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Writing the business plan

A business plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals.

Business plans may also target changes in perception and branding by the customer, client, tax-payer, or larger community.A business plan is a formal statement of a set of business goals, the reasons why they are believed to be attainable, and the plan for reaching these goals.

Operational plans describe the goals of an internal organization, working group or department. Project plans, sometimes known as project frameworks, describe the goals of a particular project. They may also address the project’s place within the organization’s larger strategic goals.

Business plans are decision making tools. There is no fixed content for a business plan. Rather the content and format of the business plan is determined by the goals and audience. A business plan should contain whatever information is needed to decide whether or not to pursue a goal.

Writing the plan

Though business plans have many different presentation formats, business plans typically cover five major content areas:

  • background information
  • a marketing plan
  • an operational plan
  • a financial plan
  • a discussion of the decision making criteria that should be used to approve the plan.

Some of these content areas may be more or less important depending on the kind of business plan. There is no fixed content for a business plan. Rather the content and format of the business plan is determined by the goals and audience. A business plan should contain whatever information is needed to decide whether or not to pursue a goal.

Summary

A loan request executive summary might contain the following information[citation needed]:

  • company information: name of company, years in business, legal structure, minority and majority owners
  • brief description of project
  • amount and length of loan
  • objective reasons why the bank should be confident that the loan will be paid back. This likely will include
    • financial track record
    • the future revenue stream
    • any contracts in place that might guarantee the revenue stream is more than just a forecast.

For a new venture, the executive summary might contain[citation needed]:

  • company information: name of company, proposed legal structure, current legal structure, minority and majority investors.
  • amount of investment requested
  • expected terminal value
  • description of market opportunity
  • objective reasons why the market opportunity can be exploited by this particular team

For an internal project plan, the executive summary might look like this[citation needed]:

  • company information: not applicable
  • description of project
  • project mandate: who requested the proposal, who is being assigned to carry it out
  • strategictactical and financial justifications
  • summary of resources needed: staff, funds, facilities

Current Status

  • number of employees
  • annual sales figures
  • key product lines
  • location of facilities
  • current stage of development (start-ups)
  • corporate structure (options are:
    • Sole proprietor
    • Partnership
    • Joint Venture
    • Publicly traded corporation
    • Limited liability company
    • Public utility
    • Non-profit organization
  • names of the majority investor, if any

History

  • founding date
  • major successes
  • strategically valuable learning experiences

Management Team

  • Board members
  • Owners
  • Senior managers
  • Managing partners
  • Head scientists and researchers

Marketing Plan

The marketing plan has five objectives:

  • to identify revenue generating opportunities
  • to provide a rationale for revenue forecasts.
  • to define marketing goals.
  • to define a set of concrete steps for reaching those goals.
  • to describe current progress towards those goals, if any.

The rationale behind revenue projections is developed by describing the market associated with each product covered by the business plan. In addition the business’s current and likely future competitive position must be discussed.

Specific marketing goals and the steps involved in achieving them are covered by describing plans for pricing, promotion, demand management, distribution, and brand development.

For more information, see Marketing Plan.

Product Portfolio

  • Core product lines relevant to venture or project
  • For each relevant product line,
    • Life cycle management plan
    • Versioning possibilities
    • Revenue potential

Market Size and Structure

  • allied markets (substitute products)
  • major players: customers, vendors, regulatory agencies, etc
  • balance of power among vendors, customers, regulatory agencies, other

Competitive analysis: Existing Markets

If the product has an existing market, a table or set of paragraphs explaining the following may be needed:

  • name, features, why proposed product is better
  • switching costs
  • customer loyalty to/brand premium of competitors
  • why the product will overcome switching costs and customer loyalty
  • the competitive strategy:
    • staying power (common for second mover large corporations)
    • expertise in mass distribution (another large second mover advantage)
    • niche for which competitor has no suitable strengths
    • monopoly rights to improved product, i.e. patents, exclusive contracts
    • richness of alliances
    • novel and hard to copy business process/culture
  • time line for growth in market share

Competitive analysis: New Markets

If the product is a new product with no existing market, one must identify all substitute products. For each significant substitute product one must explain:

  • name, features, why substitute, why proposed product better
  • switching costs and why new product justifies switching
  • expected adoption dynamics
  • expected role once market begins to develop (see above for existing products)

Pricing

  • chosen price points
  • proposed Pricing strategy
  • research supporting chosen price points

Distribution

  • Distribution strategy
  • List of major distributors
  • Current status of negotiations

Manufacturing/Deployment plan

  • Supply chain requirements
  • Production inputs
  • Facility requirements – size, layout, capacity, location
  • Equipment requirements
  • Warehousing needs for raw materials, finished goods
    • space requirements

Information and Communications Technology Plan

  • Systems needed
    • Operations: Billing, HR, SCM, CRM, Knowledge bases, etc
    • Websites: internal, public
  • Security and privacy requirements
  • Hardware requirements
  • Off-the-shelf software needed
  • Custom development requirements

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