parts of a business plan

parts of a business plan

Essential Elements of a Business Plan

1. Executive Summary

Begin your summary with a quick introduction to your company that goes into finer detail than your company pitch. Considering the fact that there’s an increasing number of competition for a decreasing amount of resources, time-starved decision makers increasingly are deciding they won’t involve themselves in a venture unless they understand what it’s about in three minutes or less. Follow this with a concise mission statement. A mission statement basically defines the purpose of your organization. It may be as short as a few sentences, but it can be like a rule of thumb that you’re always returning to. A good mission statement will ideally allow you at all times to measure if you’re achieving objectives or continually get side-tracked.

Your goal in this chapter is to create a knowledgeable, enthusiastic assessment of your company’s prospects and give a detailed rationalization for why you expect your enterprise to succeed. Importantly, this must be a separate summary from the final one you write, which might be essentially what you present to potential investors. This initial summary can and should be very comprehensive to ensure you have done all of your homework and have all the important information available in one location.

2. Company Description

Our marketing division will be a small start-up office based out of the head office of the company. We will have several employees working either on a contract or freelance basis and will eventually push to have everyone working in one location. This way we can assure quality work and project cohesiveness. Our office will be located in LA. The reason for having the office based out of the head office is because we are trying to leverage our already existing resources to gain a sustainable competitive advantage. We currently have all the computers, software, and resources that we need, as well as ample office space that will not cost us any more than we are already paying. We have already obtained permission from the owner of our company (a close family friend) to use the space and took all the equipment we needed. We will however over time need to purchase our own office supplies and computer equipment. At this point and time our only real fixed expense will be the salary paid to the employees of our division. These salaries will vary depending on the skill set and experience of the employee. All employees will receive a pay per project and the opportunity to make more money if the project is done quickly and under budget. All employees working out of the LA Office will be required to have frequent meetings and check-ins and will be partaking in team-based complex interdependent work. The reason for using contract workers in different locations is to gain the absolute best talent that we can afford. But all employees under contract will act as freelance workers largely responsible for their own taxes, etc.

3. Market Analysis

3.1 Target Market A target market is the group of customers on whom an organisation focuses its marketing efforts and it is the group on which the business will centre its attention. Identifying the target market is essential as the marketing mix can only be “set” after the consumers wants and needs are identified. The only way to do this is through market research on the existing and potential customers. This customer analysis, whether it is for a service or product, carries the same basic objective: to discover a customer need. Business can only be successful by satisfying customers that have unmet needs, it is the only way to build customer value and the long-term customer engagement. For example, an unmet customer need for the clients at a mobile car wash service was convenience. Recommendations by the students on UP Marketing suggested an expansion of the service to car washing at the clients’ place of work. This would satisfy the customer needs of less time consumption and convenience.

Perhaps the most important factor for any entrepreneur to consider is that a business opportunity exists. A market opportunity is a dynamic, temporal situation; it is a gap in the market that the entrepreneur can use to gain an advantage over the competition. Often, market opportunities are only obvious to people who are or will be in a position to take advantage of them. Entrepreneurs who present the best business plans take the time to articulate the results of their analyses, which can take many forms. The true entrepreneur is a doer, not a dreamer. The market analysis is one of the key elements of the business plan. It will identify the target market, the external environment (PEST analysis), and the competition. This information will be used to generate a marketing strategy, which is the final element of the 5 P’s: the product and later price, place, promotion, and people.

4. Organization and Management

1. Identify any skills gaps in your organisation. 2. Identify any particular skills that show to be a crucial factor in the success of your business. 3. Give consideration to how your workforce will balance work and personal life. 4. Will you use remote workers? If your business is solely internet-based or will require the use of information technology, this could be a great choice on your part to keep overheads low and maintain a cost-efficient business. IT staff can have the luxury of working from home, and often remote staff will agree to lower wages just to save the hassle of commuting.

An introduction to this plan should include: An outline of the organisational structure, goals, and how it can be achieved. A clear definition of the legal structure of the business. Whether it is a sole trader, partnership, or a ltd company. A definition of the service that is the basis of the business.

5. Financial Projections

Revenue inflow can be seen simply by determining the point before the promotional event where customers will know about the event, and subtracting the net cost of the event from the excess revenue that occurs on this date and beyond. Until that time, the net effect is actually a cost. We will have a budget of $3 per t-shirt and $10 per skateboard for promotional events. Stepwise, these events should occur about every 1-2 months. It would be very profitable if we sell approximately 500,000 t-shirts and 200,000 skateboards. This sounds like a lot, but these numbers are relatively small compared to the amount of product that is being graphed. The net effect of the promotions should garner extra sales of about $1 per t-shirt and $4 per skateboard. With the cost of the product factored in, each event should be near the break-even point. This will yield a total of -$500,000 before the event and $300,000 after each product’s respective promotion. With 300,000 t-shirts and 200,000 skateboards, we have events occurring twice a year. This will likely continue until the point of these free items coinciding with an increase in sales of video or DVD. Then it will become most profitable to increase event frequency.

Indirect sales will largely be derived from company t-shirts and skateboards. These are promotional items which will be given away free with the purchase of a certain amount of product or some sort of timed promotional event. The cost of these promotions is later added to the promotional expenses. These products will likely have a cost of $2 per t-shirt and $5 per skateboard to purchase, which includes the cost of having them printed with our company logo. The promotional events for these items will have a predetermined break-even sales point. The promotional tool to supplement information on these events will be a free video which all cinemas will be able to view. This promotional clip will be put on a CD and given away with the purchase of a video or DVD.

Direct sales will be primarily produced by the website. We expect that an average customer will purchase $30 of merchandise each time they visit the website. There will not be a comparable cost of merchandise for the customer to purchase in a traditional market setting since the merchandise will be informational. So to project this, we need to estimate how many people will visit the website each week. Our surveys show that an urban web surfer has a 65% chance of a cyber visit to a virtual community. So to take it a step further, we made a precise definition of what urban is to our target market. In a period of 6 months, we statistically estimated that this group of people visits the local mall an average of 4 times a month. This translates to 3% of available weekends and holidays. If we calculate a 3% rate of 4 weekends in 6 months, that is about 7 visits. Also, we expect some customers who do not live in these communities to find our site through various advertising methods. This will give us a total of about 10 million local customers. Multiplying 10,000,000 people by 3% and then 65%, we will find that our core customers will likely be 2,347,500 people. This is a rough estimate. It can be adjusted depending on the actual site traffic.

You must estimate and breakdown your anticipated direct and indirect sales.

1. Sales

A. Projected income statement