Question

What is a business plan? Explain its importance. 

Answer 1

A business plan is a comprehensively written down document prepared by the entrepreneur describing formally all the relevant external and internal elements involved in starting a new venture.
The business plan:
(i) Viability: It helps in finding the viability of the venture in a designated market
(ii) Guidance: It helps in providing guidance to the entrepreneur in organizing, planning activities as such:
(a) identifying the resources required
(b) enabling obtaining of licenses if required, etc.
(c) working out with legal requirements.
(iii) Queries: It helps in satisfying the queries, and issues of each group of people interested in the venture.
(iv) Evaluation: It provides room for self¬assessment and self-evaluation.
(v) Planning: It helps entrepreneur to plan ways to avoid obstacles.
(vi) Obstacles: It helps to realize the obstacles which cannot be avoided or overcome, suggesting to stop the venture while still on paper without investing further time and money.
(vii) Credit history: It reflects the entrepreneur’s credit history, the ability to meet debt and interest payments, and the amount of personal equity invested.