We explain what a business plan is and its main characteristics. In addition, we describe how to create a business plan and the difference with a business model.
What is a business plan?
A business plan is a written document containing the business, financial and structural analysis of the main aspects of a company. It works as a road map for implementing the previously defined business model.
A business plan makes it possible to assess whether the company's mission is compatible with the business context and to evaluate the feasibility of the project. It may be targeted for a start-up venture or for the launch of a specific project plan of an existing company.
The plan takes into account the whole business and financial process: the study of the market in which the activity will be developed, the necessary infrastructure and human resources, the geographical location of the company, the estimate of sales and expenses, among other aspects.
- See also: Company vision
Characteristics of a business plan
The main characteristics of a business plan are:
- It allows estimating startup and investment capital.
- It allows assessing the productive capacity and the expenses necessary for the operation of the company.
- It allows calculating the profit margin required to ensure survival.
- It allows minimizing errors and foreseeing potential problems that may arise.
- It may be drawn with professional help: an accountant, a business administrator or an economist, which increases the probability of the company's success.
- It allows collecting key information to be used by a company's management in the medium and long term.
A business plan should answer questions like:
- What does our business offer that is important or valuable to the market?
- Is there already a better product or service in the market?
- Can a better product or service be offered?
- How can the company make a profit?
- How can the business grow?
Business model vs. business plan
A business model is defined prior to the development of a business plan. The business model brings value to customers and establishes how they will interact with the company.
For example: A company may offer its products through catalog sales, online stores, franchises, retail outlets, or a combination of different business models.
A business plan is a detailed document containing all the general and essential information for the decision-making process by a company's management. Following a business plan, a company's leaders can plan and organize multiple processes, according to each areas’ tasks.
Based on a business model, a business plan can be drawn to organize and manage a company's processes in order to help it achieve its objectives.
How is a business plan written?
A business plan is a document that may vary depending on the type of company. It may be a short or extensive document containing research reports, analysis, conclusions, charts and graphs to organize and summarize contents.
Broadly speaking, the following steps are part of the overall planning process:
- Market research and analysis.
- Review of the project's status, mission, vision and objectives.
- Collection of information on the advantages and disadvantages of the company’s products and services as compared to its competitors.
- Summary of the business strategy.
- Detail of the members of the Board of Directors.
- Business model and business management.
- Financial and business plan.
Example of a business plan
Below is a case study detailing a business plan:
- Company. Professional pet photography service.
- Market research of the competition. It has been detected that direct competitors do not offer home photography service, and that 30% of current customers have asked about this type of service. This could be a competitive advantage for our business.
- Mission. To generate happiness in people who buy a portrait of their pet. To be recognized as the best supplier in the south.
- Vision. To deliver the same high quality in all services, and bear a hallmark.
- Objective. To offer a higher service than already existing, with excellent background quality, editing, selection and presentation of the final product to the client.
- Weak and strong points.
- Weak points. Sudden changes in the local economy influence both the supply of materials and the household economy of customers.
- Strong points. There are few suppliers with an artistic hallmark, and who maintain high quality at all stages of the process.
- Strategy summary. The identity of the company with a hallmark and the place it wants to occupy in the market has been defined. The necessary structure to meet these objectives is as follows:
- A private studio in a popular location of the city.
- A professional photographer and editor, and an assistant.
- Business model and business management. The physical structure and the geographic location where the company will be established have been defined. It will be divided into three departments: administration, production and post-production, the number of employees required being four.
- Financial and business plan. The investment needed to start the business and run it during the first year has been estimated at US$12,000, which includes rent of premises, new equipment, an accountant, two assistants and extra expenses. A six-month budget of US$2,000 has been estimated to cover equipment relocation services and the logistics of completed work.
Importance of a business plan
A business plan is a key tool to manage a company. The act of creating a business plan does not per se guarantee success; however, companies that operate without a specific plan usually require more time, investment, and expenses to grow and develop. A business plan is a guide that ensures the effective development of an organization.
- Ross, W., Westerfield, R. & Jaffe, J. (2009). Finanzas corporativas. 9º edición. McGraw Hill. México.
- Berry, T. (2022). What is a business plan?. https://articles.bplans.com.
- Bplans (2016). What is a business plan? (video). https://www.youtube.com.
- Bello, E. (2022). Business plan: ¿qué es, por qué lo necesitas y cómo crear uno?. https://www.iebschool.com.