A business plan helps you manage vital business activities better. It identifies the essential events that must occur and actions that must be taken, and it sets forth a clear timetable for accomplishing them. It identifies and analyzes the factors, both internal and external, that might affect operations. Some examples of external factors include economic conditions, the weather, changes in technology, competitors, etc. Internal factors include staffing and hiring, management policies, estimated cash flow, etc.
A written plan provides the mechanism to tie all these factors together and effectively manage them. It provides a timeline of the events and activities that will occur all across your business. It contains your marketing plan, which identifies your target audience and explains how you will position your product or service to reach that audience. Your specific advertising and promotional activities will be linked to sales targets. It also contains your operational plans, which deal with how your business will conduct its day-to-day activities. The timing of these activities is crucial, since there is little point in running ads for a product that isn't available for sale. Both operational and promotional milestones must be met in order for the business to stay on track.
A good business plan also includes a substantial amount of detail regarding cash flow projections that set forth the projected timing of revenues and expenses. These projections help establish whether and how the business will meet its obligations to vendors and others who provide the business with goods or services. Most of these projections are tied directly to planned operational results. For example, the sales projected to occur in one month are supposed to generate the income necessary to pay expenses that are due the following month.
In a well-crafted plan, the overall rhythm of the business will be realistically reflected. If some portion of the business is cyclical, as is often the case, the cycle will be identified and accounted for. For example, many retail outlets rely on the Thanksgiving to Christmas period for a substantial part of their annual sales volume. This cycle is reflected in the plan by, for example, increasing inventory as November approaches, planning for the addition of temporary workers to handle the expanded sales volume, and clumping expense payments directly following the busy season when cash is most available.