Using a Business Plan to Judge the Potential Viability of a Business Opportunity

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Introduction

Many businesses usually fail to succeed because of lack of viability. In essence, it’s not logical to invest a lot of money in a business opportunity especially when the future of that business is in doubt. To clear such doubt and to ensure that investments are secure, business planners or investors rely on business plans to assess the aspect of viability. A business plan is an essential tool that is very useful in summarisation of all core aspects of the business organisation. It has all the details needed in the operation and management of the business. The plan explains how the business will use its finances, manage loans, meet its objectives, and the feasibility of the plan. The plan is very useful for the internal planning by the management. Furthermore, the business plan can find it useful when applying for loans since it acts as a reliable basis for acquisition of the loan.

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Uses of a Business Plan for Venture

As mentioned earlier, a business plan helps managers and owners to acquire loans. It’s from this that the financial institutions like banks and other potential lenders get assurance that the business is sustainable and worth financing (Rakesh, 2005, 78). Nonetheless, a poor plan can also tell the lenders that the business is not viable and would lead to financial losses (Belkin, 2000, p.4). When the business ideal is still new, the plan serves as a roadmap that guides that new venture through a process of achieving its objectives. The entrepreneurs and owners of such business use it to think through the strategies set up in the plan (Freed et al, 2008, p.134; Dholakia & Firat, 2006. p.149). The major business concepts, limitations and financial sources are all indicated in the business plan and this can be revised when there are changes in the market conditions in a certain line of business (Jones, 2000, p. 12). A business plan is a set of crucial management strategy that will offer solutions and basis for crucial decision making procedure so as to attain the objectives.

Assessing Viability

A business plan is often regarded as the basic blueprint of the business opportunity because it actually covers the operation of the entire business (DeThomas & Grensing-Pophal, 2005, p. 89). They way a business is performing and its progress over time can be monitored and assessed against the said business objectives that involve sales and expenditure in a specified time and strategy (Massarella et al, 1998, p. 45). The business plan helps a business to discover and to focus on the possible loopholes that could be problematic. Business plans cover areas that are very critical and which are identified below;

Assessing the Management Plan

For any business to be successful, it must have a very competent management team and a well defined organization structure (Foo et al 2005, p. 389). This can easily be determined from the business plan. Business experts usually assert that the management team is actually the most important elements of the plan as it highlights the appropriate experience, past accomplishments, abilities, specialties, current performance and academic credentials of the management team (Abrams, 2003, p. 67; Mason & Stark, 2004, p.228). Basically when the management team and the workforce present a very good record of success it means that the business is likely to achieve its goals and hence it can be regarded as a viable business (Kaplan & Norton, 2005, p.98).

Evaluating the Target Market

The marketing plans of a business are very vital as they form the basis for the company sales and expenses as well as promotional strategies (Covello & Hazelgren, 2003, p.121). Basically the market is what will keep the business running and it’s therefore a very important element in assessing the feasibility of a business (Abrams, 2003, p. 67; Mason & Stark, 2004, p.228). Competition, clients, market niche and the products being produced will be analyzed critically. In this process, the competitiveness of the business can be determined from the actual plan. The plan serves to highlight all the strengths in the face of possible threats and weaknesses, while at the same time considering the presenting opportunities. From the strengths and opportunities that a business has, its viability can be judged against weaknesses and the threats strategies (Covello & Hazelgren, 2003, p.121). Basically if the products are able to satisfy many of the wants and needs, that were previously unfulfilled, then its success is guaranteed and the products or services will greatly find acceptance on the market (Pinson, 2003, p.111).

The Sales Plan

Reaching the business revenue target is very critical to the viability of the plan. The sales plan indicates the methods that will be used to reach the goals (Mason & Stark, 2004, p.228). From this, the client base and marketing program can be evaluated. These are usually drawn from market analysis reports and strategies (Covello & Hazelgren, 2003, p.121; Miles, 2003, p. 128). They also offer information for contingency plan hence are useful is determining whether the business is viable or not.

The Production Plan

This is imperative particularly in the overall management of the manufacturing businesses. It highlights several production alternatives and recommends the one that will be used for effective budgeting of the cost like labour and the raw material. Otherwise the section deals with new services in a service industry (Barrow et al, 2005, p.89). This information is important in determination of viability since it provide values of production costs which are usually used in a balance sheet to determine profitability (Pinson, 2003, p. 112). If a production plan is made cheaper, it means that cost of production will be manageable and profitable.

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Assessing the Financial Plan

This is one another crucial part of the business plan that determined viability of a business opportunity (Allen, 1998, p. 23). The section can be very beneficial to investors since it affirm that information about cash flow needs will be assessed for utilisation in planning. In other sections of the business plan, this could be somehow implicit that one cannot be able to understand. However, in this paper, it will be presented in terms of figures (Barrow et al, 2005, p.89; Foo et al 2005, p. 389). Financial controls, projections and the figures of market research are characteristic of this section. It also provides the amount of finances that are needed to effect the plan (Pinson, 2003, p. 112; Korhonen, 2001, p.484). Basically, if the figures are illogical then business viability cannot be determined as a success.

Evaluating the Implementation and Contingencies

The time schedule for achieving the goals should be definite and if the plan clearly reveals this, then lenders and the management team can be able to agree when the financial needs will be achieved (Scholteh, 2000, p. 89). Furthermore, a contingency plan is very important as it provides a way out in case a business faces some serious challenges that it cannot be able to handle (Eric et al, 1998, p. 89). These plans help to sidetrack obstacles that could arise like legal issues, transformational leadership and some sudden loopholes. This section gives the investor or the lender an assurance that should the business face certain tough times, there will still be a way to salvage the business so that it picks up operation once again (Pinson, 2003, p. 112). It’s a precautionary principle and a gesture of preparedness hence an assurance of viability of the business.

Conclusion

The business plan is a very important document that determines viability of a venture. Every element of the plan is very critical in its own respect, ranging from management to the recommendation. The plan presents business practicability if its elements are based on extensive research and studies. When all the loopholes are catered for, the business can be initiated. It’s also evident that good planning has been associated with success while poor plans can lead to business failures.

Reference List

Abrams, R. (2003). The Successful Business Plan: Secrets and Strategies. London, Palgrave Publishers

Allen, D. (1998). Strategic Financial Management: Managing for Long-term Financial Success. New York: Financial times Business Information.

Barrow, C. Barrow, P. & Brown, R. (2005). The Business Plan Workbook. New York, Kogan Page Publishers

Belkin, L. (2000). The Art Of Making A Plan And Making It Happen. New York, New York Times.

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Covello, J. & Hazelgren, B.J. (2003). Complete Book Of Business Plans: Simple Steps To Writing Powerful Business Plans. London, Sourcebooks Inc

DeThomas, A. & Grensing-Pophal, L. (2005). Writing a convincing business plan. New York, Palgrave Pub.

Dholakia, A N & Firat, F. (2006), ‘Global Business Beyond Modernity,’ Critical Perspectives On International Business, Vol. 2, Issue 2, pp 147 -167

Eric S.S, Brian R. F, & Jay M. B. (1998). The Ernst & Young Business Plan Guide, New York, John Wiley And Sons.

Foo, M.D., Wong, P.K & Ong, A. (2005). Do others think you have a viable business idea? Team diversity and judges’ evaluation of ideas in a business plan competition. Journal of Business Venturing, Vol. 20, Issue 3,pp 385-402

Freed, M.N, Diodato, V.P & Rouse, D.A. (2008). Business information desk reference: where to find answers to business questions. London, Macmillan Pub. Co.,

Jones, R. (2000). Business Plans: Roadmaps For Growth And Success.” Information Outlook.

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Kaplan, R. S. & Norton, D. P. (2005) Using the Balanced Scorecard as a Strategic Management System. Cambridge, Harvard Business Review.

Korhonen, A. (2001) Strategic Financial Management in a Multinational Financial Management in a Multinational Financial Conglomerate: A Multiple Goal Stochastic Programming Approach. European Journal of Operational research. (128)1. pp: 418-434.

Mason, C. & Stark, M. (2004). What do Investors Look for in a Business Plan? A Comparison of the Investment Criteria of Bankers, Venture Capitalists and Business Angels. International Small Business Journal, Vol. 22, No. 3, 227- 248

Massarella, G.J. Et Al. (1999). How to Prepare A Results-Driven Business Plan. New Jersey, Amacom

Miles, R., (2003). Organizational Strategy, Structure, and Process. Stanford: Stanford University Press.

Piercy F.N. 2002, ‘Research In Marketing: Teasing With Trivia Or Risking Relevance?’ European Journal of Marketing, Vol. 36, Issue 3, pp 350 – 363

Pinson, L. (2003). Anatomy of A Business Plan: The Step-By-Step Guide To Building Your Business. Massachusetts, AKA Associates

Rakesh, J. M., (2005). International Marketing. New York: Oxford University Press.

Scholteh, J.A. (2000). Globalization. A critical introduction. New Jersey, Palgrave Macmillan.

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BusinessEssay. 2022. "Using a Business Plan to Judge the Potential Viability of a Business Opportunity." February 17, 2022. https://business-essay.com/using-a-business-plan-to-judge-the-potential-viability-of-a-business-opportunity/.

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