Explanation of various forms of a Business Plan - Free Essay Example

Introduction The principal importance of a business plan is to generate a written sketch that appraises all facets of the trade and industry capability of a business undertaking together with an explanation and investigation of the business prospects. Learning Outcomes To define what the business plan is; who prepares it, who reads it, and how it is evaluated. To understand the scope and value of the business plan to investors, lenders, employees, suppliers, and customers. To identify information needs and sources for each critical section of the business plan. To present examples and a step-by-step explanation of the business plan. To present helpful questions for the entrepreneur at each stage of the planning process. Terminology No. Term Definition 1 Business Plan A business plan is any plan that works for a business to come across to the lead, assign resources, spotlight on key points, and organize for problems and business openings. 2 Market Intelligence Market Intelligence is about providing a company with a view of a market using existing sources of information to understand what is happening in a market place, what the issues are and what the likely market potential is. 3 Environmental analysis Assessment of external uncontrollable variables that may impact the business plan. 4 Financial plan Projections of key financial data that determine economic feasibility and necessary financial investment commitment. 5 Industry analysis Reviews industry trends and competitive strategies 6 Organization plan Describes form of ownership and lines of authority and responsibility of members of new venture. 7 Marketing plan Describes market conditions and strategy related to how products and services will be distributed, priced, and promoted. 8 Production plan Details how product(s) will be manufactured. 9 Start-up plan This plan characterizes the ladder for an innovative and fresh business. It envelops standard issues containing the company, product or service, market, forecasts, strategy, performance targets, management team, and economic analysis 10 Strategic plan It focuses further on complex selections and setting of chief precedence than on the details as depicted in the operations plan What is business plan? A business plan is any plan that works for a business to come across to the lead, assign resources, spotlight on key points, and organize for problems and business openings. A formal business plan is a comprehensive manuscript that as a rule trail a criterion based format. Formal  business plans  are a requirement for attracting external financial support for an enterprise. The business plan can further be explained as to be a printed document narrating the personality of the company, the strategy for sales and marketing, the financial conditions, illustrated through a proposed profit and loss declaration. In addition a business plan is road map that endows guidelines so a company can sketch its prospects and avoid any disastrous situation. A business plan must match with the commonly established procedures concerning structure and substance. Importance of a Business Plan The universal impression and old proverb of Those who fail to plan, plan to fail can hold immense significance for any individual who desires to commence or manage an enterprise. The business plan is a precious instrument that can help a business proprietor comprehend and appreciate the market and the rivalry that runs in it and the plan will also enable the individual to address the vital issues resulting in the avoidance of a business failure. A Business plan: Assists in clarifying and focussing the progress and projections of the businesses. Provides a well thought-out and rational skeleton within which a business can expand and perform business scheme and line of attack Provides a foundation for dialogue with third parties such as shareholders, bureaus, banks, venture capitalists etc. Puts forward a point of reference aligned with which the actual performance of the business can be measured and re-examined. Work as the vital stepping stone in hoisting inves tments. Groundwork of an inclusive plan may perhaps not warrant accomplishment in raising finances or activating support, but not comprising a plan will hold the consequence of the business collapsing. Viewpoint to be considered Three perspectives need to be considered: The perspective of the entrepreneur The entrepreneur understands the new venture better than anyone. The marketing perspective This considers the venture through the eyes of the customer. The eye of the investor The investor looks for sound financial projections. Factors Influencing a Business Plan Practical Business Concept: The distinct frequent blunder made by entrepreneurs is not choosing the correct business to begin with. The preeminent way to gain knowledge of the potential business is to be employed for someone else in that business prior to establishing your own. There can be an enormous breach involving your perception of a bright business and realism. Market Intelligence: A fine way to assess market understanding is to test market the product or service prior commencement of the venture. Next craft the business concept, prototype it and make an attempt to sell it. Fit, Budding, and Established Industry: Accomplishment draws closer to individuals who unearth businesses with immense financial sides and not essentially big inventions or progresses to mankind. Competent Management: Plan to employ people who have the expertise that you require. Label your inimitable capability and search for people who can roll your disadvantages into positive traits. A Consistent Business Focus: As a tenet, individuals who focus in a product or service will do better than people who do not focus. Spotlight your labours on an assignment that you can do so well that you will not be competing exclusively on the basis of price. Frame of Mind: Avoid committing too early. Initially the plan ought to be written in pencil, not in ink. Maintain a flowing attitude and be insistent in making changes as justified by varying state of affairs and intensifying awareness. Potential readers of the Business Plan Prospective shareholder and financiers will read the business plan. Business Plans came into use principally for companies that were seeking to have access to more funds from external parties. The business plan should be complete and detailed to deal with the apprehension of employees, shareholders, bankers, venture capitalists, suppliers, customers, advisors, and consultants Therefore a Business plan is all about putting a business on paper which should probably include the following issues Purpose (Mission Statement) Aim (How achieve the business purpose) Market Offerings (How to generate revenues) Sales/Marketing Plan (How to persuade people to buy the offerings) Operations Plan (How to use up the capital to make profits) Management Plan (How ensure the effectiveness of the business strategy) Finance Plan (How to manage the capital) Key Performance Indicators (what is to be appraised over a period to establish success ) Evaluators of the Business Plan Since the business plan must attend to the needs of all the prospective evaluators, software packages and Internet models must be used no more than to aid in the groundwork. As the entrepreneur happens to be attentive of who will read the plan, amendments and alterations will be required. Suppliers may perhaps wish to see a business plan prior to signing an agreement to deliver products or services. Customers possibly as well may feel like reviewing the plan prior to acquiring the product. The business plan ought to reflect on the requirements of these communities Prospective suppliers of funds will show a discrepancy in their needs and necessities in the business plan. Lenders are principally attracted in the capability of the new undertaking to recompense back the liability together with interest inside a nominated interlude of time. Lenders spotlight on the four Cs of credit: The entrepreneurs credit record The entrepreneurs capability to meet up with debt and interest The collateral or material assets being made available Equity payment, or the sum of personal equity been endowed by the entrepreneur. It is furthermore imperative for the entrepreneur to build up a good personal association with the credit representative of the bank. Financiers make available huge figures of capital for possession (equity) and look forward to cash out within a few years. They will often put additional stress on the entrepreneurs moral fiber than lenders. The venture capitalist will contribute a significant role in running of the business and wishes the entrepreneurs to be yielding and agreeable to allow this association. These financiers will also insist towering rates of return and will accordingly focus on the market and monetary projections. Consideration for the Business Plan Prior to setting up a business plan, the entrepreneur must perform a swift viability study to see if there are probable barricades to success. The entrepreneur should clearly define the ventures goals, which also provide a framework for the business plan. Goals that are too general or that are not feasible make the business plan difficult to control and implement. The business plan must reflect reasonable goals. Clearly defining the target audience Map out the plans construction Settle on the probable extent of the plan Spot all the chief issues to be attended to within the plan For several individuals the sheer course of action of preparation, judgment, examining, investigating and evaluating helpful than the business plan. No businesses are identical, just like no plans are identical. The business plan may possibly appear like an intimidating mission however the outcomes it will generate will be significant. Significant elements of a Business plan Cash flow is equally critical to a business and rigid to pursue. Cash is frequently misinterpreted as profits. Profits dont warrant cash in the bank. Tons of money-spinning businesses go under because of cash flow troubles. Working factors are what make things occur. The bright schemes and brilliantly arranged planning papers are merely a supposition unless the entrepreneur disperses responsibilities, with deadlines and funds. go after those who are key contributors, and track results. Business plans are in reality about attaining results and making the enterprise grow forward Who Needs a Business Plan? A business plan is in the vein of a map and a compass for a business. With a plan entrepreneurs set objectives Ascertain priorities, and supply f cash flow. Entrepreneurs need a plan to apply for business finance and for business investment. Investors want a business plan. They invest in the people, the proposal, the credit records, the market, the technology, and other factors; They look to the business plan to characterize and describe the business. The business plan classifies contracts between associates A business plan is required to correspond with a management team. The routine business schedules are disturbing, problems arrive, business openings emerge, business promises and obligations have to be pursued and tracked. How do you know where you are in business without establishing where you started and where you intended to go? How can people commit to a plan they cant see? Entrepreneurs need a business plan to trade a business, or to assign a value on a business for levy or other functions Different categories of Business Plans Business plans are furthermore also described as strategic plans, investment plans, expansion plans, operational plans, annual plans, internal plans, growth plans, product plans, feasibility plans, and through numerous other names. Detailed case dissimilarities direct towards different variety of plans Start-up plan This plan characterizes the ladder for an innovative and fresh business. It envelops standard issues containing the company, product or service, market, forecasts, strategy, performance targets, management team, and economic analysis. The financial examination comprises of proposed sales, profit and loss, balance sheet, cash flow, and a few other items. The plan begins with an executive summary and concludes with appendices explaining monthly projections for the first year. Internal plan This plan is not proposed for external financier, depository, or other third parties. They might not include detailed description of company or management team. The plan may perhaps or might not comprise comprehensive financial extensions required for forecasts and financial planning. The Internal plan usually comprises the key points as bullet points as present in PowerPoint slides rather than exhaustive texts. Operations plan This is generally an internal plan, and it may well also be described as an internal plan or a yearly plan. It would by and large be extra comprehensive on particular execution objectives, time limits, and tasks of teams and managers. Strategic plan It focuses further on complex selections and setting of chief precedence than on the details as depicted in the operations plan Growth plan The plan focuses on a detailed part of business, or a division of the business. These plans might be internal plans depending on whether or not they are being correlated to loan submission or new venture. Feasibility plan This is a straightforward start-up plan that comprises of a synopsis, mission declaration, means to success, fundamental market scrutiny, and introductory analysis of expenses, pricing, and possible costs. This type of plan is helpful for deciding whether or not to continue with a plan, to put in the picture if there is a business worth pursuing. The length of a business plan Writing a business plan can be a nerve-racking charge; mostly for the reason that the universal sensitivity is that a high-quality business plan must contain the ingredients to work miracles. When it comes to business plan writing, size does matter. Many settle for a short plan whereas others argue for a big sized plan Avoid page counting A short plan with intense text devoid of graphics is a lot longer than a long plan which is arranged in understandable bullet points, practical and constructive figures of locations or products, and business charts to exemplify vital projections. Readability and summarization A high-quality business plan must provide a reader with a good quality idea of its core contents even after a swift gliding and browsing the key points. Arrangement, captions, space, and illustrations build an immense difference. Synopses are extremely essential. Chief points must be well demonstrated in a business plan as swiftly as they do in a business presentation. The correct length of the plan depends on the temperament and intention of the plan. Writing a business plan The business plan is a planning device. It is written for a purpose and illustrates a concrete or proposed organisation, what the organisation strives to accomplish or develop into, and how it will realize its objectives. The business plan must be adequate to provide a prospective financier an absolute understanding of the business enterprise and will assist the entrepreneur illuminate his or her accepted wisdom about the business. The business plan can take a very long time to prepare. Sever al entrepreneurs mistakenly estimate the time to write a business plan takes. Contents of a Business Plan Introductory Page The title sheet makes available a concise synopsis of the business plans contents, and ought to include: a. The name and address of the company. b. The name of the entrepreneur(s), a telephone number, fax number, e-mail address, and website. c. A section describing the company and the character of the business. d. The amount of investment needed. e. A statement of the discretion of the report. It also sets out the fundamental model that the entrepreneur is endeavoring to develop. Executive Summary This part is organized after the entire plan is written. It is supposed to be two to three pages in length. The synopsis should in a few words address the key points in the business plan. Questions that must be attended to comprise of: a. What is the business idea or model? b. How is this business model distinctive? c. Who are the individuals opening this business? d. How will they attract profits and how much? If strong increase is predictable, the executive summary must be supposed to also contain an exit strategy such as an IPO. Any supportive substantiation that possibly can reinforce the case should be incorporated. This segment is just intended to emphasize the key factors and offer a strong incentive to the prospective financier to examine and comprehend it in its totality. Environmental and Industry Analysis The most important area of contemplation is the company, its notion for its products and services, and its crossing point with the industry in which it will be competing The entrepreneur ought to initially carry out an environmental analysis to classify and identify movements and transformations taking place on a nationwide and global level that may possibly impact the new venture. Examples of environmental factors are: a. Economy. b. Culture. c. Technology. d. Legal concerns. e. All of the above external factors are generally uncontrollable. Subsequently the entrepreneur should perform an industry analysis that spotlights on specific industry developments such as: a. Industry demand. b. Competition. The final component of this section should spotlight on the specific market. a. This would comprise of information as who the customer is and what the business setting is like. b. This information is important to the groundwork of the marketing pl an section. Narration of the Venture The depiction of the venture should be comprehensive in this section. This should start with the mission statement or company mission, which explain the nature of the business and what the entrepreneur expects to achieve with that business. Key fundamentals must be illustrated in detail, together with the product or service, location, personnel, background of entrepreneur, and history of the venture. The stress placed on location is a role of the type of business. In judging the space the business will absorb, the entrepreneur should reflect on parking, way in from the highway and right of entry to customers and suppliers, and other laws. A blown up local map is helpful. Maps that find customers, competitors, and different locations can be useful. If the building or location resolution engages legal matters, the entrepreneur should appoint a lawyer Production Plan If a fresh business enterprise is a manufacturing operation, a production plan is essential. This plan must illustrate the entire manufacturing procedure, together with whether or not the procedure is to be delegated to a third party If the manufacturing is conceded out by the entrepreneur, the plan must explain the material plant design and machinery and equipment required. If the new venture does not comprise of any manufacturing functions, this part would be removed. Operations Plan All businesses-manufacturing or non-manufacturing-ought to consist of an operations plan as component of the business plan. This segment goes further than the manufacturing process and illustrates the course of goods and services from production to the customer. This would be a suitable place to discuss the responsibility of technology in the business operation procedures. If the venture is not manufacturing, this segment would be titled operational plan. The entrepreneur would need to describe the chronological steps in completing a business transaction. Marketing Plan The marketing plan illustrates how the products will be disseminated, charged, and promoted The marketing plan illustrates how the sales projections will be achieved. The marketing plan needs to specify the general marketing strategy that will utilize the opportunity and competitive advantages. It should comprise a discussion of sales and service policies; pricing, distribution, promotion and advertising strategies; and sales projections. The marketing plan needs to describe what is to done, how it will be done, when it will be done, and who will do it. Prospective investors consider the marketing plan as significant to the ventures success. Organizational Plan 1. This part of the business plan describes the ventures structure of ownership. 2. If the venture is a partnership, the terms of the partnership should be included. 3. If the venture is a corporation, this should include the number of shares authorized, share options, and names and addresses of the directors and officers. 4. It is helpful to provide an organization chart indicating the lines of authority. 5. This chart shows the investor who controls the organization and how members interact. Assessment of risk It is essential that the entrepreneur compose the risk assessment in the following manner: The entrepreneur must signify the probable threats to the new venture. Next ought to be a dialogue of what may possibly occur if these risks become reality. As a final point the entrepreneur should talk about the strategy to thwart, curtail, or counter these risks. Financial Plan The financial plan establishes the investment considered necessary for the new business enterprise and specifies whether the business plan is efficiently practical. Three financial areas are discussed: The entrepreneur should recapitulate the forecasted sales and operating cost for the first three years. Cash flow figures for three years are required, with the first years projections made available monthly. The projected balance sheet shows the financial state of the business at a specific time. Appendix The appendix includes any supporting material not incorporated in the manuscript of the document. Possible documents: Letters from customers, distributors, or subcontractors. Secondary or primary research data. Leases, contracts, and other agreements. Price lists from suppliers and competitors Business Plan Dos and Donts DOS Set up a comprehensive business plan for any business you are considering. Utilize the business plan outline provided in each section. Complete sections of the business plan through the advancement of the course. Follow a line of investigation (use search engines) to locate business plans that are obtainable from the Internet. Put together the business plan in an eye-catching kit as a selling gizmo. Submit the business plan to specialists of the planned business for their recommendations. Enchant out your strategies on how to deal with harsh conditions. Spell out the strengths and weaknesses of the management team. Take account of a monthly one-year cash flow projection. Generously and regularly adapt your business plans to accommodate changing trends and market behaviours DONTS Dont be confident in calculating high future sales. Dont be positive in approximating low future costs. Dont ignore or underestimate the weaknesses in your plan. Hex them out. Dont drool on extra long-standing projections. It is advised to focus on projections the initial years of the business Dont depend totally on the distinctiveness of the business or the accomplishment of a contraption. Dont portray yourself as a celebrity. Be harshly pragmatic. Dont be the whole thing to every person. Extremely focused experts as a rule do best. Dont advance lacking sufficient monetary and accounting expertise. Dont base your business plan on a breathtaking theory. Examine it, investigate it first. Dont omit the stage of preparing a business plan prior to starting. Exercises and Revision Answer TRUE or for FALSE for each of the questions below. The universal impression and old proverb of Those who fail to plan, plan to fail can hold immense significance for any individual who desires to commence or manage an enterprise TRUE The distinct frequent blunder made by entrepreneurs is not choosing the correct business to begin with TRUE Business Plans came into use principally for companies that were seeking to have access to more funds from external parties TRUE Prior to setting up a business plan, the entrepreneur need not perform a swift viability study to see if there are probable barricades to success FALSE All businesses-manufacturing or non-manufacturing-ought to consist of an operations plan as component of the business plan TRUE The business plan is a private document and should not be read by employees and customers FALSE The process of writing the business plan provides a self-assessment for the entrepreneur TRUE The best way to address the concerns of all potential audiences when writing t he business plan is to rely exclusively on a computer software package FALSE Venture capitalists demand high rates of return for their investment in the new venture TRUE In building a marketing plan, the entrepreneur should use a process designed as a pyramid, starting with narrow data and working down to broader-based information FALSE Multiple Choice Questions Which of the following statements is (are) true? The business plan describes both internal and external elements. The preliminary business plan should be prepared by a lawyer. Most business plan resources on the Internet are too complex and expensive to be of use to the new venture. All of the above are true. Which of the following interested parties should have access to the ventures business plan? Suppliers Lenders Investors all of the above The depth and detail of a business plan depend on: The target audience. The experience of the entrepreneur. The size and scope of the new venture. The amount of capital needed. When evaluating business plans _________ are primarily concerned with the 4 Cs of credit. Investors Lenders Vendors Employees The executive summary section should: Be prepared after the total plan is written. Highlight key financial results that can be expected. Be about two to three pages in length. all of the above.