What would be important aspects to your business plan? Is one part more significant than another, explain?
For me personally, there’s no such thing as one being more important than the other when it comes to various aspects of a business plan. But if I have to choose one, I would definitely say the very first section that opens up be it an executive summary or business description would be of significant importance. If your opening is weak, no one is going to go into greater detail.
Let’s take an example, you don’t just go throwing the business plan everywhere. And, the places that you give your business plan to receive lots of other similar proposals as well. They have a limited amount of time for this particular task and with that short time span and multiple options to choose from, you just have to have a perfect document in place (Morris, Schindehutte & Allen, 2005). If your opening isn’t captivating and tailored to them, they’re very unlikely to go through the entire document nor support your business plan.
My focus towards the opening being important doesn’t simply mean that the sections to follow are not of any importance. They’re equally important. Your executive summary may be strong, business description is strong but if you fall behind with organization management - you are unlikely to get a positive outcome (Peters, 2010). Thus, every single component including the executive summary, business description, organization management, market analysis, sales strategies, funding requirement and financial projections are all vital. Those details should be clearly stated in proper understandable language and presented well. Customizing it to the particular organization or company you’re writing to adds more value and along with the chances of a success. To stress the point that every component/section in a business plan is of importance, let’s look at the content and their use for each of those sections:
Executive Summary: When the business plan is quite long, this is used. It sums the entire plan in short, understandable language. It helps you get noticed.
Business Description: For anyone looking to support you, they need to know what they’re getting into. And, the business description provides just that.
Organization Management: It is equally important for the one going through the plan to know the formation of the organization. They need to know who are the key players and their role in the team. The idea is never great alone, it needs a great team, committed and motivated towards their goal for success. This shows the exact picture of the same by not only listing the names but also their background, duties, and expertise.
Market Analysis: It studies the market to see if it’s appealing or not. Basically SWOT analysis is performed as part of this. It provides a clear picture of the strengths, weaknesses, opportunities, and threat.
Sales Strategies: As part of this the sales target is set and lists the identified steps to meet the target. It also helps to choose the desired sales strategies which suit to the defined target market.
Funding Requirement: Is it another important component as it lists what you expect from the other end and also lists what’s in it for them to take the offer. It just doesn’t have to be funding but any other kind of requirement that you’ve.
Financial Projections: These projections help get the serious attention of the investors. Having a mid-term or short-term projection shows the direction you’re taking and what you expect the business to give back (Velez-Pareja, 2010). It also grabs the attention of the investors and gets them interested in those projects are logical and appealing.
That is why I believe that every single component is important as one falling behind will mean that your entire business plan crumbles with it.
Morris, M., Schindehutte, M., & Allen, J. (2005). The entrepreneur’s business model: toward a unified perspective. Journal Of Business Research , 58 (6), 726-735.
Peters, G. (2010). Executive Summary: Mind the Gap. Business Strategy Review , 21 (2), 84-84.
Velez-Pareja, I. (2010). Forecasting Financial Statements and Financial Valuation of a Business Plan. SSRN Electronic Journal .
We have business ideas and thought in our mind and business plan is just articulate it on a paper very clearly, concisely and systematically so that we can easily convince our possible investors. In the business plan, our main focus is
It should be completed and in sequence format.
It should be in well organized.
It should have used in data, image with facts and evidences. Suppose we are planning for coffees shop business in Kathmandu and we mention our business plan in ktm valley has 30 lakhs population and 20 lakhs will be our possible customer doesn’t carry any value in business plan so we should keep the evidence.
The entrepreneur or business person is prepare the business plan for motivating or convincing our possible investors. So that it should be clear, concise, and systematics based on facts and evidences. The business plan can be shown to finances to encourage them to invest money in a company (Michael & Ireland, 2001). At this time most of new enterprise are failed because they are not aware of business plan and others stuffs. So nobody trust them and nobody want to invest their ideas so they failed. So the business plan basically guide us on a right track and it helps to understand the business process very systematically so that not even a single point is missed out (Srivastava, 2005).
Why business plans is important for new enterprises?
What are need of preparing business plan?
Many enterprise owners have a no ideas about their business objective so that business plan help them to identify their business needs and requirements.
In business plans has clearly provided specific guidelines and milestones in a written form so that our angel investors can easily understand the business process.
It also helps to focus on growth of the business and manage the business process too.
We can use business plan as a communication tools so that we can easily convince others through this medium (business Plan).
It serves as an operational tools which gives details of the past, present and future activities of a business (Stanley & Rich).
The main component of business plan are Executive summary, Vision statement, market and competitive analysis, marketing strategy, products/ services, marketing/ sales, operations and financial plan (Ramaswamy & Namakumari, 1999). It covers all the process clearly in written format and it is used for me as a reminder tools or guider. Business plan should have all required component in order form clearly so that audience or investor can easily understand the business ideas and thoughts.
Executive Summary: At first, we should have clear business summary. It has clearly mentioned business description, business objective, in short about product and service, market profile, and competitive details with possible projected growth for the company and the team (Joseph, 1999).
Vision: Vision is clear picture where we want to reach in future. So in business plan we should mention our vision clearly, where the organization want to be in future.
Market and competitive analysis: In this section, we should clearly present the data on the basis of market research and study. It covers company profile, team profile and details, different market segment and target market, Details of customer and their buying pattern and different others changing variables in a data format. In competitive analysis section here it covers industries overview, nature of competitions, industry changes, primary competitors, competitive products/ services and SWOT analysis (Adams, 1999).
Market Strategy: After completion of market study, research and competitive analysis then we make strategy on the basis of research. So in this section we clearly mention what strategy we apply in the business like Low Cost, Focused Strategy, or Differentiation Strategy.
Product/ Service: In this section has clearly explained, what types of product and services are offered to customer. What are the USPs for new product and services? It also provides each details about product and service. It also gives what could be the other future product and services.
Marketing and Sales: In this section has clearly explained the marketing plan and strategy and promotion camping.
Operation: In this section has explained about possible human resources and supply chain process, what types of CRM services we provide to our customer and what service we provided them.
Financial Plan: Financial plan is detail about where the money comes in and goes out. It should include Balance Sheet, profit and loss statement, cash flow statement, and some of the important Ratios (Gerald I, 2002). So that our possible investors can easily visualize the data and calculation and they are able to analyze when the return will be back.
Adams, B. (1999). Adams Streetwise Complete Business PlanAdams Streetwise Complete Business Plan. Adams Media .
Gerald I, W. (2002). The Analysis and Use of Financial Statements. Hardcover .
Joseph, C. (1999). "The Complete Book of Business Plans: Simple Steps to Writing a Powerful Business Plan. Small Business Sourcebooks .
Michael, H., & Ireland, A. (2001). Strategic management: competitiveness and globalization. Thomson Learning 4th ed .
Ramaswamy, V., & Namakumari, S. (1999). Strategic Planning: Formulation of corporate strategy (Texts and Cases)-The Indian context. New Dheli : Macmillan India Limited 1st Edition .
Srivastava, R. (2005). Management Policy and Strategic management (concepts skills and practice). Himalaya Publishing House .
Stanley, & Rich, R. (n.d.). Business Plans That Win $$$. Lessons from the MIT Enterprise Forum .
For a good business plan prior research and understanding of the product of service is vital without which entering into it would be highly risky. According to Timmons Model of the Entrepreneurial Process, an entrepreneur has to be able to balance the intricacy of three aspects which are opportunity, resources and team. These are further supported in their structure of refinement and balancing act by leadership, creativity and communication (Spinelli Jr. & Adams, 2012). "The business plan must reflect the unique nature of your business venture (M2 Presswire, 2005).”
Thus, as Timmons has pointed out, every business plan should address these three aspects which may come in various designs and types but hold the same goal. "The business plan must reflect the unique nature of your business venture (M2 Presswire, 2005).”
In my business plan I would place importance on the following aspects
1. Executive Summary - Understanding the Why
The executive summary like the abstract in a journal is very important as investors are busy. The first part or the executive summary must be attractive enough to hook them and make them interested. It needs to have the concept of the business, what is the opportunity and strategy used to achieve it. The target market should be specific and your business value proposition that differentiates it from the competitors.
2. The Industry and the company and its product
How the industry or market for the product/service is at the moment. How the market is segmented and catering to the need that your product/service is targeting to meet. It should answer the entry and growth strategy for the product.
3. Market Research and Analysis
I probably would do this first as this is by far one of the most important factors in a business plan. Every one has idea but to understand if there is a market for it, how consumers are addressing this need with what product in the market, price in the market, substitute product, competitor strategies can be understood. Voice of the customer can also be introduced in this research with direct interviews with the customers which can help ascertain the niche market that will have greater demand for the product and where you can meet these market consumers easily and in quantity. Doing this first will show you if what you see as an idea and opportunity actually is something that the consumers also want addressed.
4. Economics of the business
The ROI or Return on Investment should be clear. The time line for the return you expect for the initial amount of investment that you are doing is critical. This will not only make it clearer for the entrepreneur on how much it costs but also target benchmark for how much to sale and within which time it will bring profit.
5. Marketing plan
For an initial start up the growth stage is very important. Target customers need to know that the product is available and it fulfil their certain need. Understanding the market customers segment and where there are available dictates the marketing plan. For example if your business targets the younger crowd then you will have to include you marketing plan in social sites such as Facebook, Twitter, and Instagram. If catering to the older generation then national/daily newspapers, televisions, radio stations with their targeted older audiences would be better. Schemes, pricing strategy could be used to increase sales. These should be done in detail.
This also should include sales target and projection, detailed and overall marketing strategy stressing on the competitive advantages.
6. Design and development plans
The idea needs to be converted into a business viable product or service. The designing may take time to finalize with validation process until you get a prototype that works. This may require resources, expertise, and time. These aspects of time and resources required to take the idea through the journey into a final prototype needs to be recorded in detail.
7. Manufacturing and Operation plan
If it’s a manufacturing business then location for operation is important. Location determines the transport cost, labour cost, availability for access for raw material transport and transport of finished goods. Regulatory issues and compliances of government should also be reviewed.
8. Management Team
A part of Timmons model talks about the team management. It is important to have good relation in a team. Everyone should be on-board and should have a specific pre allotted responsibility and rules for understanding their roles. Open sharing and acceptance of suggestions should be done. The expertise that every group holds should be cleared up. Management remuneration, stock option, BOD, advisors and hired experts needs to be stated with their roles and remuneration.
9. Sustainability and impact
Impact on the environment, customers and society needs to be understood. CSR should be addressed if there are any ethical issues.
10. Critical Risk, Problems and assumptions
SWOT should also be done of the business to understand any risk, problems and major assumption that have been done in the planning.
11. Financial plan
The financial plan of how much to invest from equity and debt should be understood. Estimated cash flow, potential breakeven time frame, pro-forma income statement should be conducted.
12. Proposed company offerings
Desired financing that you expect what the value proposition that you give to the investor should be clear. Investor must know what your projected return is and how much you need the financing for. Equity proposition should be done with clear and concise intro in.
These are a brief indicator of what should be addressed in a business plan. All of these parts are interrelated and so cannot be excluded. If all these checklist are ticked before starting a business, there are higher changes of success.
M2 Presswire. (2005, March 22). Research and Markets: Research and Markets : The Essential Guide to Business Plan Writing for Life Sciences Industry. M2 Presswire; Coventry .
Spinelli Jr., S., & Adams, R. (2012). New Venture Creation, ENTREPRENEURSHIP FOR THE 21st CENTURY. New York: McGraw-Hill.
Business plan is an efficient technique to combine various business objectives into logical arrangement that involves truthful thinking of business concepts to identify the available opportunities and recognize problematic areas for business and start planning for that. In simple terms, business plan can be defined as a business functioning on paper that serves as a useful tool for the start-ups as well as existing businesses seeking growth and expansion (Amir, Hormozi, Sutton, & McMinn, 2002).
While writing my business plan, I need to pay attention in the content, sequence, style, structure and organization of the plan to make sure that the information included in it is communicated to the readers in desired manner. It is very important to know the audience of our business plan before we start working on it to make it precise. As suggested by Baliga and Rodrigues (2015), the different segments I need to incorporate in my business plan are:
The cover page and table of content that gives idea to the audience about what they are going to read and the themes covered in the plan in order to get their attention.
Executive Summary that exhibits the key topics included in business plan to create interest in the audience.
Description of business highlighting the background of business, product description and benefits, target market segment and unique selling proposition.
Competitive analysis explaining the strengths, weaknesses, opportunities and threats provided by internal and external environment.
Market analysis revealing the target market, growth potential and competition the organization might face.
Marketing plan including strategies to reach the audience, make them purchase aware our product and persuading them to make purchase decision along with the estimated cost.
Operational plan describing the entire process from acquisition of raw material to production of finished goods.
Financial plan specifying capital requirement, assets, liabilities, estimated costs, projected profits and expected returns.
Management summary including the knowledge, experience and expertise of team members.
In addition to correct formatting, we need to be careful about the language we use. The business plan should be able to get attention of the audience, arouse interest in the readers, make them desire our products and services and persuade them to take the desired action of buying the product.
For example, if my business idea is about starting recycling business, my business plan should be able to convince the audience that I am there to address the problem of waste management to some extent by providing them concrete data related with the cost required for up the business, the feasibility of the idea in the market, revenue model for our business, break-even point for the business, existing competitors, strategies to promote business, cost associated with the operations and process involved in recycling backed up by our own research of research done by other credible sources.
It is difficult to choose any one of the aspects as the most important one in the business plan. If we draft an excellent business plan but our structure is too messy, there are several grammatical errors and the content cannot be read easily, nobody will be interested in going through it. Similarly, it we properly structure the business plan but fail to include provide facts and figures to support the ideas presented in the paper, it is not going to work either. So, maintaining balance between every aspects is important.
Referring specifically to the format of business plan, I think the executive summary is the most important part as most of the readers decide whether to give a read through the business plan based on execution summary. However, it does not mean that we can pay less attention to the remaining parts. All the details must be synchronized and presented in consistent and logical manner to appeal the readers (Spinelli & Adams).
Amir, M., Hormozi, G. S., Sutton, R. D., & McMinn, W. L. (2002). Business Plans for New and Small Businesses: Paving the Path to Success. Managemant Decision, 40 (8), 755-763.
Baliga, A. J., & Rodrigues, L. L. (2015, April). Business Plan- The Secret to Success. The International Journal of Business and Management, 3 (4), 210-214.
Spinelli, S., & Adams, R. J. (n.d.). New Venture Creation: Entrepreneurship for the 21st Century (Nineth ed.). Irwin: McGraw Hill Education.