Analyzing the Core Functions of a Business Plan: From Internal Management and Funding to Successful Execution

By: Ahmad Fuad

​1. Introduction and Core Functions

A business plan is a critical tool for entrepreneurs when planning to launch new ventures or expand existing ones. Business plans act as roadmaps to success since they provide business owners with a clear picture of all aspects such as marketing, product, and financial details that regard the venture. 

To elaborate, Greene and Hopp (2017) reveal that a business plan helps an entrepreneur strategize on how to exploit an opportunity. Furthermore, a business plan improves the probability of an investment's success because, through it, an entrepreneur can sell the idea to prospective investors, analyze critical elements such as the market and competitors; it informs the management of its roles, strategy, and targets.

Building on this foundational role, a business's management requires a robust framework to guide it on how to execute its daily activities. A business plan meets this need by acting as the reference tool to ensure that the business fulfils its goals and objectives by guaranteeing that all members of staff and teams understand and play their roles accordingly (Burke, Fraser, and Greene, 2010).

Moreover, apart from enhancing success by improving on management, a business plan provides a detailed guideline on all the aspects of the venture. In addition to structuring internal operations, a business plan enables entrepreneurs to assess all the relevant factors regarding their intended investments to ensure that they do not incur losses.

Business plans entail vital data such as the product to be traded, competitors, profitability, marketing strategies, and the timeline of the anticipated results (Prayson, Bierer and Dannefer, 2014). Consequently, with mastery of these factors, entrepreneurs are aware of what to adjust and how to improve the plan before implementing it (Turner and Endres, 2017).

Perhaps most critically, entrepreneurs cannot successfully launch their businesses without adequate funding. A business plan is a critical document since it helps entrepreneurs to obtain business funding from both investors and financial institutions on credit (Bewayo, 2015). 

Specifically, a business plan analyzes the profits and revenue to be generated by establishing the proposed business, and financiers utilize the information to make funding decisions (McCready and Molls, 2018). Hence, one of the broad priorities of a business plan is to obtain funding for the proposed venture, although it is also vital for laying down the objectives of the management.

In conclusion, the broad priorities of a business plan include sourcing funding, creating effective management by acting as a reference point of what is required, as well as analyzing critical elements of the business to guarantee its success once it is launched.

2. Illustrative Case Studies of Business Plans in Practice

The business plan consists of the company's strategic decisions that embrace its goals and vision, and this plan is the key to its success or failure. Modern entrepreneurship presents both good and bad examples of a business plan, that allows others to learn essential details from these experiences.

The examples of bad business plans denoted Kodak and EA cases, and they both demonstrated poor decisions and inadequate strategies. Kodak failed as a result of switching its business model to the film-based one (Mui, 2012). The good aspect of this plan was probably the intention to reboot the trend of film-based photography. 

However, the company completely neglected the fact that this market was entirely on the decline. As a result, the company accepted this risk and lost its profits and leadership in the business. The possible improvement to this decision would be the investment in digital technologies instead of the suggested plan.

Another bad business denoted the EA case, and the company misconducted the focus area. The organization mostly focused on how to obtain revenue and neglected the game innovation that resulted in the tarnishing of the brand image (Sherr, 2015). The only good aspect of this strategy considered gaining maximum profits. The company could improve the situation by returning the former core values.

In contrast, the good and exceptional example of a business plan denoted Amazon's strategy. The company's business model did not change during the decades. Its focus consisted of the customer and revenue growth, the degree to which our customers continue to purchase from the company on a repeat basis, and the strength of the brand (Kelleher, 2017). The good side of this approach denoted the perseverance and simplicity in making goals that became the cornerstone of Amazon's expansion.

3. Securing Funding and the Investor Perspective 

Given the criticality of funding, a government grant is one of the methods that one could utilize to fund his business idea. A myriad of grants is offered to those who want to fund their business. The only caveat is that one must meet the criteria that have been pinpointed.

Needless to say that it is highly competitive, that’s why entrepreneurs might be apprehensive about it, thus, it’s quintessential to have an auspicious business idea to ensure that it can stand out. Moreover, it is of paramount importance to have a potent business plan along with a fine-tuned business model.

Another way that one might consider is asking his family, relatives and friends to shore him up with his business. This method is instrumental if one has a big tribe or clan. What’s more, an entrepreneur can finance his business from his personal fund. Using your own money is advantageous down the road, therefore, you won’t be burdened with debts (Bullock, 2019).

Furthermore, one might seek help from angel investors who support start-ups “in exchange for ownership equity in the company” (Ganti, 2020). One may also consider venture capitalists who offer capital to favourable firms (Business Dictionary, n.d.) In addition, an entrepreneur can also take a loan from a bank or launch a crowdfunding campaign.

Delving deeper into venture capital, venture capitalists are the only source to finance many startups that can’t take a loan from a bank due to for example poor credit rating (Gompers and Lerner, 1999). Venture capital is an undeniably risky route, thus, it is understandable why venture capitalists are going to be extremely vigilant and heedful when it comes to deciding which business to invest in.

In fact, 80% of start-ups fail in their first five years, consequently, VCs are taking a high risk by investing in novel small firms. Indeed, there are a plethora of things that VCs consider before agreeing to finance a company.

First of all, one of the forces that have an impact on a venture capitalist’s decision is management. VCs, take into account the effectiveness of the management. They look for a management team that has got the capacity to implement their business plan. Subsequently, having a conscientious and diligent management team is tremendously valuable in the long run.

Conclusively, investors are interested in seeing an effective business plan, hence, it is of great significance to have a practicable, feasible, and adaptive business plan. What is more, It must take into consideration the hurdles and obstacles that might come up along the way.

Having said that, investors are looking for a creative idea and at the same time the skills to sustain it. In addition, an entrepreneur needs to show the VCs that his business idea has a very high success rate (Blakey, 2017).

4. The Art of the Pitch and Product Uniqueness

Moving on to another topic which is in what way we should pitch our business idea. First and foremost, it’s indispensable to craft an elevator pitch since it boosts the prospects of success(Soorjoo, 2012). Secondly, prove that your organisation has a qualified management team who are acquainted with the market.

Moreover, present pragmatic revenue growth and give evidence for your projections (Startuploans, n.d.). Further, some might make a colossal blunder by using jargons and acronyms in their pitch, accordingly, you’d better off not using them.

Underpinning a successful pitch, an entrepreneur who wants to pitch his business idea to investors should be confident enough; to convince them that he has got something outstanding to bring to the table. Undoubtedly, the ability to persuade essentially comes from being confident about your idea and believing that you have really got a superlative idea.

In fact, having the ability to demonstrate the uniqueness of your product is only one factor, therefore, at the end of the day, there are other several crucial factors that have a powerful influence on the investor’s decision, which our colleagues have already discussed and alluded to in this thread.

Specifically, when it comes to how to showcase that a product is unique, a start-up must present a feature that its product or service has. A feature that makes it stand out. That start-up is the only one that provides that feature, so it is critical that its rivals don’t provide it. 

The underlying logic is that if a company doesn’t have an exceptional and remarkable product or service, why a customer will buy from it in the first place? Hence, it is of significance that a start-up offers something extraordinary (JAMES, 2019).

However, it is crucial to note that an entrepreneur might have a unique product, however, I don’t necessarily think that just because of that reason, investors will invest in a firm, since, it needs to have a strong business plan and business model. Indeed, “companies now are turning toward business model innovation as an alternative or complement to product or process innovation” (AMIT and ZOTT, 2012).

5. Internal Communication and Technological Enablement

Shifting focus to internal applications, business plan presentation is very critical for organizations as far as their performance is concerned. In fact, most companies do use business plan presentations for sharing information with their executives, managers, and employees (Busenitz 2020).

This is because information sharing makes the employees and managers to be well conversant with what they are required to do in order to help in achieving the objectives of the organization. Furthermore, information about business plan helps all the stakeholders of the organization to come up with the most effective strategies that can help the firm in question achieve its targets.

Some of the important information that a company can share with its employees, managers, and executives include the strategies or information about corporate policies, which are useful in guiding employees’ behavior (Wong et al. 2018).

On the same front, human resource managers may use business presentations for social issues, such as business ethics or sexual harassment training, and in developing staff welfare manuals (Mauludin 2020). In addition, executives of an organization can use business plan presentations to understand the expected trends in the industry and develop the necessary strategies that can help the company to grow in tandem with the projected industry trends.

In the contemporary business environment, developing a business plan requires one to have some ICT skills. In fact, ICT skills have a significant contribution to the competencies that help to be well conversant with the planning process. In addition, ICT skills are useful in upgrading business plans that were developed previously without taking into consideration ICT tools and their impact on business growth and development, thereby, improving the quality of the business plan (Lehner 2018).

Moreover, due to the development of ICT skills, many things can be performed more efficiently and with greater success, as ICT skills make it possible to even test different decision-making scenarios (Brown and Parr 2018). By testing different decision-making scenarios, one is able to understand how the developed business plan would be implemented and whether its implementation would generate the required goals or not.

In fact, ICT skills can help in testing the viability of a business plan in order to ensure that it does not compromise on the quality of the business process. Furthermore, with the help of business plan simulators, ICT skills provide one with an opportunity to learn about different ICT tools that are useful in the business planning process (Tata and McNamara 2018). Therefore, a quality business plan will be developed.

6. The Role of Financial Management in Execution

Ultimately, the financial aspects of the plan require expert execution. A financial manager is the person who is responsible for pinpointing the best way to utilize a business's money. Short-term expenditures support an organization's daily activities. For example, Nike consistently dedicates money to purchase raw materials like fabric and leather as well as to pay staff salaries.

Long-term expenditures are usually for fixed assets. For Nike, those would comprise expenses to build a new industrial unit, purchase automated industrial equipment, or acquire a sport’s clothing company (Gitman et al., 2018).

Short-term expenditures (which are usually called operating expenses) are expenses that are utilized to help existing production and selling activities. They usually cause current assets that involve cash along with any other assets which could be exchanged to cash within a year.

A financial manager’s objective is to control current assets; so that the business has got an adequate amount of cash to pay its liabilities, besides supporting its accounts receivable as well as inventory. This is vital because cash is the essence of a company. Without having enough cash a business cannot function.

A financial manager has got a critical duty which is cash management. It is quintessential to make sure that sufficient cash is there, not to mention that unanticipated expenses might arise along the way. A plethora of organisations maintain a minimum cash balance to cover unforeseen expenses or changes in predicted cash flows (Gitman et al., 2018).

It goes without saying that any firm should have money in order for it to operate, and it should initially spend money on wages, salaries, facilities, equipment, supplies as well as inventory so that it can yield money. Subsequently, finance is crucially important to the prosperity of any organisation.

It is of great significance for a business to manage its money to attain its yearned and longed outcomes, and that is what financial management is. Ultimately, all the decisions of a firm have financial consequences (Brigham and Ehrhardt, 2013).

A sedulous financial manager ought to trace how money is coming into and going out of the business. He works with managers from different sections to pinpoint how current funds are going to be leveraged, and needless to say, how much money is needful. Wherefore, he picks out the optimal sources to procure the necessary funding.

For instance, a financial manager oversees daily operational data to make certain that the firm has got adequate cash. Over the long term, the manager fastidiously studies whether there are prospects of starting out a new manufacturing facility. Moreover, he proposes the most felicitous trajectory to finance the project, raise funds, and thence observe the project’s execution as well as its operation (Gitman et al., 2018).

References

• AMIT, R., and ZOTT, C., 2012. Creating Value Through Business Model Innovation. 
• Bewayo, E. 2015. 'The overemphasis on business plans in entrepreneurship education: Why does it persist?' Journal of Small Business and Entrepreneurship Development.
• Blakey, D., 2017. How To Attract Venture Capital In 5 Smart Steps. 
• Brigham, E., and Ehrhardt, M., 2013. Financial management: Theory & practice. 
• Brown, J. and Parr, A., 2018. ICT skill frameworks: do they achieve their goals and users’ expectations? Advanced Journal of Professional Practice.
• Bullock, L., 2019. How to Fund Your Start-Up Business Idea? 
• Burke, A., Fraser, S. and Greene, F. 2010. 'The multiple effects of business planning on new venture performance', Journal of Management Studies.
• Busenitz, L.W., 2020. Your business plan and presentation: Articulating your journey to commercialization. In Biotechnology Entrepreneurship. Academic Press.
• Business Dictionary, n.d. What Is A Venture Capitalist?
• Ganti, A., 2020. Angel Investor. 
• Gitman, L., McDaniel, C., Shah, A., Reece, M., Koffel, L., Talsma, B., and Hyatt, J., 2018. Introduction To Business. 
• Gompers, P., and Lerner, J., 1999. What Drives Venture Capital Fundraising? 
• Greene, F. and Hopp, C. 2017. Research: Writing a business plan makes your startup more likely to succeed.  Harvard Business Review
• JAMES, G., 2015. 6 Ways You Can Become Unique. 
• Kelleher, K., 2017. Amazon Is Still Executing Bezos’s 1997 Plan. 
• Lehner, F., 2018. ICT skills and competencies for SMEs: results from a structured literature analysis on the individual level. In The Impact of Digitalization in the Workplace. Springer, Cham.
• Mauludin, L.A., 2020. English for business presentation. Airlangga University Press.
• McCready, K. and Molls, E. 2018. 'Developing a business plan for a library publishing program', Publications.
• Mui, C., 2012. How Kodak Failed. 
• Prayson, R., Bierer, S. and Dannefer, E. 2014. 'Perspectives on learning and business plans—more in common than meets the eye', Journal of Graduate Medical Education.
• Sherr, I., 2015. How Electronic Arts Stopped Being The Worst Company In America. 
• Soorjoo, M., 2012. How to Pitch Your Business to Anyone, Get Funded, and Win Clients. 
• Startuploans, n.d. How to pitch your business idea. 
• Tata, J.S. and McNamara, P.E., 2018. Impact of ICT on agricultural extension services delivery: Evidence from the Catholic Relief Services SMART skills and Farmbook project in Kenya. The Journal of Agricultural Education and Extension.
• Turner, S. and Endres, A. 2017. 'Strategies for enhancing small business owners' success rates', International Journal of Applied Management and Technology.
• Wong, C.A., Kulhari, S., McGeoch, E.J., Jones, A.T., Weiner, J., Polsky, D. and Baker, T., 2018. Shopping on the public and private health insurance marketplaces: Consumer decision aids and plan presentation. Journal of General Internal Medicine.​