Question

Q3: discuss the business plan importance, problems and clarify a brief description of the business plan Components.

Answer 1

Importance of a business plan :

Business plan refers to the anticipation or estimation of the purpose and requirements of business in advance so that necessary provisions could be made at place to facilitate the smooth running of operations.

The benefits provided by a business plan are ;

1) It clarifies the very purpose of business and helps outline its main motive and objective necessary to be obtained.

2) It provides to the human resources a clarity regarding the long term and short term objectives and goals so that they can formulate strategies to accomplish them.

3) Business plan helps business to get aware of roles, responsibilities resource requirements, infrastructure and routine performing jobs through providing a detailed statement of work needed to get carried

4) Business plan acts as a blueprint for the organization and thus signifies the job positions, highlights opportunities available at the market place, reflects on the best ways of investment , suitable appraisal system.

5) It helps in raising capital in the best way by providing an insights to optimal capital structure preferred and helps to choose best sources of supply through performing cost benefit analysis.

6) Business plan thus acts as a road map guiding on decision making, providing synopsis to all aspects of business and likely choosing the best. Business plan drives organization and its efforts towards fulfillment of its purpose.

Problem in formulating a business plan :

1) Inability to predict future conditions accurately :

Due to limited knowledge about the future and shortcomings of forecasting techniques it is not possible to formulate an accurate business plan which will thus not be able to provide assurance of the anticipated qualitative and quantitative information such as facts or figures.

2) lack of commitment :

The business plan requires perseverance, patience and comitmment which after a certain point produces weariness and thus due to lack of comitmment various factors remain unattended causing business plan to be incompetent.

3) Dynamic environment creating uncertainties :

Business plan often fails or is subject to various complexities due to the dynamic environment, which changes now and then and brings with it various uncertainties and complexties that are difficult to cope up with. Thus handling these uncertainties is difficult while formulating a business plan.

4) Unrealistic targets :

Sometimes business plan formulation results in over expectation due to which the projections provided by the business plan become unrealistic or unattainable wit given conditions. Thus this shortcomings is hard to eliminate resukting in faukty estimations.

Brief description of components of a business plan :

1)Executive summary : This Consists of expectations from business , its aims and objectives behind starting it , the clarity of purpose and suggested ways to accomplish them.

2) Company description:

The company description will involve the nature of business, size of business, funds available, resources required, goals and objectives, job positions and other key information about business ,which will help in formulating the business plan.

3) Market Analysis: This component involves knowledge of opportunities and threats in market place, the market segment target customers , competitors, current product available etc. So that business plan formulate suitable strategies to cope up with the market and its complexities and help in serving the market in a better way.

4) Description of management and organization :

Here the job positions are identified, relationship between superior and subordinate is established, managers are put on required places, skills, roles and responsibilities are identified for carrying operations etc This will also involve recruitment process and related things, planned in advance for avoiding complexities.

5)Marketing plan :

Here the business plan involves deciding the criteria or supply channel through which the products and services will be made available to potential customers or target market. This helps in anticipating the problems which might arise and thus keep necessary provisions available in advance.

6) Financial projections:

Here the business plan includes the decisions regarding obtaining of funds, their utilization , mechanism to choose best sources which will reduce Cost of acquisition etc so that it is ensured that necessary funds are available to carry on business activities smoothly without any interruption

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