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Business Start
source by: businesstown.com
Objective Throughout the process of creating a plan, you need to keep in mind the objective of the plan. Why are you writing the plan? Is it to manage the business? Or is it to raise money?
Annual plans are used to manage a business. Business plans are used to attract capital. But there are exceptions, and often the difference between annual plans and business plans becomes muddled. Banks and other lenders or investors may require a copy of each year’s annual plan. And management may use the start-up business plan as a basis for operating the business.
Keeping a clear distinction between annual plans and business plans is not important. What is important is keeping the primary objective of and the primary audience for the plan clear. As a rule of thumb, if the plan will be used to attract investors or lenders, this is the primary objective and outsiders are the primary audience. If the plan will help manage the business, this is the primary objective and insiders are the primary audience.
Some or all of the following elements should be a part of your plan, depending upon your objective.
Summary Summaries should be short and concise—one page is ideal. It should cover the following points:
• Strategy overview. Start with a brief overview of your business strategy. If your business will be based, at least initially, on a particular product or service, describe it in the introductory paragraph. • Strategy logic. In the the next paragraph or two ex- plain why your strategy makes sense or why your product or service has promise. Are you entering a fast- growing market or providing a unique product or service that distinguishes your business from existing businesses? • Business development. Next, you should describe the stage your business is in.
? Is it already generating sales? ? Have you done test marketing? ? Is a prototype developed? ? Has market research been performed?
• Business development. Name the key people in your organization and describe, briefly, what special talents, expertise, or connections they will bring to the business. • Financial objectives. If your plan is being developed to raise capital, be clear about the amount of capital you are seeking and how you plan to use investor or lender funding. • Business organization. Describe the form of business organization you will take and where the company will be located. Remember to keep your summary short and easy to understand. Avoid technical jargon and details. Don’t try to summarize all of the different major elements of your plan. Just focus on the key elements that you think will be of most interest to your audience. Skip the pie-in-the-sky profit projections and outlook generalizations.
Concept The concept is a clear explanation of your business strategy. It is not a definition of the business or a summary of its markets but, instead, a quick summary of the one or two key factors that set your business apart from the competition.
• Product description. New business strategies are often closely tied to a particular product or service. If this is your situation, include a clear and substantive description of your principal product or service. Follow this with a focused discussion of what will make your product or service stand out from any similar offerings in the marketplace. Focus, in depth, on just a few of the most competitive attributes of your product or service. • Impact factors. You should also describe any other aspect of your business that is fundamental to your strategy. Areas that might have significant impact on your strategy are marketing, research and development, or strategic alliances with other firms. For example, if everyone else in your industry is selling their product through retail channels but you feel that you can develop a strong competitive advantage by selling via direct mail, then you should discuss this in the concept section. Market conditions and the competition should be included as points of reference only when necessary. An in-depth analysis of these factors will be included later in the plan.
Current situation This section is most appropriate for plans being used to seek financing. Within this section you will describe what stage of development your company is in and what the sought-after financing will be used for. There are three basic reasons for seeking outside financing: start-up financing, expansion financing, and work-out financing.
• Start-up financing. If you are seeking start-up financing, you will need to list specific milestones that have been achieved and emphasize all positive developments without being misleading. You should anticipate the questions your lenders or investors may ask.
? Has the market research been done? ? Has a prototype product been developed? ? Have facilities been leased? ? Is the management team in place? ? Has manufacturing been contracted? ? Are marketing plans finalized?
Whether or not you receive financing and the terms of that financing will depend upon the stage of development your company is in. The more fully developed your company is, the better your financial arrangements will be. • Expansion financing. If your business is already up and running and you are seeking expansion financing, you need to give clear evidence that you are not, in reality, seeking financing as a way to solve existing problems, or to cover losses or extraordinary expenses such as might be experienced during a start-up. • Work-out financing. Many investors and lenders do not like to offer work-out financing. Those who are willing to consider it will want to see a plan that clearly identifies the reasons for current or previous problems and provides a strong plan for corrective action. No matter what type of financing you are seeking, financiers like to be apprised of the source and amount of any capital that has already been secured. They will expect key executives to have made substantial personal equity investments in the business. They will feel even more comfortable if they recognize any other investors who may have participated in earlier stages of the financing process.
The market Later in this book, you will learn how to develop and write a marketing plan. You may want to refer to that section now. Aspects of that plan need to be addressed in your business plan.
? How large is the potential market? ? How many people or businesses are currently using a competitor’s product that is the same or similar to the one you are offering or plan to offer? ? How many prospects potentially have any possible use for the product? ? Is the market growing, flattening, or shrinking?
Market segmentation Almost every market has some major and distinctive segments. Even if it is not currently segmented, the probability that it could or will be is great. This is particularly true if the marketplace for your product or service is multi-regional or national. If this is the case, segmentation is almost necessary, especially for a small firm, if you hope to be competitive.
You will need to discuss segmentation within your business category and how you intend to cope with any positive or negative affects it may have on your particular business. Almost all markets are segmented by price and quality issues. Generally, however, price and quality do not provide the most clear or definitive market segmentation. Much stronger segmentation can usually be found through an evaluation of product or service uses and importance to various consumers.
Consumer analysis In your business plan you will need to evaluate the typical consumers within the market segments you are targeting. There are countless variables to consider when analyzing consumer behavior. Try to focus on those behavioral possibilities that best determine how viable your product will be in your target markets. Look at
? Which features will most appeal to consumers? ? How are choices made between competing products? ? Which marketing promotions or media avenues seem to offer the best vehicles for reaching the consumer base? And ask the following questions: ? How much disposable income do target consumers have to spend on this product? ? How do your target consumers reach purchasing decisions? ? Are consumers presold on a particular brand before they visit a store or do they buy on impulse? ? What characteristics influence the purchase of one product or service over a competing one?
Competition Include an overview of those firms and their products and/or services that you will be in direct competition with. Identify the market leader and define what makes it successful. Emphasize those characteristics of the firm or offerings that are different than yours.
Don’t dismiss this section just because you don’t have any current competition. If there isn’t a product or service similar to yours on the market, identity those firms that provide products or services that perform essentially the same function. You should also make an attempt to identify any firms that are likely to enter the market or are in the process of developing products or services that will be competitive with those you are offering.
Product features and benefits You briefly described the key features of your product or service in the concept section of the plan. In this section you should explore features and benefits in depth. It is essential to be clear not only about the distinguishing features of your product or service but also to delineate any strong consumer benefits. What makes your product or service significantly better than competitive offerings?
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Small Business
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