For the formation of any business, the entrepreneur has to convince the donors on what profits the business intends to make. This also facilitates the capital donors determine how much they are to invest into the business. In addition to that, it helps the investors to know the projected sales, costs and general business expenses thereby helping them in making a decision as to whether the business is viable or not. For this reason, every willing investor must make sure that he has the correct figures at hand so as to ensure that the business does manage to attract the much needed funding for start off. The numbers should not only be there to attract investors into the business but should also be realistic accurate and workable.
For any business firm, there has to be marketing of the products involved in the business. The business planner has to ensure that he keeps it patent to the person reading the plan, who in this case is the potential investors, on the marketing plans for the business products. The plan must be clear and concise in order to keep it patent to the person reading that one is completely aware of the market that he is getting into (Fiore 110). For purposes of the same, the plan’s market for its product segment should have clear information regarding the expected market and the expected growth of the market. This way, the investors, are able to estimate their profits and thus make the decisions on whether to invest or not in the proposed investment project.
Following the explanation on the market share for the information, a business planner should be able to give satisfactory information on the projected sales. In this case, the planner has to give a detailed sales projection for the firm in the following couple of years. In some cases, following the calculations done and with other market factors, such as competition, the sales projections might be lower than the planner would like it to be. Under such circumstances, it is important that, if the planner makes any adjustments to the business plan, he puts in the sources from which the extra revenue is to come from (Wallace 125). Lack of doing the same may make the plan lose credibility due to the lack of clarity on the revenue sources. As a result of this, funding to the business is pushed away.
Cost and expenses figures are numbers that, if missing, can completely mess up a business plan. The costs explain to the potential investors the ways through which the business money is to be used. Costs that should never be forgotten on a business plan include payments to employees and the payments attached to the premises to which the business is to be located (Gordon). The cost values, in the case that the investors wish to take on the proposed investments could be used to see whether there is any solution to cut down costs involved in running a business. The detailed information on the costs of the business provides the investors with the chances to see how cost can be minimized with no harm being done to the quality of output by the firm.
Finally, from after the projected sales and costs have been calculated, the planner can always estimate the expected means from a business investment. For industries producing many goods and services, historical information on past sales and costs by other companies may be used to estimate the sales expected to be made and the costs that are anticipated to be sustained during the production (Covello and Hazelgren 145). In this case, the past information on how much the sales for the other companies has been reflects the demand for the commodity and, therefore, the demand for the good will always apply for a new company that is to be set up, as well. If it is a business that is currently establishing, the planner may have to best project on what the expected sales and costs might be (Covello and Hazelgren 145).
In the use of both the historical and pure projection data to estimate the numbers to use in the business proposal, assumptions always come in handy (Bowhill 34). The fact that accurate numbers are used in the proposals does not mean that there are no assumptions made about the market, sale, costs or profits. It is, for example, assumed that the market will remain the same for a period in which the business plan is made for. This is variable as markets keep on changing due to emerging trends now and then. A business plan, therefore, does not guarantee the successfulness of the business but rather, gives a framework on how the business should be run.
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Butler David.Business Planning: A Guide to Business Start-Up.Oxford, U.K: Taylor & Francis, 2000. Print.
Covello A. Joseph, Hazelgren J. Brian. Complete Book of Business Plans: Simple Steps to Writing Powerful Business Plans.Illinois: Financial Sourcebooks, 1994. Print.
Fiore Frank. Write a Business Plan in No Time. New York: Que Publishing, 2005. Print.
Gordon M. Jason. A Business Plan for Growth-Based Ventures.CreateSpace , 2007. Print.
Wallace F. Thomas. Sales & Operations Planning: The "how-to" Handbook. Ohio: T F Wallace & Co, 1999. Print.