The aim of venturing into a business is to make profits. In this case, all elements of a business plan should be aimed at creating a successful entrepreneurial venture. A business plan is a document that indicates a plan on how an investment is to be conducted. It includes among other elements; generation of ideas, financial and market analysis, strategic objectives, cash flows and profits and loss forecasts. Other elements that may be included in the business plan are a balance sheet projections, competitive strategies and scenario analysis. All these elements contained in a business plan give an understanding of the current and future expectations of the business. They identify the business and give a rationale of investing in the said business. In this case, these elements should be comprehensive and a faithful representative of the actual situation of the business venture. If well drawn, the elements of a business plan will contribute in creating a successful business venture.
Seven major elements of a business plan with respect to creating a successful business venture are explained here.
1. Generation of Ideas
Generation of ideas in a business plan refers to the initial stage of defining the type of business the entrepreneur wishes to invest his or her funds in. It is an overview of the general operation of the business venture. The type of goods or services to be offered, the target market and the managerial organization of the business is indicated by this element. In most business plans, this element is referred to as the executive summary. Generation of ideas is a crucial element of a business plan in the sense that it differentiates the business from other operators in the market. This element helps the business operator to secure operational permits from the authorities and help him to generally plan the entire business.
For this element to be of any significant importance in creating a successful business venture, the limits of operations of the business should be clearly defined. Defining the extent to which the business wishes to operate helps in planning not only for the infrastructure but also for the finances involved in starting and running the business.
2. Financial Analysis
Financial analysis of a business plan aims at giving an understanding on the amount of funds required to start and run a business venture. It should include such things as the operational costs, management costs and any other type of cost that the investor may incur when starting and running the business venture.
Financial analysis in this respect helps the business operators to plan on the extent of their operations, based on the fact that all business operations require finances either directly or indirectly. For a business venture to succeed, the entrepreneur should include in the financial analysis, the current financial position of the business and the anticipated incomes and expenditures of the business. The worthiness of a business venture is measured in terms of its ability to make profits. Financial analysis on the other hand determines the amount of money to be invested in the business. For him, a heavy investment in terms of finances is expected to yield higher profits compared to lower financial investments, with all other factors held constant. Financial analysis also gives a rationale of investing in a given business venture. A good financial analysis will therefore lead to a good planning of the business organization and result to the success of the business venture.
3. Market Analysis
A good market analysis should be a faithful representation of the actual current situation of the market. It should include both the advantages and disadvantages of investing in the present time, and give a forecast of any anticipated changes of the market forces. With this knowledge, the entrepreneur will be in a position to identify and plan on how to solve any barriers in advance.
Market analysis should include among other things the current demand and supply trends, the current price for the products and that of other complementary products and the accessibility to the market in terms of infrastructure and other limitations. In the market analysis, the entrepreneur should analyze the target population. In this case, the he or she should look at the potential of the target population in terms of their purchasing power. This should be done by analyzing their disposable income. It is worth noting that a change in the market may affect the operations of the business significantly.
A good market analysis not only gives a rational for the entrepreneur to invest in the make but also helps in planning for the production of goods and services. Competitive strategies aimed at cutting operational costs can be designed if only the entrepreneur has a clear picture of the actual situation in the market. This therefore gives market analysis the potential of creating a successful business venture.
4. Strategic Objectives
A strategic objective of a business plan refers to the specific targets that an entrepreneur aims at achieving within a specified period of time. In most business plans, strategic objectives are contained in the mission statement of the business. Strategic objectives should clearly define the goals of the business and the time limits in which the entrepreneur wishes to achieve these goals. The goals contained in a strategic plan should be specific, challenging but achievable. This is based on the fact that strategic objectives measure the achievements of a business. Setting higher goals and working towards achieving these goals will in turn result into higher success of the business. Strategic objectives give direction to a business venture. In this respect, the success of a business venture will be measured in terms of the degree of achievement of the strategic objectives. Setting challenging strategic objectives ensures progress of the business venture. The strategic objectives should also be designed in a way that the achievement of a lower objective leads into the achievement of a higher one.
In this case, the entrepreneur should ensures an upwards and downwards communication in the business. Strategic objectives control the operations of business activities. All activities of a business should be aimed at achieving the strategic objectives.
5. Cash Flows
Cash flows in a business plan refer to the rate at which money is to be generated and used when starting and running a business organization. It includes both the anticipated expenditures and incomes of the business organization. A good cash flow should include the initial costs of starting up the business, cots of constructing the business premises, managerial costs, operational costs and maintenance costs. There should also be included in the cash flow a reserve for other expenses that may not be foreseeable at the moment. The expected flow of money into the business should also be included in the cash flow. A good cash flow justifies the investment. The success of a business venture depends on the cash flowing in and out of the business. If the amount of cash flowing out of a business exceeds the money generated by the business, such a business is considered a worthless investment.
This is because it does not achieve the aims of an investment, which are to make profits. A good projection of cash flow helps the entrepreneur to secure sponsors for his or her business. It helps in the general planning of the activities of the business and thus contributes in making a successful entrepreneurship.
6. Profits and Loss Forecasts
Profits and loss forecasts refers to the possible returns or losses expected by the entrepreneur after investing his or her money in a given business venture. A good profit and loss projection should be realistic. It should be drawn after analyzing the current market climate and the advantages and challenges of the business.
The entrepreneur should consider any possible change in the production costs and the costs of his or her products in the market. A good profits and loss forecast helps the entrepreneur in planning for the operations of the business and as a result contribute in creating a successful entrepreneurship.
7. Competitive Strategies and Scenario Analysis
Competitive strategies refers to the advantages of a given business venture over other businesses in the market, while scenario analysis refers to the inquiry into the current situation of the business. An entrepreneur should bank on the competitive strategies of the business and at the same time use scenario analysis to identify the shortcomings of the business. Both competitive analyses a scenario analysis of a business helps the entrepreneur to understand his or her business and set realistic goals for the business. This realization in turn contributes in creating a successful entrepreneurship.