Developing A Business Plan

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Developing A Business Plan

By James Hughes

The business plan consists of a narrative and several financial worksheets. The narrative template is the body of the business plan. It contains more than one hundred and fifty questions divided into several sections.The real value in creating a business plan is not in having the finished product; rather, the value lies in the process of researching and thing about your business in a systematic way. The act of planning helps you to think things through thoroughly, study and research if you are not sure of the facts, and look at your ideas critically. It may take some time now but saves you the pain of costly or perhaps disastrous mistakes later.It typically takes several weeks to complete a good plan. Most of that time is spent in research and re-thinking your ideas and assumptions. But then, that is the value of the process. So make time to do the background job properly; those who do never regret the effort. Finally, be sure to keep detailed notes on your sources of information and on the assumptions underlying your financial data.In writing your executive summary, include everything that you would cover in a five-minute interview. Explain the fundamentals of the proposed business. For example, what will your product be? Who will your customers be? Who are the owners? What do you think the future holds for your business and industry? Ensure you make it professional, concise, enthusiastic and concise.Furthermore, one would have to do a general company description which includes mission statement, company goals and objectives, business philosophy and legal form of ownership. A mission statement is a brief caption usually in thirty words or fewer explaining the reason for the organization and its guiding principles.Goals are destinations where you want your business to be. Objectives are project markers along the way to goal achievement. For example, a goal might be to have a healthy, successful company that is a leader in customer service and that has a loyal customer following. Objectives might be annual sales targets and some specific measures of customer satisfaction.In addition, you have draft your business philosophy that is, what is important to you in business and to whom will you market your products? Describe your industry. Is a growth industry? What changes do you foresee in the industry, short or long term? How will your company be poised to take advantage of them? Furthermore, describe your company’s most important strengths and core competencies. What factors will make the company succeed? What do you think your major competitive strengths will be? What background experience, skills, and strengths do you personally bring to this new venture?Lastly for this segment, what legal form of ownership will the company take? Is it sole proprietorship, partnership, corporation, or Limited Liability Company? And what’s the basis for your selection?Describe in depth your products or services. What factors will give you competitive advantages or disadvantages. Examples include level of quality or unique features. Also, what are the pricing, fee or leasing structures of your products or services?What are the facts about your industry? What is the total size of your market? What percent share of the market will you have? What are the trends in consumer preferences and trends in target market growth? What barriers to entry do you face in entering this market with your company? For example, high capital costs, high production and marketing costs, unions, shipping costs, consumer acceptance and brand recognition, training and skills, unique technology and patents, change in technology, change in government regulations and policies etc. How will you overcome the barriers?No matter how good your product or service is, the venture cannot succeed without effective marketing. And this begins with careful, systematic research. It is dangerous to assume that you already know about your intended market. You need to do market research to make sure you are on track. In your marketing plan, be as specific as possible; give statistics, numbers, and sources. The marketing plan will be the basis, later on of the all-important sales projection.Identify your target customers, their characteristics, and their geographical locations otherwise known as demographics. If you sell a consumer product, but sell it through a channel of distributors, wholesalers, and retailers, you must carefully analyse both the end consumer and the middleman businesses to which you sell.Next, what products or services will compete with you? Will they compete with you across the board, or just for certain products, certain customers or certain locations? How will your products or services fare with the competition?Now that you have systematically analysed your industry, your product, your customers, and the competition, you should have a clear picture of where your company fits into the world. In one short paragraph, define your niche, that is, your unique corner of the market.Another important thing to take into consideration is what advertising medium will you use to get the word out to your customers? Will you use methods other than paid advertising, such as trade shows, catalogues, word of mouth and network of friends or professionals?In addition to advertising, what plans do you have for graphic image support? This includes things like logo design, branding, business cards, signage, letter heads and interior design. What image do you want to project? How do you want customers to see you?Setting prices is also another serious thing to be considered. For most small businesses, having the lowest price is not a good policy. It robs you of needed profit margin; customers may not care as much about price as you think; and large competitors may under-price you anyway. Usually, you will do better to have average prices and compete on quality and service. What will be your customer service and credit policies?Probably you do not have a precise location picked out yet. This is the time to think about what you want and need in a location. Many start-ups run successfully from home for a while before renting stores as the case may be. Is your location important to your customers? Is it consistent with your image? If customers come to your place, is it convenient for them in terms of interior spaces, parking lot etc.Who will manage the business on a day-to-day basis? What experience does that person bring to the business? Is there a plan for continuation of the business if this person leaves or is incapacitated?Now that you have described your products, services, customers, markets and marketing plans in detail, it is time to attach some numbers to your plan. The forecast should be based on your historical sales, your marketing strategies and industry data if available. You may want to do two forecasts:
  1. A ‘best guess’, which is what you really expect
  2. A ‘worst case’ low estimate that you are confident you can reach no matter what happens. Remember to keep notes on your research and your assumptions as you build this sales forecast and all subsequent spread sheets in the plan. This is critical if you are going to present it to funding sources.
 To your profitable business venture.

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