The primary value of your business plan will be to create a written outline that evaluates all aspects of the economic viability of your business venture including a description and analysis of your business prospects.Preparing and maintaining a business plan is important for any business regardless of its size or nature. But it will not ensure your success. If you maintain a correct assessment of the changing economics of your business, your plan will provide a useful road map as well as a financing tool. But if you have miscalculated the potential, then your business plan could become a road map leading to failure.
What is a business plan ? A written document describing the nature of the business, the sales and marketing strategy, and the financial background, and containing a projected profit and loss statement A business plan is also a road map that provides directions so a business can plan its future and helps it avoid bumps in the road. The time you spend making your business plan thorough and accurate, and keeping it up-to-date, is an investment that pays big dividends in the long term. Continue to read more after the cut..
Why Prepare A Business Plan?
Your business plan is going to be useful in a number of ways.
First and foremost, it will define and focus your objective using appropriate information and analysis.
You can use it as a selling tool in dealing with important relationships including your lenders, investors and banks.
Your business plan can uncover omissions and/or weaknesses in your planning process.
You can use the plan to solicit opinions and advice from people, including those in your intended field of business, who will freely give you invaluable advice. Too often, entrepreneurs forge ahead ("My Way!") without the benefit of input from experts who could save them from potentially disastrous mistakes. "My Way" is a great song, but in practice can result in unnecessary hardships. To help get started in lining up appointments, you can fill in and use the following template. We have also provided a larger blank template for you to use at the end of this session. People to see include your investors, family members, banker, lawyer, attorney, business mentors, trusted business friends, potential customers, competitors (distant ones), potential landlords, and the U.S. Small Business Administration.
What to Avoid in Your Business Plan
If you had to do it over again, what things would you do differently?
Place some reasonable limits on long-term, future projections. (Long-term means over one year.) Better to stick with short-term objectives and modify the plan as your business progresses. Too often, long-range planning becomes meaningless because the reality of your business can be different from your initial concept.
Avoid optimism. In fact, to offset optimism, be extremely conservative in predicting capital requirements, timelines, sales and profits. Few business plans correctly anticipate how much money and time will be required.
Avoid language or explanations that are difficult to understand. Do not ignore spelling out what your strategies will be in the event of business adversities.
Don't depend entirely on the uniqueness of your business or even a patented invention. Success comes to those who start businesses with great economics and not necessarily great inventions.
Now that you understand the meaning of a business plan and why you need a business plan, it's time to roll up your sleeves and get everything down on paper. The following pages will describe in detail the seven essential sections of a business plan: what you should include, what you shouldn't include, how to work the numbers and additional resources you can turn to for help. With that in mind, jump right in.
Executive Summary:Within the overall outline of the business plan, the executive summary will follow the title page. The summary should tell the reader what you want. This is very important. All too often, what the business owner desires is buried on page eight. Clearly state what you're asking for in the summary.
Business Description:The business description usually begins with a short description of the industry. When describing the industry, discuss the present outlook as well as future possibilities. You should also provide information on all the various markets within the industry, including any new products or developments that will benefit or adversely affect your business.
Market Strategies: Market strategies are the result of a meticulous market analysis. A market analysis forces the entrepreneur to become familiar with all aspects of the market so that the target market can be defined and the company can be positioned in order to garner its share of sales.
Competitive Analysis:The purpose of the competitive analysis is to determine the strengths and weaknesses of the competitors within your market, strategies that will provide you with a distinct advantage, the barriers that can be developed in order to prevent competition from entering your market, and any weaknesses that can be exploited within the product development cycle.
Design & Development Plan: The purpose of the design and development plan section is to provide investors with a description of the product's design, chart its development within the context of production, marketing and the company itself, and create a development budget that will enable the company to reach its goals.
Operations & Management Plan: The operations and management plan is designed to describe just how the business functions on a continuing basis. The operations plan will highlight the logistics of the organization such as the various responsibilities of the management team, the tasks assigned to each division within the company, and capital and expense requirements related to the operations of the business.
Financial Factors: Financial data is always at the back of the business plan, but that doesn't mean it's any less important than up-front material such as the business concept and the management team.
However ,Start-up entrepreneurs often have difficulty writing out business plans. This discipline is going to help you in many ways so don't skip this planning tool! To make it easier, here are eight steps that will produce a worthwhile plan:
- Review the two sample plans furnished in this session.
- Focus and refine your concept based on the data you have compiled.
- Gather all the data you can on the feasibility and the specifics of your business concept.
- Outline the specifics of your business. Using a "what, where, why, how" approach might be useful.
- Include your experience, education and personal information.
- Fill in the templates at the end of each session with clear language and realistic projections.
- Print off the business plan templates from each session into an MS Word document.
- You may wish to enhance your presentation with bar charts, pie charts and graphics.
Furthermore , your business plan must contain the following factors;
A Sound Business Concept: The single most common mistake made by entrepreneurs is not selecting the right business initially. The best way to learn about your prospective business is to work for someone else in that business before beginning your own. There can be a huge gap between your concept of a fine business and reality.
Understanding of Your Market: A good way to test your understanding is to test market your product or service before your start. You think you have a great kite that will capture the imagination of kite fliers throughout the world? Then craft some of them and try selling them first.
A Healthy, Growing and Stable Industry: Remember that some of the great inventions of all time, like airplanes and cars, did not result in economic benefit for many of those who tried to exploit these great advances. For example, the cumulative earnings of all airlines since Wilber Wright flew that first plane are less than zero. Success comes to those who find businesses with great economics and not necessarily great inventions or advances to mankind.
Capable Management: Look for people you like and admire, who have good ethical values, have complementary skills and are smarter than you. Plan to hire people who have the skills that you lack. Define your unique ability and seek out others who turn your weaknesses into strengths.
Able Financial Control: You will learn later the importance of becoming qualified in accounting, computer software and cash flow management. Most entrepreneurs do not come from accounting backgrounds and must go back to school to learn these skills. Would you bet your savings in a game where you don't know how to keep score? People mistakenly do it in business all the time.
Financial Management Skills: Build a qualified team to evaluate the best options for utilizing retained earnings. This information is contained in Session 6 of our Business Expansion course.
A Consistent Business Focus: As a rule, people who specialize in a product or service will do better than people who do not specialize. Focus your efforts on something that you can do so well that you will not be competing solely on the basis of price.
A Mind set to Anticipate Change: Don't commit yourself too early. Your first plan should be written in pencil, not in ink. Keep a fluid mind set and be aggressive in making revisions as warranted by changing circumstances and expanding knowledge.
Include Plans for Conducting Business Online: According to the January 2005 Trend/Forecasting Report of The Dilenschneider Group, in the U.S. alone, the 2004 holiday season online shopping jumped by more than 25% from 2003. (In 2005 it jumped another 25%!) Consumer and business-to-business online sales are set to expand exponentially in the coming decade, and small retailers can reach an ever-increasing pool of customers. Be sure to see the how-to details in the following Session 12, E-commerce.
In conclusion,Here are some ways on how to formulate (and reformulate) your business plan:
- Be flexible early in the process and keep it fluid.
- Don't commit too early. Expect your first plan to be provisional and subject to revision.
- Ask yourself if your experience or expertise gives you the right to an opinion on your specific opportunity.
- Identify your potential deal killers: variables that are likely to prove fatal to the venture.
- Clearly identify what you see as the key drivers of success. What are you betting on here?
- Raise money only in sufficient amount to finance the experiment or evaluation you next envision, with a cushion for contingencies.
- Delay hiring key managers until initial rounds of experimentation have produced a stable business model.
- At some point, take the plunge and test your product or service on a small scare in the real world through customer research, test marketing, or prototypes.
- Test and refine your business model before expanding your operations.
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