Business Plan is required mainly for the following purposes:
- Lenders and Investors want to see a logical and coherent plan before putting their money at risk
- Statutory Permissions / Approvals are accorded on Business Plan
Importance & Benefits:
- Business Plan – will force you and your team to think through all the elements of your business
- Trusted and experienced outsiders who review your initial plan & identify your weakness, missed opportunities, un-supportable assumptions, overly optimistic assumptions in your Business Plan on paper – can and will then improve your prospects and reduce the probability of rejection and chance of operation failures
- How much you can afford for personnel & other expenses, target customers and success factors
- It is also a Budget vis-à-vis Result projections. It will induce you to investigate for corrective measures – if there is deviations.
Why some business plans fail
- Goals set by the Entrepreneur are un-reasonable and unrealizable.
- Goals are not measurable
- The Entrepreneur has not made total commitment
- The Entrepreneur has no experience in the planned business
- The Entrepreneur has no sense of potential threats or weaknesses
- No Customer need was not established for the proposed product or services.
A Business Plan is meant for stakeholders:
Business Plan focuses on The Entrepreneur’s 5 “C”s – which Investors/Lenders assess :-
- Capital - How much is the Capital of Entrepreneur ?
- Capacity - Is the projected Cash Flow realistic & adequate ?
- Collateral – What are the securities being provided ?
- Character – Is the Entrepreneur trust-worthy ?
- Conditions – Is the external condition conducive ?