12.1: Purpose of Business Plan

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The business plan serves many purposes. The business plan presents a succinct overview of the what, how, when, and why of the business. First, it is used to communicate with investors. It provides investors with a concise overview of what the business is about and how investors can make money. In many ways, the business plan is a prototype of the business model. It is a scaled-down version that describes how the business will function. The business plan also serves as a platform for the business founders to communicate and it can be used as a blueprint for operating the business the first year.Sahlman (1997, July-August). It also helps mentors and consultants to identify weaknesses, missed opportunities, strange assumptions, and overly optimistic projections. Finally, the business plan also serves as a tool for educating new employees on how the business works and how they will fit into the business activities.