What Are the Functions of a Business Plan?

A business plan is a written document that is essentially a blueprint for your burgeoning enterprise. When done properly, the creation of a business plan forces you to take a close look at your business idea and gives you a clear indication of what it really takes to be successful. Your business plan will serve a number of important functions in the short term as well as in the long term.

Road Map

A business plan serves as a type of road map for your business by clarifying where you are, where you want to be and how you plan to get there. Without a clear business plan, you may resort to methods of trial and error to attain business success, and it will be much more difficult to determine whether you're making real progress.

Details of Your Business

Your business plan explains what your business is about by describing your products or services in detail and what the ultimate goals of your business are. For example, your plan may stipulate what your revenue goals are for each of your first three years of operation. Your plan should also indicate why you believe there is a need for your business and who your main competitors will be.

Marketing Plan

A business plan should describe how you intend to market your products or services as well as identify your target market. For example, if you're selling a product that appeals to young professionals between the ages of 25 and 34, your plan should include the marketing strategy you intend to use to reach them, such as developing advertising for media outlets that appeal to that particular demographic.

Initial Costs

If your business requires any start-up capital or costs, your business plan should list all required items and your anticipated cost for each. If you're seeking financing, you'll need to determine how much money you'll need to borrow and how you arrived at the figure. Possible costs can include a place of business, equipment, the hiring of employees and marketing expenses.

Securing Financing

A business plan is essential if you intend to seek financing to start your business. A financial institution such as a bank will want to see your plan to determine the viability of your business idea. If you're seeking investors as a means of raising capital, they'll also most likely want to view your plan to determine their level of investment risk.