Final answer:
While a business plan is crucial for presenting a company's strategy to suppliers and partners, systematically organizing founders' thoughts, and giving investors a basis for assessment, it cannot assure lenders and investors of a decent return due to inherent business risks.
Step-by-step explanation:
A business plan is important for various reasons, but not all options presented are correct regarding its importance. We'll evaluate each of the given choices:
- A. A business plan is a selling document that enables a company to present itself to potential suppliers and business partners. This is true as it outlines the business model, products, market strategy, and more, which are all critical factors for building relationships with suppliers and partners.
- B. A business plan forces a firm's founders to systematically think through each aspect of their new venture. Absolutely, as it helps in planning and addressing potential challenges in advance.
- C. A business plan provides an investor with something to react to. Indeed, it forms the basis of discussions and evaluations by investors.
- D. A business plan provides lenders and investors assurance that they will earn a decent return. This is incorrect, because while a business plan can show potential for profit, it cannot assure or guarantee returns due to the inherent risks involved in any business venture, particularly in the case of startups.
As firms grow and become more established, the business plan's role evolves, and the reliance on personal knowledge of the managers decreases because financial performance information becomes more readily available to investors such as bondholders and shareholders.