MGT602 Technical Article Theme 9

Author: Jawad Hassan, Instructor Business Administration, Virtual University of Pakistan

Technical Articles Theme 09 · Title: Business Idea and Business Plan · Videos: 105-114 · Topics Covered

105. Preparing a powerful business plan: The significance
106. Users of Business Plan
107. Extent of a Business Plan
108. Features of a Business Plan
109. Arrangements of Business Plan
110. Table of Contents and General Business Description
111. Management Plan
112. Product, Services, and Marketing Plan
113. Operations and Production Plan
114. Financial Plan and Appendix

Business Idea and Business Plan

Business plan is considered as the backbone of an entrepreneurial venture. Business plan helps entrepreneurs the most, to start a business. Irrelevant to a business success, it is obvious that every entrepreneur has some kind of business plan whether formal or informal business plan. Although a business plan does not guarantee the success of a business venture but it is good to have one. Different attributes of a business plan provide exclusive support to help manage and sustain a business unit. Therefore, it is critical to understand the basics of a business plan. For this one needs to know that any business activity is based on an idea (a business idea/a thought to start a business). A business idea is considered as a thought in someone’s mind. Moreover, it could be in the written form, but still it is has no physical existence until it is transformed into a physical business activity. A business plan is that tool which assists the connectivity between a business idea and a physical business. Or a business plan is that ladder through which a business idea travels from space (thoughts in mid) to the earth (physical presence of a business unit). Hence, it is clarified that a business idea itself has no relevance to an entrepreneurial venture in the absence of a business plan.

Why business plan is prepared?

It is a dream for an entrepreneur to convert his/her dream (a business idea) into a practice. The business plan is prepared to transform a business idea into a practical business. For example: your business idea is to open an automobile workshop or to setup an advertising agency for digital marketing services. In any of these cases you will definitely need a written business plan to convert your thoughts into a physical business.

For whom business plan is prepared?

The essence of this question is to identify the potential users/beneficiaries of a business plan. Broadly a business plan has two types of users: internal and external users. Internal users are entrepreneurs themselves who get immediate guidelines to start a business through a step by step approach. Potential employees are also the beneficiaries of a business plan document i.e. skill full employees of a business setup can become the part of a newly hired team by an entrepreneur (a new business being established on the basis of a business idea). In this case the entrepreneur must have a business plan to attract, guide and retain the newly employed human resources. External users are customers who can pre order or initiate a transaction in advance with the entrepreneur. Customers deem to analyze an entrepreneur’s plan to conduct a business, its inputs and outputs in detail and then decide whether to collaborate with the startup or not. In the same way, suppliers and investors identify the potential benefits of being the part of a business startup.

What is the extent of a business plan?

It is very important to know the depth of a business plan. The length and the depth of a business plan depends upon the following factors.

1. The entrepreneur itself: Orientation of the entrepreneur decides the depth of a business plan. An entrepreneur with a deep orientation to a business will enlist more attributes, requirements and details of a business setting within the business plan document. Ability/Education of an entrepreneur will also affect the length and details of a business plan. A more educated entrepreneur will be able to know even minor details of a business startup and hence such an input will deepen the content of a business plan. An entrepreneur’s choice, preference and ability to understand the importance of a business plan also affects its depth directly. It is quite possible that an entrepreneur may consider the business plan a mere formality while the other one may take it very seriously.
2. The complexity of the business: The nature of a business decides the extent of a business plan. The level of complexity is different for different businesses. The business plan requirements for a cement factory would be different (much complex) from fast food restaurant or a barber shop (less complex). It is critical to understand that, the more complex a business is, lengthier its business plan will be. The complexity and depth of a business plan will help to reduce business risk and avoid unwanted mistakes. Thus it is recommended to write an in-depth business plan in case of a complex business. It is not a healthy notion to avoid writing an in-depth business plan due to its complexity and robust technical requirements.
3. The level of competition: The magnitude of competition will decide the details of a business plan. The science of competition acts just like complexity factor. More competition will require more information and knowledge based input to help devise a
4. The level of uncertainty: Being uncertain is a characteristic of a human’s life. Similarly it applies to the business planning process. The increasing level of uncertainty demands an increase in the rigor of a business plan.
5. Availability of time and monetary resources: It is the luxury of time and available resources which decide the length of planning a business idea and writing it in the form of a business plan document. Time, the length of the window opportunity and the financial resources will guide you in deciding the ingredients of a business plan.