Who is the business plan intended for?
By Dr. Tsvika Ben-Porat. Author of the book Three’s a company – Man, Entrepreneur and Manager
The business plan is intended for several bodies:
The entrepreneur themselves: In the many times I have met with entrepreneurs I have noticed that it is only when an entrepreneur sits down and prepares a business plan that they realise the true extent of the required financial investment and how so many things that seemed simple on the surface are very complex when they come to be implemented – even if only on paper or on the computer screen.
The entrepreneur is therefore considered the central ‘client’ of the business plan. The plan requires them (or of those who prepare it on their behalf) to think of most of the existing possibilities at every stage of life of the product or service they wish to promote and transform into a business venture.
The times an entrepreneur has been taken by surprise during the process of writing the business plan, by the required sums necessary to turn the idea into a business, are more than can be numbered. One of the suggestions I give entrepreneurs is that before preparing the business plan they make a list of all the finance, permits and licenses they think will be required, and then to compare this with the data of the full, comprehensive business plan. The difference can be enormous.
It is precisely for this reason that the entrepreneur has to be personally involved with every step of preparation of the business plan: in order to see how the gap widens more and more before their eyes. The road from the sheet of paper with the initial sketch to the finished business plan is paved with numbers, expenses, large investments of time and money and so on.
The entrepreneur’s environment: One of the fascinating points we see again and again is the use an entrepreneur makes of the business plan in their environment – the environment they live and work in, or their professional environment. At times, the use of the business plan is to justify themselves or the changes they are going through. At times the business plan is presented to family and friends who may help.
Potential investors: Every potential investor prefers to look at a business plan before discussing the initiative itself or taking part in the entrepreneur’s presentation. The entrepreneur’s investment in a good business plan is to many investors an inseparable part of the progress from a ‘weekend’ idea to a business system that is based on long-term profitability.
Venture Capital Funds: These Funds put the business plan as top priority (even before the presentation). The venture capital funds are not interested in meeting with the entrepreneur before they have carefully read the business plan they have prepared. Remember, the venture capital funds represent their owners, who are themselves private individuals, firms or corporations who are on the lookout for long-term investments with only a slightly higher risk than the norm. At this point it is worth noting that some of the investors of the venture funds, or the managers of the funds, prefer only to read the ‘executive summary’ of the business plan because of the number of different business plans that reach their desks.
Banks: The bank is the strategic/business partner of every business, especially a start-up or a business that finds itself in a process of acceleration (intra-organisational initiatives). The bank manager, and sometimes the area or regional manager, wants to see a detailed business plan of the idea they are about to finance. The bank has a team of analysts and economists who are able to examine the business plan to see if it is realistic and viable.
The business plan is significant not only to the process of launching the new firm, but in the on-going work process versus the bank. Managers, who wish to make changes within the firm, or to come out with new investments, are required to submit a business plan for a renewed examination by the bank before an additional loan is granted.
Governmental authorities: Some initiatives require various government sponsorships. A large number of western countries (for instance, Canada, the USA, Germany and the United Kingdom) offer varying levels of support to entrepreneurs who wish to develop a business in that country. The funds the government makes available to the entrepreneur are dependent on the submission of a business plan.
The significance of the above five parameters is that the business plan has to be reasonable, balanced and most importantly one that covers most future activity. So a good business plan attempts to predict or foresee the business future of the concept or the patent.