writing a business plan[1]

7/28/2019 Writing a Business Plan[1]

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BY

SURENDRA P. SINGH

PROFESSOR, AGRIBUSINESSTENNESSEE STATE UNIVERSITY

NASHVILLE, TN 37209-1561

WRITING A BUSINESS PLAN:

The What, Whether, Why and How of

the Business Plan


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What is a Business Plan? The business plan covers what you intend to do

with your business and how it will be done.

Writing a business plan forces you to take a

deep look at your idea and how you will turn it

into a business. It is a blue print of your business.

It will help you:

Define the purpose of your business and

organize it.

Help you anticipate problems before they arise,

so effectively deal with them

Determine how business will grow


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In short it helps you to decide:

Where your firm needs to go and how fast,

how to get there and what to do along theway to reduce uncertainty and manage risk

and change?

Doing so helps you recognize areas that need

rethinking or support.

A business plan can be particularly helpful after

start-up as a tool to understand and as a

means of guiding growth. Components of a Business Plan

Your business plan(BP) will typically include

the following.

Business Description What do you plan to do ?


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Market Analysis Who will be your customers ;

What do they want from you? Competitor Assessment Who will you

compete against? What do these competitors

offer?

Marketing Plan How will you reach your

customers?

Operating Plan How do you plan to implement

idea. Financial PlanHow much money will it cost;

and where will you get the necessary funds from

?

Executive Summary What are the


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Plan?

First, a business plan helps provide direction

by making you discuss where you want totake the business.

Second, a business plan provides structure

to your thinking and helps you make sure

youve covered all of the important areas.Third, a business plan prompts you to think

about the future.

A good business plan will include ideas fordealing with new competitors in your market,

helping you prepare your business for this

situation.

A business plan will help you communicate


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Who Should Write the Business

plan?

The person or persons responsible forimplementing the plan should be heavilyinvolved in its development. Some people hireconsultants or have employees draft the plan.If youre going to be accountable for the

decision that will be based on the plan, thenyou need to be involved in its development.You might have input from experts

How long should a business plan be. Part of answer depends on the audience of your

plan.

If you are going to present it to potential investor

Detailed If it is for internal use ourself or artner- short


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Business Plant outline

I. Business Description1. Type of Business

Describe What the business does and whatproduct(s)/service(s) it offers

Provide over view of the business and itsobjectives.

Clearly state your purpose for being inbusiness.

Having a mission statement will helpcommunicate this.

Mission Statement

A statement of purpose is written to outline

intentions and motivations.


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Mission statement should explain why your

business exists and what it hopes to achieve?

It should answer three main questions:

1. What are the needs that you exist to fulfill?

(address) the purpose of business.

2. What are you doing to address theseneeds? How would you fulfill these needs?

3. What principles or beliefs guide your work

(the values)

Product Economic Social

Ben & Jerrys Mission Statement


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2. Business Overview/ HistorySummary of current state of business, new,

expansion, start-up, or the takeover of an

existing firm, franchise?

3. Business Organization

Legal structure Sole proprietorship , LLC.

Who the principal owners are?

Also provide nature (type of business, retailer,food service, manufactures.

4. Business Position Why your business

different from others. Explain why you will be

profitable and succeed.


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. ar e na ys s - ar eCharacteristic

1. Your Business will be part of an industry. Describe

industry. So readers can understand the marketplace. Include information on its size location,

history, competitiveness, and profitability as well as

its general health. In particular, discuss the current

trends in opportunities and threats. This is done to prove that a market exists for

your product/service.

Your research will be foundation of your

forecasted sales levels, size of operation, and

the financing required.

2. Target Market, Target Customer Profile

Describe your target market, its present size, the


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Who are willing and able to buy your product?

Define your target customer as specifically as possible both

quantitatively and qualitatively.

Research and provide demographic information about whoyoull focus on and information to understand why

customers buy products.

Thorough and detailed research sets a good business plan

apart from an average one. If you are selling to consumers, then consider the following:

Are your customers local, regional, national, and/or

international?

Are your customers young, old, male, female, high income,low income, etc.,?

Are there behavioral characteristic that differentiate your

customers? ( for instance price shoppers versus

convenience shoppers)

Are there cultural considerations, social connections, or


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If your customers are primarily businesses, thenconsider the following:

Do business customers needs differ by industry?

Do business customers in different regions havedifferent needs?

Who in the business is involved in the purchasingdecision?

What is their job function? Who influences theirdecisions? What is their background and knowledgewith respect to your product/service?

What are company buying policies and procedures,

financial constraints, and timing of purchases? Potential information sources are often publicly

available, and you should augment them withinterviews with people currently in the industry as well

as your own experience. You should also include astatement of the otential o ortunities for rowth.


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III. COMPETITOR ASSESSMENT The

CompetitionAll businesses have competitors in some form.

Some competitors sell similar products, while otherssell a product that serves the same function.

First, identify (define) your competitors and then profilethem.

Describe and assess competitors as what theirbusiness is doing. Focus on their strengths andweaknesses compare to your own. Understand theirbusiness how your competitors fill consumersneeds. Explain how your business will be better thantheirs how your business like theirs and how it isdifferent.

When reviewing competitors, consider what they haveas for as : Market Share, relationship with customers, advertising


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IV. MARKETING PLAN- Marketing Plan usually addresses four areas :

Product Offered, Price Charged, Place(Distribution system) and Promotional efforts.

Product describe what it is, What it does, itsfeatures, benefits. Describe its size, shape, color,

qualities, life etc.,Include pictures, packaging, Warranties, returns,training , services

Service Explain What the service is and What

need it addresses for your target market, describehow you will perform services.

Pricing - Pricing strategies are based on theprescribed value of your product and services.

Many strategies Simple to much sophisticated


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As you make pricing decision, think about yourcost to produce product/service.

This will be a floor on your price check

Check Market price. Place Distribution

Describe how your product/ service will bedistributed and under what geographical area.

Concentrate on the methods and channels ofdelivery that will optimize your sales/ profits.

Describe how your product will be sold- throughretailers, direct sales, and/or other methods.

Describe how your product will reach customers.


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Promotion: Promotional activities are designed to

communicate the value of your products andservices to your customers.

The range of promotional tools available is

broad a combination is used

What is the most effective and efficient way to

get your message in front of target segment.

Budget how much money do you have to

invest in promotional activities. Time line of activities.


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V.OPERATING PLAN In this section discuss how the business will be owned

and managed, your personal and physical resourceneeds, and the legal issues you will have.

1. Ownership & Management

Describe ownership, investors, amount ofinvestment.

Explain how the business will be managed on a dayto day basis. Partnership or corporationcomposition and function of Board of DirectorsWho will be involved in making decisions.

Managers their qualifications, consultants. Describe all key people and how you will organize

each persons responsibilities and authorities forthe efficient operation of your business. Develop

job descriptions.


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2.Resources and Productiona) Other Staffing - /what your personnel needs will be . Job

descriptions

b) Production Methods- Outline the methods your will beusing to produce your product.

c) Facilities and Equipment

d) Estimate What facilities and equipment you will use.

e) Operations How your business will be operated in terms of both

schedule and procedures. Part-time full-time,seasonal. Describe how you will manage yourbusiness.

f) Legal Issues- Trade marks, patents, service marks.,g) Compliance Every business is subject to local, state and federal

regulation.

h) Tax Identification number from the federal government

include it.


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VI.FINANCIAL PLAN1. Financing Sought Give detailed description of

what you are seeking. If you want a loan (debt financing), describe

the terms.

Generally, a leader will need to know your

preferences on loan amount, length of theloan, interest rate (fixed, variable).

Indicate funds to this point in the business.

If seeking a loan describe the collateral

involved.

2. Financial Statements

These, mostly in table form, support your

loan/investment request and/or indicate the


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Forecasts of product demand, revenues, and expensesfor new ventures will draw on the market research youconducted. Your projections are only as good as yourassumptions, so make sure they are valid and realistic.

Document as much as you possibly can, including howyou developed your assumptions.

Provide projections for two to four years in the future,including : ( Projected).1.

Forecasted income (monthly for first two years, thenby quarter of year thereafter).2. Forecasted cash flows by month ( monthly for first

two years, then by quarter or year there after)3. Forecasted balance sheet for all years (year-end),

and4. Breakeven Analysis.

RiskAs with any venture, there will be risks. Identify and

describe the most threatening risks to your business.Outline the activities you will pursue to manage the


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VII.EXECUTIVE SUMMARY

In Executive Summary you highlight the

important aspects of your business. Try to fit inone- to two page.

In one page ( two at most) cover these key

points:

Your Mission and Goals

The Product /Service

Business Description

Management DescriptionThe Marketing Plan

Key Elements of your Operation

Funding Requirements, and Profit and CashForecasts


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Describe how your business is financed. If you arelooking for money, state the exact amount you willneed.

How it will be used and the type of financing(debt or equity) you prefer. If you are flexible,indicate your preference and then state that youare flexible. If you seek venture capital, indicate

when the venture capitalist can expect to sell hisor her shares in the company to earn the expectedreturn on investment.

Cover Page

The cover page should include the companyname, address and phone number as well as acontact persons name, address and phonenumber. Be sure the contact person will be

available during reasonable business and after


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Plan Do involve all of the management team in the

preparation of the business. Do make the plan logical. Comprehensive.

And readable and as short as possible.

Do demonstrate commitment to the venture by

investing a significant amount of time andsome money in preparing the plan.

Do articulate what the critical risks and

assumptions are and how and why these aretolerable.

Do disclose and discuss any current or

potential problems in the venture.

Do identify several alternative sources of


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Do spell out the proposed deal how much for

what ownership share and how investors will

win.

Do be creative in gaining the attention and

interest of potential investors.

Do remember that plan is not the business and

that an ounce of can-do implementation is worthtwo pounds of planning.

Do accept orders and customers that will

generate a positive cash flow, even if it means

you have to postpone writing the plan.

Do know your targeted investor groups (e.g.,

venture capitalist, bank, or leasing company) and

what they really want and what they dislike, and


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Donts Dont have unnamed, mysterious people on the management

team (e.g., a Mr. G who is currently a financial vice presidentwith another firm and who will join you later).

Dont make ambiguous, vague, or unsubstantiated statements ,such as estimating sales on the basis of what the team wouldlike to produce.

Dont describe technical products or manufacturing processes

using jargon or in a way that only an expert can understand ,because this limits the usefulness of the plan. For example, aventure capitalist will not invest in what he or she does notunderstand- or what he or she thinks the team does notunderstand.

Dont spend money on developing fancy brochures, elaborateslide show presentations, and other Sizzle instead, show thesteak.

Dont waste time writing a plan when you could be closing sales

and collecting cashD t h d d l h h

writing a business plan[1]

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