What is involved in a business plan?

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The business plan typically serves quite a few different purposes including the following. An in-depth business plan:

Projects the Financial Future

The main item of interest in the business plan, for many people, is a picture of the financial future. The plan projects the future economic situation and financial performance of the company, for owners, investors, and potential investors.

Identifies and Measures Risks

An in-depth business plan Identifies and measures significant risks for the business. These are events that would lead to different financial situations and financial performance results. The document must therefore also present strategies for dealing with threats and managing risks. 

Describes the Business Model

The business plan defines and outlines the company’s business model. The model shows where and how the company expects to spend money, bring in revenues and earn margins. And, the model includes a quantitative Pro-forma Income statement estimating gross margin, operating margin, and profit margin. 

Identifies Key Assumptions

A complete business plan Identifies critical assumptions and trends underlying future financial results for the company. These may include trends in business volume, market demand, competitors actions, or prices of goods and services crucial to the business. As a result, senior managers watch these trends closely and update the plan when they change.

Helps Prioritize Business Objectives

A complete business plan guides management in setting and prioritizing business objectives. The business plan thereby provides a basis for:

Setting financial targets for financial goals.

Setting targets for key performance indicators for non-financial objectives.

Setting targets for key performance indicators for non-financial objectives.

Identifying contingencies and critical success factors critical for meeting objectives. 

Source for Budgeting

The business plan serves as the primary starting resource for developing budgets. The business plan serves as the primary starting resource for developing budgets. In this role, it is indispensable for budgetary work because it captures the company’s forecasts for spending and incoming revenues.

Serves as a Resource for Business Case Analysis

The business plan is a critical resource for those building or evaluating business case analyses. Business Case Analysis is central for instance, for supporting capital acquisitions, investments, product or marketing decisions, and project proposals.