The business plans of many companies may be requested by banks, potential partners for equity/strategic alliances, the government or investors. However, one must know to define what a business plan is fundamentally and the purpose that individuals are asking for it. There is a lot of hype online about what it should be, but this blog post is designed to serve as an elaboration into what a business plan is in terms of what it is designed to achieve. First, we must set forth the premise that life is dynamic and unforeseen events occur on a minute by minute basis. With this understood, putting detailed and sophisticated long term step by step projections will fall victim to these unforeseen events. Does this deem the business plan worthless? No it does not, as if your company is writing a business plan thinking that it is writing the pages of its own destiny it is wasting its time.
The Competitive Positioning at a Certain Point in Time
A business plan serves as the competitive position of your company in a particular point in time that may help to understand how existing resources may be applied to forecast future performance, particularly when there is an absence of historical operating information. An example of this may be a company that is entering the industry with specific resources. They have a good business idea, a solid team and $150,000 cash in the bank.
By demonstrating these factors, a company may judge the risk level of the business compared to its alternatives. The alternatives to a bank may be selecting financing for another company with more competitive positioning, including better resources. For a potential partner, this may mean applying his or her time to the company they deem to have the best competitive. Therefore, it is a decision agent for companies and the individuals that make up them to form decisions.
A Persuasion Agent
By persuasion we do not mean manipulation, but effectively demonstrating the competitive positioning and resources in the best method for a desired outcome possible. Some companies may focus too much on their market weaknesses compared to the competition, or fail to adequately mention the problem in the market that they are addressing or key attractive points of the management team. The business plan is a persuasion agent that individuals will use to gather information about your company. You have control over the information that they have access to and providing it in a specific method and amount may alter the decision process. Evidence has shown that individuals make decisions differently not only when different information is exposed, but also when the same information is exposed differently.
A Strategy to Be Refined
There is never one strategy continued in perpetuation indefinitely. The best companies lay out objectives a few weeks to a quarter in advance. A company’s vision may even change as the market does, therefore planning until the end will only reach the end sooner than anticipated from a lack of understanding. Unfortunately, this is something that must be understood through experience and cannot be taught or effectively learned without firsthand experience. By understanding the purpose of the business plan your company can exactly pinpoint what it is designed to achieve and effectively formulate a path to obtain it.