How is a five-year business plan defined?
Essentially, a business plan is a proper affirmation of professional objectives, their basis of potential, reason for attainability, and means for accomplishing them; whether set forth by an organization, business team, or individual entrepreneur. In this instance, we will explore the significance and value of the five-year business plan on the CEO/entrepreneurial level.
How can a five-year business plan help you?
Every entrepreneur fundamentally needs a business plan. Not only will it help you manage your firm, but also help you monitor your company’s progress as well. In essence, it holds you, the business owner, accountable and enables you to control, and even forecast, the outgrowth of your business.
Additionally, a business plan can help you encourage and convince individuals and corporations to invest in your venture. Besides being used to secure funds from banks and other financing institutions, it can present as a tool for recruiting key employees for your company. A five-year business plan is largely the most reliable term for a company; small business investors as well as commercial loan officers are familiar with the dependability this term.
What’s more, the execution of a five-year plan as such, can even assist you in communicating your vision for your company to your employees and investors, while helping develop accurate financial forecasts for your organization.
According to data reported by Tim Berry, Palo Alto Software founder, entrepreneur, and contributor to Small Business Trends, those who actually finalized and implemented business plans had twice the probability of growing successful businesses or attaining necessary capital, as those who opted not to write a business plan.
What are the steps in creating an effective five-year business plan?
Now that we have evaluated the importance of creating a five-year plan, let us identify the best course of action for devising an effective plan, specific to the requirements of your own business goals:
Determine your objectives.
Before writing your business plan, you will need to think about and visualize where you anticipate your business to be five years into the future. Will you have a rapidly growing business with multiple branches? Will your business be bigger, but not to a point where there is a significant increase? Will you have already sold your business after reaping large profits and be travelling around the world with your family?
When you have determined your objectives, you can start drafting your five-year business plan.
Write the Executive Summary.
You will need to summarize the main points of your business plan in this section. Since this is the first section that investors or bank officials will see, you must clearly state what you are asking for.
Draft the company overview.
In this section, you should begin by briefly describing the nature of your industry. State why you’ve decided to put up your business. Tell investors what your company does; describe the staff and give its location. Define the objectives of your company, and introduce your company’s products and/or services.
Create a section for your marketing plan.
Indicate how you plan to achieve consumer penetration. Include price points and target marketing, and show print and media campaigns that you plan to use.
Do a competitive analysis.
Discuss the present position of your business and its growth potential. Give information on other markets within the industry by providing demographic studies and industry statistics from verifiable sources. Include new developments that may benefit or have adverse effects on your business.
Create a design and development plan section.
By describing your offered services or product design, you will help clarify your investors’ view of your company. Chart the development of your product on the production level, as well as marketing activity, and the business itself. Then, create a budget for projected development that will make your business goals more achievable.
Write the operations and management section.
Explain the continuous functions of your business and how they occur. Introduce your organization’s most pivotal team members. Include a biographical summary of each central employee, including his or her responsibility within the organization, previous business experience, as well as his educational background. In this section, you need to show the requirements for capital expenditure relating to the processes of your organization.
Write the financial section of your business plan.
Itemize your company’s financial data, incorporating the past five years, while showing your projection into the subsequent five years to come. For new companies that are void of previous data history, make educated assumptions based on estimated business costs and generated revenue. All data and costs should be shown in a spreadsheet, including cost of operations, goods, salary, and all possible streams of revenue.
Polish your Executive Summary section.
Make sure that each section of your business plan has a concise summary.
Add supporting documentation for your company at the end of your business plan.
This may include financial statements and tax returns, business licenses, permits, patents and photographs of your products and your organization’s premises.
Once you have established your business and it is doing well, you must review your progress to ensure you are remaining on your intended path. You need to revisit and update your business plan at least once a year. It is important to update with each change that occurs – whether that change is brought about by the current economic situation, new competition, or suggestions or comments made by your customers and colleagues in the business.
Clearly, a business plan is a long-term development process. Always keep your plan fresh and observe closely when your assumptions and projections turn into reality. Keep track of mistakes that you see along the way. Take note of how and why anything goes wrong and avoid repeating those mistakes.
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