A business is defined by Wikipedia as a company or unincorporated group under the law that engages in professional, commercial, or financial activities. Companies can be either for-profit or non-profitable organizations that conduct business to meet a social objective or further an ideal charitable cause. They can also be of public or private nature and have the power to make money or use their resources to serve the public. It may be owned by one individual or a group of individuals or a group of companies.
A business plan provides direction for conducting business affairs and lays down principles by which the business can operate profitably. A business plan must be prepared in collaboration with the members of the Board of Directors and the Chief Executive Officer (the highest ranking officer) of the Company. The business plan is prepared for the year ahead and will cover significant events such as financing needs, working capital, marketing programs, sales and loss, cash flow, balance sheet, and other operating matters. All significant events involving the Company such as merger and acquisition, consolidation, reorganization, all significant purchases and sales, and debt issues must be included in the balance sheet. All of these items are usually reported on the last business statement and quarterly statements of income.
There are a number of strategies that businesses must utilize to ensure that the Company meets its purposes and develops a profitable business strategy. One such strategy is to engage in social responsibility programs. Companies may choose to participate in neighborhood programs that provide jobs, training, and the infrastructure that are needed for economic development in the areas in which they operate. For example, the city of Detroit has a Schools Promoting Tomorrow’s Education Program in which businesses receive funding to establish new schools or expand existing schools in neighborhoods where children live.
Another business strategy that businesses must implement is to determine the source of their profits. Profit is reported according to the method of compensation provided by an individual, the location where that profit is generated, the nature of the services rendered, and the amount of revenue generated. For example, some businesses gain profits by receiving royalty payments for use of intellectual property such as books, music, movies, etc. Others may receive money for the advertising used in their respective businesses. A third way in which businesses obtain profits is through the sale of their products.
A key factor in determining the sources of their income is a detailed analysis of their cash flow and income statement. The analysis of cash flow is required in order to determine the amount of working capital available to fund ongoing operations and to meet future projected expenses. In addition to analyzing the current and long-term income statement, the business plan will need to include a market analysis. The market analysis will identify specific geographic areas where a business could locate in order to obtain the products and/or services that they offer. A company’s market analysis will be different depending upon their product offerings and the number of employees in that geographic area.
Developing a sound business concept that provides a strong foundation for the development of a viable venture will lead to successful implementation. The executive summary should be used as the initial statement of purpose in the business plan. The summary should be carefully written and only include information that is necessary to explain each major aspect of the business concept. The executive summary should be written in a conversational language that allows its readers to understand the ideas easily. To have an effective business plan, the following tips should be used: