What is a business plan and what purpose does it serve-01105
This subjective question is related to the book/course
vu eco401 Economics.
It can also be found in
vu eco401 Mid Term Solved Past Paper No. 3.
Business Plan:
A business plan is a written document prepared by the entrepreneur that describesall the relevant external and internal elements involved in starting a new venture. Itaddresses both short- and long-term decision making. The business plan is like a roadmap for the business' development. The Internet also provides outlines for businessplanning. Entrepreneurs can also hire or offer equity to another person to provideexpertise in preparing the business plan. In developing the business plan the entrepreneurcan determine how much money will be needed from new and existing sources.
Purpose of Business Plan:
The business plan must be comprehensive enough to address the concerns ofemployees, investors, bankers, venture capitalists, suppliers, and customers. Threeperspectives need to be considered:
The entrepreneur understands the new venture better than anyone. The marketingperspective considers the venture through the eyes of the customer. The investor looks forsound financial projections. The depth of the business plan depends on the size and scopeof the proposed venture.
The business plan is valuable to the entrepreneur and investors because:
- It helps determine the viability of the venture in a designated market.
- It gives guidance in organizing planning activities.
- It serves as an important tool in obtaining financing. Potential investors are veryparticular about what should be included in the plan. The process of developing abusiness plan also provides a self-assessment of the entrepreneur. This self-evaluationrequires the entrepreneur to think through obstacles that might prevent the venture'ssuccess. It also allows the entrepreneur to plan ways to avoid such obstacles.
