A Statement Of Cash Flows Is Prepared From The Advantages Of A Good Business Plan

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Advantages Of A Good Business Plan

Planning is an important factor in the success of any business. Developing a business plan is not just a requirement, but a fundamental requirement for building one’s business these days. It is an honest truth that every business from big companies to entrepreneurs needs a plan. Developing a business plan will help one create a framework that will take his business to its true destination. A business plan helps one develop work guidelines, formulate strategies, understand one’s target market, measure performance, monitor progress, make future plans and raise additional capital for expansion or boosting operations.

Often, the thinking in the mind of most business owners or investors fails. The only way to overcome this failure is to find the common reasons why businesses fail in the first place. Currently the world is facing economic challenges, global economic recession, high commodity prices, high rate of foreclosures and difficulties in getting loans from banks, tough competition, complicated tax laws and high operational costs etc. All these challenges have to be faced. Businesses today make it more challenging for start-up businesses to survive. In today’s world, both small and large businesses have realized the need to evaluate their business potential and strategize for the future.

However, inadequate planning is the reason many businesses fail, and the rate at which they fail is staggering. It is generally believed that most businesses fail in their first year of operation, and 80% of those that fail do not have a well-researched plan. It turns out that business failure is not just linked to small businesses which I choose not to mention here, go down. Although the failure rate in small businesses is very significant, and is the main reason why a good business plan is essential. Perhaps to raise additional cash and provide potential investors and lenders with the information they need to make investment decisions. This is why developing a business plan is extremely important. One’s business plan has to be distinct and its trajectory has to be strong due to the high competition to attract funding for one’s business. Investors no longer risk their money on businesses that do not prove to have great potential for them.

A business plan is like a road map, it shows a route, the pitfalls to avoid to reach its destination, for example, if one decides to travel by road from one place to another, he will first need a road. A map that shows him the way to go. He needs to determine how far and how much gas his car will need to get him to his destination. Also, he has to calculate how much it will cost him for this trip, if he wants to raise money, if he takes a loan, how he wants to pay it back. With all this in mind, he now has a travel plan that will take him to his destination. In the same vein, a business plan provides one with a strategy, path and road map to success.

Incidentally, the idea of ​​working with a business plan is for a person to focus on his set goals. Statistics show that many businesses fail due to inadequate planning. If he doesn’t know where he’s going, any path seems fine. Most people make big mistakes by jumping into a business without adequate preparation and planning. A good business plan helps one focus on his goals and implement the strategies that helped him formulate the plan. Just like a road, one’s business plan needs to be consulted so that one is focused and not run the business in a layman’s way.

Working with a business plan, it will prevent one from entering unfamiliar territory. The plan becomes the working map for him and his organization. I am not spelling out the do’s and don’ts, tasks and how each and every department should work. It helps one to become more efficient, reduce waste and redundancies, channel one’s resources to the right place and guide one in the successful running of one’s business.

As a performance tool, it measures the progress of one’s business goals through tracking, monitoring, and evaluation, and can also be used as a checkpoint to measure performance. Today’s world is so dynamic that what is applicable today may not be applicable tomorrow and as a result of this dynamism, it is essential to create a good business plan to protect against business related risks.

Apart from the performance tool, a perfect business plan must have other essential tools in its system, which really make a perfect plan. It should have human resource tool, marketing and strategy tool, financial tool, communication tool and most importantly investor guide. A well-defined business plan attracts others to be part of the vision. It must have a clear mission and objective that will set the stage for others to get into the business. He should inspire teamwork and creativity among his people and ensure that everyone understands the goals and objectives.

However, a good business plan defines one’s target market, the people to whom one wants to sell one’s products, how to reach them, how to promote one’s products, in addition to defining one’s market mix- people, place, product and price. People- This defines the people involved in the promotion of one’s goods and services. Product- This defines what one’s goods and services are. Place- Defines location which also includes means of delivering goods and services. Price- defines how much one’s products and services are worth in the market which will enable him to analyze and evaluate his return on investment (ROI). A marketing and strategy tool defines one’s business strengths, its weaknesses, its opportunities and threats. It creates a graph that helps minimize costs while maximizing profits.

The financial tool in a good business plan enables one to understand his business financial position, develop his budget and decide how his finances will be allocated. It also calculates the return on one’s investment, analyzes its income statement, cash-flow, balance sheet, break-even point i.e. analysis of how many sales are required to cover costs, which underpins the pricing of its products. and services, and at the same time calculates how much is required to finance one’s business which helps clarify one’s financial needs.

A good business plan communicates one’s ideas, communicates one’s goals, objectives, management approach, responsibilities, and identifies with one’s audience how one’s strategy will increase profitability and performance, without overreacting to one’s goals and objectives. Business communicates in two ways- internal communication and external communication. Internal communication includes the communication of corporate vision, shared values, policies, guidelines and employee motivation. External communication includes branding, customer relations, marketing, advertising, media and public relations etc.

A good business plan is used to attract funds from investors. Most investors will look at a business plan as a decision-making tool. Investors look for a few things in a business. This includes one’s management team, every investor will want to know the business owner’s managerial skills, passion and dedication to his business. A comprehensive description of how one’s products or services should be marketed, its customer base, its market and financial analysis. A business plan should have realistic financial projections. Every investor always likes to see investment return, cash-flow and break-even analysis from his business associate. Therefore, a well-crafted business plan is key to attracting investors.

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