Reasons for Constructing a Business
When setting up a business it is sometimes easy to focus only on the day-to-day running of the business rather than what may happen in the future to the business. Lack of attention to the future of the business could possibly lead to problems such as bankruptcy.
A business plan is a ‘living document’ which considers details about where the business wants to end up in the near and distant future. As a business changes, the business plan will also have to change.
A business cannot guarantee the success of a business but it can help an entrepreneur to get a realistic view of how specific aspects of change may affect his or her business. It also gives them a good picture of where to get funds and who potential competitors and customers may be. Competitors may vary depending on the business type, if the business was a small local convenience store, the possibility of a Asda being build nearby will have a harsh effect on the convenience store.
The business plan is a planning tool that gives the entrepreneur something to work on. This is because the plan gives details about the essential elements of that business including: * A description of the business * Its product or service * Its aims and objectives * Its marketing plan * Its financial predictions
Giving businesses a clear picture of the various stages they need to go through in order to be successful
A business plan helps coordination during the first stages of setting up a business. This may include choosing the overall aims of that business is likely to have. The business plan may be vital in order to get financial help from banks like Lloyds TSB or other funding institutions like Quick Quid. The plan allows entrepreneurs to also consider the more practical side of the skills needed by staff and the location of premises.
Setting goals and objectives for the business, in both short and long term.
Setting up goals for the business in the longer term can help the entrepreneur really think about what they want to achieve by considering their unique selling point or niche in the market these goals are also known as aims that the business is working towards. Many organisations produce a written statement of their aims known as a mission statement.
To be successful, the business needs to be offering something different from the competition or be the only business that is offering that product or service in the area. Opening a new business is not always about thinking of a new concept or invention, but a way of doing something different that will attract people to buy your services rather than those of your competitors. This could include creating a new brand of cola, but offering different, unique types of flavour. Coca Cola has done this to help stretch its lead over Pepsi.
Once the aims have been set, the organisation has an idea of where they are heading but smaller steps are needed to help them. These steps are a list of plans that a business uses to achieve its aims and are called objectives. The aim of a business might be to make profit, so the corresponding objectives could be to increase sales through additional advertising or to cut staffing costs.
If these objectives are SMART, they can be used to gauge to work out whether the business is being run as predicted by the plan or if changes need to be made in order for things to be put back on track.
Specific – Objectives need to relate to the issues and markets in which the business is involved in.