Definition of a Business Plan

Betsy Gallup
business woman

The first step to creating a dynamic business plan is understanding the definition of a business plan.

Short Definition of a Business Plan

The short definition of a business plan is just that - a definition. It defines different aspects of your business and lays out a plan of action to ensure your success. Like any good plan of action, a good business plan requires a critical look at your goals and meticulous organization and presentation.

A business plan may be generated for internal use, such as planning your goals for the next year, or for external use, such as lining up financing. Many companies define a business plan for each use, providing more specific details to the internal plan, while presenting the big picture to potential financiers.

The Big Picture

A stellar business plan is broken down into distinct sections, each adding a vital component in defining the purpose of the business. Typical elements addressed are:

  • Business description
  • Marketing plan
  • Management plan
  • Financial plan and supporting documentation

Additional information may be included as part of these elements or presented as separate subsections. These include:

  • Executive summary
  • Market analysis
  • Detailed service and product line information

Business Description

The business description is a detailed overview of what you intend to accomplish. Anyone can say they are in the day care business, but a good business plan description goes into detail. A more effective description might be:

  • Little Lambs Day Care targets the parents of children between the ages of two and eight who live and work in the vicinity of Oak Park Mall. The aim is to offer drop-in day care services between the hours of 9 a.m. and 9 p.m., to coincide with the normal mall operating hours. Services will be provided by licensed, adult day care providers. At present, there are no other licensed facilities in the area offering these services.

Marketing Plan

Not even the best product and services will sell if no one knows about them. For this reason, it is vital to research your potential clients, competitors, and optimal marketing options. Even if you have twenty years experience, you need to be able to effectively spell out these elements and what steps you took to determine them in a way that investors, and anyone else reviewing the document, will be confident with your knowledge.

Management Plan

As important as it is to define company marketing goals, it is equally important to outline who you plan to provide the goods and services to in a timely, professional manner. Include such details as:

  • A brief resume for each of the active owners and key management figures in the company, including quantified successes, such as "increased sales by 15 percent in 2007)
  • Organizational outline, which includes the chain of command
  • Job descriptions, staffing recommendations, and employee incentive programs

Financial Plan

No business succeeds without a steady influx and outflow of cash; therefore no business plan is complete without both a budget and a look at what current and past cash flows look like. This is especially important if your plan will be used to secure financing. Be prepared to provide a full set of financial records and a detailed budget for the upcoming year and an extended forecast. Make sure to disclose any non-financial information that may drastically alter current expectations, such as a pending lawsuit or outstanding insurance claims.

Final Word on Business Plans

Unlike dictionary definitions that may go centuries without ever being redefined, a business plan is a liquid thing. To be most effective, it must be revisited and altered periodically to take into account changing business events, such as unforeseeable natural disasters, stock market fluctuations, and turn over in the managerial staff.

Make sure you start your business off with the best chance of success possible. Devote time and research to defining your business in writing. It will provide you with a clear path to success.

Definition of a Business Plan