Business and Business Plan
The term ‘Business’ refers to an independent organization or an enterprise which actively participates in commercial, industrial or professional activities. Businesses can be categorized as both profit and non-profit entities. The function of the non-profit business organizations is to work towards the fulfillment of a charitable mission or to work for a social cause. The profit-making business organizations comprise the efforts and activities of individuals towards channeling the production and sale of finished good and services into the market to make the profit.
The inception of business begins with a business concept (the idea) and a name. The ongoing market trends and the nature of the business are analyzed in order to determine whether the business idea can be turned into a full-fledged business or not and whether or not the business setup is promising enough to render the quality services to consumers or not. The business name is also regarded as one of the most important assets of a firm and therefore proper considerations need to be taken while deciding the name of the business organization. The business organizations working under false or fictitious names are required to be reported immediately.
A business organization comes into function after the development of the Business Plan. Business Plan is nothing but a legalized and formal document consisting of detailed description about the strategies, goals, and objectives of the organization and the plan of achieving the desired goals and objectives (will read about it in detail further within the text). A business plan becomes an absolute necessity while withdrawing capital for beginning operations.
It is utmost important to determine the legal structure of a business organization. On the basis of the type of business institution, it is required to establish its permits, attach itself to the requirements of registration and get its license for legalizing its working.
The business structures have been classified into the following types: Sole Proprietorship, partnerships, limited liability companies, and corporations. Among all of these, the sole proprietorship is regarded as the most extensive type of business structure. A sole proprietorship is a type of business arrangement in which the business is owned and operated by a single person. Since there are no legalized separations within this type of business arrangement, the legal and the tax liabilities of the business lies with the owner. A partnership is referred to as the type of business arrangement in which two or more than two people join together to handle the business affairs of an entity. Within this structure, each of the partners is responsible for contributing the resources and money to the business and equally shares all the profits and the losses incurred by the business. Both the shared profits and losses are recorded on each of the partner’s tax return. The corporation is yet another type of business structure in which all the people participating in the business act as a single group or entity. The shareholders of a corporation are the owners of the corporation business organization itself who exchange consideration for the common stock of the corporation. The process of incorporating a business causes the owners to release themselves from the financial liability of the business obligation however it is important for the owner to be aware of the fact that corporation has unfavorable taxation rules for them. In order to avoid this situation, a new type of business structure was formulated and introduced in the market for the first time in the year in 1977 at Wyoming known as the Limited Liability Company(LLC). This structure combines the limited-liability benefits of a corporation with the pass-through taxation benefits of a partnership.
The decision made regarding the size of the business is also contemplated to be an important one. On a broad scale, the size of the business organization or entity falls in the range of small-scale businesses such as the family restaurants to big multinational agglomerates such as the General Electric. The larger businesses are found to be dealing with a lot of issues related to corporate stock and finance operations. Due to this, a large-scale company works along the line of severed reporting and operating restrictions. The small-scale business companies, on the other hand, are devoid of any such restrictions and work independently of the regulators.
As already discussed, for setting up the company the development of a business plan is crucial. However, there are certain things that are required to kept in mind while making a business plan such as:
1. Length of the Plan
The construction of the plan should be simple. The shorter the length of the business plan, the easier it is to explain the plan to others. It should comprise important bullet points covering topics related to strategy, basic financial projections such as cash, flow, budget and expenses, tactics and milestones for tracking the tasks and responsibilities, etc.
2. Presenting the Business Plan
The business plans should only be presented in the printed format when it is required to share the information on the business plan with multiple people such as the outsiders or the team members collectively. Apart from this, the business plans should be conserved as a dynamic document on the computer.
3. Contents of Business Plan
A formal business plan is inclusive of the following elements:
An executive summary
A company overviews
Information related to the products and services offered by the company
A list of major milestones of the company
Your marketing plans
Details about the financial plan of the company
Information about each and every member of their company and the role each of the individual performs within the company.
4. The frequency of revising a business plan
Revising the business plan is important. The companies continuously make progress towards their goal which needs to be continuously updated within the business plan. A specific time and date within the week are scheduled for the same. This helps in making a comparison between the actual goals achieved against the financial projections of the goal.
5. Choosing the right business plan for conducting business
Different business plans serve different purposes and hence they come in a variety of forms. Commonly, three types of business plans are used for designing the business plan of the business organization or an entity which have been enumerated as follows:One Page Business Plan
It is a single page summary of the entire business plan. Within this business plan, all the important information related to the business is explained in a clear, concise and direct manner. One-page business plans are used because of dual purposes. First, it is an efficient means to deliver the entire information of the business plan to a potential investor or buyer who runs short of time. Secondly, its use makes it easy for the early-stage companies to go through their entire ideas in a short time at a go and add the new ones as they come up.
The Lean Business Plan
It is more informative in nature as compared to the one-page plan but is not even a detailed plan as the lengthy traditional business plan. The lean business plan is allocated with the formalities which are required at the time of dispensing a plan for loan or investment externally and primarily focuses on specific subjects of interest such as tactics, milestones, metrics, budgets, forecasts, and strategy. The simplest type of lean business plan makes use of the bullets for defining the aforesaid points of a business plan. Two to three hours are required for making a lean plan with revision time of two to three hours per month. The lean business plan is used both by the startup and the existing businesses.
External Business Plan
It is also known as the Standard Business Plan Document. These are a detailed description of the business information which is read by the outsiders in order to provide them with information about the business organization. It is commonly used for convincing the investors in funding the business. It is also used as a means of support for a loan application. Along with this, it is also used for training, absorbing and enlisting the employees within the company.
Hence, a clear, concise and well-informed business plan is formulated by keeping all of the aforesaid points into considering while designing the business plan for a business organization or an entity.
Would you like to read more about this topic? This book might interest you: Growth Strategies in Business.