business plan experts

business plan experts

The Art and Science of Developing a Successful Business Plan

1. Introduction to Business Planning

A business plan is an essential tool for company formation and growth. It provides actionable items for all aspects of business, including planning for marketing, sales, and product launching, for managing cash flow, and for increasing the return on investment for investors. Though many investors will be less interested in the content of the business plan than in a company’s current cash flow potential, key investors, such as venture capitalists or other investment organizations, may expect a highly detailed business plan as part of the due diligence process. The business plan demonstrates to venture capitalists and private investors that an entrepreneur can take the vision and idea of the company and turn it into a profitable venture.

The business plan can also be an extremely valuable tool for another reason, which is evaluating the actions of the entrepreneur and the management team, especially when financial projections are updated and tracked over time. The business plan, by flagging important milestones and acting as an ongoing compass, holds the management team accountable for planned growth, so the business plan is used for more than just obtaining capital. The business plan’s purpose is to communicate the nature of the business and to prove that success can be achieved based on a tangible product or service, a realistic market opportunity, and sufficient marketing and sales resources to generate rapid growth in order to achieve financial viability.

2. Key Components of a Comprehensive Business Plan

Business plans vary in length from five to over 100 pages, but typically they all contain the same sections. A comprehensive business plan will include a one- to two-paragraph executive summary; a description of the business; general company information; marketing and customer information; an evaluation of competitors; a marketing plan; a description of the development or procurement and delivery process; a profile of key personnel; the company’s organization structure; a discussion of financial risk and present and projected financial performance; and relevant attachments.

Executive Summary. This section is required, as it often is the most critical for obtaining funding. It should be a brief description of the key elements of the business and therefore should be completed last. Provide an overview of the business, the market and competition, and basic financial information, then keep refining the document so that only the most important aspects remain.

Business Description. Describe the business in this section, and also some of the concept’s unique characteristics and motivations for wanting to pursue it. The business description should include background information and a detailed history of the business, the business or product markets, the type of customers served, and the main production and delivery methods. The description should also include the goals of the business and address how success will be measured. Also, you need to be succinct. The business plan for a bank or other lender should provide little if any new information. What counts is the quality of the information and the quality of the writing. Be direct, clear, and reader-friendly. Summarize often, using headings and other devices to direct the reader’s attention and generate interest. Limit jargon and technical terms, and direct the plan toward the interests of the readers.

3. Market Research and Analysis

Market research should be a combination of both statistical analysis and common sense. Do not forget to use a little intuition in determining what the data truly might mean. Your ability to do well in business may depend on how well you can read between the lines when evaluating your market. In analyzing potential markets, consider projections for future conditions and determine an expected market growth rate. The more specific you can be with your market definition, the better you know your market. It also helps to know what your market does not include. You must be able to distinguish exactly who are your customers, and whether they will still exist in six months or one year. This market analysis should be purchased at a market research company and should not be obtained from a library. Data growth figures and specific business characteristics are confidential and can be guaranteed to be comparative when you buy from market research companies.

Having gathered the necessary information, the next step is to be able to read your data. Most statistical work is most valuable in offering comparisons. You need to know how many companies are in your business, as a comparison to the number of companies operating. You are attempting to determine your market potential. Your growth will be directly related to the growth of your market, and so you must be able to demonstrate the growth of your industry in your business plan. A common error is to write “there are 20 million people in the United States, of which 10 million would like our product. We estimate we can sell to 5% of those people within the first year, which represents 10 times the electronic computer industry’s growth for the same period.”

4. Financial Projections and Budgeting

At this stage, it is time to project the financial performance of your business. There are many complex ways of projecting costs, sales, and returns, but we will focus on methods that are both easy to use and practical. Begin by creating a sales projection for the first year of business that is month by month, or week by week, as the case may be. To do this, begin with your projected sales prices for products and your projected sales volume. Then, multiply price by volume to obtain a total sales figure. For example, if honey is sold at $3.50 per pint and your forecast is 60 pints per market day, your first week’s sales at each market will be $210. The sum of these total sales numbers is your weekly sales volume.

The process used for profit planning can be equally useful for larger companies, with minor adjustments in scale factors. Although profit planning can be done on a monthly or yearly basis, once set up it is very easily utilized on a weekly or daily basis. It can avoid major mistakes and bad decisions that can result from poor budget preparation. When carefully developed and properly used, a profit plan provides can set up a very powerful economic steering mechanism that can actually avoid and correct those shortcomings. It is amazing how this proactive year-round economic system can eliminate many of the pitfalls of traditional budgeting and performance evaluation and permit timely control and correction of on-going business factors to reduce risk.

5. Effective Presentation and Communication Strategies

1. With the exception of the government and a few large corporations, probably no one likes to read business plans. Your business plan can be more than an internal planning document. Many entrepreneurs use their writing as an opportunity to develop writing and presentation skills for a broader audience. This can involve distribution of the business plan as a mentor, present seminars, meetings with bankers and venture capitalists. In these and other presentations, one of the first impressions a reader has usually begins with the appearance of the report. So it is important in the initial development and use of good visual presentation skills such as how to structure information, use of colour, design and graphics.

2. The business community has become more sensitized to the ethical aspects of the formal reporting process. The concept of corporate governance is one of the relatively new design of entrepreneurship and business courses in the country. Business ethics are an important aspect of any business curriculum. Consequently, ethical considerations have long been associated with any formal business-related activity. Information gathering and evaluation are general prerequisites for any situation where a decision must be made. The ethical evaluation of the decision-making process is another important consideration. If personal actions are based on false or misleading information earnings estimates are examples of earnings management – then the possibility of adverse consequences is present. The improper reporting of critical business information can contribute greatly to the loss of public confidence in commerce and industry, not to mention the fact that knowingly distorting the financial outlook of a new business is illegal.