common purpose is to raise capital.
As the road map for a business’s development, the business plan
The business plan provides the most complete source of information for valuation of the business. Thus, it is often the main method of describing a company to external audiences such as potential sources for financing and key personnel being recruited. It should assist outside parties to understand the current status of the company, its opportunities, and its needs for resources such as capital and personnel.
Hindle and Mainprize (2006) suggested that business plan writers must strive to effectively communicate their expectations about the nature of an uncertain future and to project credibility. The liabilities of newness make communicating the expected future of new ventures much more difficult than for existing businesses. Consequently, business plan writers should adhere to five specific communication principles.
First, business plans must be written to meet the expectations of targeted readers in terms of what they need to know to support the proposed business. They should also lay out the milestones that investors or other targeted readers need to know. Finally, writers must clearly outline the opportunity, the context within the proposed venture will operate (internal and external environment), and the business model (Hindle & Mainprize, 2006).
There are also five business plan credibility principles that writers should consider. Business plan writers should build and establish their credibility by highlighting important and relevant information about the venture team. Writers need to elaborate on the plans they outline in their document so that targeted readers have the information they need to assess the plan’s credibility. To build and establish credibility, they must integrate scenarios to show that the entrepreneur has made realistic assumptions and has effectively anticipated what the future holds for their proposed venture. Writers need to provide comprehensive and realistic financial links between all relevant components of the plan. Finally, they must outline the deal, or the value that targeted readers should expect to derive from their involvement with the venture (Hindle & Mainprize, 2006).
Many businesses must have a business plan to achieve their goals. Using a standard format helps the reader understand that the you have thought everything through, and that the returns justify the risk. The following are some basic guidelines for business plan development.
1. If appropriate, include nice, catchy, professional graphics on your title page to make it appealing to targeted readers, but don’t go overboard.
2. Bind your document so readers can go through it easily without it falling apart. You might use a three-ring binder, coil binding, or a similar method. Make sure the binding method you use does not obscure the information next to where it is bound.
3. Make certain all of your pages are ordered and numbered correctly.
4. The usual business plan convention is to number all major sections and subsections within your plan using the format as follows:
1. First main heading
1.1 First subheading under the first main heading
1.1.1. First sub-subheading under the first subheading
2. Second main heading
2.1 First subheading under the second main heading
Use the styles and references features in Word to automatically number and format your section titles and to generate your table of contents. Be sure that the last thing you do before printing your document is update your automatic numbering and automatically generated tables. If you fail to do this, your numbering may be incorrect.
5. Prior to submitting your plan, be 100% certain each of the following requirements are met:
This statement might mean there is a total shortage of 100,000 units, but competitors are filling this gap by producing 25,000 per year; in which case there will only be a shortage for four years. However, it could mean that the annual shortage is 100,000 units and only 25,000 are produced each year, in which case the total shortage is very high and is growing each year.
This page titled 1.1: Chapter 1 – Developing a Business Plan is shared under a CC BY-SA 4.0 license and was authored, remixed, and/or curated by Lee A. Swanson via source content that was edited to the style and standards of the LibreTexts platform.
