A business plan
A business plan is a formal statement of
business goals, reasons they are attainable, and plans for reaching them. It
may also contain background information about the organization or team
attempting to reach those goals. Business plans may target changes in
perception and branding by the customer, client, taxpayer, or larger community.
When the existing business is to assume a major change or when planning a new
venture, a 3 to 5 year business plan is required, since investors will look for
their investment return in that timeframe.
Business plan formatting
Every business plan requires a few basic sections that outline your business, what it does and how it will be run. Here's what to consider when thinking about your plan:
Every business plan requires a few basic sections that outline your business, what it does and how it will be run. Here's what to consider when thinking about your plan:
Executive summary. This is
usually the first section of any business plan. It gives the reader a condensed
overview of what your business is all about and how you intend to accomplish
your goals. Although the executive summary may be the most important part of a
business plan, Ferriolo advised new business owners to write it last.
"Most
people don't write a business plan because they are disciplined but because
they need to get something —either a partner or financing," he said.
"Once you have completed the other segments of the plan, you can write the
executive summary in a way that is focused on reaching that goal."
Company description. Think
of this section as an extended elevator pitch. You want to thoroughly explain the goals of your
business and how you will satisfy the needs of your market. Your company
descriptionalso explains the competitive advantages that you believe will make
your business a success.
Market analysis. This
sectionis where you explain your market research to readers, including your
specific target market and why this market segment would be interested in your
product.
Organization and management. The
organization and management section tells your readers about the structure of
your business and who in the company is responsible for different operations.
Service or product line. This
section includes a description of your product or service and any associated
copyright information or research and development activities.
Marketing and sales. The
marketing and sales section includes information on market penetration and
growth strategies for your business, as well as information about your sales
strategies and activities.
Financial projections. This
section outlines what your business will accomplish financially over the next
three to five years. Potential investors, creditors and business partners may
ask for this so they know they're making a good investment with your business.
Funding request. If you
plan to ask for a loan or other financial assistance, then you'll need to
include a formal funding request as part of your business plan. This section
includes specifics about how much money you need now and how much you'll need
in the future.
Keep
in mind that while the sections listed above are the conventional elements of a
business plan, your plan should reflect the kind of business you wish to start.
Making the most of your plan
If
you are struggling to find the time to complete your plan, it can be tempting
to hire an expert to help. However, Ferriolo cautioned that immediately
outsourcing the task may deprive you of some of the benefit.
"I
honestly think the best course is to try tackling it yourself," Ferriolo
said. "You get familiar with what is needed, and you learn your own
strengths and weaknesses. Then, if you decide you need help, you'll understand
the value of what you're getting."
It
is also critical to avoid the temptation to overstate numbers or expectations
in an effort to help secure financing. While the ploy may fool some,
experienced banks will do their own projections before offering you a loan. If
your plan lacks adequate research or contains purely speculative numbers, it
could hurt, rather than help, your prospects.
Finally,
remember that the business plan should be revisited as your business grows.
"Don't
just make the business plan and use it for funding —really benchmark your
company against it,"Ferriolo said. "Reference the plan monthly and
quarterly, and revise your research and estimates as you proceed. Being
accountable to the vision you set forth will help keep you in line and
successful."
1.
^ Pinson,
Linda. (2004). Anatomy of a Business Plan: A Step-by-Step Guide to Building
a Business and Securing Your Company’s Future (6th Edition). Page 20.
Dearborn Trade: Chicago, USA.
5.
^ Tasmanian government project management knowledge base government project plan Archived June 22,
2009 at the Wayback Machine
6.
^ Boston College, Carroll School of Management, Business Plan
Project The business school advises
students that "To create a robust business plan, teams must take a
comprehensive view of the enterprise and incorporate management-practice
knowledge from every first-semester course." It is increasingly common for
business schools to use business plan projects to provide an opportunity for
students to integrate knowledge learned through their courses.[dead link]
7.
^ a
b
Eric S. Siegel, Brian R. Ford, Jay M. Bornstein (1993), 'The Ernst &
Young Business Plan Guide' (New York: John Wiley and Sons) ISBN 0-471-57826-6
8.
^ Creating
a Business Plan: Expert Solutions to Everyday Challenges. United States:
Harvard Business School. 2007. p. 7. ISBN 1422118851.
9.
^ "Cayenne Consultng LLC Ten Big Questions" (PDF). 'Cayenne Consultng LLC'. Cayenne Consultng LLC.
2015-03-28. Retrieved 2015-03-28.
10. ^ "Pennsylvania Business Plan Competition". Economic Spa.
competition intended to teach economic principles to K-12 students
11. ^ Bernier,
Ph.D., P.Ag., Roger Laurent. Five Criteria For a Successful Business Plan in Biotech. Archived from the original
on January 6, 2012.
A
written document describing all relevant internal and external elements, and
strategies for starting a new venture.
It is an integration of
functional plans; addresses short-term and long-term decision making for the
first three years of operation.
SCOPE AND VALUES
- Who is expected to read the plan
can often affect its actual content and focus.
- In preparing the plan it is
important to consider the:
- Entrepreneur’s perspective.
- Marketing perspective.
- Investor's perspective.
- Depth and detail in the business
plan depend on:
- Size and scope of the proposed new
venture.
- Size of the market.
- Competition.
- Potential growth.
- The business plan is valuable
because it:
- Helps determine the viability of
the venture in a designated market.
- Guides the entrepreneur in
organizing planning activities.
- Serves as an important tool in
obtaining financing.
- This process provides a
self-assessment by the entrepreneur.
- WRITING A BUSNESS
A
business plan should be comprehensive enough to give any potential investor a
complete picture and understanding of the new venture.
It
should help the entrepreneur clarify his or her thinking about the business.
- Introductory Page
- Name and address of the company.
- Name of the entrepreneur(s),
telephone number, fax number, e-mail address, and Web site address.
- Description of the company and
nature of the business.
- Statement of financing needed.
- Statement of confidentiality of
report.
- Executive Summary
- About two to three pages in length summarizing the
complete business plan.
- Environmental and Industry Analysis
- The environmental analysis
assesses external uncontrollable variables that may impact the business
plan.
- Examples: Economy, culture, technology,
legal concerns, etc.
- The industry analysis involves
reviewing industry trends and competitive strategies.
Examples: Industry
demand, competition
- Operations Plan
- All businesses (manufacturing or
nonmanufacturing) should include an operations plan as part of the
business plan.
- It goes beyond the manufacturing
process.
- Describes the flow of goods and
services from production to the customer.
- The major distinction between
services and manufactured goods is services involve intangible
performances.
- Marketing Plan
- It describes market conditions and
strategy related to how the product/service will be distributed, priced,
and promoted.
- Marketing research evidence to
support any of the marketing decision strategies as well as for
forecasting sales should be described in this section.
- Potential investors regard the
marketing plan as critical to the success of the new Organizational Plan
- It describes the form of ownership
and lines of authority and responsibility of members of new venture.
- In case of a partnership, the
terms of the partnership should be included.
- In case of a corporation, the
following should be included:
- Shares of stock authorized and
share options.
- Names, addresses, and resumes of
directors and officers.
- Organization chart.
- venture.
- Assessment of Risk
- Identifies potential hazards and
alternative strategies to meet goals and objectives.
- The entrepreneur should indicate:
- Potential risks to the new
venture.
- Impact of the risks.
- Strategy to prevent, minimize, or
respond to the risk.
- Major risks could result from:
- Competitor’s reaction.
- Weaknesses in marketing/
production/ management team.
- New advances in technology.
- Financial Plan
- It contains projections of key
financial data that determine economic feasibility and necessary
financial investment commitment.
- It should contain:
- Summarized forecasted sales and
appropriate expenses for at least the first three years.
- Cash flow figures for three
years.
- Projected balance sheet.
- Appendix
- It contains any backup material
that is not necessary in the text of the document.
- It may include:
- Letters from customers,
distributors, or subcontractors.
- Secondary data or primary
research data used to support plan decisions.
- Leases, contracts, or other types
of agreements.
Price lists from
suppliers and competitors
WHY SOME GOALS FAIL.
- Goals are unreasonable.
- Objectives are not measurable.
- Entrepreneur has not made a total
commitment to the business or to the family.
- Lack of experience in the planned
business.
- No sense of potential threats or
weaknesses to the business.
- No customer need was established
for the proposed product or service.
Executive Summary
The purpose of an executive
summary is to provide a quick and concise overview of the business (in one or
two pages).
This is where you sell
your self, and your idea!
Although this section appears
first, it should be written last.
The summary should highlight
key elements of the entire Business Concept (who, what, where, when, how),
including:
Objectives
of the business (Mission Statement)
Your
products or services, with emphasis on unique selling proposition
Who
will buy your product and why and how you are going to market to them
Your
estimate of market potential and assessment of the competition
Cash
Flow Projections & Profit Margins
How
much money is needed, how many dollars you are bringing to the business, what
will be done with it and how/when it will be paid back
Organization Overview
Background:
Business
name and location (if purchasing an existing business, how long it has operated
Business
number (registration)
GST,
PST, payroll registrations
Regulations
and licenses
Municipal
zoning considerations
Proposed
legal structure (sole proprietorship, partnership, corporation)
Insurance
coverage
Record
keeping plans
Owners
skills/experience and personal qualifications for managing this business
Family
cooperation/ support (if pertinent)
Advisors
Huron Small Business Enterprise
Centre (519) 527-0305 Page 3
Your Product/ Service:
This section should cover items
such as:
A
detailed explanation of your service/product, paying attention to the time
factor involved in delivering the service/ creating the product
Details
of your niche advantage
Suppliers
and terms
Pricing
policies and terms of sale
Customer
service considerations; features, benefits and competitive advantages of your
product
Inventory
and Production processes (if relevant)
Marketing Plan:
Market research is the most
important part of any Business Concept/plan since it determines not only
potential demand and the target market but also expected sales levels, future
opportunities in the market, how many employees will be needed, etc. In
essence, the marketing plan is the foundation of a good Business Concept.
This section should demonstrate
that you understand how your market should be segmented, and that you have the
ability to sell and deliver your product or service effectively to the right
targets. This is the place to show why customers will buy from your company.
The following outlines some of
the things that should be included:
Proof of Demand:
Identify
the industry and describe trends and the outlook for the market. By
investigating past trends, it is often possible to anticipate future
opportunities in the market.
Pick
at least three reasons you feel there is demand for your service/product
and then locate statistics, articles, and other supporting documentation for
your reason
Focus
on your niche advantage and why you feel that will generate demand
Evaluation
of a market survey, if completed
Target Market:
Identify
your target market(s). It is important to segment and target the market
properly – something that new companies frequently overlook. Concentrating your
resources on the needs of a specific segment and carving out a niche may mean
the difference between success and failure.
Competition:
Investigate
the competition, who they are and what are their strengths and weaknesses. If
you fully understand your own strengths and weaknesses you can turn them into
opportunities.
Huron Small Business Enterprise
Centre (519) 527-0305 Page 4
Sales Plan:
Discuss
how and where you plan to sell and distribute your product or service.
What
is your strategy for sales?
How
many sales calls will it take to get an order, and how large will an average
order be?
Advertising and Promotions:
Discuss
how you will generate awareness of your product or service among potential
customers. Which promotional activities you will use… public relations, trade
shows, sales incentives, promotional literature, media, etc.
Will
these expenses be a large percentage of total expenses? If so, explain how much
they will be and when they are likely to be incurred.
Financial Plan
You will need to include any
previous financial statements (if applicable) as well as detailed projections
for the first year. If you are requesting considerable funding, you will likely
be asked to provide financial projections for two or three years.
List
all start-up costs, with estimates of any major items
Cash
flow projections by month for the next 24 months
Summarize/identify
all assumptions in your revenues and expenses
Break-even
analysis
Owner’s
personal equity statement
Consider using a computer
application to help you with projections based on your assumptions. Your
projections should be tied to your market expectations. It is important to
state clearly the assumptions you used when preparing the projections. Your
financial analysis should identify and support the amount of money you are
seeking from potential investors or financial institutions. Preparing financial
projections requires accounting and finance knowledge. If none of your team
members are qualified in this area, get outside help.
Money needed:
This section of your Business
Concept should indicate the amount of money you will need, when you will need
it, how it will be used and how repaid. Respond to questions like:
How
much money do you need?
How
much will you need over the next three to five years, and when?
How
will you use the initial funds?
If financing
is needed in order for you to start your business, the financing must be
finalized and approved after your Business Concept receives MTCU approval, you
have signed the SEB Agreement with MTCU, and your Business Plan is completed.
Appendix
Include exhibits to provide
additional details that help tell your story. For example
Resumes
and references
Photographs
or sketches of your product/service and site
Market
studies and research
Published
data and articles relating to your market research
Sample
promotional materials
Relevant
examples/drafts of contracts and agreements (eg. Partnership agreements,
leases, etc.)
Other Considerations:
Organization of Concept:
Organize your Business Concept
so it is easy for readers to find specific sections. Many readers will read only
selected section according to their needs for specific information. Your
Business Concept should have a table of contents. Also consider using tabs to
identify major sections.
Objective Overview:
After you have completed your
Business Concept, have others review it and provide feedback/comments.
Confidentiality:
Your Business Concept will
contain sensitive and confidential information. Therefore, you should carefully
control its distribution. Indicate on the cover page, and in the footer, that
it is confidential. A sample statement can be put on the cover page, such as:
The
following Business Concept contains information of a highly confidential
nature. Any disclosure of the contents of this Business Concept or other
information provided, without the express written permission of the company, is
prohibited.
Revised.
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