The Business Plan
BUSINESS PLANS HAVE many uses. One of the more common is for raising capital. In this respect, business plans are the foundation for financing plans. They are also part of the offering prospectus needed for an initial public stock offering.
Although business plans are not used as frequently as a management tool as they are for raising capital, it is as internal, working documents that they are the most valuable. They become an integral part of your annual planning process. They serve as the starting point for your long-term strategic plan. Business plans define the parameters for your operating budgets. Regardless of how business plans are used, however, the research and effort that go into the preparation of each segment of the plan help department heads, functional managers, and even top managers crystallize their understanding of your company’s total operation, its business base, and its long-term future. This alone should be reason enough to go through the exercise of updating a business plan at least once a year.
It should be noted that, although the terms business plan and strategic plan are often used interchangeably, these plans serve entirely different purposes. A strategic plan is long term. It outlines long-term objectives for market share, sales growth, return on investment, and many other aspects of the company’s overall prospects. Business plans, on the other hand, cover a much shorter time period. They are oriented more toward short-term business tactics that can be implemented by personnel at middle-management levels. Business plans focus on improving the performance of a company this year, and