Business plans include financial, operations, marketing, legal, human resource plans which are combined to make the business plan. Many people prepare business plans when they are starting a new business or when they are applying for a loan. There are different business plans for different purposes. New businesses will require a comprehensive explanation of the company description, what products and services they are selling, the management team and the goals of the company and how they expect to achieve them to attract investors. Banks require the financial analysis included in the business plan to evaluate the company's ability to repay the loan.
Business planning is a basic necessity of every business, start-ups and established ones. For start-ups this involves setting goals for the business and making plans of how to achieve these goals. Goals must be attainable and strategies are set to allocate resources to accomplish these goals. Established businesses prepare business plans when they want to expand, acquire, start a new product-line and improve on the existing ones.
Business planning which includes budgeting involves allocation of the future income to expenses, savings and investments. The expected income will be used to buy materials and supplies, pay rent and utilities, salaries and allocate part of the income to savings and investments in stocks, bonds, shares in other companies and real estate. Investments should be short-term and long-term so the business can continue earning income to pay future expenses and for future expansion.
Capital investments should be planned for in advance because they involve committing company finances in the long-term purchasing property, machinery and equipment, buying a new business, a new product line and for future growth and development.
Business planning helps the company know where it is heading to and allocating resources to the priorities in order to maximize profit. It is a combination of forecasting the income statement, the balance sheet and cash-flow. The forecasting of incomes and expenses and also the profit, the assets, loans and liabilities and the cash flowing in and the cash flowing out are very vital. Some people think only the profit is important but without the cash in-flow and cash out-flow the business can find it hard to operate. The financial analysis also includes ratios and break-even analysis to give a wide perspective of the business.
Writing a business plan may require a business planner, accountants and legal experts but one can also use the software available in many websites which include videos explaining how to prepare a business plan. There are tutorials that train the person involved to prepare targets on all aspects of a business plan.
Business plans were secret documents in the past but today there are software and open source programs available that make them public. A business plan must be followed with strategies of how to implement it with management staff assigned particular responsibilities with dates and budgets and following it up to achieve results. The business plan must be realistic and attainable.