Business planning process
A business plan is probably the most important part of transforming one’s idea to a profitable venture. Many business experts have been quoted emphasizing on the importance of planning when establishing or running a business. A business plan is supposed to be an all inclusive document, giving information about a business’ operations, products, finances, ownership, objectives, management and many other topics which relate to it.
Business plans are written in different ways and may have different contents, depending with what an entrepreneur intends to achieve. A business plan can be made to give a business directions of where it is headed to, or can be made to seek funds and attract investors. It is mostly made up of factual information but should be written in a language which is easily understood by investors and other interested parties.
Summary of the business
An executive summary gives a brief outline of the rest of a business plan. The executive summary should give the reader a brief overview of every part of the plan. It is especially intended for someone who may not have time to go through the whole document. The executive summary in many cases will sell someone’s idea or will be a reason for an idea being rejected. Big financial institutions receive very many proposals each day and may not have time to go through each of them. The executive summary should therefore be the most perfect part of a plan, to motivate an investor to read further. It should be pithy and quite professional.
This part of a business plan also indicates a business’ strategic objectives regarding quality, marketing, sales, hiring and consistency. The process of developing strategic objectives helps a business owner have an in-depth understanding of what the business is, what it intends to achieve and how it is going to do so. Strategic objectives include proving solutions to everyday needs of the clients, establishing a professional, customer driven and growth oriented team, working out a strategic marketing plan and maximizing revenues for a business, among many strategies intended at making the business successful.
Information on the company
“Information on the company is supposed to be very factual” (McKeever, 2008, pg. 13). It is information which will not easily change, at least for the period of time when a proposal is being considered by an investor. Information on the company includes when the company was formed and the type of company, shedding light on the industry in which the business is in, and ownership. Depending with the type of company, this part of the business plan may be required to explain shareholding and the percentages in which shares are distributed. For partnerships, the plan is supposed to clearly explain who is involved and how they are involved. Such information is supposed to give an investor or an interested party a good background of who they may be partnering with if they choose to join or work with the business.
Company information includes the foundation of the business which may be a brief history of how the business was founded. If the person writing the business plan is not the founder, it is important to explain briefly how the person acquired ownership. The most important part of the company’s information is the people involved currently, how they are involved and the nature of their involvement (Longenecker and Thomson, 2006). A bit of personal information may be required but that is very dependent on what the plan is supposed to achieve.
There is also a small measure of information which may not necessarily be factual, does not have to be included but may be important. The story of a company, dreams of the founder or owner and explanations for choice of business can be included or not. Such information however, may be very important for someone who is writing a business plan with the aim of attracting investors. It is argued that investors will feel more comfortable and will easily trust a business, if they know the business on a more detailed level.
According to Longenecker and Thomson (2006) “lenders are more used to seeing figures and facts and will not necessarily get excited about them”. They hardly have a good business story to read about. A good, professional, well structured story of a business will therefore make a plan more noticeable. Business story which sounds hopeful and feels real will easily attract investors than a plan with big numbers. The intentions of writing the plan therefore, dictate what is included as company information.
Information on the industry
When writing this part, Silver (1999) advices that “this is a part where a good statistical source is worth every cent”. Information on the industry is supposed to give the reader a clear explanation on the nature of business and the industry as a whole. It is aimed at understanding and showing the reader how the industry is growing. This part of the plan is what explains how the business fits into the industry. It is supposed to give a very professional and precise statistics about the industry’s market size, nature of market and scale of operation. For a new business venturing into a very new industry, one might be required to do a market survey and analysis on their own since data may not be available.
Even for a business in well known and studied markets, a business may be required to do its own market survey and analysis to ensure very updated information. Many new business many not be able to do industry surveys on there own but today, there exists many businesses focused on understanding different industries and collecting information about them. When developing a business plan therefore, one must establish a reputable analyst who will help them gather the right information.
Other than impressing the investors, this part of the business plan is very important in helping investors understand the markets they are venturing into. Industry information reveals the size of different markets, ease or hardship of penetrating to different markets, salary rates, availability of required professionals in the industry, and where to find them. The information in this section is very important in determining the possibility of success or failure for a business. It is also important when preparing financial statements since a business is able to approximate which areas they need to invest in more. It is also the most important process of understanding competition. It helps an investor compare and contrast their plan and operations with those of competitors, know how much market share they hold and their strategies.
For a plan intended at attracting investors, financial institutions are more likely to relate to numbers and figures than they are with explanations (Bygrave and Andrew, 2010). Information on the industry gives an entrepreneur a chance to prove how much they understand about their business. It is also the part of the plan which makes it easy for an investor to make comparisons with other businesses and industries. Investors find it easy to understand and read an entrepreneur’s personality from this section of the business plan, since it reveals one’s commitment to understanding their business.
Marketing plan
The marketing plan focuses on how goods and services will be promoted in different markets. Information about the industry serves as a guideline in understanding different markets. It also gives the business information about who is doing well in the market and what is working for them. After having a clear understanding of the the markets, it is easier to plan how to get into a market. A marketing plan should be cost sensitive and must be very considerate of the needs of the targeted clientele. For a new business, it must be focused on how to get the product into the market and have it noticed. For an already existing business, the marketing plan should be more focused on developing brand loyalty as well as attracting new customers.
A marketing plan must consist of the situation analysis. A situation analysis may call for a well conducted SWOT analysis to determine the business’ strengths, weaknesses, opportunities and threats (McKeever, 2008). It must also contain a marketing strategy which should include objectives to be met, information on market segments and product positioning (Silver, 1999). A marketing plan is also supposed to have sales forecasts and how they will be achieved. An expense budget is important at the end of a marketing plan to show how the processes mentioned above will be financed and followed up.
Management
Management gives the strength and capabilities of a business’ management team. This section is not necessarily the most important but strengthens the scope of the plan (Singla, 2008). For a business plan which lacks this part, the team’s strength should be well revealed in the marketing plan and the financial analysis. It includes a paragraph or a page of each of the senior officers in the business or the leaders of each of the departments. It is a showcase of the business team’s strengths and their role in the success of the business.
The management summary will include a summary of each of the mentioned people’s academic qualifications, their experience, relevance of their experience and qualifications in a business, and most importantly their achievements in the past. For a business owner, it is also a chance to understand their team well and consider changes where necessary. A good team is considered the pillar of every business and will determine how far a business will go.
Financial analysis
Financial analysis is the most important part of a business plan, and preparing one is considered a science (McKeever, 2008). The aim of any business is to make profits, otherwise it would not make any sense to run it. A good financial analysis reveals the business’ performance for three years, predictions based on many different factors. A good business plan should have both short and long term financial projections if it has to attract any attention (McKeever, 2008). Today, there are available software packages to help one make professional financial projections. Financial statements are written to attract investors and to help the business owner have a better analysis of the financial aspect of their business.
This part of the business plan will consist of different financial statements. The income statement conveys projected revenues and expenses (Silver, 1999). It reveals a business’ profits and losses at a given period of time. Projections show what is expected to happen in the two or three years that follow the preparation of the plan. It helps a business understand its taxes, depreciation and other money factors relevant for a business’ successful operation.“A balanced sheet breaks down the business’ assets, liabilities and owner’s equity” (Gitman and Carl, 2009). Cash flow statements show the utilization of money and other resources in the business. Projections show how the money is expected to move in a projected period of time. They help a business balance expenses and income as well as capital investments needed by the business.
Entrepreneurial characteristics
High value for business image
When preparing to establish a successful business, one must be prepared to work on the image of the business first. The image of a business is very important and must be clear to the targeted market. A good entrepreneur recognizes this and puts in place measures to see it happen. A good business image is created through quality and consideration of every stakeholder’s interest. The customers’ interests are catered for by ensuring quality, fair pricing and availability of products. Market analysis gives the business enough information to make this happen.
How an entrepreneur treats employees has a major influence on a business’ image. A good entrepreneur understands that valued, respected and well treated employees reflect on the products’ quality and a business’ performance. If a business does not treat its employees well, it might have a problem developing an impressive management statement in a business plan. A good entrepreneur also understands that employees should be treated as a team and encouraged to work as one. Other stakeholders include investors, suppliers, distributors and the community surrounding the business.
Ability to evaluate risks and assumptions
Another important entrepreneur characteristics is the ability to evaluate risks and make professional, well supported assumptions. Every business should be considered a risky investment (Silver, 1999). In today’s market, its getting increasingly hard to attract customers or even get noticed by the market. The success of any business is hugely dependent on its acceptance by the market. Risk evaluation is especially important when making projected cash flows and balance sheets. It is important for the business to put into considerations the amount of risks involved and every possible eventuality, as well as have a reaction plan in case any of it does occur. Its also important to realize that since businesses have become extremely competitive today, a break even may not be very immediate. Such considerations must be factored in on any projections and enough cash reserves must be in place as working capital.
When developing business plans and when running a business, the company should only have reasonable assumptions about market growth projections, especially in such fluctuating markets and economies. Its also important to put into consideration the fact that markets will change, and a plan of how to shift markets or business when that happens. A good entrepreneur must always have an exit plan when the business seizes to be viable or when it has achieved what it wanted to.
Ability to be strategic in the market
An entrepreneur should have a good workable marketing strategy for any business to achieve success. Information about an industry enables an entrepreneur to formulate and develop those strategies which work for a business. Marketing strategies include hiring top sales and marketing personnel since quality marketing staff is essential in sustaining a company’s growth in the market place. Identifying strong and well qualified staff, as well as constantly developing them, is imperative if a business has to survive in today’s highly competitive markets (Longenecker and Thomson, 2006).
A successful marketing strategy will also include building relationships with customers. Establishing a strong, healthy and long term relationship with customers is important in ensuring that products are constantly updated to the customers demands and preferences. Continually updating the customers on the progressive quality of a business’ products, makes them feel valued. That way, they are able to air their complaints about a product, rather than move on easy to the next available products.
Have a good sales strategy
A good entrepreneur must be able to move products in the market. It is not enough to just market and create awareness of a product in the market. A successful entrepreneur will launch aggressive and effective advertising campaigns to keep the market well aware of the existence of their products. Investing in advertisement should be strategic and cost effective, especially for a young business. A successful entrepreneur will therefore consult and establish the most cost effective and fruitful ways to improve sales volumes.
Being unique is a good way to sell a business in today’ saturated markets. Standing out from the rest should be the most important priority of a successful entrepreneur. An ordinary product today will most likely go unnoticed (Barrile and Terry, 2007). It is therefore imperative to create products which will get a market’s attention. This can be done by identifying a need in the industry in which the business is operating in, and looking for ways to fulfill it.
Ability to utilize funds
Funds utilization is an important entrepreneurial characteristic, especially for a start-up business. An entrepreneur must have a clear plan of how they intend to invest any funds in the business, to build a healthy cash flow statement (Gitman and Carl, 2009). Funds utilization would include start up expenses, development and sustainability finances. Start up expenses include purchases, hiring and putting all the legalities in order by acquiring all the necessary papers and documents from the government and concerned bodies.
A successful entrepreneur must be able to utilize the industry analysis information to set up priorities on how money should be spent. Business objectives also give guidelines on the the most important expenses. Cost cutting skills and information play an important role in preparing projected cash flows, balance sheets and different expense accounts. Personnel is a big part of the business and an entrepreneur must be able to allocate enough to ensure that a business has a healthy team.
Long term budgeting should include development of new products, personnel compensation and incentives, as well as medical covers and training. Research should also have a big proportion of the budget if the business has to stay well updated on new trends in the business and if it has to stay constantly ahead of the competitors in developing new products. At a later stage, the business can afford to budget on discounts to customers and reward packages for loyal customers.
Creativity
Today, markets are constantly changing and many businesses are struggling to stay relevant and profitable in the market (Barrile and Terry, 2007). A good entrepreneur must be creative and introduce fresh products to the market as may be found necessary. New products must be driven by creativity and must show uniqueness. With high levels of competition in all industries today, it is important to stay ahead of the competition by offering customers what is not easily found in other companies. A business must ensure that the company’s clientele does not have a reason to window shop for other products and service providers.
Existing customers are always the biggest avenue to advertise the business and should therefore be offered new products to talk about and advertise the business. New customers should be treated with special attention to create loyalty. Other avenues in which a business can create loyalty includes discounted products for already existing customers. Follow up on different clients leaves them feeling appreciated and feel as part of a team, which they will stand with even in times of trouble.
Reference list
Barrile, S. and Terry, C., 2007. Business management: Corporate management, people and change. South Yarra, Vic.: Macmillan Education Australia.
Bygrave, W.D. and Andrew, Z., 2010. The portable MBA in entrepreneurship. Hobonken, N.J.: John Wiley & Sons.
Gitman, L.J. and Carl, M., 2009. The future of business:The essentials. Mason, OH: South-Western Cenage Learning.
Longenecker, J.G. and Thomson, G., 2006. Small business management: An entrepreneurial emphasis. Mason, Ohio: Thomson Publishers.
McKeever, M.P., 2008. How to write a business plan. Berkeley, Calif.: Nolo.
Silver, A.D., 1999. Entrepreneur characteristics. Cold Spring, N.Y.: Lane Gate Capital Corp.
Singla, R.K., 2008. Business management. New Delhi: V.K India.