A business plan is a document that summarizes an entrepreneur's thoughts and experiences – on his current business, and its prospects for potential investors, clients, suppliers and employees – into a formal scheme.
WHY WRITE A BUSINESS PLAN?
A business plan serves as a communication tool for an entrepreneur and his potential investors. It is a platform for an entrepreneur to manifest his business expansion ideas to potential investors, and it also serves as a visual guide to help the entrepreneur to better understand where he is, where he wants to be and how he plans to get there.
BUSINESS PLAN FORMAT
There is no fixed format; there are only recommended ones. Business plans require different formats to succinctly communicate different objectives to different end-readers. In today's theme, selling an idea to investors, one would need to use a format that most effectively communicates (a) the company's current status amid a larger industry and market, (b) the product, marketing and sales strategies, and (c) a realistically projected revenue. Below is a recommended format.
1. EXECUTIVE SUMMARY
Although every business plan starts with an executive summary, it is to be written last. It is a summary that captures the gist of the entire plan. It aims (a) to convince the reader that the investment-seeker has a good understanding of his business, (b) to convey the most important points because this could be the only section that some investors read, and (c) to succinctly highlight the company's current and projected products, markets, financial performance, recent industry trends, management team, financial projections, and on how one plans to pay back the investors. It is a synopsis following the following major components.
– Vision and mission statements
– Company overview
– Product strategy
– Market analysis
– Marketing plan
– Financial plan
2. VISION AND MISSION STATEMENT
Vision is nothing without a map; otherwise, it would be called a dream. The vision statement sells an achievable end-state, and the mission statement shows the investors how. In a business plan, the vision and mission statements are combined into a single statement.
The vision shows where one's business is heading. It puts one or two paragraphs on how the business will be like and how big it will be with a realistic long-tem projection over a period of usually five years. The mission describes the strategy, the steps to take and the business philosophy for making the vision happen. A mission statement would answer the below questions.
– How would the business survive, grow and start reaping profits during the expansion period?
– What are the business strengths, vulnerabilities and competitive advantages?
– What is the business's sense of public image and community standing?
– What is the entrepreneur's attitude towards its management, investors, strategic alliances (affiliated establishments) and employees?
Definitions
Objective: Specific plan to reach a goal
Goal: The success target
Mission: Steps to be taken to achieve a vision
Vision: The ultimate realistic view of the business
3. COMPANY OVERVIEW
The company overview is probably the easiest to write in any business plan. It comprises the official company name, its legal form of business (proprietorship, partnership, corporation etc), its location, its facilities, its ownership, the management team (including the board of directors, if any) and the staffing (including special personnel plans and staff enlargement projection). The depth and length of each component (one paragraph per component) would depend on the applicability of the relevant contents to the potential investors.
4. PRODUCT STRATEGY
This section highlights the current product, the research and development of the current and future products, and the production and delivery methods. The special features of the current product must be emphasized because many other companies also have good products, but good products alone would not churn out opportunities to become businesses. The investors would be attracted to the product developer's insight, for examples, the factors that would keep the product in the market longer than others, and the unique technology that only the entrepreneur and the investors would own. Below are the highlights.
– Competitive comparison (product life cycle, uniqueness of the product, production technology, delivery methods, research and development etc)
– Sales literature (corporate and product profiles, advertisement and promotion materials, sales kits etc)
– Product fulfillment (how the company handles or intends to handle after-sales services to maintain customer loyalty)
5. MARKET ANALYSIS
The market analysis defines the market, profiles the customers, analyzes the competitors and assesses the market risks. Below are some of the issues to think through
– Which market is the product competitiveness in? For example, an anti-aging sheep placenta extract should be measured up with other anti-aging health supplements in the market instead of the health-supplement market in general.
– Who are the customers? For example, up-market products meant for the high-income group would require a proper office environment, a professional corporate image to carry out the business.
– Who are the competitors? For example, knowing the aggressiveness and the scale of operations of the closest competitor would create an awareness on the magnitude of effort and of capital to be injected into the business to be competitive.
– What are the fundamental rules? For example, for the sheep placenta extracts to compete in the anti-aging health supplement market, it must allow potential customers know its anti-aging effects in order to compete in the stated market.
6. MARKETING PLAN
A marketing plan is a combination of a number of procedures to make one's product known to potential customers. These procedures involve sales, distribution, advertisement, promotion and public relations. Below are the main points.
– Marketing strategy to communicate the combination of procedures, and why the entrepreneur thinks that this is a good mix.
– Sales strategy to lay out who are the intended customers, the sales targets and forecast, price strategy, promotion, sales from strategic alliances etc.
– Distribution method, for examples, direct or indirect distribution, exclusive distribution, network marketing (including multi-lateral marketing), selective distribution etc.
– Advertisement and promotion (commonly known as 'A & P')
– Public relations, for examples, endorsements by local authorities, community projects, sponsorship, participation in the Polytechnic internship program etc.
7. FINANCIAL PLAN
The financial plan discusses sensitive money issues, which are likely to be the top concerns of most investors. These issues include the company's current financial status, the size of the investment, how the investments would be used, when there would have been the break-even point, when would ROI (return On investment) be positive and the investors' exit option. The usual components are
– The company's current financial reports (start-up summary, balance sheets, profit and loss statements for the previous years to now)
– A summary on how and when would the additional capital be injected.
– Based on a sales forecast, when would break-even and positive ROI happen? Use projected profit and loss statements and planned balance sheet.
– What are the investors' pull-out options?
PRODUCTING AND PRESENTING THE BUSINESS PLAN
Now that the business plan had been drafted, the final chore is to produce and present the hard work. During production, ensure that the draft is proofread, typeset and edited before sending for print and binding. The plan should have a cover letter and a content page. Presentation is a must. It has to be a well-rehearsed face-to-face presentation with the written plan or with presentation slides.
