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A written business plan serves more functions than just arranging finance, dealing with suppliers and vendors and familiarising the prospective employees about the business. A written business plan as a management tool acts as a roadmap for one’s business. It helps the promoter to chronologically organise important business events so that the promoter does not forget any business preconditions before taking critical business decisions.
Business Plan as management tool provides two benefits in the management of one’ business:
Business plan as management tool must have the following two elements and their milestones must be met for the business to sail through:
Most of the businesses are cyclical in nature and a business plan as management tool helps in accounting such period of boom and bust in the business.
A common practice adopted by some of the most successful business plans is that their plans are quantifiable i.e. the business success depends on achieving of a certain quantifiable or objective target such as reaching sales to a particular target or selling a particular quantity of products during a given financial year. If a business does not have a written plan and it waits for the whole year to track the progress then such business will not have enough time to make the necessary changes to achieve the target. On the other hand, where a business has a quantifiable written business plan, then he will be able to track the actual performance on real time basis and accordingly make changes in the strategy to achieve the desired target.
A well written business plan as management tool depicts the fundamentals of a business and is a reflection of how it is perceived by the other stakeholders[1] in the business. The suppliers and vendors will be interested to give discounts or defer payments if they believe in the strong fundamentals of the business. Similar is the case with the lenders who would be willing to extend loan to the business if they believe that the business will be able to repay. Further, the employees will continue with the business if they believe that the business has a bright future. All this is reflected from the written business plan.
Read Our Article: Why a Business Plan is Considered as a First Step of Business?
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