what does a business plan look like

what does a business plan look like

Creating an Effective Business Plan

1. Introduction

It is essential for success that a business must have a well thought out business plan. The purpose of a business plan is to identify, describe, and analyze a business opportunity and/or a business already underway, examining its technical, economic, and financial feasibility. It has been said that a business plan is a road map or a flight plan. A good business plan is an invaluable tool for any business – it’s a very structured way of analyzing your business and going back to it to make sure you’re on the right track. At the same time, it may also be a credential for raising finance. A business plan is not just a one-time document, but a continuous ongoing process that helps in monitoring the progress of the business. Continuously comparing the actual results with the original plan and making course corrections thereby making the plan an up-to-date guide for the business. A good business plan follows a general format and generally takes about three months to write. The length of the document should not exceed 100 pages with the possibility of attaching spreadsheets with financial information. A good business plan can be very verbose or concise; it all depends on the goal of the plan and the audience. However, regardless of the type of plan, here are a few key things to keep in mind: A business plan is never done, it is considered to be a work in progress. A business plan is not only used as a tool for raising finance but also as a tool to achieve goals. A good business plan is a strong management tool.

2. Executive Summary

The executive summary may be the most important section of a business plan. The Entrepreneur website says that it “has to convince the reader to delve into the other pages of the plan.” It should be written last because it’s the essence of the entire plan and one doesn’t know what the summary is until the other pieces are in place. The primary goal of the summary is to briefly and concisely present a general overview of the business. This is best kept to a one or two paragraph summary. Draw the reader in and make him interested in the business. What would make an investor want to invest or someone want to join the team? This is the time to shine and sell the business without bragging. How can you do it better or be cheaper or have a leg up on the competition? This is when to point out specific strengths and unique selling points. Remember to keep it general but enticing. Finally, the summary can briefly delve into the market, the industry, the management team and the financial highlights. Throughout the entire summary it’s important to keep the language positive and powerful. This must be the reader’s hook.

3. Market Analysis

Earlier in the lesson, the competitive advantage of a company was said to be its ability to have a lower cost or differentiation on its product. However, it is vitally important to convert this to a competitive benefit. Low cost is a relative concept and is often a short-term competitive weapon because the firm providing the product may just be trying to survive in the industry. A low cost producer obviously is benefited by an industry where there is lesser technology in the production life cycle. But such an industry looks less attractive to a company with a long-term perspective. This is because, over time technology will increase leading to lower costs of production for the more high tech company. It would not benefit a firm to enter an industry facing price wars because a firm can often times lower its cost by producing more which will increase the demand for labour. Also a firm with capital to invest can buy up competitors resources and produce a great output thus leading to the f

4. Business Strategy

Business strategy is a detailed plan outlined on how to develop a competitive advantage within your industry. It is a broad plan knowing what the business is going to do with efficient and effective decisions. A good business strategy will integrate the company’s goals, policies, and action sequences (tactics) into a cohesive whole. A poorly defined strategy will result in a confused company with slow growth and lower than desired profits. At any one time, there can be a number of different business strategies at work within industry. These may be position-based strategies where the company looks to gain a leading market share or cost-based strategies where the aim is to offer consumers the best value. Either way, companies that are successful in their attempts will develop a strategy that matches best with their internal situation as well as their environment. By the end of making a business strategy, the firm will have a clear way to follow using the strategy to align company resources to execute the strategy, the market strategy acting to gain a stronger relative market position, and the resulting financial and strategic objectives. A company’s strategy will determine its success in accomplishing the objectives of that strategy. After analyzing many types of firms with different types of strategic objectives, it was found that higher quality execution of the strategy was the single most universal statistically significant indicator of both successful and unsuccessful companies. Strategy execution is a broad issue and a continuing problem for many companies, but aligning the strategy to decision making is a great way to move forward.

5. Financial Projections

The sales forecast is a very important aspect of a business plan. There are various methods to project sales; you could use recent market research data, or extrapolate from your own pre-existing data. Allow for changes in the economy, your competitive environment, and modify your monthly sales over the year accordingly. Prices and unit sales must be estimated and can only be done accurately if the business has conducted thorough market research. Be sure to record your assumptions and logic behind your sales forecast.

Break-even Analysis – The break-even analysis details two different break-even points. The simple break-even is the number of units where total revenue equals total costs. The more complex break-even takes the opportunity cost into account.

The financial section is often viewed as the most important part of a business plan. It is likely to receive a lot of attention and even scrutiny from potential lenders and investors. Use your sales forecast, expense projections, and projected profit and loss statement as the foundation. Be sure to record your assumptions and provide an explanation for anticipated changes in the P&L.