Definition of a Business Plan

A business plan is a written document that describes an entrepreneur's business idea and explains how the business will be run and developed. It sets out the goals of the business and the strategies used to achieve them.

What is a business plan?

A business plan is prepared by the entrepreneur before the business begins operating. It is the product of the planning function of management — thinking ahead about what to achieve and how to achieve it. The plan focuses on the future and acts as a roadmap that guides the entrepreneur's decisions.

• It is formal and written, not merely an idea kept in the mind.
• It is future-oriented — it maps out the actions that will be taken.
• It covers the marketing, operations and financial aspects of the business.

Why the definition matters

Besides guiding the entrepreneur, a business plan is used to attract investors and to apply for financing such as a bank loan. A bank wants to see a clear plan before approving a loan, so the document becomes a communication tool between the entrepreneur and outside parties.

Characteristics of a business plan

A good business plan has several important characteristics. It must be comprehensive because it covers all the main aspects of the business, from marketing to finance. It must be realistic so that the targets set can genuinely be achieved, and flexible so it can be adjusted when market conditions change.

It should also be clear and well-organised so that a reader such as a bank officer or a potential partner can grasp the entrepreneur's idea quickly. A thorough plan also shows that the entrepreneur is serious and has done research, which raises the confidence of those who read it. In short, the document turns an idea in the mind into an action plan that can be carried out.