Business Plan
A business plan precisely defines your business, identifies your goals, and serves as your firm’s resume. The basic components include a current and proforma balance sheet, an income statement, and a cash flow analysis. It helps you allocate resources properly, handle unforeseen complications, and make good business decisions. Because it provides specific and organized information about your company and how you will repay borrowed money, a good business plan is a crucial part of any loan application. Additionally, it informs sales personnel, suppliers, and others about your operations and goals.
Importance of a Business Plan
The importance of a comprehensive, thoughtful business plan cannot be overemphasized. It is important for:
- outside funding
- credit from suppliers
- management of your operation and finances
- promotion and marketing of your business
- achievement of your business goals and objectives
Despite the critical importance of a business plan, many entrepreneurs drag their feet when it comes to preparing a written document. They argue that their marketplace changes too fast for a business plan to be useful or that they just do not have enough time. But just as a builder won’t begin construction without a blueprint, eager business owners shouldn’t rush into new ventures without a business plan. It is true that the marketplace changes too fast for any long-term business predictions to come true; nevertheless, the first year’s month-by-month predictions are usually 90% true. Thereafter, slowly it becomes calculated guesses, but still planning provides the impetus, energy, and drive necessary for the business to achieve its objectives.
Before You Begin
Before writing your business plan, you need answers to the following core questions:
- What service or product does your business provide and what needs does it fill?
- Who are the potential customers for your product or service and why will they purchase it from you?
- How will you reach your potential customers?
- Where and how will you get the financial resources to start your business?
The clearer are your answers to these questions, the better will be your business plan. Be as detailed as possible. Writing the answers down provides a firm ground on which your business plan may be based.
Tentative Index of a Business Plan
[ Note: The index will change according to the information obtained/to be disclosed. Not all information may be disclosed. For example, if you are not applying for a loan, then the last three year's tax statements of principals need not be disclosed. Much other information can be added or deleted as per the market's demand and supply conditions with respect to your business.]
INDEX
1.0 Executive Summary
1.1 Description of business
1.2 Objectives
1.3 Mission
1.4 Marketing
1.5 Competition
1.6 Operating procedures
1.7 Personnel
1.8 Business insurance
1.9 Keys to success
2.0 Company Summary
2.1 Company Ownership
2.2 Company History (for ongoing companies) or Start-up Plan (for new companies).
2.3 Company Locations and Facilities
3.0 Products and Services
3.1 Product and Service Description
3.2 Competitive Comparison
3.3 Sales Literature
3.4 Sourcing and Fulfillment
3.5 Technology
3.6 Future Products and Services
4.0 Market Analysis Summary
4.1 Market Segmentation
4.2 Target Market Segment Strategy
4.2.1 Market Needs
4.2.2 Market Trends
4.2.3 Market Growth
4.3 Industry Analysis
4.3.1 Industry Participants
4.3.2 Distribution Patterns
4.3.3 Competition and Buying Patterns
4.3.4 Main Competitors
5.0 Strategy and Implementation Summary
5.1 Strategy Pyramids
5.2 Value Proposition
5.3 Competitive Edge
5.4 Marketing Strategy
5.4.1 Positioning Statements
5.4.2 Pricing Strategy
5.4.3 Promotion Strategy
5.4.4 Distribution Patterns
5.4.5 Marketing Programs
5.5 Sales Strategy
5.5.1 Sales Forecast
5.5.2 Sales Programs
5.6 Strategic Alliances
5.7 Milestones
6.0 Web Plan Summary
6.1 Website Marketing Strategy
6.2 Development Requirements
7.0 Management Summary
7.1 Organizational Structure
7.2 Management Team
7.3 Management Team Gaps
7.4 Personnel Plan
8.0 Financial Plan
8.1 Loan applications
8.2 Capital equipment and supply list
8.3 Important Assumptions
8.4 Key Financial Indicators
8.5 Break-even Analysis
8.6 Projected Profit and Loss
8.7 Projected Cash Flow
8.8 Projected Balance Sheet
8.9 Business Ratios
8.10 Long-term Plan
9.0 Supporting Documents
9.1 Tax returns of principals for last three years Personal financial statement (all banks have these forms)
9.2 For franchised businesses, a copy of franchise contract and all supporting documents provided by the franchisor
9.3 Copy of proposed lease or purchase agreement for building space
9.4 Copy of licenses and other legal documents
9.5 Copy of resumes of all principals
9.6 Copies of letters of intent from suppliers, etc.
Conclusion
A good business plan is imperative for any business be it small, medium, or big if it needs to survive in today’s tough business environment. Like a warrior sharpens his sword for 6 hours for a battle of 6 minutes, similarly a businessperson should take several days to prepare his business plan in order to survive for many years.
Business Plan
A business plan is a written summary of your business idea including the product, people, equipment, financing, competition, sales and marketing, cash flow and operations that are required. You will want to prepare a business plan not only for your new venture but also for new products or business models. If you need financing for your venture you will need a Business Plan to present the plan to venture capitalist, investors or your bank. Even if you are self financing the venture you should prepare a business plan as if you were going to present it to your bank. There is no one easier to lie to than yourself and no one easier to fool.
There is no magic formula for a Business Plan although I always found when presenting a plan to a bank the heavier and longer it was the easier it was to get the banks approval. You plan should at a minimum include the following.
A detailed description of the product or line of products or services including target consumer and features and benefits of the product. A statement of qualifications and experience of the person or persons who will lead and manage the venture. A detailed plan of where and how the product will be manufactured or purchased. If it requires manufacturing where will you get the equipment, factory space, raw materials and skilled labor? If you are purchasing the product what are your supply lines? Do you have a purchasing agreement in place? How reliable is the source? Can you get alternate sources if necessary? A marketing plan that details you unique selling propositions, market area, method of reaching your customer such as advertising or online marketing. How will you attract the right sales people? If you are planning on using a marketing firm provide details. If you are out sourcing sales such as to a real estate agent if you are building homes include information on the individual or firm you intend to use. If they provide a marketing plan include that in your business plan. A cash flow plan detailing required cash resources and how long the cash will be required before the venture becomes cash positive. A statement of required resources not listed above such as licenses, permits, insurance, testing and research, office space and associated equipment and furniture. An organizational chart showing a plan for operating the business at inception and as it grows. A list of your key advisors; accountant, attorney, insurance professional Include a break even and profit analysis. How many units or dollars do you need to sell to break even and how many do you need to sell to provide a return to your investors? A bank will want to make sure they are going to get repaid. Investors will expect a return which well exceeds return they could get from safer investments such as saving accounts, money markets or bonds.
Even if you do not need to reach out to investors and a bank and are going to be self financed prepare a business plan and present it to a bank or group of investors who do not have fallen in love with the idea like you have. If you cannot convince them to provide funding then you likely need to reexamine the plan.
Friends and relatives are not a good audience as they will either be too easily swayed by your enthusiasm or afraid to tell you what they really think. I once had a relative who I looked up to all my life. He was buying a franchise when he retired and he showed me the business plan. When I looked at the return on investment and the work required to produce that income I thought “this plan will never work.” Because I had looked up to him so long I kept my opinion to myself. He spent almost ten years working too many hours trying to keep from losing his retirement savings. In the end only the long hours and a lot of resourcefulness helped him recoup his original investment.
Original Content copyright 2010 Thomas Robinson
What is in a Business Plan? The Key Sections
A business plan’s contents are no secret. Many books, articles, and courses describe the major sections of a business plan. Although variations exist, there are key sections common to most outlines in business planning literature.
Executive Summary
An executive summary, generally one page to a few pages at most, covers all of the main points of the business plan to come.
Company Overview or Description
The next section begins with an overview of the current situation of the company. This covers who the founders are and why they started the company, what the products or services offered are or will be, and what steps have been taken toward the launch to date.
Market Analysis
Sections detailing research and analysis done on the market for the business come next. This should begin with an overview of the market or industry, including its size, breakup, and trends it is experiencing going forward. Data on the specific customer segments and competitors for the new business follow.
Marketing Plan
A marketing plan then covers what is generally called the 4 Ps of Marketing: Product (description of the products or services offered), Promotion (the promotional tactics to be used), Pricing (the pricing strategy for the business), and Place (the location for a retail facility or other means of distribution for the product or service).
Operations and Management Plans
The next section or sections detail the plan for how the company will operate and be managed. This must include details on who the managers are and their qualifications, whether they are partners or hired employees.
Financial Plan
The business plan continues with a description of the financial results the business intends to see, and the underlying cost and revenue assumptions. The financial section also details the amount of capital needed, what the funding will be used for, and the sources of funding that are being sought.
Appendices
Finally, a business plan concludes with appendices of documents which support the plan further. The appendices include full pro forma financial statements (income statement, balance sheet, cash flow statement) as well.