So, What is a Business Plan?

4th Jun 2012
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Well, a Business Plan is just that – a plan for your business. A Business Plan is a document that conveys to the reader (who could be you, a potential investor, a potential employee or a potential business partner) how your business will solve a problem or fill a gap and everything you will need, as well as produce as an outcome, while you are at it. To you, it serves as a roadmap, a self-checking tool, a detailed and quantified representation of where you want to be (vision) and how you plan to get there (mission).

Is there a standard business plan? Yes and no. What is ideal is to match your business plan to its purpose. For example, if prepared from an investment perspective, a business plan must include details such as management team, which can be skipped if the plan is being made for internal purposes only. A typical business plan, however, consists of certain standard elements and ideally, should not cross the 30 page mark. The standard elements of a business plan include:

  1. Executive Summary: Although placed at the front of the document, this part is best written last. It is important to give this summary significant thought and time, as it is the first test of the clarity of your thought process and the amount of faith you have on your idea. Make this part convincing and realistic. Be jargon free and user friendly. Since it is a summary, make sure it’s not too long and includes all the key points of the entire plan.
  2. Company/Business Description: In this section, include a brief description of how the company began and how it has reached its current state. Include details of the industry, present scenario and future possibilities, both positive and negative. Base all of your observations on reliable data. Include details of business structure, legal form, distribution of your product/service, advertising, promotions, etc. Also explain how your business will be profitable.
  3. Products and Services: Describe the products and services you have on offer. Make sure that the description is clear and concise and comprehensible even for someone who doesn’t understand the technical aspects of your product/service. Emphasize the uniqueness of your offering and the competitive edge. Also describe the stage in development that your product is currently in.
  4. Market Analysis and Marketing Strategies: Define your market. Determine the size, type and prospects of your target market. Who are your competitors? Study them. Identify your direct, indirect and even potential competitors. What are their offerings? Their market shares? Their funding? Their pricing? Promotional Strategies? Now why are you different and why are you better? Are you cheaper? A better value for money? Do you offer add-on services that the competitors do not? Define your sales and distribution strategy – your planned sales force, your distribution channels. Layout your pricing strategy, advertising, packaging, PR and promotion plans. Include a competitive analysis all along.
  5. Management Plan and Organizational Structure: Highlight your current and proposed structure. List advisors and board members. Give details of every member’s role, background and prior experience, i.e. what each member is expected to bring to the table. Also identify current and potential skill gaps and how you plan to fill them.
  6. Financial projections: Include projected income statements, projected cash flow statements and projected balance sheets. Also include a break-even analysis. An income statement essentially outlines your business’s cash generating ability. It includes details on when sales are made and when expenses are incurred. It highlights details of costs –fixed and variable, income, profit margins, depreciation, taxes, etc. A cash flow statement shows how much cash will be needed to meet obligations, when it is going to be required, and from where it will come. A balance sheet is a summary of all the preceding financial information broken down into Assets, Liabilities and Equity. Demonstrate the company’s growth prospects over a 3-5 year period. Present different scenarios for the financial projections of sales, costs and cash flow for both the short and long term. Ask "what if?" questions to ensure that key factors and their impact on the financings required are carefully and realistically assessed. For example, what if sales decline by 20%, or supplier costs increase by 30%, or both? How does this impact on the profit and cash flow projections?Watch out this space for tutorials and how-to guides on business planning and more!
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