A business plan is a written explanation of the future of your business. There is no need to make it more complicated. It is document which describes what you plan to do in the company as well as how you are planning to do it. If you write down a paragraph on the back of an envelope which describes your business strategy, you’ve penned a plan or at least the kernel of a plan.
Business plans can assist the business owner with performing several tasks for those who write as well as read them. These plans are used by investment-seeking entrepreneurs in order to convey their vision to potential investors. In addition, a business plan may also be used by firms who are attempting to attract key employees, look for new business, deal with suppliers or merely to understand how to handle their companies better.
The nitty-gritty of a business plan
Stated simply, a business plan communicates your business goals, the strategies which you’ll make use of to meet these outcomes, potential challenges which may confront your business in addition to ways to respond to them, the organisational structure of your company (including titles and responsibilities), and lastly, the amount of capital which is required to finance your venture and sustain it until it breaks even.
A substantial part of your business plan consists of your financial statements. These statements are formal archives of your business’s financial activities. Financial statements provide a summary (short and long term) of your company’s financial condition. The four primary financial statements are the following:
- Income statement: Your bottom line which is calculated by subtracting costs from revenue in order to calculate net profit
- Balance sheet: This is a financial snapshot which shows what you own, what you owe as well as what your company is worth
- Cash flow statement: This statement follows the flow of cash in and out of your company
- Budget: This financial statement is your financial forecast that indicates where you plan to make as well as spend money