The 4 key reasons that people build business plans

The 4 key reasons that people build business plans

There are a number of different reasons why people create business plans. Understanding the reason for your plan can help you better target your message. Whilst all plans are largely similar, the key areas of focus should differ slightly based on the reason for building your business plan. The business plan should clearly articulate the opportunity represented by your business and the approach you propose will best capitalize on the opportunity. Investor focused plans should also include an explanation of the proposed exit approach.

Business Plan Reason#1: Finding an investor

A Business plan, often referred to as an information memorandum is usually the foundation document on which an investment is made. Investors have specific requirements of a business plan, and have a desire to see how they will realize a return on their investment. A clear exit strategy provides a an understanding of how the funds will be returned to the investor. Each investor may have a different investment horizon and the plan should reflect a return in that investment horizon. The best place to start with preparing an investment business plan is to identify your potential investors first. Understand as much as possible about their investment criteria before you start writing.

Business Plan Reason#2: Obtaining a loan

Obtaining a loan requires formal documentation of the business opportunity, prospects and financial implications. Loans usually require a higher level of certainty than investors. These plans should be realistic with clearly documented rationale and assumptions. There needs to be as much focus on solid numbers as there does on the business vision and strategy. Bankers often have set criteria for investment and as much as possible should be understood about approval guidelines as possible before the plan is constructed.

Business Plan Reason#3: Demonstrating Compliance

Obtaining required operating licenses and permits can drive the creation of a business plan. These audiences are looking for effective processes and governance associated with the successful execution of these processes. Whilst the document needs to contain similar information to other forms of business planning, more emphasis is placed on the "Operations" section. Who will be conducting key activities and how will it be managed. What processes are in place to ensure that any issues or errors are corrected quickly.

Business Plan Reason#4: Recruiting partners, staff and directors

A recruitment business plan needs to be a strong sales document. Particularly in the early stages of venture creation, little is known about the business. The purpose of the plan is to clearly describe what the business will do and why it is likely to be successful in delivering value to stakeholders.

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