Eureka! You’ve got this great business idea. The next iPod or whatever and it’s going to be bigger and better, you are going to be rich and famous…OK! STOP dreaming! And start working on the first thing that you’ll need to sell this ‘great idea’ - THE BUSINESS PLAN!
This one is a logical follow up to one of my previous posts, “Are you an Entrepreneur?” because a business plan is one of the most essential tools that an entrepreneur can possess. It can also prove to be one of the most challenging concepts to master. For anyone looking to become a successful entrepreneur it is crucial to understand all aspects of a business plan. My attempt is to present you a simplified series of posts that tell you all that you need to know.
Definition: a business plan is a summary of how a business owner intends to organize an entrepreneurial venture and implement activities necessary and sufficient for the venture to succeed.
Role of the business plan: Making a good business plan takes a lot of time and effort. In most cases, a business plan is created to explain and illustrate the vision you have for your business, and to persuade others to help you achieve that vision. To accomplish this, your plan will need to demonstrate on paper that you have a firm visualization of what your business is going to be. It needs to convince others that your business concept can be successful, and that you possess the expertise-alone or collectively-to assure that it will be both successful and profitable.
While it is obviously important to be able to present your business concept in a way that allows others to understand quickly and precisely what you hope to be doing, you also need to develop a business plan for your own use. The process of developing your business plan will require you to focus on exactly what you are trying to achieve. (Bellissimo Coffee Infogroup)
This brings us to the three most important questions in business:
1. Where am I now? (’I’ here is the business/idea/concept/company)
2. Where do I want to go?
3. How am I going to get there?
Add these three questions to your business Bible. Not only will they guide you to make a successful business plan but they will also become your strategic allies while planning the future of your company at any given point of time. Businesses all over the world pay millions to consultants to draw up the answers to precisely these three questions. I will soon write a post explaining these questions in more detail.
What your business plan should include:
There are no fixed things that a business plan should include because it must be shaped to reflect the needs and requirements of the venture it represents. The information included will depend on the stage of the venture in question. A plan for a new venture will obviously be more detailed than for a yearly plan for an already established business. (Wickham, P.A. (2004) Strategic Entrepreneurship. FT Prentice Hall)
Your plan should reflect the information required by the people to whom you are presenting to and it should clearly show what you want from them.
The following is the skeleton of what a business plan should include. I will post an example and a template of a business plan, which will make it easy to understand and use:
1. Mission - this is the formal mission statement that defines the business, what it is, what it is aiming to deliver, to whom, why it makes a difference and what it aspires to achieve.
2. Overview of Key Objectives:
a. Financial objectives: the turnover and profits for the period of the plan; the growth desired over the previous period.
b. Strategic objectives: achievements in the market and gains to be made in market position.
3. The Market Environment:
a. Background to the market
b. Competitors
c. Competitive conditions
d. Competitive advantage of the venture
e. Definition of product offering
f. Definition of target markets
4. Strategy:
a. Product strategy
b. Price strategy
c. Distribution strategy
d. Promotional strategy
e. Networking
5. Financial forecasts:
a. Income
b. Routine expenditure
c. Capital expenditure
d. Cash-flow
6. Activity:
a. Major projects
7. People:
a. Key players in the venture
It is the lack of understanding of the business plan that causes many people to run away from it. Remember, the business plan is a powerful tool and an asset to you. When used effectively it can help to soften the toughest of investors/venture capitalists/banks etc.
There is so much more that I can’t possibly cover in this post. Look out for much more on this…
Your idea is the seed; the business plan is everything that goes into nurturing and developing that seed
Update: Also read “Who will finance your ‘Great Idea’?”
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