4.16. BUSINESS PLAN DESIGN
A simulation model with Vensim
The purpose of a business plan is to facilitate the achievement of the most important objectives and goals of a company, organization or corporation; this takes on a particular importance in a turbulent, uncertain and competitive world. The use of a business plan can minimize risks at all levels of business management, especially for new businesses, considering that 90% of these do not last beyond the first three years of existence. Therefore, it is important to be able to determine the endogenous factors that can affect the growth of a business.
The objective of all business plans is to obtain a profit, which may be social, environmental or purely economic. As a minimum, this objective requires the company to achieve a reasonable return on investment (ROI), either at managerial or institutional level, in order to generate resources for further use.
In the economic world, especially in small and medium enterprises (SME), a detailed ROI calculation can minimize the risk of failure, especially for new business during the first three years of existence.
A business plan is an interactive exploration in which we create possible future scenarios, both external and internal, in an attempt to design action plans in advance that may potentially lead us to our goals.
A business plan will not turn bad ideas into good business but it will allow us to discover these errors in time and avoid greater mishaps. Good ideas which are converted into a good business plan generate better business and can be used as the foundation for a more ambitious strategic reconsideration when circumstances require.
The definition of the basic qualitative variables such as environment, economic situation and market, as well as that of the basic quantitative variables such as capital, revenue or sales necessary to formulate a business plan can permit small businesses to make an initial evaluation of their economic viability in terms of their Return on Investment (ROI) over the first few years and, therefore, assure their implementation.
Throughout this framework, we repeatedly come across the inevitable conflict of interests and opinions between managers and owners, which leads us to the creation of the model presented below.
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