the business plan

the business plan

How to Write a Business Plan

1. Introduction

No business should be launched without a business plan! A lottery is not a viable start-up strategy and takes a minimal investment of $14 and can really define the preliminary stages getting into the legalities and complexities of forming a real business. Creating a plan will save you time and potential frustration, while enabling you to forecast and handle current and future hurdles. A business plan gives you direction, helps you qualify your ideas, and defines the path you intend to take your business. This includes all the various phases of your business from the initial set-up to expansion and diversification.

A common misconception is that a business plan is only necessary for funding. Contrary to this belief, the business plan is not only a tool for investors. There are several valuable reasons for creating a business plan. These include: (1) To test the feasibility of a business idea (2) To give an overall view of a business (3) To better understand your market (4) To create a budget and forecast (5) To monitor and grow your business

Creating a business plan is a key part of starting your own business. This section will provide an introduction to what a business plan is and the reasons why it is essential. Note that while the entire guide is designed to be useful no matter what type of business you are planning to start, this section is specifically for starting a new business.

2. Executive Summary

The executive summary of the business plan should state the purpose of the business, the problem the business solves, the target market, the solution, and financial projections. This summary should communicate to any potential investors the strength of the new or continuing business venture and will need to be clear and concise. The key elements include stating the mission or purpose of your company, the issue at hand or what creates the need for your business, an overview of what your business does, and finally a projection for the future. The first part of the executive summary should be a capabilities statement. This should succinctly state what your company is capable of doing currently. This is important so that there is a basis for comparison when the financial projections are addressed in the mission statement. This will make the credibility of the financial projections more apparent. If your business does not have a lot of capabilities at this point, that is fine. Try to make a list of things you hope to accomplish that will create a basis for the financials in the next few years and use that as a sort of mission statement. This will make clear the intended cause and effect relationship of the things your company does and the money it will make. Remember that a capabilities statement will be followed by a similar capabilities section in the mission, so make sure not to repeat and just give a general sense of what the company is currently doing and the desired future it is working towards.

3. Market Analysis

Market Trends Anything that provides market intelligence about the direction in which a market is moving falls under this category. The aim is to show that you know where the market is (or where it is going) and how your product/service fits into it. Think about what has happened to those involved in the recent past and how you think this is going to affect what they do and how they do it in the near future. These are the reasons why people buy or not buy a product/service and, as you will identify and detail in a later section, are critical to your marketing message. This can be very specific market information like sales figures for a certain industry or broader information such as legislative changes which end up affecting an entire market. Always translate this event or series of events into how you think it will affect what customers do and why they will buy your product.

Market Needs This section is very important as it is where you show your potential investor that you have an in-depth knowledge of your market. You need to know who your customer is and how you are going to reach your target. Discuss and address their needs, whether your product is a necessity or a luxury. What are the growth trends in your market and how can you take advantage of this? You need to persuade the reader that your product/service is necessary for this particular market and that it has been growing steadily year on year.

4. Business Strategy

All of these should always be developed with a considerate amount of customer participation to solve their needs and satisfaction and a constant improvement and innovative drive to respond and create market changes.

g) Finally, a sense of scope in terms of the activities the organization will undertake and the markets it will serve. This will often be highlighted in an SLEPT analysis.

f) The type of strategy, for example, a cost leadership or a differentiation strategy, and the things which give the organization a sustainable competitive advantage.

e) The objectives or the results which are expected to be achieved and are stated in financial and non-financial terms.

d) The internal environment of the organization and the resources, capabilities, and competencies.

c) The external environment in which the organization is aiming to be successful and a clear analysis of this environment.

b) The vision of the business venture and the goals which it plans to achieve in the future.

a) The mission statement which outlines what the business is all about i.e. what it does, how it does it, and why it does it.

The business strategy should be a clear and concise statement of the business direction and the things that should be achieved from the activity which is being undertaken. The elements of a well-formulated business strategy which are most commonly covered in a business plan are:

5. Financial Projections

Start by projecting sales. This is useful in itself as it forces you to understand the dynamics of selling your product. This involves defining the market size and the sales your company can achieve. From this, you can figure out how many units of your product you can sell, and from this, you can derive your sales revenue. For a young company, a product is usually a work in progress. If you are producing something new, say how much you think a consumer will be willing to pay for it or a similar existing product. If you have no idea what the consumer would pay (probably the case for software companies), figure out how much it costs you to make the product and use cost-plus pricing. Always have a best and worst-case scenario, the reality will probably be somewhere in between. As you get more into actual accounting person by person projects can be made with Revenue/Unit = Total Salary/Cost of Employing that person. But for now, just stick to projecting total sales revenue.

Think of it as budgeting on steroids. This is where you get to put into writing how much money you think your company will make and how much it will spend. Creating these projections is really a very scientific process, you will need to know the revenue drivers and the expense drivers to really be able to produce accurate projections.