For start-up ventures, the process of preparing a business plan serves as a road map to the future by making entrepreneurs and business owners think through their strategies, evaluate their basic business concepts, recognize their business's limitations, and avoid a variety of mistakes. Lack of proper planning is one of the most often cited reasons for business failures.
Business plans help companies identify their goals and objectives and provide them with tactics and strategies to reach those goals.
Finally, the business plan is the primary source of information for potential purchasers of a company or one of its divisions or product lines.
As with outside lenders and investors, business plans prepared for potential buyers provide them with verifiable facts and projections about the company's performance.
Once potentially troublesome areas have been identified, proposed solutions and contingency plans can be incorporated into the business plan.
Business plans also cover such areas as marketing opportunities and future financing requirements that require management attention.
The process of preparing and developing a business plan is an interactive one that involves every functional area of a company.
Successful business plans are usually the result of team effort, in which all employees provide input based on their special areas of expertise and technical skill.
In other cases, such as for a business acquisition, it may be necessary to prepare a business plan on short notice.
The process can be expedited by determining what information is needed from each area of a company.