Business plan basics

1.Business plan basics

A business plan defines the structure of the company and the object of the business activity. It contains a market analysis and details of strategic marketing, management structure, personnel and finance. A business plan plays an essential role in business administration. When properly conceived, it acts as a valuable tool.

What is a business plan? 

A business plan synthesizes all the essential aspects and information about a company, whether it is being developed or already in operation. The business plan is a substantial, detailed document containing the principal data about the structure of the company. This includes the object of activity, a market analysis, the specific approach to strategic marketing of the company, management structure and personnel and all relevant financial information.

Why Is It Essential to Have a Business Plan?

Simply because it makes all the difference between organized activity and chaos. It opposes a randomized course of events to an estimated, pre-evaluated one, offering the premises of a success-oriented business by reducing unexpected, unwanted occurrence. Building a business plan can be rather demanding. It makes an exhaustive, detailed analysis of the activity of the firm. The result must be a blueprint of the company. It combines a strategic vision of the company with the data that will turn the business plan into a performance-enhancing tool by means of planning, measuring and improving. Starting a business will necessarily require planning. There is, of course, a huge difference between the appearance of things and the production of real plans on paper. By following a pattern of questions to be answered, issues are never considered before they arise. Creating a business plan is a test for both the business and the entrepreneur. Without a plan, there are some aspects to be perfected before the business can be started. There may even be a major problem which will indicate that the business will not function. For already existing businesses, the necessity of a business plan may appear at various stages: when applying for a loan, for example, or at a difficult moment when readjustment of some parameters is necessary, or when you have to rethink essential business directions.

Prerequisites in Formulating the Plan

Self-assessment, business type, products, marketing analysis components, setting a target customer and establishing the best way to reach him or her, ways of promoting your product, budget analysis, personnel and management team questions, and solutions for unfavourable situations, considering everything predictable and back-planning everything unpredictable. After formulating your plan the implementation phasefollows. There is a simple rule: the healthiest is not to deviate too much from the established plan as you might risk losing track and encountering problems you did not even envisage. Also, once the business plan is implemented, one should always keep an open mind, and show flexibility to adjustments on the way.

2.Executive summary.

When preparing business plans, the executive summary requires particularly close attention. The executive summary, which is of crucial importance, should present the entire business plan in no more than two pages at the beginning of the plan.

Investors - Capture their attention!

• A business plan should put the best possible face on your company or business, whether it is projected or already in existence.
• Most potential investors are far too busy to read endless reports or plans. To obtain a first impression, they first look at the summary. Perhaps they might even just glance at the finances. Only after the summary has caught their interest will they decide to devote some time to reading the whole plan. Aim to capture their attention in a punchy summary.

You have to communicate the essentials of your plan to the potential investor. Do not confuse investors with too much sophistication or scholarship. Follow the KISS principle. Keep it simple, stupid. Make the plan as digestible and realistic as you can.

The Executive Summary Format

While there are no strict guidleines, here are the main topics to be covered:

• a brief description of the business or company — providing a mission statement and objectives
• a description of the product and its competitiveness
• a short presentation of the team of people behind the business
• an estimate of market size
• the key measures for success
• an emphasis on the financial upside
• formulation of the request for investment

Convince readers of the market need for the particular product or service that you are offering. State what you are going to do better and how you will solve the problems of the existing market. To assist readability, insert a table of contents immediately after the summary. Make it easy to locate the specific sections in your business plan with an Executive Summary.

3.Company description.

Without too much superfluous detail, the company description section of the business plan should clearly define the basics of your company or business. This part of the business plan describes the company thoroughly, already established or about to be, and the basic business concept.

What to include in the Company Description

When you write a company description, you should cover the following:

• Company name
• Form of organization. (Sole Proprietor, Partnership, etc.)
• Ownership — full name of the owner/owners
• Location, offices headquarters, branches. Explain the benefits of the location
• Definition of the business. The products or services will be outlined without too much detail. A more thorough description will appear in the chapter on products. It will also describe the reasons for and advantages of the choice of product or service.
• History of the company. If the business is new, give a short historical sketch of the idea behind the foundation of the company. For an already established business, explain its origin, and the development of the product or service over time. Include some historical data on sales and profits. After giving the historical background, outline the current status of your business. State the business history and purpose of the company clearly.
• Company goals — plans to be accomplished over coming years (up to five years in advance), and how these are going to relate to the investment you are seeking. Keep the the goals realistic and credible.
• Future plans for the growth and expansion of the company. Will you keep the business smal? Do you plan to expand extensively? Link this to the projected investment. Once again, be moderate and keep things simple and believable.

Write the section in a clear and organized manner.

4.Management team.

A good presentation of your management team in the business plan may play a decisive role in loan granting.

If you present a strong management team successfully, you may bolster your business plan, by showing that you can apply your good ideas and theory in the practical world. You will achieve a presentation of this kind by stressing those management skills at your disposal which have the greatest focus on your business and activities.

Three key elements in the presentation of your management team.

• The management-team summary surveys the principal roles of each team member. It may also refer to your future plans, for example, projected hirings.
• The organizational structure specifies the hierarchy and outlines responsibilities and decision-making powers.This is also an opportunity to provide a mission statement and describe the working environment you are aiming for.
• In the management team-section you set out the skills and track record of the company managers. You may also offer details about key employees, pointing out qualifications, experience or outstanding skills, those qualities which will add a competitive edge to the image of the business.A paragraph enumerating the business expertise of your staff would be absolutely appropriate. This might include special knowledge of budget control, personnel management, public relations and strategic planning.Reveal plans for future training courses or any other measures to improve your the skills of your personnel skills. Make it clear that you plan to offer them the opportunity to acquire new information and knowledge, that they will be able to develop their value on the market.
• In the personnel plan describe your personnel structure and long-term plans for staff, as well as the financial aspects they involve. Specify payroll costs, as well as other possible future costs.

5.Marketing Plan - Market Analysis Components

Marketing Plan - The market analysis, with its component parts, locates your business within existing and future markets. Your plan must demonstrate intimate knowledge of the targeted industry and evaluate the competition. This section of your business plan presents a market-research survey, locating your business in the market environment. It also determines whether the market is sufficient to support the business. It analyzes the following aspects:

Market characteristics and market segmentation

• Briefly describe here the market you are in or the market you are planning to enter: product coverage area, environment, additional product area if necessary and potential customers.Analyze the market also from a chronological perspective:
• Provide a historical market survey of the products and producers;
• Analyze the current status of the market — needs and trends;
• Forecast market growth.
• Define the prospective segments of your market: fields of interest, reasons for the interest caused by your products or services in particular market segments.

Market analysis and its component parts

• Participants in this industry — seek out the principal representatives in the market of your industry.
• Distribution patterns — analysis of the principal means of distribution of the specific products or services to the customer.
• Competition and buying patterns Identify the main competitors (direct and indirect) and the principal factors which determine purchasing choices of the product or service. Here you should analyze your specific target market needs and the means of coverage, identify unexplored or poorly exploited market niches and your opportunities on these territories. Analyze the strengths and weaknesses of the offers of your competitors by comparing their offers to yours.

In this section you must answer these questions:

• Will your sales reach break-even point?
• Is the market large enough?
• Are your products or services competitive enough to break into the market?

6.Business Plan: Product or Service

This section of the business plan will describe in a non-technical manner the characteristics of your products or services, stressing upon their competitive qualities.

This section describes what your product or service consists of. It should contain detailed descriptions of products and/or services.

Make the presentation explicative, as if addressing a reader who is not familiar with the offered products/services.

Product description: should cover size, shape, color, design, capabilities. Representative pictures might be helpful in retaining the reader’s attention. Also add a brief description of the production technology (needed materials, type of labor) and some things on patent protection.

Services: explain the services — what they are, what needs they address, the operations area, needed materials or equipment, operations program(scheduling — days, hours), steps in the service process, benefits for clients.

A competitive comparison of your products should be performed here, showing your key advantages towards your competition.

For both producers and services providers, the sourcing analysis should be represented here. It shows that you have considered and analyzed the necessary means to fulfill your objectives, that is the products/services you offer. Elements to be analyzed: standard costs, materials, manufacturing operations (purchased services if required) from the strengths and weaknesses perspective.

A presentation of the technology you use in order to produce/maintain/develop your products/services will speak about your ability to put to good use facilicities offered by modern science and about your openness to new.

You may also want to present future products or services future planning. It implies describing a product strategy, how you see the relationship between market needs and product development. This topic would mostly appeal to possible investors, who look for the business’ perspective than to bankers who would not be interested in ideas of future products but in more concrete things.

The business plan writer should treat this subject from the perspective of the customer’s needs and the potential of your product of benefit offers. This chapter is decisive for the wholistic impression of the reader — whether the business/company has anything interesting to offer, something that will sell, something that will retain attention and seem attractive.

The section must be informative enough, offering an easily understandable image without boring details. Emphasis should be placed on the difference your products or services make on the market.

7.Business plan evaluation.

How does an investor or banker accomplish a business plan evaluation? When a business plan has been drawn up, evaluation is critical. The business plan evaluation phase it's best to be concentrated on the value of the plan and whether it has the results forecasted. The business plan will be the subject of intensive scrutiny by the banker or the investor. Before this happens, thorough proofreading is essential. First evaluate the plan yourself, to eliminate any possible weak points or flaws. In this process, look at the plan from a different perspective, as an outsider, as one of the readers targeted. The business plan evaluation is strictly linked to the the type of reader. In his or her eyes, which aspect of the plan plays the crucial role?  To put it plainly:

• If it is the investor, he will be interested in long-term profit he can make from investing. In other words, he will look closely at the viability and growth possibilities of your project. Equally, he will want to identify potential exit routes at the time of investment. He will therefore focus on management information, marketing and sales perspectives, and naturally, on the finance.
• Buyers will look for a business with potential and perspective. They will have your products and services as their main focus. Facts and figures related to marketing and finance play almost as important a role.
• Bankers and business partners offering credit will be primarily interested in your solvency. For this reason stress the healthy state of your finances. If called upon, you may also wish to reveal your fixed assets as collateral.
• Most good job applicants will be concerned about their paychecks. Can the employer ensure regular salary payments for the personnel? As well as this, future employees will take an interest in your company's financial history and your forecasts.

Risk analysis is fundamental when your business plan targets investors or bank funds. Reassure them with an exit strategy. This will give you the opportunity to disclose possible risks, and give you a double advantage. It will reveal you as a someone who thinks ahead, who considers damage control. In the case of an unexpected disaster, it will show that you have thought of the legal implications. Once again, write your proposal so that it covers all the relevant questions which may be raised by all possible interested readers. The business evaluation plan can not be limited only to content. While evaluation criteria may differ from case to case, the main aspects under review remain the same:

• The written business plan itself — dates and deadlines must be analyzed exhaustively. All fundamental questions must be answered.
• The manner of presentation — form, clarity, conciseness, logical presentation, a realistic approach.
• The viability of the business — from the point of view of market competitiveness, management capability and financial competence. Does the business plan present a business strategy with a strong and sustainable competitive advantage?

8.Business Plan Implementation

A vital stage in business planning: business plan implementation. Here is where the business plan implementation puts theory into practice. If theory and practice do not come together, the plan will remain on the drawing board. The business plan must be implemented with due regard to deadlines set. The responsibility of each individual involved in the plan must be clearly delineated. The implementation plan must form an integral part of the business plan. The manager must have a clear idea of the practical impact of his business ideas.

Business Plan Implementation Steps

• Establishing the business objectives
• Defining and assigning the tasks needed to attain the objectives set
• Setting out a timescale
• Monitoring activities and progress

Business Plan Implementation Objectives

The objectives must be clearly and concisely set out, with the planning of key waystages. They must at the same time be realistic, demanding but achievable.

Tasks

The tasks must be listed with the individuals responsible for completing each task. They must be simply and clearly stated, and need not be oppressive. The results envisaged should outweigh the time and effort devoted to the tasks.

Timescale

Each task, and its duration, must be framed within a clear timescale. The result clearly displays all the activities necessary with their deadlines.

Monitoring Activity and Progress

During the monitoring process, delays must be highlighted. This stage identifies and rectifies the delays. Within a business plan, several implementation plans will be needed for the particular aspects of the business: product planning, marketing, financial problems and human resource management (Business Plan Implementation).

9.Business Plan Templates

When you create a business plan, you can write it yourself, with the help of books, business plan templates and experts, or you can pay someone else to do it for you. This latter option, while appearing simpler, can be expensive. In theory, it is the business owner who should create the business plan, although the process can be very demanding.

Business plan templates

Business plan templates can be found in professional software, on the Internet or offline. You can avoid the risk of producing a standardized plan, lacking in originality, by personalizing those sections which allow this. You can do more with the executive summary than you can with figures and tables. The executive summary, if written compellingly, may be decisive for the overall quality of the plan. So how do you choose the most appropriate business plan software to create the best image of your business? Look for these features:

• Easy to use
• Best-suited to your domain of activity
• Teamworking if necessary
• Software support

When building the plan yourself you may need to resort to professional consultants in various specific fields if necessary — economics, marketing, personnel management etc.

Advantages of building a business plan by yourself

• the owner is the only one who can express best what his business consists of in detail;
• is less expensive than hiring a professional writer;
• you can use software templates that provide samples;
• using softwares prevents you from omitting important information;
• you will learn more about your own business seeing it from various perspectives and will be able to self-evaluate;
• you will learn more about fields like finance, marketing, sales, product planning etc.

Disadvantages

• time consuming process;
• requires much effort;
• requires writing ability;
• implies resorting to professionals for specific domains, which may be costly.

Hire a business plan writer

A second option you have is to hire a business plan writer who will do the job for you. The important thing here is to make the right choice. That is, for best results you need to find a professional with relevant training, experience, portfolio and recommendations. As you are the one to know best all the ins and outs of your business, it is essential that the writer always keep in touch with you at all stages.