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Making a Risk Management Plan for Your Business
It’s impossible to eliminate all business risk. Therefore, it’s essential for having a plan for its management. You’ll be developing one covering compliance, environmental, financial, operational and reputation risk management. These guidelines are for making a risk management plan for your business.
Developing Your Executive Summary
When you start the risk management plan with an executive summary, you’re breaking apart what it will be compromised of into easy to understand chunks. Even though this summary is the project’s high-level overview, the goal is describing the risk management plan’s approach and scope. In doing so, you’re informing all stakeholders regarding what to expect when they’re reviewing these plans so that they can set their expectations appropriately.
Who Are the Stakeholders and What Potential Problems Need Identifying?
During this phase of making the risk management plan, you’re going to need to have a team meeting. Every member of the team must be vocal regarding what they believe could be potential problems or risks. Stakeholders should also be involved in this meeting as well to help you collect ideas regarding what could become a potential risk. All who are participating should look at past projects, what went wrong, what is going wrong in current projects and what everyone hopes to achieve from what they learned from these experiences. During this session, you’ll be creating a sample risk management plan that begins to outline risk management standards and risk management strategies.
Evaluate the Potential Risks Identified
A myriad of internal and external sources can pose as risks including commercial, management and technical, for example. When you’re identifying what these potential risks are and have your list complete, the next step is organizing it according to importance and likelihood. Categorize each risk according to how it could impact your project. For example, does the risk threaten to throw off timelines or budgets? Using a risk breakdown structure is an effective way to help ensure all potential risks are effectively categorized and considered. Use of this risk management plan template keeps everything organized and paints a clear picture of everything you’re identifying.
Assign Ownership and Create Responses
It’s essential to ensure a team member is overseeing each potential risk. That way, they can jump into action should an issue occur. Those who are assigned a risk, as well as the project manager, should work as a team to develop responses before problems arise. That way, if there are issues, the person overseeing the risk can refer to the response that was predetermined.
Have a System for Monitoring
Having effective risk management companies plans includes having a system for monitoring. It’s not wise to develop a security risk management or compliance risk management plan, for example, without having a system for monitoring. What this means is there’s a system for monitoring in place to ensure risk doesn’t occur until the project is finished. In doing so, you’re ensuring no new risks will potentially surface. If one does, like during the IT risk management process, for example, your team will know how to react.
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Scope and value of Business plan
Scope of business plan.
The setting of objectives is a decision-making process that reflects the aims of the entire organization. Generally, it begins at the top with a clear statement of the organization’s purpose. If well communicated and clearly defined down through the hierarchy, this statement becomes the basis for short-range objectives in the annual budget.
Management articulates the overall goals to and throughout the organization in order to coordinate all business activities efficiently and effectively. It does this by:
- Formulating and distributing a clear, concise statement of the central purpose of the business
- Leading in the formulating of long-range organizational goals
- Coordinating the activities of each department and division in developing derivative objectives
- Ensuring that each subdivision participates in the budget process
- Directing the establishment of short-term objectives through constructing the annual budget
- Evaluating actual results on the basis of the plans
The organization must know why it exists and how its current business can be profitable in the future. Successful businesses define themselves according to customer needs and satisfaction with products and services.
Management identifies the customers, their buying preferences, product sophistication, geographical locations, and market level. Analyzing this data in relation to the expected business environment, management determines the future market potential, the economic variables affecting this market, potential changes in buying habits, and unmet needs existing now and those to groom in the future.
In order to synchronize interdepartmental planning with overall plans, management reviews each department’s objectives to ensure that they are subordinate to the objectives of the next higher level.
Management quantifies objectives by establishing goals that are: specific and concrete, measurable, time-specific, realistic and attainable, open to modification, and flexible in their adaptation.
Because goals are objective-oriented, management generally lists them together. For example:
- Profit objectives state performance in terms of profits, earnings, return on investments, etc. A goal might call for an annual increase in profits of 15 percent for each of the next five years.
- Human resources. This broad topic includes training, deployment, benefits, work issues, and qualifications. In an architectural consulting firm, management might have a goal of in-house CAD training for a specified number of hours in order to reach a certain level of competence.
- Customer service. Management can look at improvements in customer service by stating the number of hours or the percentage of complaints it seeks to reduce. The cost or cost savings are stated in dollar terms. If the business sells service contracts for its products, sales goals can be calculated in percentage and dollar increases by type and level of contract.
- Social responsibility. Management may desire to increase volunteerism or contributions to community efforts. It would calculate the number of hours or dollars within a given time frame.
Evaluating proposed plans
Management undertakes a complete review and evaluation of the proposed strategies to determine their feasibility and desirability. Some evaluations call for the application of good judgment—the use of common sense. Others use sophisticated and complex mathematical models.
Prior to directing the development of a profit budget for the upcoming annual period, management resolves issues related to the internal workings of the organization from a behavioral point of view. For example:
- Ensuring managerial sophistication in the application of the plans
- Developing a realistic profit plan, and assigning adequate responsibility and control
- Establishing appropriate standards and objectives
- Communicating the attitudes, policies, and guidelines to operational and administrative personnel
- Attaining managerial flexibility in the execution of the plans
- Evaluating and updating the system to harmonize with the changing operational and business environments
Stating actions and resources required
With the objectives and forecasts in place, management decides what actions and resources are necessary in order to bring the forecast in line with the objectives. The basic steps management plans to take in order to reach an objective are its strategies.
Strategies exist at different levels in an organization and are classified according to the level at which they allocate resources. The overall strategy, often referred to as the grand strategy, outlines how to pursue objectives in light of the expected business environment and the business’s own capabilities. From the overall strategy, managers develop a number of more specific strategies.
- Corporate strategies address what business(es) an organization will conduct and how it will allocate its aggregate resources, such as finances, personnel, and capital assets. These are long-term in nature.
- Growth strategies describe how management plans to expand sales, product line, employees, capacity, and so forth. Especially necessary for dynamic markets where product life cycles are short, growth strategies can be (a) in the expansion of the current business line, (b) in vertical integration of suppliers and end-users, and (c) in diversifying into a different line of business.
- Stability strategies reflect a management satisfied with the present course of action and determined to maintain the status quo. Successful in environments changing very slowly, this strategy does not preclude working toward operational efficiencies and productivity increases.
- Defensive strategies, or retrenchment, are necessary to reduce overall exposure and activity. Defensive strategies are used: to reverse negative trends in profitability by decreasing costs and turning around the business operations; to divest part or all of a business to raise cash; and to liquidate an entire company for an acceptable profit.
- Business strategies focus on sales and production schemes designed to enhance competition and increase profits.
- Functional strategies deal with finance, marketing, personnel, organization, etc. These are expressed in the annual budget and address day-to-day operations.
Value of Business plan
A business plan is critical to the success of any business. And, if the plan is frequently reviewed and updated, it becomes increasingly valuable over time. It provides valuable historical information to help a business owner make decisions on the future direction of the company. Effective business planning will enable the owner to both maximize profits and maximize the value of the company. If the exit strategy of the owner is to sell the business, effective business planning during the life of the business will contribute to successfully selling the business at the best possible price.
What Information is Included in a Business Plan?
The information included in a business plan is also of great interest to a prospective buyer who is evaluating the business as a possible acquisition. Some of the major business areas that should be included in a business plan that would also be of interest to a buyer include the following:
– Mission Statement and Company Philosophy
– Company History
– Short term and long term revenue and profit goals
– Organizational structure
- Current Organization
- Organizational growth plan
- Employee development
- Target market
- Major accounts and/or markets
- Sales and marketing strategies
- Current processes
- Planned and proposed changes to operations
– Product and\or service lines
– Documented history of key successes and failures during the life of the business
Complete and accurate books and records are essential for the successful sale of any business. Typically, a buyer’s first exposure to the confidential details of a business comes in the form of a comprehensive document covering the financial and operational aspects of the business. Presenting buyers with the details contained in a good business plan will make a great first impression and can shorten the time it takes to close the sale. Providing buyers with extensive details upfront can shorten the buyer’s evaluation and due diligence process.
The growth potential of a business is usually a huge factor in a buyer’s decision to acquire that business. Potential can be difficult to prove, but a well-documented business plan can give a buyer a comfortable level of understanding about the potential opportunities and challenges for the business in the future.
A business owner’s claims about potential are sometimes discounted by buyers, unless those claims are supported by the type of in-depth historical and current data that is included in a good business plan. A business plan not only helps to prove potential; it also provides the buyer with several ideas on a possible road map on how to achieve that potential.
The first time business owner will sometimes experience anxiety over their ability to successfully manage a business, even though they may be highly qualified. A business plan should help to relieve that anxiety. The plan not only provides valuable information on how to manage a business, but also enables the buyer to benefit from the years of experience of the previous owner. The new owner can see a history of both successes and failures in the business, and they will benefit from the lessons learned by the previous owner.
Operations and Management
The operations and management component of your plan is designed to describe how the business functions on a continuing basis. The operations plan highlights the logistics of the organization, such as the responsibilities of the management team, the tasks assigned to each division within the company, and capital and expense requirements related to the operations of the business.
Financial Components of Your Business Plan
After defining the product, market and operations, the next area to turn your attention to are the three financial statements that form the backbone of your business plan: the income statement, cash flow statement, and balance sheet .
The income statement is a simple and straightforward report on the business’ cash-generating ability. It is a scorecard on the financial performance of your business that reflects when sales are made and when expenses are incurred. It draws information from the various financial models developed earlier such as revenue, expenses, capital (in the form of depreciation), and cost of goods. By combining these elements, the income statement illustrates just how much your company makes or loses during the year by subtracting cost of goods and expenses from revenue to arrive at a net result, which is either a profit or loss. In addition to the income statements, include a note analyzing the results. The analysis should be very short, emphasizing the key points of the income statement. Your CPA can help you craft this.
The cash flow statement is one of the most critical information tools for your business, since it shows how much cash you’ll need to meet obligations, when you’ll require it and where it will come from. The result is the profit or loss at the end of each month and year. The cash flow statement carries both profits and losses over to the next month to also show the cumulative amount. Running a loss on your cash flow statement is a major red flag that indicates not having enough cash to meet expenses-something that demands immediate attention and action.
The cash flow statement should be prepared on a monthly basis during the first year, on a quarterly basis for the second year, and annually for the third year. The following 17 items are listed in the order they need to appear on your cash flow statement. As with the income statement, you’ll need to analyze the cash flow statement in a short summary in the business plan. Once again, the analysis doesn’t have to be long and should cover highlights only. Ask your CPA for help.
The last financial statement you’ll need is a balance sheet. Unlike the previous financial statements, the balance sheet is generated annually for the business plan and is, more or less, a summary of all the preceding financial information broken down into three areas: assets, liabilities and equity.
Balance sheets are used to calculate the net worth of a business or individual by measuring assets against liabilities. If your business plan is for an existing business, the balance sheet from your last reporting period should be included. If the business plan is for a new business, try to project what your assets and liabilities will be over the course of the business plan to determine what equity you may accumulate in the business. To obtain financing for a new business, you’ll need to include a personal financial statement or balance sheet.
In the business plan, you’ll need to create an analysis for the balance sheet just as you need to do for the income and cash flow statements. The analysis of the balance sheet should be kept short and cover key points.
In this section, include any other documents that are of interest to your reader, such as your resume; contracts with suppliers, customers, or clients, letters of reference, letters of intent, copy of your lease and any other legal documents, tax returns for the previous three years, and anything else relevant to your business plan.
Some people think you don’t need a business plan unless you’re trying to borrow money. Of course, it’s true that you do need a good plan if you intend to approach a lender–whether a banker, a venture capitalist or any number of other sources–for startup capital. But a business plan is more than a pitch for financing; it’s a guide to help you define and meet your business goals.
Just as you wouldn’t start off on a cross-country drive without a road map, you should not embark on your new business without a business plan to guide you. A business plan won’t automatically make you a success, but it will help you avoid some common causes of business failure, such as under-capitalization or lack of an adequate market.
As you research and prepare your business plan, you’ll find weak spots in your business idea that you’ll be able to repair. You’ll also discover areas with potential you may not have thought about before–and ways to profit from them. Only by putting together a business plan can you decide whether your great idea is really worth your time and investment.
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Services and Scope of Work for Business Plan
A business plan contains a standard scope of work unless a client has provided a different scope of work. I work with my clients based on their specific needs and develop customized business plans that fit multiple audiences and various funding purposes. Standard scope of work includes:
- Executive Summary
- Business Overview
- Key Success Factors
- Commercial Viability of Business
- Job descriptions of owners and staff involved
- Organization chart explaining the above
- Market Research and Analysis
- Competitor Analysis
- Sales, Marketing and Promotions Strategy
- Competitive Edge
- Potential Customer Analysis
- SWOT Analysis
- Specific information of products/ services and pricing
- Distribution Strategy (if any), depending on the business model
- Operations Analysis
- Governing Laws, Regulations, and Licensing
- Risk Management and Contingency Plan
- Capital investment details and funding required
- Financials (2 years income statement, balance sheet, and cash flow statements)
- References for online market research
The Scope and Value of a Business Plan
A business plan outlines the future formal description an entrepreneurial organization. It is usually written down and formalized to all the stakeholders of the business organization. Also, the plan is the statement that outlines the goals, plans laid down to make sure they are attained clearly, and reasons why the organizations have faith on their actual attainment (Hisrich, Peters, & Shepherd, 2013).
Apparently, a business plan possesses some ideas on its projected state, suggestions on the target implementers such as organizations, and information about the associated stakeholders. These details are important within the plan because all linked parties will take roles towards achieving the business goals as outlined within the planning document.
Business plans are categorized into two types. This categorization is done according to the people that have these plans directed to them. The business plans are either focused externally or internally ( The U.S Small Business Administration, 2013). Business plans directed externally are those whose audiences are stakeholders of the commerce coming from the external end. These include shareholders from the public, investors, donors, and customers of the business. Internal plans direct the departments and stakeholders within the organization towards reaching the goals stated in the written documents. In this type of business plan, the steps to be followed in introducing new products, improved services and restructuring of departments within the firm are highlighted.
Business plans are crucial and necessary for the success of a business firm. It is known as the strategy that makes most businesses competitive and successful. For entrepreneurs, a business plan is one tool they should never omit. It is advisable for those coming up with new ventures to formulate their strategies and procedures through such planning before starting their operations.
The Scope and Value
When writing down the business plan, the issues and needs that concern all the stakeholders of the organization should be considered. This implies that the management, shareholders, customers, suppliers, and employees will have their interests addressed. Furthermore, it shows the big scope covered in the plan.
A business plan is vital to the entrepreneur since it makes sure there are goals and objectives for the business venture that the organization or entrepreneur is targeting. This is crucial since it will help to keep the business on focus. The business plan also gives guidance on the planning to be initiated for the implementation of the identified ventures. It is also valuable because it helps in checking the viability of a business venture to an organization or entrepreneur. This is useful because investors pay attention to the relevant ideas in the business. In addition, the planning is essential when getting the information required to get funding and approval from the management (Berry, 2013).
There are many reasons as to why one should have a business plan for his/her small or big firm. Many small businesses do not identify the needs of making these plans which explains their increasing closure attributed to sustainable strategies. On the other hand, organizations and persons insisting on having business plans for their entrepreneurial ventures end up being successful in most occurrences. The following paragraphs comprise the importance of the business plan.
Management having Specific Objectives
A business plan states all objectives of the organization where the managers have specific aims to achieve among them. This is beneficial to the business because the organization will be able to assess the performance of the managers easily by checking the strategies they have implemented to achieve the identified goals. The presence of these specific aims is also important to the managers since it enables them in setting strategies that can work best, and also track their own performance to ensure provision of the best for the business (Hisrich, Peters, & Shepherd, 2013).
A business plan acts as a vital motivational material to the entrepreneurs and firms. When the interested parties have it with all the set objectives to be achieved written down, they can keep checking if the goals are being achieved in a timely manner. If the stakeholders of the business are able to notice that some of the objectives set have been attained or are almost being achieved, they get the morale to keep on working towards achieving all goals within a specified period. This motivates everyone involved in attaining the goals of the organization to keep working efficiently as the goals are actually attainable.
Keep Stakeholders on Track
In the business plan, there are indications of the goals and identification of the strategies to be followed. This suggests that all the stakeholders and members of the organization will know what part they have to play towards achieving the business goals. Therefore, it will be easy for these entrepreneurs or stakeholders to check if they have moved away from the goals of the business and get back on the right track (Berry, 2013).
One crucial benefit of business plans is that it brings all the stakeholders of an entrepreneurial organization together when working towards attaining the goals. Once the objectives are set, they will have to be worked on jointly by the management and all the other employees for effectiveness in achieving them. The coordination of all the employees of the firm, starting from the top management to the lowest employee, will be an added advantage to the business over its competitors. Teamwork makes the goals easily attainable.
Create Investments for the Business
Investors are usually particular when picking a business to invest their capital. They have to be certain that their investments are safe. To be sure of this, the investors first insist on checking the business plan of the venture they want to put their money into. Therefore, entrepreneurs with well stated business plans stand a high chance of getting financial assistance from investors and other financial institutions.
Most Important Section of the Business Plan
A business plan has sections in which it is presented. The first part addresses the formation and ownership of the company/business. There is also a section that highlights the product to be introduced by the business idea and the market that is targeted. The other part deals with the finances related to the business. Some of the pertinent sections in a business plan are highlighted in the following paragraphs.
The statement of cash flow is among the most vital section of the business plan determining the operations on income generation. For effective running of a business, there must be cash in the organization for it to meet the requirements and pay for expenses incurred while implementing the plan. This entails planning for the cash available to be used in the venture and representing the budget to potential investors. Monitoring cash flow is crucial when assessing the performance of the stakeholders in trying to attain the business goals. Factors like the balance sheets, losses, and profits are important in gauging the performance of the business plan (Hull, 2013).
The part where the strengths, opportunities, weaknesses, and threats of the company are analyzed is also necessary for the business set up. These opportunities and strengths are responsible for making the progress of the business viable. The opportunities make the business have something good to present in the market while the strengths enables the business to face competition in better ways (Hull, 2013). In a business plan, the threats and weaknesses of the company are also analyzed. This is important because the stakeholders get to know what might pull the business down and strategizes on the ways to fix it.
Reasons for Business Plans Failing
Not all the business plans used by business organizations end up being successful in attaining the objectives of the plan. Some of these business plans fail because of misplaced ideas or improper evaluations.
Lack of Long Term Goals
Most companies concentrate on short term goals and forget about the business future when making their plans. This has seen organizations getting stranded after a short period of working on their business plans because it reaches a time when they have no direction or guide. Consequently, the objectives of the business plan end up not being achieved (Lavinsky, 2013).
Failure to Indicate Ones Unique Factors of Success
Different business firms have their own unique factors that put them ahead of their competitors and therefore make them competitive in the sector. Attributes like having a highly qualified management team and getting into a partnership with important companies put an entrepreneur at a better position of succeeding. When these success factors are not indicated in the business plan, the stakeholders in charge of implementing the plan forget to take advantage of them and beat their competitors.
Lack of persistence
For most businesses, it becomes tough when seeking investors to invest their cash in the business ideas they possess. Their business plans can be ignored by many investors due to fear, but giving up remains the last option for an entrepreneur who targets success in his or her ideas. Firms with no persistence would drop their business plans while the ones seeking success will press on until an investors agree to take their ideas (Mastermind, 2013).
The establishment of a business plan is vital to mark the trading progress and inform about the successes as well as failures. It is a strategy of identifying the areas that require changes in order to reach the targets. This research paper, therefore, recommends that all businesses should plan before initiating a progress of any form. In this way, the outcomes of implementing it will have greater chances of being successful than when there are no directions to follow. Moreover, capital wasted due to mismanagement and losses will be lower allowing many investors to gain interest on the business performances within a specified region. However, if an area has a history of failure, the investors will not have the confidence to allocate funds for the business operations in it. This history will not only boost the economy of the host nation, but also provide income to the employees and stakeholders.
Berry, T. (2013). 10 Business Plan Benefits You Might Be Forgetting. Web.
Hisrich, R., Peters, M., & Shepherd, D. (2013). Entrepreneurship. Boston: McGraw-Hill/Irwin.
Hull, P. (2013). 10 Essential Business Plan Components. Web.
Lavinsky, D. (2013). 4 Reasons Business Plans Fail. Web.
Mastermind. (2013). Why Most Business Plans Are Doomed to Fail. Web.
The U.S Small Business Administration. (2013). Create Your Business Plan. Web.
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What Is a Business Plan?
Understanding business plans, how to write a business plan, elements of a business plan, special considerations.
- Business Plan FAQs
Business Plan: What It Is, What's Included, and How To Write One
Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.
Investopedia / Ryan Oakley
A business plan is a document that defines in detail a company's objectives and how it plans to achieve its goals. A business plan lays out a written road map for the firm from marketing , financial, and operational standpoints. Both startups and established companies use business plans.
A business plan is an important document aimed at a company's external and internal audiences. For instance, a business plan is used to attract investment before a company has established a proven track record. It can also help to secure lending from financial institutions.
Furthermore, a business plan can serve to keep a company's executive team on the same page about strategic action items and on target for meeting established goals.
Although they're especially useful for new businesses, every company should have a business plan. Ideally, the plan is reviewed and updated periodically to reflect goals that have been met or have changed. Sometimes, a new business plan is created for an established business that has decided to move in a new direction.
- A business plan is a document describing a company's core business activities and how it plans to achieve its goals.
- Startup companies use business plans to get off the ground and attract outside investors.
- A business plan can also be used as an internal guide to keep an executive team focused on and working toward short- and long-term objectives.
- Businesses may create a lengthier traditional business plan or a shorter lean startup business plan.
- Good business plans should include an executive summary and sections on products and services, marketing strategy and analysis, financial planning, and a budget.
Want Funding? You Need a Business Plan
A business plan is a fundamental document that any new business should have in place prior to beginning operations. Indeed, banks and venture capital firms often require a viable business plan before considering whether they'll provide capital to new businesses.
Operating without a business plan usually is not a good idea. In fact, very few companies are able to last very long without one. There are benefits to creating (and sticking to) a good business plan. These include being able to think through ideas before investing too much money in them and working through potential obstacles to success.
A good business plan should outline all the projected costs and possible pitfalls of each decision a company makes. Business plans, even among competitors in the same industry, are rarely identical. However, they can have the same basic elements, such as an executive summary of the business and detailed descriptions of its operations, products and services, and financial projections. A plan also states how the business intends to achieve its goals.
While it's a good idea to give as much detail as possible, it's also important that a plan be concise to keep a reader's attention to the end.
A well-considered and well-written business plan can be of enormous value to a company. While there are templates that you can use to write a business plan, try to avoid producing a generic result. The plan should include an overview and, if possible, details of the industry of which the business will be a part. It should explain how the business will distinguish itself from its competitors.
Start with the essential structure: an executive summary, company description, market analysis, product or service description, marketing strategy, financial projections, and appendix (which include documents and data that support the main sections). These sections or elements of a business plan are outlined below.
When you write your business plan, you don’t have to strictly follow a particular business plan outline or template. Use only those sections that make the most sense for your particular business and its needs.
Traditional business plans use some combination of the sections below. Your plan might also include any funding requests you're making. Regardless, try to keep the main body of your plan to around 15-25 pages.
The length of a business plan varies greatly from business to business. Consider fitting the basic information into a 15- to 25-page document. Then, other crucial elements that take up a lot of space—such as applications for patents—can be referenced in the main document and included as appendices.
As mentioned above, no two business plans are the same. Nonetheless, they tend to have the same elements. Below are some of the common and key parts of a business plan.
- Executive summary: This section outlines the company and includes the mission statement along with any information about the company's leadership, employees, operations, and location.
- Products and services: Here, the company can outline the products and services it will offer, and may also include pricing, product lifespan, and benefits to the consumer. Other factors that may go into this section include production and manufacturing processes, any patents the company may have, as well as proprietary technology . Information about research and development (R&D) can also be included here.
- Market analysis: A firm needs a good handle on its industry as well as its target market. This section of the plan will detail a company's competition and how the company fits in the industry, along with its relative strengths and weaknesses. It will also describe the expected consumer demand for a company's products or services and how easy or difficult it may be to grab market share from incumbents.
- Marketing strategy: This section describes how the company will attract and keep its customer base and how it intends to reach the consumer. A clear distribution channel must be outlined. The section also spells out advertising and marketing campaign plans and the types of media those campaigns will use.
- Financial planning: This section should include a company's financial planning and projections. Financial statements, balance sheets, and other financial information may be included for established businesses. New businesses will include targets and estimates for the first few years plus a description of potential investors.
- Budget: Every company needs to have a budget in place. This section should include costs related to staffing, development, manufacturing, marketing, and any other expenses related to the business.
Unique Business Plans Help
The best business plans aren't generic ones created from easily accessed templates. A company should entice readers with a plan that demonstrates its singularity and potential for success.
Types of Business Plans
Business plans help companies identify their objectives and remain on track to meet goals. They can help companies start, manage themselves, and grow once up and running. They also act as a means to attract lenders and investors.
Although there is no right or wrong business plan, they can fall into two different categories—traditional or lean startup. According to the Small Business Administration (SBA) , the traditional business plan is the most common. It contains a lot of detail in each section. These tend to be longer than the lean startup plan and require more work.
Lean startup business plans, on the other hand, use an abbreviated structure that highlights key elements. These business plans aren't as common in the business world because they're short—as short as one page—and lack detail. If a company uses this kind of plan, it should be prepared to provide more detail if an investor or lender requests it.
A complete business plan must include a set of financial projections for the business. These forward-looking financial statements are often called pro-forma financial statements or simply the " pro-formas ." They include an overall budget, current and projected financing needs, a market analysis, and the company's marketing strategy.
Other Considerations for a Business Plan
A major reason for a business plan is to give owners a clear picture of objectives, goals, resources, potential costs, and drawbacks of certain business decisions. A business plan should help them modify their structures before implementing their ideas. It also allows owners to project the type of financing required to get their businesses up and running.
If there are any especially interesting aspects of the business, they should be highlighted and used to attract financing, if needed. For example, Tesla Motors' electric car business essentially began only as a business plan.
Importantly, a business plan shouldn't be a static document. As a business grows and changes, so too should the business plan. An annual review of the company and its plan allows an entrepreneur or group of owners to update the plan, based on successes, setbacks, and other new information. It provides an opportunity to size up the plan's ability to help the company grow.
Think of the business plan as a living document that evolves with your business.
A business plan is a document created by a company that describes the company's goals, operations, industry standing, marketing objectives, and financial projections. The information it contains can be a helpful guide in running the company. What's more, it can be a valuable tool to attract investors and obtain financing from financial institutions.
Why Do Business Plans Fail?
Even if you have a good business plan, your company can still fail, especially if you do not stick to the plan! Having strong leadership with focus on the plan is always a good strategy. Even when following the plan, if you had poor assumptions going into your projections, you can be caught with cash flow shortages and out of control budgets. Markets and the economy can also change. Without flexibility built in to your business plan, you may be unable to pivot to a new course as needed.
What Does a Lean Startup Business Plan Include?
The lean startup business plan is an option when a company prefers a quick explanation of its business. The company may feel that it doesn't have a lot of information to provide since it's just getting started.
Sections can include: a value proposition, a company's major activities and advantages, resources such as staff, intellectual property, and capital, a list of partnerships, customer segments, and revenue sources.
Small Business Administration. " Write Your Business Plan ."
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- What Is Bootstrapping? What It Means and How It's Used in Investing 12 of 46
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- Seed Capital: What It Is, How It Works, Example 14 of 46
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- Small Business Administration (SBA): Definition and What It Does 19 of 46
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- What is the C Suite?: Meaning and Positions Defined 21 of 46
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How To Write the Perfect Business Plan in 9 Steps (2023)
- by Desirae Odjick
- Dec 3, 2022
- 25 minute read
A great business plan can help you clarify your strategy, identify potential roadblocks, decide what you’ll need in the way of resources, and evaluate the viability of your idea or your growth plans before you start a business .
Not every successful business launches with a formal business plan, but many founders find value in taking time to step back, research their idea and the market they’re looking to enter, and understand the scope and the strategy behind their tactics. That’s where writing a business plan comes in.
Table of Contents
What is a business plan?
Why write a business plan, business plan formats, how to write a business plan in 9 steps, tips for creating a small business plan, common mistakes when writing a business plan, prepare your business plan today, business plan faq.
A business plan is a document describing a business, its products or services, how it earns (or will earn) money, its leadership and staffing, its financing, its operations model, and many other details essential to its success.
We had a marketing background but not much experience in the other functions needed to run a fashion ecommerce business, like operations, finance, production, and tech. Laying out a business plan helped us identify the “unknowns” and made it easier to spot the gaps where we’d need help or, at the very least, to skill up ourselves. Jordan Barnett, Kapow Meggings
Investors rely on business plans to evaluate the feasibility of a business before funding it, which is why business plans are commonly associated with getting a loan. But there are several compelling reasons to consider writing a business plan, even if you don’t need funding.
- Strategic planning: Writing out your plan is an invaluable exercise for clarifying your ideas and can help you understand the scope of your business, as well as the amount of time, money, and resources you’ll need to get started.
- Evaluating ideas: If you’ve got multiple ideas in mind, a rough business plan for each can help you focus your time and energy on the ones with the highest chance of success.
- Research: To write a business plan, you’ll need to research your ideal customer and your competitors—information that will help you make more strategic decisions.
- Recruiting: Your business plan is one of the easiest ways to communicate your vision to potential new hires and can help build their confidence in the venture, especially if you’re in the early stages of growth.
- Partnerships: If you plan to approach other companies to collaborate, having a clear overview of your vision, your audience, and your business strategy will make it much easier for them to identify whether your business is a good fit for theirs—especially if they’re further along than you in their growth trajectory.
- Competitions: There are many business plan competitions offering prizes such as mentorships, grants, or investment capital. To find relevant competitions in your industry and area, try Googling “business plan competition + [your location]” and “business plan competition + [your industry].”
If you’re looking for a structured way to lay out your thoughts and ideas, and to share those ideas with people who can have a big impact on your success, a business plan is an excellent starting point.
Free: Business Plan Template
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Business plans can span from one page to multiple pages with detailed graphs and reports. There’s no one way to create a business plan. The goal is to convey the most important information about your company for readers.
Common types of business plans we see include, but are not limited to, the following:
- Traditional. These are the most common business plans. Below, we’ll cover the standard elements of a business plan and go into detail for each section. Traditional business plans take longer to write and can be dozens of pages long. Venture capitalist firms and lenders ask for this plan.
- Lean. A lean business plan is a shorter version of a traditional business plan. It follows the same format, but only includes the most important information. Businesses use this plan to onboard new hires or modify existing plans for a specific target market.
- Nonprofit. A nonprofit business plan is for any entity that operates for public or social benefit. It covers everything you’ll find in a traditional business plan, plus a section describing the impact the company plans to make. For example, a speaker and headphone brand that aims to help people with hearing disabilities. Donors often request this plan.
Check out real-world examples of different business plans by reading The Road to Success: Business Plan Examples to Inspire Your Own .
- Draft an executive summary
- Describe your company
- Perform a market analysis
- Outline the management and organization
- List your products and services
- Perform customer segmentation
- Define a marketing plan
- Provide a logistics and operations plan
- Make a financial plan
Few things are more intimidating than a blank page. Starting your business plan with a structured outline and key elements for what you’ll include in each section is the best first step you can take.
Since an outline is such an important step in the process of writing a business plan, we’ve put together a high-level overview you can copy into your blank document to get you started (and avoid the terror of facing a blank page). You can also start with a free business plan template and use it to inform the structure of your plan.
Once you’ve got your business plan outline in place, it’s time to fill it in. We’ve broken it down by section to help you build your plan step by step.
1. Draft an executive summary
A good executive summary is one of the most crucial sections of your plan—it’s also the last section you should write.
The executive summary’s purpose is to distill everything that follows and give time-crunched reviewers (e.g., potential investors and lenders) a high-level overview of your business that persuades them to read further.
Again, it’s a summary, so highlight the key points you’ve uncovered while writing your plan. If you’re writing for your own planning purposes, you can skip the summary altogether—although you might want to give it a try anyway, just for practice.
An executive summary shouldn’t exceed one page. Admittedly, that space constraint can make squeezing in all of the salient information a bit stressful—but it’s not impossible. Here’s what your business plan’s executive summary should include:
- Business concept. What does your business do?
- Business goals and vision. What does your business want to do?
- Product description and differentiation. What do you sell, and why is it different?
- Target market. Who do you sell to?
- Marketing strategy. How do you plan on reaching your customers?
- Current financial state. What do you currently earn in revenue?
- Projected financial state. What do you foresee earning in revenue?
- The ask. How much money are you asking for?
- The team. strong> Who’s involved in the business?
2. Describe your company
This section of your business plan should answer two fundamental questions: who are you, and what do you plan to do? Answering these questions with a company description provides an introduction to why you’re in business, why you’re different, what you have going for you, and why you’re a good investment bet. For example, clean makeup brand Saie shares a letter from its founder on the company’s mission and why it exists.
Clarifying these details is still a useful exercise, even if you’re the only person who’s going to see them. It’s an opportunity to put to paper some of the more intangible facets of your business, like your principles, ideals, and cultural philosophies.
Here are some of the components you should include in your company description:
- Your business structure (Are you a sole proprietorship, general partnership, limited partnership, or incorporated company?)
- Your business model
- Your industry
- Your business’s vision, mission, and value proposition
- Background information on your business or its history
- Business objectives, both short and long term
- Your team, including key personnel and their salaries
Some of these points are statements of fact, but others will require a bit more thought to define, especially when it comes to your business’s vision, mission, and values. This is where you start getting to the core of why your business exists, what you hope to accomplish, and what you stand for.
This is where you start getting to the core of why your business exists, what you hope to accomplish, and what you stand for.
To define your values, think about all the people your company is accountable to, including owners, employees, suppliers, customers, and investors. Now consider how you’d like to conduct business with each of them. As you make a list, your core values should start to emerge.
Once you know your values, you can write a mission statement . Your statement should explain, in a convincing manner, why your business exists, and should be no longer than a single sentence.
As an example, Shopify’s mission statement is “Making commerce better for everyone.” It’s the “why” behind everything we do and clear enough that it needs no further explanation.
What impact do you envision your business having on the world once you’ve achieved your vision?
Next, craft your vision statement: what impact do you envision your business having on the world once you’ve achieved your vision? Phrase this impact as an assertion—begin the statement with “We will” and you’ll be off to a great start. Your vision statement, unlike your mission statement, can be longer than a single sentence, but try to keep it to three at most. The best vision statements are concise.
Finally, your company description should include both short- and long-term goals. Short-term goals, generally, should be achievable within the next year, while one to five years is a good window for long-term goals. Make sure all your goals are SMART: specific, measurable, attainable, realistic, and time-bound.
3. Perform a market analysis
No matter what type of business you start, it’s no exaggeration to say your market can make or break it. Choose the right market for your products—one with plenty of customers who understand and need your product—and you’ll have a head start on success. If you choose the wrong market, or the right market at the wrong time, you may find yourself struggling for each sale.
Market analysis is a key section of your business plan, whether or not you ever intend for anyone else to read it.
This is why market research and analysis is a key section of your business plan, whether or not you ever intend for anyone else to read it. It should include an overview of how big you estimate the market is for your products, an analysis of your business’s position in the market, and an overview of the competitive landscape. Thorough research supporting your conclusions is important both to persuade investors and to validate your own assumptions as you work through your plan.
How big is your potential market?
The potential market is an estimate of how many people need your product. While it’s exciting to imagine sky-high sales figures, you’ll want to use as much relevant independent data as possible to validate your estimated potential market.
Since this can be a daunting process, here are some general tips to help you begin your research:
- Understand your ideal customer profile . If you’re targeting millennial consumers in the US, you first can look for government data about the size of that group. You also could look at projected changes to the number of people in your target age range over the next few years.
- Research relevant industry trends and trajectory. If your product serves retirees, try to find data about how many people will be retiring in the next five years, as well as any information you can find about consumption patterns among that group. If you’re selling fitness equipment, you could look at trends in gym memberships and overall health and fitness among your target audience or the population at large. Finally, look for information on whether your general industry is projected to grow or decline over the next few years.
- Make informed guesses. You’ll never have perfect, complete information about the size of your total addressable market. Your goal is to base your estimates on as many verifiable data points as necessary for a confident guess.
Some sources to consult for market data include government statistics offices, industry associations, academic research, and respected news outlets covering your industry.
A SWOT analysis looks at your strengths, weaknesses, opportunities, and threats. What are the best things about your company? What are you not so good at? What market or industry shifts can you take advantage of and turn into opportunities? Are there external factors threatening your ability to succeed?
These breakdowns often are presented as a grid, with bullet points in each section breaking down the most relevant information—so you can probably skip writing full paragraphs here. Strengths and weaknesses—both internal company factors—are listed first, with opportunities and threats following in the next row. With this visual presentation, your reader can quickly see the factors that may impact your business and determine your competitive advantage in the market.
Here’s an example:
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There are three overarching factors you can use to differentiate your business in the face of competition:
- Cost leadership. You have the capacity to maximize profits by offering lower prices than the majority of your competitors. Examples include companies like Mejuri and Endy .
- Differentiation. Your product or service offers something distinct from the current cost leaders in your industry and banks on standing out based on your uniqueness. Think of companies like Knix and Qalo .
- Segmentation. You focus on a very specific, or niche, target market, and aim to build traction with a smaller audience before moving on to a broader market. Companies like TomboyX and Heyday Footwear are great examples of this strategy.
To understand which is the best fit, you’ll need to understand your business as well as the competitive landscape.
You’ll always have competition in the market, even with an innovative product, so it’s important to include a competitive overview in your business plan. If you’re entering an established market, include a list of a few companies you consider direct competitors and explain how you plan to differentiate your products and business from theirs.
You’ll always have competition in the market, even with an innovative product.
For example, if you’re selling jewelry, your competitive differentiation could be that, unlike many high-end competitors, you donate a percentage of your profits to a notable charity or pass savings on to your customers.
If you’re entering a market where you can’t easily identify direct competitors, consider your indirect competitors—companies offering products that are substitutes for yours. For example, if you’re selling an innovative new piece of kitchen equipment, it’s too easy to say that because your product is new, you have no competition. Consider what your potential customers are doing to solve the same problems your product solves.
4. Outline management and organization
The management and organization section of your business plan should tell readers about who’s running your company. Detail the legal structure of your business. Communicate whether you’ll incorporate your business as an S corporation or create a limited partnership or sole proprietorship.
If you have a management team, use an organizational chart to show your company’s internal structure, including the roles, responsibilities, and relationships between people in your chart. Communicate how each person will contribute to the success of your startup.
5. List your products and services
Your products or services will feature prominently in most areas of your business plan, but it’s important to provide a section that outlines key details about them for interested readers.
If you sell many items, you can include more general information on each of your product lines; if you only sell a few, provide additional information on each. For example, bag shop BAGGU sells a large selection of different types of bags, in addition to home goods and other accessories. Its business plan would list out those bags and key details about each.
Describe new products you’ll launch in the near future and any intellectual property you own. Express how they’ll improve profitability.
It’s also important to note where products are coming from—handmade crafts are sourced differently than trending products for a dropshipping business, for instance.
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6. perform customer segmentation.
Your ideal customer, also known as your target market, is the foundation of your marketing plan , if not your business plan as a whole. You’ll want to keep this person in mind as you make strategic decisions, which is why an overview of who they are is important to understand and include in your plan.
To give a holistic overview of your ideal customer, describe a number of general and specific demographic characteristics. Customer segmentation often includes:
- Where they live
- Their age range
- Their level of education
- Some common behavior patterns
- How they spend their free time
- Where they work
- What technology they use
- How much they earn
- Where they’re commonly employed
- Their values, beliefs, or opinions
This information will vary based on what you’re selling, but you should be specific enough that it’s unquestionably clear who you’re trying to reach—and more importantly, why you’ve made the choices you have based on who your customers are and what they value.
For example, a college student has different interests, shopping habits, and pricing sensitivity than a 50-year-old executive at a Fortune 500 company. Your business plan and decisions would look very different based on which one was your ideal customer.
7. Define a marketing plan
Your marketing efforts are directly informed by your ideal customer. Your marketing plan should outline your current decisions and your future strategy, with a focus on how your ideas are a fit for that ideal customer.
If you’re planning to invest heavily in > Instagram marketing , for example, it might make sense to include whether Instagram is a leading platform for your audience—if it’s not, that might be a sign to rethink your marketing plan.
Most marketing plans include information on four key subjects. How much detail you present on each will depend on both your business and your plan’s audience.
- Price. How much do your products cost, and why have you made that decision?
- Product. What are you selling and how do you differentiate it in the market?
- Promotion. How will you get your products in front of your ideal customer?
- Place. Where will you sell your products?
Promotion may be the bulk of your plan since you can more readily dive into tactical details, but the other three areas should be covered at least briefly—each is an important strategic lever in your marketing mix.
8. Provide a logistics and operations plan
Logistics and operations are the workflows you’ll implement to make your ideas a reality. If you’re writing a business plan for your own planning purposes, this is still an important section to consider, even though you might not need to include the same level of detail as if you were seeking investment.
Cover all parts of your planned operations, including:
- Suppliers. Where do you get the raw materials you need for production, or where are your products produced?
- Production. Will you make, manufacture, wholesale , or dropship your products? How long does it take to produce your products and get them shipped to you? How will you handle a busy season or an unexpected spike in demand?
- Facilities. Where will you and any team members work? Do you plan to have a physical retail space? If yes, where?
- Equipment. What tools and technology do you require to be up and running? This includes everything from computers to lightbulbs and everything in between.
- Shipping and fulfillment. Will you be handling all the fulfillment tasks in-house, or will you use a third-party fulfillment partner?
- Inventory. How much will you keep on hand, and where will it be stored? How will you ship it to partners if required, and how will you approach inventory management ?
This section should signal to your reader that you’ve got a solid understanding of your supply chain and strong contingency plans in place to cover potential uncertainty. If your reader is you, it should give you a basis to make other important decisions, like how to price your products to cover your estimated costs, and at what point you plan to break even on your initial spending.
9. Make a financial plan
No matter how great your idea is, and regardless of the effort, time, and money you invest, a business lives or dies based on its financial health. At the end of the day, people want to work with a business they expect to be viable for the foreseeable future.
The level of detail required in your financial plan will depend on your audience and goals, but typically you’ll want to include three major views of your financials: an income statement, a balance sheet, and a cash-flow statement. It also may be appropriate to include financial data and projections.
Here’s a spreadsheet template that includes everything you’ll need to create an income statement, balance sheet, and cash-flow statement, including some sample numbers. You can edit it to reflect projections if needed.
Your income statement is designed to give readers a look at your revenue sources and expenses over a given time period. With those two pieces of information, they can see the all-important bottom line or the profit or loss your business experienced during that time. If you haven’t launched your business yet, you can project future milestones of the same information.
Your balance sheet offers a look at how much equity you have in your business. On one side, you list all your business assets (what you own), and on the other side, all your liabilities (what you owe). This provides a snapshot of your business’s shareholder equity, which is calculated as:
Assets - Liabilities = Equity
Cash flow statement
Your cash flow statement is similar to your income statement, with one important difference: it takes into account when revenues are collected and when expenses are paid.
When the cash you have coming in is greater than the cash you have going out, your cash flow is positive. When the opposite scenario is true, your cash flow is negative. Ideally, your cash flow statement will help you see when cash is low, when you might have a surplus, and where you might need to have a contingency plan to access funding to keep your business solvent .
It can be especially helpful to forecast your cash-flow statement to identify gaps or negative cash flow and adjust operations as required. Here’s a full guide to working through cash-flow projections for your business.
Download your copy of these templates to build out these financial statements for your business plan.
Know your audience
When you know who will be reading your plan—even if you’re just writing it for yourself to clarify your ideas—you can tailor the language and level of detail to them. This can also help you make sure you’re including the most relevant information and figure out when to omit sections that aren’t as impactful.
Have a clear goal
You’ll need to put in more work and deliver a more thorough plan if your goal is to secure funding for your business versus working through a plan for yourself or even your team.
Invest time in research
Sections of your business plan will primarily be informed by your ideas and vision, but some of the most crucial information you’ll need requires research from independent sources. This is where you can invest time in understanding who you’re selling to, whether there’s demand for your products, and who else is selling similar products or services.
Keep it short and to the point
No matter who you’re writing for, your business plan should be short and readable—generally no longer than 15 to 20 pages. If you do have additional documents you think may be valuable to your audience and your goals, consider adding them as appendices.
Keep the tone, style, and voice consistent
This is best managed by having a single person write the plan or by allowing time for the plan to be properly edited before distributing it.
Use a business plan software
Writing a business plan isn’t the easiest task for business owners. But it’s important for anyone starting or expanding a business. Fortunately, there are tools to help with everything from planning, drafting, creating graphics, syncing financial data, and more. Business plan software also have templates and tutorials to help you finish a comprehensive plan in hours, rather than days.
A few curated picks include:
- LivePlan : the most affordable option with samples and templates
- Bizplan : tailored for startups seeking investment
- GoSmallBiz : budget-friendly option with industry-specific templates
For a more in-depth look at the available options, read Get Guidance: 6 Business Plan Software to Help Write Your Future .
Other articles on business plans would never tell you what we’re about to tell you: your business plan can fail. The last thing you want is for time and effort to go down the drain. Avoid these common mistakes:
- Bad business idea. Not every idea is going to win. Sometimes your idea may be too risky and you won’t be able to get funding for it. Other times it’s too expensive or there’s no market. Aim for small business ideas that require little money and bypass traditional startup costs.
- No exit strategy. Investors reading your business plan want to know one thing: will your venture make them money? If you don’t show an exit strategy, or a plan for them to leave the business with maximum profits, you’ll have little luck finding capital.
- Unbalanced teams. A great product is the cost of entry to starting a business. But an incredible team will take it to the top. Unfortunately, many business owners overlook a balanced team. They assume readers want to see potential profits, without worrying about how you’ll get it done. If you’re pitching a new software idea, it makes sense to have at least one developer or IT specialist on your team.
- Missing financial projections. Your numbers are the most interesting part for readers. Don’t leave out your balance sheet, cash flow statements, P&L statements, and income statements. Include your break-even analysis and return-on-investment calculations to create a successful business plan.
- Spelling and grammar errors. Some businesses think hiring a professional editor is overkill. The reality is, all the best organizations have an editor review their documents. If someone spots typos while reading your business plan, how can they believe you’ll run a successful company?
Read through the following business plan example. You can download a copy in Microsoft Word or Google Docs and use it to inspire your own business planning.
Download sample business plan example (.doc)
A business plan can help you identify clear, deliberate next steps for your business, even if you never plan to pitch investors—and it can help you see gaps in your plan before they become issues. Whether you’ve written a business plan for a new online business idea , a retail storefront, growing your established business, or purchasing an existing business , you now have a comprehensive guide and the information you need to help you start working on the next phase of your own business.
Illustrations by Rachel Tunstall
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How do i write a business plan.
- Executive summary
- Company description
- Market analysis
- Management and organization
- Products and services
- Customer segmentation
- Marketing plan
- Logistics and operations
- Financial plan
What is a good business plan?
What are the 3 main purposes of a business plan, what are the different types of business plans, about the author.
Desirae is a senior product marketing manager at Shopify, and has zero chill when it comes to helping entrepreneurs grow their businesses.
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What Is Business Scope (Explained: All You Need To Know)
Looking for Business Scope ?
What does scope mean in business?
What’s essential to know?
In this article, I will break down the meaning of Business Scope so you know all there is to know about it!
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Table of Contents
Business Scope Meaning
You’re looking to write a business plan, apply for a business loan, or register a new business entity and you’re asked to provide the “scope” of your business…
What does business scope mean?
What should you indicate there?
Defining and properly understanding your business scope is very important for all businesses to ensure that all employees, managers, executives, and directors are all paddling in the same direction.
In the English language, the word scope is defined as “area” or “subject matter”.
In essence, “business scope” means the “area” in which your business operations (your business objective).
Depending on your business, you may have to define your business scope per department, per region, per product line, or for the entire business.
For example, a small boutique selling t-shirts will have a highly defined scope (the sale of consumer goods at retail).
On the other hand, a large conglomerate having subsidiaries operating in different lines of business will have to define its scope per subsidiary or line of business.
Business Scope Definition
How do you define business scope?
If you ask ten people to define business scope, you may potentially get ten different answers.
Business scope is a broad term that can be defined in many ways.
Scope in business tends to summarize in a few words what your company does.
Here is a definition of business scope that can be considered:
Business scope refers to the main strategic direction of your company Author
In other words, your business scope refers to the reason why company shareholders appoint the board of directors and the board’s overall objectives.
Your “business scope” should refer to every business activity performed by your company from sales, marketing, product development, contracting, and all other functions.
Why Is Business Scope Important
Defining the scope of your business is quite important.
For a new company starting out, defining your business scope allows you to better target your business plan, increase your chance of getting the business financing or loan that you need, and ensure that everyone in your company is working on the same objective.
Having a good understanding of your business scope will also allow you to properly define your business when you’re looking to form a new business entity.
In many states, you’ll be asked to provide the “business scope” when you’re looking to form a new business entity.
Having defined your business scope, especially for a new business, will help you immediately answer this question.
In other jurisdictions, the scope of your business is also mentioned in the company’s incorporation papers, charter, memorandum, articles of association, or similar documents.
- Need of business
How To Write A Business Scope
The scope of your business should be clear enough allowing everyone to quickly understand what your business does.
To define your business scope, you’ll first need to understand the nature of your business.
There are three broad nature of business categories: service business , merchandising business , and manufacturing business.
For example, a consulting firm will be in the service business whereas a grocery store will be in the merchandising business.
Once you have defined your overall business nature, then you can start defining your scope.
For most small businesses, the business scope should cover what your company does as a whole.
However, large businesses may need to consider their scope per unit, region, industry, or other segments.
To narrow your scope, consider the strategic direction of your company.
What is your company looking to achieve?
What’s the overall purpose of your company?
Who are you trying to serve?
Your scope should cover the products and services you offer, all your physical locations, and the markets you serve.
For example, a shoe store will potentially have the following business scope: provide affordable sports shoes to sports amateurs and athletes.
- Nature of business meaning
Business Scope Example
Let’s look at a few examples of business scope to better understand the topic.
A family-owned catering business can define its scope as “providing catering services to individuals and companies in the city”.
A small boutique could define its scope to be “purchase consumer goods wholesale and sell to consumers at retail”.
A large company having different lines of business can define a scope for each line of business, such as:
- Provide professional services to companies for the implementation of network security products and equipment
- Provide network security products and equipment to companies of all size
- Types of businesses
So there you have it folks!
What does business scope mean in simple terms?
Scope in business refers to a statement summing up all the activities performed by a company from sales, marketing, product, contracts, and more.
For most businesses (small businesses and SMEs), business scope covers all departments and all functions of the business.
For larger organizations, the scope may be defined per region, industry, or other qualifications.
Properly defining your business “ scope ” is crucial allowing you to quickly verbalize what your company does and the results it is looking to achieve.
Now that you know what “business scope” means, why it’s important, and how to define one, good luck with your business!
If you enjoyed this article on Business Scope , I recommend you look into the following terms and concepts. Enjoy!
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How to Write a Business Plan
When how to write a business plan is at the top of the SBA list of the ten steps in how to start a business, it tells you something about how important the experts consider it to be. Planning a business and writing a business plan is more than just having a location picked and a product or service to sell. Financing, marketing strategy, and future growth all require a well-researched and thought out business plan.
- Chapter 1 – Getting Started
- Chapter 2 – The Key Elements of a Business Plan
- Chapter 3 – Executive Summary
- Chapter 4 – Business Description
- Chapter 5 – Business Environment Analysis
- Chapter 6 – Industry Analysis
- Chapter 7 – Competitive Analysis
- Chapter 8 – Market Analysis
- Chapter 9 – Marketing Plan
- Chapter 10 – Operations Plan
- Chapter 11 – Team and Management Plan
- Chapter 12 – Financial Projections
- Chapter 13 – Appendix
There are many articles and resources available on the Internet explaining how to write a business plan, but writing a business plan is more than merely following a business plan template or copying someone’s business plan examples. A business plan can be as simple as a few notes scrawled on a paper napkin. It can be a 40-page document with multiple sections and subsections describing every minute detail of its operations, products, and finances.
Writing an effective business plan is easier if you take time before starting the writing process to conduct your research and gather the information you need to incorporate into it. Business owners of new startups or established companies can benefit from thinking through and researching such success-determining issues as:
- Marketing strategies
- Regulatory environment
- Capitalization requirements
- Financing opportunities
From this list, you quickly realize that a business plan is more than a document a business uses to get financing or to attract investors. It is a roadmap of how your business will operate to succeed. Before you can begin writing your business planning roadmap, you need reliable information about your industry, your competitors, your product, and your customers for inclusion in it. An industry analysis, competitor analysis, product feature comparison, and market research will give you the information you need.
How to Conduct an Industry Analysis
Understanding the market and industry in which your company will do business is accomplished through industry analysis. An industry analysis conducted before you begin to write a business plan will help you to:
- Recognize and analyze ways of reducing business risks
- Identify industry trends including potential problem areas within the industry
- Project capitalization requirements for your business
- Identify product and service trends and opportunities
Industry analysis is specific to the particular industry in which a business is currently operating or plans to venture. It provides information from which a business owner can create a long-term strategy to minimize risks and take advantage of growth opportunities.
Porter’s Industry Analysis Method
A method developed by Michael E. Porter of Harvard University has become the most frequently used method for analyzing any industry to create a strategy to compete within it. According to Porter, five forces influence all markets and industries.
The five forces are:
- Ease of entry: When new companies can enter an industry with relative ease, those companies already in operation will love their competitive advantage. Profits will suffer unless existing companies have a way to block or slow new entries. Government regulation, customer loyalty, and patents and copyrights can be barriers to new businesses entering a market or industry.
- Power held by suppliers: Suppliers of products, services, or materials that a business needs can affect a company’s ability to compete. If there are few alternative products or only a few vendors offering the materials, the suppliers can dictate prices, quantities, and delivery times to businesses that must purchase from them.
- Power of buyers: Strong customer bargaining power, as in industries where there are many competing products from which a buyer can choose, can affect a company’s ability to price its products without fear of losing customers.
- Availability of substitute products or services: If two companies with similar products compete within an industry, they will each benefit as advertising and marketing by the companies will generally increase customer demand. For example, two businesses selling different house paint brands will mutually benefit as customer demand for their products increases due to the competing marketing campaigns. A company that sells and promotes vinyl siding as a substitute for painted surfaces will reduce the market share’s size for paint.
- Competitive rivalry: This factor in the analysis takes into consideration the number of competitors in an industry and their relative strength. An industry with many companies offering similar products will offer a company little opportunity to control consumers’ or suppliers’ ability from going elsewhere.
Porter believed that an analysis of the five forces that exist in every industry could help forecast a company’s ability to compete and remain profitable. You will obtain sufficient information on your industry from the five forces analysis to formulate long- and short-term strategies to incorporate into your business plan.
A business plan for startup companies will benefit from an industry analysis that provides ownership with information to make decisions and formulate policy in certain key areas. You should be able to answer the following key questions about the industry and your company’s ability to successfully compete in it when you have completed the industry analysis:
- What are the primary economic characteristics of the industry?
- How strong are the competitive forces that exist within the industry?
- What trends or changes can be expected in the industry, and from where will they come?
- What response will competitors make to the entry of a new company into the industry?
- What are the factors that will determine your company’s ability to succeed?
- What are the industry prospects for profitability and potential for growth?
- Will the company compete on a local, national, regional, or international basis?
- What modifications or changes must be done to the company’s products or services to make them competitive in this industry?
Industry Analysis Resources and Tools
There are several free industry analysis resources and tools available to entrepreneurs preparing to write a business plan. A few of the more popular sources of industry information include:
- BizStats (www.bizstats.com): It offers statistics and financial data on businesses in a variety of industries as well as tools to calculate business valuation and cost of goods sold.
- Securities and Exchange Commission (www.sec.gov/edgar.shtml): The SEC makes annual reports and other financial filings of publicly traded companies available for review at its website.
- FreeLunch.com: This site from Moody’s Analytics offers data on economic trends and financial data from around the country.
- Hoover’s Online (www.hoovers.com): This is a Dun & Bradstreet offers a searchable database of financial information and profiles of public and private companies.
- U.S. Census Bureau (www.census.gov): Government agencies can offer a treasure-trove of information. The Census Bureau has searchable databases with industry overviews, economic data by region, and population statistics.
- Thomas Register (www.thomasnet.com): Originally published in book form, the Thomas Register is a searchable database of product information and market trends for various industries. It publishes an annual survey it calls its “Industry Market Barometer” that shows where reporting companies are, where they have been and where they are heading.
- Library of Congress Legislative Information (https://beta.congress.gov/): The primary source for information about recently enacted federal legislation that could affect a business or an entire industry.
- Websites of individual companies or trade associations: Most companies have websites that provide information about the business, including products and management structure. Trade associations usually have websites that offer glimpses into what is happening within an industry from those working in it.
Industry analysis is not to be confused with a market analysis or a competitor analysis, both of which are included in a business plan for entrepreneurs. Industry analysis will describe the products offered within a particular industry and the marketplace parameters concerning economic, regulatory, and political issues. An industry analysis establishes the marketplace’s scope; a market analysis tells a business owner if a particular industry’s market will be profitable for a company’s product.
How to do a Competitor Analysis
Competitor analysis is when a business obtains information to identify and learn more about key competitors to predict how the competition will react. Competitive analysis plays a vital role in strategic planning, so writing a great business plan becomes easier if you do your research before writing your business plan.
Unlike the competitive rivalry factor of industry analysis, a competitor analysis focuses attention on each competitor’s strengths and weaknesses instead of focusing on the overall competitive climate within an industry. A competitor analysis offers a detailed profile of each competitor along with an analysis of marketing strategies that can be used to counter position your company to improve market share or profitability.
At the completion of your competitor analysis, you should be able to:
- Identify your primary competition within your industry and marketplace
- Know the company profile of your competitors
- Identify the geographic location in which competitors operate
- Identify competitor’s market share and profitability
- Know and understand your competition’s strategies and objectives
- Identify benefits, such as increased customer awareness, derived from your competitors’ marketing
- How to identify and understand competitor strategies that are successful and those that are not
- How to anticipate your competition’s response to implementation of your strategies and plans
- Learn how to turn your competition’s anticipated response to your benefit
The following steps will guide you through your competitor analysis:
- Create a list of your current and future competitors
- Gather data and information about your competitors, their products, and their marketing and pricing strategies
- Review and analyze the data
- Create a list of your competitors’ strengths and weaknesses
- Create strategies to take advantage of competitors’ weaknesses while a minimizing threats posed by their strengths
Sources of Competitor Information
Information for competitor analysis is available from several sources, including news stories and press releases, advertising, company websites, promotional campaigns, patent and copyright applications, price lists, and, in the case of publicly traded companies, annual reports, and SEC filings.
Sometimes, getting information about a competitor might require a bit of sleuthing on your part. If your competitor has a store that is open to the public, no rules are prohibiting you from visiting it and taking a look around. Becoming a member of a competitor’s mailing list to receive promotional material and updates on new products and pricing is a quick and easy source of information.
The information gathered about competitors might not seem like much when looked at separately, but it can be mosaic-like in what it reveals about your competition when viewed as a whole. A random conversation with a supplier might reveal information about a change in a competitor’s product line. The point is to take advantage of every opportunity to acquire data about the marketplace in which your business operates. It might reveal something about your competitors that could be used in developing or refining your marketing strategy.
How to do a Product Feature Comparison
A product feature comparison allows you to compare your company’s product with products produced by competitors. Unlike a competitor analysis that allows you to determine how your business measures up to competing businesses, product feature comparisons limit their focus to the products themselves. When used as part of creating an easy business plan, product features comparison data can provide critical information to making marketing decisions.
1. Conducting the Research
The first thing you should do is purchase or acquire your competitor’s product. This gives you the chance to evaluate your competitor’s sales process while acquiring the product to test. Using the product, you can compare features on the competitor’s product with your own product. If the features of the competing product give it a performance advantage over your own, you can evaluate how important those features are to determine if your product should be redesigned. Another source of information on the product is the internet. What are consumers saying about your product versus the product sold by your competitor? Product reviews by websites that specialize in testing products could also tell you how your product is faring in the marketplace compared to other products.
2. Product Comparison Tables
The information you obtained through your research and product testing is easier to compare if compiled in a simple table format. Each product’s features can be listed under separate columns for each feature, and each product feature can be judged to determine which one was the best. The best feature gets one point while the other product’s feature gets no points. The winning product is the one that ends up with the most points.
Another method of evaluating the features of different products is to assign a score of 1 to 10, with a higher score going to features deemed to be the most important as far as product performance. The winning product is the one that ends up with the highest overall score.
3. Coming to a Conclusion
Comparing a competitor’s product features with those of your own product is only useful if you use the information to make worthwhile improvements to your product. Redesigning your product just to make it look more like your competitor’s product only makes sense if the redesign meets a customer need that your product is not currently meeting.
The conclusions you reach from the data a product feature comparison gives can be incorporated into the market analysis, competitive analysis, and marketing plan sections when writing a business plan. The information will also be useful in guiding decisions made for the future development of new products.
How to Conduct Market Research
Market research provides businesses with information about their customers and the markets in which they do business. By analyzing its data, business owners offer products that consumers want at competitive prices with other sellers. For the new entrepreneur who is learning how to start a business, market research performed before preparing a business plan can help formulate strategies to reduce risks, recognize marketplace and industry trends, and identify opportunities to increase sales.
The marketplace for many businesses is no longer limited to one country. The growth of internet commerce has made it possible for even small businesses to participate in the global economy for many products and services. Market research can help owners of businesses to evaluate the feasibility of expansion into international markets.
The data collected through market research should give a business owner the answers to the following questions:
- Who are the customers for a company’s product or service? What factors influence consumers to purchase this product or service?
- What improvements or changes in current products would encourage customers to purchase more of them?
- What price range will cause customers to switch to other competing products?
- What features of a competitor’s product do customers like or dislike?
- What other uses of the product exist that can be introduced into new markets?
- Marketing research allows you to compile a profile of your current or potential customers to provide answers to the following questions:
- How old are they?
- Where do they live?
- What is their highest level of education?
- How large is the customer base?
- What are their favorite leisure time activities
- What do they do for a living?
- How much do they earn?
- Where are they employed?
- What technology do they use and prefer?
- What are their beliefs, values or opinions?
- Where do they prefer to shop?
- For whom do they shop?
Market Research Tools
The methods of gathering information about consumers do not have to be complicated. Frequently used methods include: Interviews by telephone or face-to-face Surveys are conducted online, by telephone, or through the mail. Questionnaires are completed online, in person, or through the mail. Focus groups to solicit feedback from people representing a cross-section of potential customers
Steps in Market Research
Any of the tools used to gather information can be employed using a five-step approach.
- Step 1: Identify what you want to learn or find out. Be specific about what you want to learn. Working on a single issue or question is easier than trying to create a survey or interview covering a wide variety of topics. For example, if your company is attempting to develop a new and improved widget to replace widgets currently being sold, you might focus your research on customer experiences with the old widget. Are they satisfied with how it performs? Do they believe there is a need for a new and improved model? Would they buy a new and improved model? How much are they willing to pay?
- Step 2: Draft questions to allow for follow-up questions depending upon the answer given.
- Step 3: Identify the target group for your research. Interviewing people who have never used your product will not generate data to determine how your product users react to its design changes.
- Step 4: Select the most effective tool for obtaining the information you need. If your company is in the telecommunications industry, surveying by telephone might be more effective than one conducted through the mail.
- Step 5: Analyze the results of your research. Market research data is only as good as the use to which you can put it. Go back and review the purpose of your research. Determine if the data you gathered allows you to answer the question or solve the problem. If it does, develop a strategy and implement it. If it does not, then decide what additional data you need and return to step 1.
The Key Elements in Writing a Business Plan
The answer to the question “How do you write a business plan?” depends upon the type of business and the purpose for which you are going to use it. Too many business owners think of a business plan as they need to convince a bank to lend their company a loan or convince a venture capitalist to invest in it.
In fact, business plans come in all shapes and sizes, depending upon the audience for which the plan is intended. For example, a startup company would want a business plan containing all of the bells and whistles to serve as a comprehensive guide for the new owners and management. Should the time come when financing is needed for new equipment or expansion, a revised business plan that focuses on the company’s financial growth and ability to repay, the debt would be needed.
Business plans are written with an audience in mind. Internal business plans are written for a company’s management team to use as an operational guide. It can also be written with a specific project in mind to allow owners and managers to evaluate its feasibility and profitability. These types of plans might include projections about profitability and growth ten or more years into the future.
External plans are written for the benefit of an audience located outside of the company. Prospective investors or venture capitalists and lending institutions are examples of the types of audiences for which external business plans are created. These types of plans are created to answer a question or address a particular problem. For instance, prospective investors want a business plan that demonstrates their future growth and profitability to generate a return on their capital investment.
Too many businesses start with inadequate planning. No one goes into business to lose money. If you start a business, you expect that it will be profitable and succeed. Writing a business plan forces you to focus on the strategies that will make your business a successful one. That is why learning how to write a plan is important for new businesses or established businesses that might be venturing into new markets or launching new products.
Business plans come in all shapes and sizes, so what you choose to include in your business plan will depend upon your audience, the question it seeks to answer or the problem it seeks to resolve, and your personal preferences. The most frequently included elements of a business plan are the following:
- Executive summary
- Business description
- Business environment analysis
- Industry analysis
- Competitive analysis
- Market analysis
- Marketing plan
- Operations plan
- Team and management plan
- Financial projections
The Executive Summary
Regardless of the business plan format chosen, the executive summary always appears first in the document. Its purpose is to educate and inform the reader about the company. It should explain where the company is at present, where it is going, and how it plans to succeed. In a plan prepared for an external audience, such as investors or bankers, the executive summary is the first opportunity the business owner has to engage the reader’s interest.
Even though it appears first in a business plan, the executive summary should be written last. The executive summary is a snapshot of your business plan that a reader can quickly look at to become acquainted with your business. Writing it last allows you to highlight your plan’s strengths in the first section your audience reads.
Your executive summary should include the following information
- Mission Statement: This explains to the reader why your company exists. Its mission statement should guide the activities of your company.
- Company Information: This is a brief statement giving a historical perspective of your company. It should include the date of formation, locations, company founders, and current employees.
- Highlights: This is an opportunity to tell the reader about profit or market milestones achieved by the company since its inception.
- Products and Services: Briefly mention and describe the company’s products or services.
- Financial Information: This section is particularly important for companies seeking financing and should include mention of bank references and investors.
- Future Projections: Explain the direction in which ownership and management plan to take the business.
Remember that even though it might be the last thing you write for your business plan, the executive summary is the first thing people will read. You have to grab the reader’s attention and hold it. Think of the executive summary as a highlight reel showcasing your business. One of the reasons for saving the executive summary until last to write is to give you the chance to include the best parts from each of the sections of your business plan in it.
Write the executive summary with a particular audience in mind. If you are trying to attract investors, you should focus on those sections of your business plan that establish how your company’s product fills a consumer need. Reference the market research and marketing strategies that demonstrate how your company will take advantage of this.
After completing the executive summary, read it aloud. It should convey your intended message is clear, unequivocal terms that flow without sounding like a sales pitch.
A business description tells the reader more than simply, “We sell things.” This section of the business plan is an overview of the company, including its legal structure, its owners and management, a brief company history, information about the products or services it offers, markets the company will serve and other information to demonstrate how the company plans to introduce its product into the marketplace.
The purpose of the business description is to help a reader to quickly grasp the goals the company has set and how it intends to meet those goals. By the time people are finished reading, they should have a clear picture of the nature of the company’s business, its business structure, its goals and objectives, and its strengths and advantages.
Begin the description with a few sentences that give a capsule view of the company, its product, and its position in the industry in which it competes. This is an elevator pitch to get the reader interested in learning more about the company. Let the reader know if this is a new venture or a business for a while.
The business description should continue with a statement about the type of business structure adopted by the company. Explain whether it is a corporation, partnership, sole proprietorship, or limited liability company, and list the principals’ names along with brief profiles for each one showing how their presence benefits the company.
Part of the business’s description should include information about the company’s products and services, the potential customers, supply and distribution channels, competitive advantages offered by product features, and how the company plans to exploit those advantages. End the business description by explaining the specifics of how the company plans to be profitable.
The business description section of a business plan should not be overly long. Depending upon the company’s size and the number of products offered by it, a description that is one to two pages in length should suffice.
Business Environment Analysis
Business planning is an ongoing process that does not begin and end with writing a business plan. Periodically taking stock of how a company is doing is essential to ensuring that it meets its goals and will become or continue to be successful and profitable. A business plan should be flexible by incorporating tools to analyze company performance compared to other industry businesses.
A business environmental analysis accomplishes section accomplishes this by providing useful information to management and company owners. Analyzing this data allows the management team to identify those plans and strategies that are not.
The environment in which a company operates involves internal and external factors that influence how business is conducted. Internal factors include a company’s business culture, its organizational structure, and the methods by which it is managed. External environmental factors might include government activities such as laws and regulatory actions, economic changes such as recessions, social trends and movements that shift consumer preferences, and innovations in technology that can help or damage a business’s profitability and productivity.
A systematic process of analyzing the environment to identify those environmental factors affecting a company determines its impact on the business and developing strategies to take advantage of them or limit their effects. After a business has implemented a strategy, the process will monitor the business environment to ensure that it is working and does not require modification or change.
Business plan tools that give management a constant source of current and accurate information about the marketplace and the industry and competitive forces at work in both are essential to an effective analysis of the business environment. Three of those tools are the industry analysis, the competitor analysis, and the market analysis that should be included when writing a business plan.
The industry analysis you performed before sitting down to write your business plan can be incorporated into it to provide data on the industry and markets in which your company conducts business. Drawing upon the data you collected using the various industry analysis resources mentioned earlier allows you to identify the risks and opportunities confronting the company as it prepares to enter the marketplace with its products or services. This information permits you to develop strategies to take full advantage of business opportunities while minimizing or avoiding the identified risks.
When written as a section of a company’s business plan, an industry analysis can be presented as a five-step process.
- Step 1: Give a brief overview of the industry. Define the industry in terms of historical background, the geographic area it services, and its products.
- Step 2: Review trends and growth patterns that have existed within the industry.
- Step 3: Identify factors that influence the industry. These might include government regulatory policies and competitive practices of other businesses.
- Step 4: Using data gathered through research, the industry forecast anticipated growth. The predictions should be both long- and short-term.
- Step 5: Describe how your company will position itself within the industry. Focus on how your company can take advantage of opportunities identified within the industry.
You want your business plan to tell you how your company compares to others in the industry. It is difficult to predict how your company’s product or service will perform in the marketplace without knowing what your competitors are doing. A competitive analysis section draws upon the research you did before writing your business plan to offer the data and analysis to support your performance assumptions.
Writing an effective competitive analysis can be accomplished in five steps. Keep in mind that the data you will need about your competitors should have been gathered earlier when you conducted the industry analysis before starting work on creating your business plan.
- Step 1: Identify and list your competitors. You can do this in paragraph format or a spreadsheet. You should include each competitor’s name and location along with the products they offer, sales volume, market share, pricing information, marketing strategy, and other details of their business.
- Step 2: List your competitors’ strengths and weaknesses.
- Step 3: Analyze the strengths and weaknesses of your company. Focus on how your company can exploit its strengths while overcoming or minimizing identifiable weaknesses.
- Step 4: Describe your company’s role in the marketplace. Explain how your company can compete for a market share, given the information you acquired about your competitors. This is where you support marketing decisions and strategies with the data you previously gathered through your marketing research, product feature comparison, competitive analysis, and industry analysis.
- Step 5: Give a detailed description of your company. Use this opportunity to describe how ownership, management, location, business structure, and other resources possessed by your company will allow it to succeed in the marketplace.
You should use this section of your business plan to describe the market into which you intend to introduce your company’s products or services. This is where you draw from the data you collected earlier when you did your preliminary market analysis before getting to work on preparing your company’s plan.
Ideally, the market analysis should offer an overview of the marketplace, the positions held by your competitors, and other facts to support your company’s strategies about marketing, production, and distribution.
Some of the key topics that should be addressed in this section include:
- A description of the industry and the market. This should include information about projected growth, potential changes in consumer demand, and anticipated trends or cycles that could affect product performance.
- Describe your customers. Describe the customer need that the product or service satisfies. Provide demographics about your customers and show how the product your company offers falls within those demographics.
- How big is the market? If your market research shows that the market has been shrinking, a decision to enter or continue in the market should be supported by research supporting a prediction for future growth.
- Describe and explain the pricing structures of your company and its competitors. Describe how your marketing and pricing will give your company an advantage in the market, or describe what changes must be made to give your company an edge.
- The data collected in the competitive analysis can be incorporated into the market analysis to show how your company will compete with other companies offering the same or similar products or services.
The purpose of a company’s marketing plan is to attract customers willing to purchase a particular product or product line. Creating a market for the product or service your company offers began with the business environment analysis and continues by developing a marketing strategy. A marketing strategy must be flexible and should be evaluated periodically to determine if it must be reworked due to changes in the marketplace.
Marketing plans frequently include strategies for four stages.
- Penetration strategies represent the company’s plans for its initial entry into the market.
- Growth strategy builds upon a product’s success by introducing it to different users or into new markets.
- Another strategy analyzes new or alternative methods of distributing a company’s product to increase sales, such as hiring salespeople or developing new retail outlets.
- The fourth strategy controls the communications process between the company and its customers. Methods of advertising and audiences to be targeted are just two of the issues that a communications strategy should address.
The strategies created by a company under its marketing plan are affected by or affect other aspects of the business plan. For instance, a business’s decision to expand into new markets by acquiring a company already selling in the new market might be hampered by a lack of capital to complete the transaction. It might force the company to seek additional capital by adding investors or borrowing money.
The operations plan is closely tied to the team and management plan section of a business plan. An operations plan is the engine that runs the machine you call a business. Without an operations plan, nothing else in your business plan will get done. The operations section of a business plan created to obtain bank financing or some other external purpose does not require the details to go into a plan that will guide ownership and management in running the business.
This section should be crammed with details and instructions to direct people within the business’s day-to-day operations. The personnel covered in the team and management plan section of a business plan should refer to the operations plan to carry out the strategies and tasks needed to run the business.
An effective way of including an operations plan when writing a business plan is to combine it into a single section entitled “Operations and Management Plan.” Writing the section begins with creating an organization chart showing each business member’s title, duties and responsibilities, and supervisory role.
Team and Management Plan
The people who make up your ownership and management team focus on the team and management portion of a business plan for entrepreneurs. Whether intended for internal or external use, readers of this section of a business plan should have a clear understanding of who is in charge. The length and complexity of this section will depend upon the size of the company. The business plan written by a sole proprietor will be much shorter than one prepared for a corporation with multiple management teams, a board of directors, and multiple locations.
The team and management section includes a list of owners and key management personnel and a description of the role each plays in running the organization, the compensation and benefits each one receives, and the criteria used for giving promotions and increasing compensation. Brief biographical information for each of the owners, key personnel, and members of the board of directors offers readers insight into the qualifications each person brings to the organization.
Other information about the company that should be included in this section includes:
- Business structure
- Length of time business has existed
- Mission statement and values
- Background and history of the company
This section of the business plan provides readers with a picture of where your company has been and where it is going from its finances. Established companies should include financial data on past performance. Banks, venture capitalists, and other lenders usually want at least three years of financial data, but some might want to see up to five years of information.
Financial data that should be included in the plan include income and cash flow statements and balance sheets. Some lenders might ask to include accounts receivable statements, accounts payable statements, and documentation of other company debt obligations.
Regardless of how long a company has been in existence, this section must include projections of its future financial picture. These projections must be supported by data the company has compiled through its research and analysis of the industry, competitors, markets, and products.
Financial forecasts should include the following documents:
- Statements of projected income
- Balance sheets
- Cash flow statements
- Capital expenditure budgets
Assumptions that a company makes about future market trends or other factors that could influence the financial projections should be explained. People outside of a company want to see that financial projections in a business plan are supported by accurate data or an analysis based on assumptions having a historical basis.
Financial projections can be supported by graphs, charts, credit history, order history, reference letters, or anything that a business believes will lend credibility and support the plan’s predictions. Such items might work best if they are included in the appendix section of the plan.
The information supporting projections, strategies, and assumptions made in a business plan will be found within the body of each section of it. An appendix usually contains financial information to which company owners and managers might want to limit access. For example, a company that prepares a plan specifically to obtain lender financing could use the appendix to submit tax returns, credit histories, and confidential data such as customer information only to those lenders requesting it. It can also be used for supporting reports, photographs, and other information that takes up more than a couple of pages.
An appendix should begin with a table of contents corresponding to the organization of the business plan sections. Even if it only contains information on some but not all sections of the plan, the appendix should always be located after its last section.
Resources on How to Write a Business Plan:
Business plan examples.
http://www.bplans.com/sample_business_plans.php http://www.score.org/resources/business-planning-financial-statements-template-gallery http://www.businessplans.org/businessplans.html http://www.businessballs.com/freebusinessplansandmarketingtemplates.htm http://www.businessplanarchive.org/
Business Plan Writing Resources
http://www.carnegielibrary.org/research/business/bplansindex.html http://www.hbs.edu/entrepreneurship/resources/businessplan.html http://www.entrepreneur.com/businessplan/index.html http://www.sbdcnet.org/small-business-information-center/business-plans http://www.inc.com/business-plans https://www.sequoiacap.com/grove/posts/6bzx/writing-a-business-plan http://www.sba.gov/tools/business-plan/1 https://business.usa.gov/start-a-business http://www.startupconnection.net/premium-resources/business-plan-disconnect/
Article References on How to Write a Business Plan:
- William A Sahlman. How to Write a Great Business Plan. Harvard Business Press Books 2008. ISBN-1422121429
- Bruce R. Barringer. Preparing Effective Business Plans: An Entrepreneurial Approach. Prentice Hall 2008. ISBN-0132318326
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Corporate Entrepreneurship: How to Create a Thriving Entrepreneurial Spirit Throughout Your Company by Robert Hisrich, Claudine Kearney
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Scope and Value of the Business Plan
The individuals creating the corporate business plan need to be prepared to address issues, needs, and concerns of each constituency in the organization. While these individuals will definitely include management of the organization and/or the internal venture fund’s evaluation team, they could also include consultants, customers, employees, suppliers, or even outside funders.
Corporate entrepreneurs need to put themselves in the position of the potential buyer. Apple’s tremendous turnaround in 1998 (with its focus on desktop and portable computers) and continued success in 2009 (with the simple-to-use iPod) was a direct result of considering the product from the end user’s point of view.
The business plan ...
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THE VALUE OF A BUSINESS PLAN
A business plan is a dynamic, living document, as versatile and multi-faceted as your business. A core advantage of creating a plan is it can assist you in making better and more informed decisions for your business. A business plan can be of use to a company in any stage. It requires careful and strategic planning during the creation process to maximize efficacy and its implementation can offer a wide range of advantages to a company.
WHAT IS A BUSINESS PLAN?
A business plan is an outline of your business, which typically describes your business and the products and/or services it offers. It also includes financial information, your vision, budgets, financial and operational objectives, as well as strategies to show how these objectives will be met. It can be written for various reasons, such as internal purposes or to secure funding.
WHO CAN BENEFIT FROM A BUSINESS PLAN?
An ideal business plan evolves and progresses with your business; it is updated as your company changes and it assists you in the decision-making process during any stage of the business cycle. A company in any phase can reap its benefits.
A business plan can help turn your vision and capital into fruition if you are a new business owner. It can help you to communicate your vision effectively, assess whether your idea is viable and provide the information required in order to secure financing from lenders. If your goal is to expand an established business, a plan can help you make better decisions in order to grow, while avoiding foreseeable risks. Also, a business plan can help smooth over the process of exiting your business if you are looking to sell, transfer or dissolve it. After all, effective business planning during the life of your business contributes to selling your business at the best price and allows you to consider strategies that take time to implement.
GETTING STARTED STRATEGICALLY
First, consider the reason for your business plan, as this dictates the breadth and level of detail it requires. Your reason can be related to general internal requirements or specific needs, such as raising capital to sustain growth. Determine the amount of detail and scope yours requires and execute it accordingly.
Then, consider working with multiple resources when developing your business plan, including financial advisors, business consultants, peer groups and key employees. Exploring different perspectives allows you to consider and compare various scenarios and increases the chances of your plan meeting your objectives. Keep in mind that unlike internal partners or colleagues, an external party may require a greater amount of detail in order to understand your business and industry.
Finally, ensure you gather as much information as possible about your business and market before devising your business plan. According to the Harvard Business Journal, companies that produced their plans 6-12 months after deciding to start their businesses had an increased profitability rate of 8%. Also, ensure your plan is created with plenty of recent customer opinions in mind. The Harvard Business Journal has found that start-up companies’ chances of venture viability increased by 27% if their business plans were created during their market research phases, as they were speaking with customers and preparing their marketing blueprints.
SIGNIFICANT BENEFITS OF HAVING A BUSINESS PLAN
Creating a business plan offers a broad range of benefits to a business owner and his or her enterprise. Your plan can paint a comprehensive picture of your business, improve employee performance, underscore opportunities for growth and facilitate sound decision making.
A noteworthy benefit of having a business plan is it gives employees a distinct sense of direction and increases cohesiveness and productivity. Implementing your plan provides you with the potential to create a unified team, which is jointly focused on specific goals, in a synergistic manner. It provides structure and helps keep you and your team focused on annual and long-term goals. When members of your team are informed about your business plan, they can evaluate and adjust their own performance in terms of company objectives and expectations. Your business will operate more efficiently when employees are on the same page and focused on clear-cut targets and priorities.
In addition, creating or updating your business plan compels you to think about the scope of your entire business, as you carefully analyze it within its specialized parts. In assessing your market analysis, financial requirements, employees, operations, marketing plan and production, and how they relate to one another, you begin to form a holistic view of your company. As you connect the dots and consider all the elements of your business conjointly, you may discover relationships between them and identify useful patterns.
What is more, as you brainstorm to create your plan, you will find multiple opportunities to grow and improve your business. Identifying pertinent opportunities is crucial when it comes to the success of your company, as a missed opportunity can have detrimental consequences. Your plan can uncover untapped market potential, innovative ways to improve the products or services you offer, funds you can potentially save and more.
Lastly, a carefully thought-out business plan allows you to make better decisions for your business and enables you to look to future developments with an informed perspective. Business owners are faced with what can seem like an endless amount of decisions and problems to solve. Key information in your business plan, regarding budgets, your industry, operations and allocating resources is useful to consider during the process of making decisions for your business. Such information ensures you have the appropriate facts and figures to support your decisions, making them more substantial and well founded, which results in more favourable outcomes.
ELEMENTS TO INCLUDE IN YOUR PLAN
A one-page, high-level overview of your business, which sparks the reader’s interest. Focus on the fundamental attributes you have found in constructing your plan. Many people leave this section until the end, to incorporate all important findings.
An Overview of Your Company
A description of what your business does, its vision, goals and values. Explain who you and your team are and why you are the correct people to take your idea to market. Inform the reader of your business structure, industry, objectives and the nature of your business.
A prior history of financial performance and a forecast with key assumptions; consider including income statements, a balance sheet, cash-flow data, a profit and loss statement and a personnel plan. Your forecast should feature, at minimum, the future 12 months and its level of detail will be based on its audience and the purpose of your plan.
Products and Services
Describe your products or services in detail and what makes them unique. Provide an outline of the problems you aim to solve and how you plan to solve them. Showcase the value and quality of your products or services, you may need to provide extra detail if your reader is not familiar with your industry.
A competitive analysis of how your business will fare in the face of competition. Explain your ability to lower prices in order to maximize profits and whether your products or services offer features that set them apart from competitors. Include some companies you believe to be your direct competitors and your plans to differentiate your business from theirs.
A business plan is a highly beneficial tool, which can contribute to the success of your business. A sound plan will provide you with a well-rounded understanding of your business and the environment in which it operates. Your plan does not always need to be complex or time-consuming, it merely requires you to reflect on significant factors that affect your company. It can assist your organization in all of its stages and offers an extensive list of benefits, so long as you put in the necessary research and planning. Remember, your business plan should not be stagnant and can be as ever changing as the twists and turns of your business.
T his article has been written in general terms to provide broad guidance only. It should not be relied upon to cover specific situations and you should not act upon the information contained herein without obtaining specific professional advice. Please contact our office to discuss this information in the context of your specific circumstances. We accept no responsibility for any loss or damage resulting from your reliance on the information in this article.
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