A formal business plan is just as important for an established business, irrespective of its size, as it is for a startup. It serves four critical functions as follows:- Helps management or an entrepreneur to clarify, focus and research their business's or project's development and prospects.
- Provides a considered and logical framework within which a business can develop and pursue business strategies over the next three to five years.
- Serves as a basis for discussion with third parties such as shareholders, agencies, banks, investors etc.
- Offers a benchmark against which actual performance can be measured and reviewed.
Just as no two businesses are alike, so also with business plans. As some issues in a plan will be more relevant to some businesses than to others, it is important to tailor a plan's contents to suit individual circumstances. Nonetheless, most plans follow a well-tried and tested structure and general advice on preparing a plan is universally applicable.
A business plan should be a realistic view of the expectations and long-term objectives for an established business or new venture. It provides the framework within which it must operate and, ultimately, succeed or fail. For management or entrepreneurs seeking external support, the plan is the most important sales document that they are ever likely to produce as it could be the key to raising finance etc. Preparation of a comprehensive plan will not guarantee success in raising funds or mobilizing support, but lack of a sound plan will, almost certainly, ensure failure.
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