Business Plan

Planning is needed to grow or start a business. The main source of planning

for a company is the business plan.

Business planning is the process whereby an organization’s leaders figure

out the best roadmap for growth and document their plan for success.

The business planning process includes diagnosing the company’s internal

strengths and weaknesses, improving its efficiency, working out how it will
compete against rival firms in the future, and setting milestones for progress
so they can be measured.

The Advantages of Having a Business Plan

Sets objectives and benchmarks: Proper planning helps a business set

realistic objectives and assign stipulated time for those goals to be met. This
results in long-term profitability. It also lets a company set benchmarks and
Key Performance Indicators (KPIs) necessary to reach its goals.

Maximizes resource allocation: A good business plan helps to effectively

organize and allocate the company’s resources. It provides an
understanding of the result of actions, such as, opening new offices,
recruiting fresh staff, change in production, and so on. It also helps the
business estimate the financial impact of such actions.

Enhances viability: A plan greatly contributes towards turning concepts

into reality. Though business plans vary from company to company, the
blueprints of successful companies often serve as an excellent guide for
nascent-stage start-ups and new entrepreneurs. It also helps existing firms
to market, advertise, and promote new products and services into the
market.
Aids in decision making: Running a business involves a lot of decision
making: where to pitch, where to locate, what to sell, what to charge — the
list goes on. A well thought-out business plan provides an organization the
ability to anticipate the curveballs that the future could throw at them. It
allows them to come up with answers and solutions to these issues well in
advance.

Fix past mistakes: When businesses create plans keeping in mind the
flaws and failures of the past and what worked for them and what didn’t, it
can help them save time, money, and resources. Such plans that reflects the
lessons learnt from the past offers businesses an opportunity to avoid future
pitfalls.

Attracts investors: A business plan gives investors an in-depth idea about

the objectives, structure, and validity of a firm. It helps to secure their
confidence and encourages them to invest.

Types of Business Plans

Business plans are formulated according to the needs of a business. There
are a few common types of business plan that nearly all businesses in
existence use.

1. Start-up plan: As the name suggests, this is a documentation of

the plans, structure, and objections of a new business
establishments. It describes the products and services that are to be
produced by the firm, the staff management, and market analysis of
their production. Often, a detailed finance spreadsheet is also
attached to this document for investors to determine the viability of
the new business set-up.

2. Feasibility plan: A feasibility plan evaluates the prospective

customers of the products or services that are to be produced by a
 company. It also estimates the possibility of a profit or a loss of a
venture. It helps to forecast how well a product will sell at the
market, the duration it will require to yield results, and the profit
margin that it will secure on investments.

3. Expansion Plan: This kind of plan is primarily framed when a

company decided to expand in terms of production or structure. It
lays down the fundamental steps and guidelines with regards to
internal or external growth. It helps the firm to analyze the activities
like resource allocation for increased production, financial
investments, employment of extra staff, and much more.

4. Operations Plan: An operational plan is also called an annual plan.

This details the day-to-day activities and strategies that a business
needs to follow in order to materialize its targets. It outlines the
roles and responsibilities of the managing body, the various
departments, and the company’s employees for the holistic success
of the firm.

5. Strategic Plan: This document caters to the internal strategies of

the company and is a part of the foundational grounds of the
establishments. It can be accurately drafted with the help of a SWOT
analysis through which the strengths, weaknesses, opportunities,
and threats can be categorized and evaluated so that to develop
means for optimizing profits.

6. Tactical Planning: Tactical plans are about what will happen.

Strategic planning is aided by tactical planning. It outlines the
tactics the organization intends to employ to achieve the goals
outlined in the strategic plan.

7. Contingency Planning: When something unexpected occurs or

something needs to be changed, contingency plans are created. In
 situations where a change is required, contingency planning can be
beneficial.

Business Planning Process

The business plan process includes:

1. Research
2. Strategize
3. Calculate Financial Forecast
4. Draft Your Plan
5. Revise & Proofread
6. Business Plan Presentation

1. Do Your Research

Conduct detailed research into the industry, target market, existing

customer base, competitors, and costs of the business begins the process.
You may ask yourself the following questions:

 What are your business goals?

 What is the current state of your business?
 What are the current industry trends?
 What is your competition doing?
There are a variety of resources needed, ranging from databases and articles
to direct interviews with other entrepreneurs, potential customers, or
industry experts. The information gathered during this process should be
documented and organized carefully, including the source as there is a need
to cite sources within your business plan.
SWOT Analysis for your own business to identify your strengths, weaknesses,
opportunities, and potential risks as this will help you develop your strategies
to highlight your competitive advantage.

2. Strategize

Use the research to determine the best strategy for your business. You may
choose to develop new strategies or refine existing strategies that have
demonstrated success in the industry. Pulling the best practices of the
industry provides a foundation, but then you should expand on the different
activities that focus on your competitive advantage.

This step of the planning process may include formulating a vision for the
company’s future, which can be done by conducting intensive customer
interviews and understanding their motivations for purchasing goods and
services of interest. Dig deeper into decisions on an appropriate marketing
plan, operational processes to execute your plan, and human resources
required for the first five years of the company’s life.

3. Calculate Your Financial Forecast

All of the activities you choose for your strategy come at some cost and,
hopefully, lead to some revenues. Sketch out the financial situation by
looking at whether you can expect revenues to cover all costs and leave
room for profit in the long run.

Begin to insert your financial assumptions and startup costs into a financial
model which can produce a first-year cash flow statement for you, giving you
the best sense of the cash, you will need on hand to fund your early
operations.

A full set of financial statements provides the details about the company’s
operations and performance, including its expenses and profits by
accounting period (quarterly or year-to-date). Financial statements also
provide a snapshot of the company’s current financial position, including its
assets and liabilities.

4. Draft Your Plan

With financials more or less settled and a strategy decided, it is time to draft
through the narrative of each component of your business plan. With the
background work you have completed, the drafting itself should be a
relatively painless process.

5. Revise & Proofread

Revisit the entire plan to look for any ideas or wording that may be
confusing, redundant, or irrelevant to the points you are making within the
plan. You may want to work with other management team members in your
business who are familiar with the company’s operations or marketing plan
in order to fine-tune the plan.

Finally, proofread thoroughly for spelling, grammar, and formatting, enlisting

the help of others to act as additional sets of eyes. You may begin to
experience burnout from working on the plan for so long and have a need to
set it aside for a bit to look at it again with fresh eyes.

6. Business Plan Presentation

The presentation of the business plan should succinctly highlight the key
points outlined above and include additional material that would be helpful
to potential investors such as financial information, resumes of key
employees, or samples of marketing materials. It can also be beneficial to
provide a report on past sales or financial performance and what the
business has done to bring it back into positive territory
The Key Elements of a Business Plan

There is some preliminary work that’s required before you actually sit down
to write a plan for your business. Knowing what goes into a business plan is
one of them.

ELEMENTS OF THE BUSINESS PLAN

1. Executive Summary

The Executive Summary is the first section of your business plan, and also
the last one you should write. It represents the reader’s first impression
of your business. As a result, it will likely define their opinion as they
continue reading the business plan.
Executive Summary: An executive summary gives a clear picture of the
strategies and goals of your business right at the outset. Though its value is
often understated, it can be extremely helpful in creating the readers’ first
impression of your business. As such, it could define the opinions of
customers and investors from the get-go.

A good Executive Summary includes key facts about your business such as:

 Business & product description;

 Current positioning & targeting;

 Financial outlook & requirements;

 Past and future achievements & goals.

2. Business Overview

After the Executive Summary, a business plan starts with a comprehensive

explanation of what your business proposition is and how it relates to
the market where your company operates.

Business Description: A thorough business description removes room for any

ambiguity from your processes. An excellent business description will explain
the size and structure of the firm as well as its position in the market. It also
describes the kind of products and services that the company offers. It even
states as to whether the company is old and established or new and aspiring.
Most importantly, it highlights the USP of the products or services as
compared to your competitors in the market.

In this section of the business plan, you should explain precisely:

 what your company does;

  what are its products or services;

 in which market it operates;

 who are its customers.

Include:

 Your mission statement;

 The philosophy, vision and goals of your company;

 Your industry and target audience;

 The structure of your business, detailing your customers, suppliers,

partners and competitors;

 Your products and services and the problem they solve;

 Unique Selling Point(s).

If the company already has a well-defined product or service, this section can
be divided into Company Description and Products & Services.

3. Sales & Marketing Strategy

This section of the business plan requires a deep understanding of your

market space and how your business positions itself within its niche
and competes with existing players.

Market Analysis: A systematic market analysis helps to determine the

current position of a business and analyzes its scope for future expansions.
This can help in evaluating investments, promotions, marketing, and
distribution of products. In-depth market understanding also helps a business
combat competition and make plans for long-term success.Within your Sales
& Marketing strategy, you should outline:
  A definition of your target market – include its size, existing and
emerging trends and your projected market share;

 An assessment of your market – this should summarise how

attractive your target market is to your company and why, Porter’s
Five Forces or the more recent Six Forces Model are useful tools to
define this;

 Threats & Opportunities – you can use a SWOT Analysis to present

these;

 Product/Service Features – once you have thoroughly described

your product/service, make sure to highlight its Unique Selling Points,
as well as any complementary offerings and after-sale services;

 Target Consumers – whether you’re a B2B or B2C company, it’s a

good idea to include an ideal customer profile to describe exactly what
niche(s) you are going to target;

 Key Competitors – research and analyse any other players inside or

outside your market whose offering might compete with you directly or
indirectly;

 Positioning – explain in a short paragraph how your company

differentiates from your competitors and how it presents itself to your
target niche;

 Marketing Plan & Budget – outline the marketing and advertising

tactics you will use to promote your business, giving an overview of
your brand and of the communication elements that support it;

 Pricing – explain how your pricing strategy fits within the competition
and how it relates to your positioning;

A very common mistake that should be avoided is writing that you have no
competition. Instead, you should show your efforts in researching your
competitors and assessing how they could threaten your business.
4. Operations & Management

This section gives you the opportunity to explain to the reader how your
company does things differently.

The people and processes that are allow your business to operate on a
daily basis are the key to your competitive advantage. In fact, they help you
build a better product, deliver it more efficiently or at a lower costs. Your
Operations & Management must be able to successfully realise what you
‘promised’ in the previous sections.

Operations and Management: Much like a statement of purpose, this allows

an enterprise to explain its uniqueness to its readers and customers. It
showcases the ways in which the firm can deliver greater and superior
products at cheaper rates and in relatively less time.

INCLUDE THE FOLLOWING

1. Operational Plan – this section outlines all the day-to-day operations

of the business. It involves detailing all the processes and resources
that the company requires for each of its activities. You should include:

 Production or Service Delivery;

 Quality Control;

 Inventory;

 Suppliers;

 Credit policies;

 Legal environment;

 Location.
 2. Organisational Structure – this is an overview of all the people
involved in your business and their position in relation to each other.
You should detail the experience of the existing team, as well as the
roles that haven’t been filled yet. Include advisors and non-executive
directors.
Investors and banks will also look at this section to get an idea of
salary costs. As these are normally a significant cost centre, don’t
overestimate your staff needs.

5. Financial Plan

Financial Plan: This is the most important element of a business plan and is
primarily addressed to investors and sponsors. It requires a firm to reveal its
financial policies and market analysis. At times, a 5-year financial report is
also required to be included to show past performances and profits. The
financial plan draws out the current business strategies, future projections,
and the total estimated worth of the firm.

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This section includes projections, budgets and goals that are unique to each
business. In particular, you should focus on explaining the assumptions
on which you based your forecasts, more than on the forecasts
themselves. Every good Financial Plan will include:
  12-month Profit & Loss Projection – A month-by-month forecast of
sales, operating costs, tax and profits for the following
year. Sometimes three years.

 Cash Flow Statement & Forecast – This financial statement tracks

the amount of cash that leaves or enters the business at any given
time.

 Breakeven Analysis – This is a cornerstone of your business plan.

Here you should show what level of projected sales allows the business
to cover its costs.

 Capital Requirements – This point is fundamental as it shows

investors what their money will be spent on. It should contain a
summary of all the expenses for big purchases and day-to-day running
costs.

The Financial Plan is usually followed by the Appendices. Here you should
include detailed spreadsheets and calculations used to prepare the financial
statements