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WORDS TO UNDERSTAND

Business Plan

The Business Plan: What it is

The business plan (or strategic plan) is the document that methodically illustrates the company’s strategic direction, its main operating and financial targets, the actions it will take to achieve those objectives, the new initiatives and investments planned, and their impact on the company’s performance.

Usually once a year, listed companies present to the financial community their business plan for the next three years. The business plan is also one of the fundamental documents that accompany a company’s listing on the stock exchange or extraordinary mergers or significant acquisitions.

The contents of a business plan can be grouped into the following general categories:

  • market analysis: a vision of the external environment and the industry (demand, distribution structure, competition, and suppliers), focusing on the market, its size, its performance over time, and changes in customer needs;
  • strategic guidelines: an illustration of the company’s strategic position, its critical success factors, competitive advantages, and internal and external growth lines (acquisitions of other companies or business units);
  • economic targets: setting of targets in terms of revenues, costs, net income, etc., both at the consolidated level and by business areas;
  • marketing decisions: focusing on geographical areas, business segments, pricing policy, expected volume, and distribution channel choice;
  • company organization: focuses on personnel and the organizational structure, evaluating human resource requirements and the necessary skills, and shaping the final organizational structure;
  • financing decisions: the investment plan with its impact on operations, including details on the costs relating to production capacity, emphasizing the consistency between planned investment and production targets and cost optimization criteria.

Unlike documents that are just as important, such as the financial statements, there are no precise regulations for drafting the business plan, nor a standardized structure. Generally, however, the business plan should include enough information to allow for:

  • a focus on value creation in the framework of a long-term vision;
  • use of this focus as a true and proper guideline for managing the company’s operations;
  • the company’s preparation for its interaction with the financial market.
 
The Business Plan: Main contents
 


Page updated 10 gennaio 2014

 
 
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