Q The Importance of a Business Plan Planning is an essential part of any business—big or small. A business plan is a carefully constructed guide for the person starting a business. A business plan has three basic purposes: communication, management, and planning. A business tool is helpful to show potential investors so they can decide if they want to invest in the business. The business plan should be clear and concise and should answer four questions of interest to banking officials and investors: 1. What is the nature and mission of the new venture? 2. Why is the new business a good idea? 3. What are the businessperson’s goals? 4. How much will the new venture cost? There are several components to a business plan. Refer to the Components of a Business Plan table to learn more about each section. Components of a Business Plan Components Descriptions Introduction • Name, address, and phone number of the business • Statement of confidentiality Executive Summary • One- to two-page overview of the business plan and a justification of why it will succeed Benefits to the Community • How the business will impact economic, community, and human development Company and Industry • Background of the company, choice of legal business form, information on products or services, potential customers, current competitors, and the business’s future Management Team • Introduction of the management team including their skills, talents, job descriptions, and compensation Manufacturing and Operations Plan • Facilities needed, space requirements, capital equipment, labor force, inventory control, and purchasing requirement Labor Force • Quality of skilled workers available and the training, compensation, and motivation of the workers Marketing Plan • Markets, market trends, competitors, market share, pricing, promotion, distribution, and service policy Financial Plan • Summary of investment needed, sales and cash flow forecasts, breakeven analysis, and sources of funding Exit Strategy • Discussion of succession plan or going public Critical Risks and Assumptions • Weaknesses of the business and how the company will deal with them and other business problems Appendix • Supplementary information crucial to the plan 1.Which of the following are the basic purposes of a business plan? (Select three.) 2.The Company and Industry section of the business plan would _______. 3.Which section of the business plan would discuss the facilities needed for the business including space requirements and capital equipment? 4.The Labor Force section of the business plan would discuss _______.

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