A business plan outlines organizational goals and what needs to be done to realize these goals. Its principal use is to show stakeholders their roles in supporting the organisation’s course. Managers use the plan to direct their subordinates by explaining the responsibilities of departments and individuals in line with the set goals. In other words, a plan ensures that all efforts in the organisation are channelled towards a common purpose.
2.Attract financiers and Investors
A business plan is used for assessing he profitability of a business and its sustainability. It has a section that projects financial performance showing the ability to generate returns. Besides this section, a comprehensive market analysis is carried out identifying the opportunities and threats relevant to the firms. An internal analysis is also carried out to demonstrate how internal resources position the firm in light of the identified opportunities and threats. A business plan, therefore, shows the capacity of a business to pay loans and generate profits which are of interest to financiers and investors respectively.
3.Managing cash flows
Cash flow troubles are more serious than profitability problems. A company that cannot generate sufficient cash flows to meet its short-term liabilities as they fall due cannot survive as opposed to a loss-making firm that has sufficient cash flows that can continue operating for years. A business plan shows cash consuming operations in a business process and how the cash needs will be met. A business plan also has a projected cash flow statement showing future cash flows.
A business plan is a tool for communicating with internal and external stakeholders. The ability of a firm to meet its goals is dependent on the clarity of communication clarity when engaging different classes of stakeholders. A business plan is used for communicating goals and strategies to employees and lower level managers. The strategic goals contained in a corporate plan are formulated at the top level and a plan is used to explain these goals to the employees. A business plan contained detailed information about organizational structure, processes, and key resource which important to external stakeholders seeking to understand the firm.
A business plan provides a roadmap for growth and expansion. Analysing the environment is an important section of a plan which leads to identifying expansion opportunities. A plan shows how a firm can exploit these opportunities to realize growth.