What Is a Business Plan? A business plan is a document that describes your business and makes detailed projections about its future. Much of what the plan deals with is the financial part of the business, though there is also going to be information about the owner of the company, the principal company employees, and also about employees that might be hired in the future. While many people write a business plan in anticipation of getting a loan, or as a way to get financial support for their business from a venture capitalist, a business plan may be written purely for internal use. A business plan can be a way of assessing the current state of the company, of determining where the company will go in the future, and, if necessary, a blueprint for breaking the company apart. By using a plan, the company can track itself. A plan can help the owners recognize problems before they become insurmountable. The Physical Look of the Plan A business plan is, in a sense, a work in progress. A new business makes projections, but until the company has been going for a certain length of time, it cannot know whether those projections are accurate. Once you have been in business for a while, you can use accurate numbers to make more accurate predictions. Thus, the copy of a business plan that stays in-house should be in a format that allows it to be changed easily. A three-ring binder is appropriate for this type of plan. However, many companies use their business plan as a way to borrow or raise money. The copy you give to the bank loan officer should be nicely bound, with a professional-looking cover. The plan itself needs to be long enough to give all the information that is needed, but at the same time, it should not be so long that the reader gets lost in its facts and figures. As a general rule, 30 or 40 pages is good enough. You should make enough copies so that you can leave one with each bank officer or venture capitalist that you talk to. However, if for some reason you do not get the loan or the financing, be sure to get that copy back.
Why Do You Need a Business Plan? Many investors will require a written business proposal before they consider lending you money. Sometimes, a landlord will require a business plan before leasing space to your business. The idea is that these people want you to be successful in your business venture, and they want to know that you as a business owner understand all the important aspects of your business and that you have thought through your situation adequately. These people also want a detailed description of how you plan to make money, so that you can pay off your loan (or keep up payments on your lease). Your plan is a way of showing the business community that you and your partners have done more than dream a big dream. One very important reason to create a business plan is so that you can educate yourself about how money flows through your business. Writing a plan is just as important to you as it is to a potential investor. Not only does having a plan answer questions that potential backers will have, it also answers questions that you may have. It gives you an idea of your financial strengths and weaknesses. Naturally, once you know where the weaknesses are, you can take steps to correct them. Creating a plan also gives you the opportunity to fine-tune parts of your business proposal without spending any money. If you have created a computer spreadsheet, for example, you can adjust profit margins to make changes in variables to see how they play out. This increases your chances of being successful in your business. Unfortunately, most new businesses do not succeed. A business plan is one way of increasing your chances by helping you cover all your bases. It also helps you anticipate some of the pitfalls you'll encounter as your business grows. And the plan will help you determine whether you are on track (or off track) several months down the road. Finally, if you are taking your company into foreign markets, a business plan is a standard measuring tool you can utilize to determine your potential away from the domestic markets with which you are more familiar. How Business Plans are Used [ edit ] Venture Capital business plan contests - provides a way for venture capitals to find promising projects venture capital assessment of business plans - focus on qualitative factors such as team. [ edit ] Public Offerings in a public offering, potential investors can evaluate perspectives of issuing company  [ edit ] Within Corporations [ edit ] Fundraising Fundraising is the primary purpose for many business plans, since they are related to the inherent probable success/failure of the company risk . [ edit ] Total Quality Management For more information see Total Quality Management [ edit ] Management by Objective For more information see Management by objectives [ edit ] Strategic Planning For more information see Strategic Planning [ edit ] Education [ edit ] K-12 Business plans are used in some primary and secondary programs to teach economic principles.  Wikiversity has a Lunar Boom Town project where students of all ages can collaborate with designing and revising business models and practice evaluating them to learn practical business planning techniques and methodology. [ edit ] Higher Education BA, MBA programs integrative team projects projects for specific course work Business plan contests GetSet for Business  provides UK educational establishments with the facility for students to learn about starting a business and produce a professional and bespoke business plan online.
Organizational Background In a written plan information may appear in a separate section, an appendix, or may be omitted all together depending on the nature of the plan. If the plan is directed at people outside of the company, a brief synopsis may appear in the executive summary. This will be supplemented with a more detailed discussion elsewhere in the plan. [ edit ] Mission Statement A mission statement is a brief (one sentence or less) description of a company or other organization's purpose. It typically explains what the organization provides to its clients, in general terms that most of the employees can relate to. Although a company might use its mission statement as an advertising slogan, a more common use is to remind executives and employees of the overall goal they are expected to pursue. [ edit ] Current Status Number of employees Annual sales figures Key product lines Location of facilities Current stage of development (start-ups) Corporate structure (options are: Sole proprietor Partnership Joint Venture Publicly traded corporation Private corporation Limited liability company Public utility Non-profit organization Names of the majority investor, if any [ edit ] History Founding date Major successes Strategically valuable learning experiences [ edit ] Management Team Board members Owners Senior managers Managing partners Head scientists and researchers
Marketing Plan The marketing plan has five objectives: If the product is a new product with no existing market, one must identify all substitute products. For each significant substitute product one must explain: Name, features, why substitute, why proposed product better Switching costs and why new product justifies switching Expected adoption dynamics Expected role once market begins to develop (see above for existing products) [ edit ] Pricing Chosen price points Proposed Pricing strategy [ edit ] Demand Management In Economics Demand Management is the art or science of controlling economic demand to avoid a recession. The term is also used to refer to management of the distribution of, and access to goods and services on the basis of needs. An example is social security and welfare services. Rather than increasing budgets for these things, governments may develop policies that allocate existing resources according a hierarchy of need. [ edit ] Distribution Distribution strategy List of major distributors Current status of negotiations [ edit ] Promotion and Brand Development Promotion strategy
Operational Plan The plan outlines how we will service our clients cost effectively [ edit ] Research and Development Plan [ edit ] Manufacturing/Deployment Plan Supply chain requirements Production inputs Facility requirements - size, layout, capacity, location Equipment requirements Warehousing needs for raw materials, finished goods Space requirements [ edit ] Information and Communications Technology Plan Systems needed Operations: Billing, HR, SCM, CRM, Knowledge bases, etc Websites: internal, public Security and privacy requirements Hardware requirements Off-the-shelf software needed Custom development requirements [ edit ] Staffing Plan [ edit ] Staffing Needs List of roles Management structure For each role Number of employees Proposed compensation Availability [ edit ] Union Issues [ edit ] Training Requirements [ edit ] Hiring Time Table [ edit ] Staffing Budget [ edit ] Business Process Outsourcing Plan [ edit ] Asset Development Plan [ edit ] Intellectual Property Plan Intellectual property inventory Portfolio development plan [ edit ] Acquisition Plan Some business plans gain competitive advantage by buying companies up and down the value chain. Some gain competitive advantage by buying up companies and consolidating them. Sometimes a business plan will seek to earn a superior return by adding superior management talent to an existing weak company. For more information see Mergers and Acquisitions . When acquisitions form a major part of the business strategy, the acquisition plan needs to be included in the business plan. Acquisition strategy Proposed acquisition targets Effect on market structure (if consolidation plan is being proposed) Also, some acquisition plan will explain the basis of appointing the Liquidator of the acquisition procedures [ edit ] Organizational Learning Plan The organizational learning plan discusses what lessons will be learned from the marketing, operational, and finance plans and how those lessons will be consolidated to gain strategic advantage. Market sensing - organization's method for collecting information about customers (George Day) - the accumulation of future competencies by building on existing competencies. (Michael Hays, Costas Markides) [ edit ] Cost Allocation Model If variable costs play an important role in the business plan, it may be helpful to include a cost allocation model. This is particularly true if one has a unique business model that creates competitive advantage by transforming traditionally fixed costs into variable costs[ citation needed ]. Fixed cost Variable costs
Asset Development Plan [ edit ] Intellectual Property Plan Intellectual property inventory Portfolio development plan [ edit ] Acquisition Plan Some business plans gain competitive advantage by buying companies up and down the value chain. Some gain competitive advantage by buying up companies and consolidating them. Sometimes a business plan will seek to earn a superior return by adding superior management talent to an existing weak company. For more information see Mergers and Acquisitions . When acquisitions form a major part of the business strategy, the acquisition plan needs to be included in the business plan. Acquisition strategy Proposed acquisition targets Effect on market structure (if consolidation plan is being proposed) Also, some acquisition plan will explain the basis of appointing the Liquidator of the acquisition procedures [ edit ] Organizational Learning Plan The organizational learning plan discusses what lessons will be learned from the marketing, operational, and finance plans and how those lessons will be consolidated to gain strategic advantage. Market sensing - organization's method for collecting information about customers (George Day) - the accumulation of future competencies by building on existing competencies. (Michael Hays, Costas Markides) [ edit ] Cost Allocation Model If variable costs play an important role in the business plan, it may be helpful to include a cost allocation model. This is particularly true if one has a unique business model that creates competitive advantage by transforming traditionally fixed costs into variable costs[ citation needed ]. Fixed cost Variable costs
Financial Plan For more information, see Financial plan . [ edit ] Current Financing Key investors or owners Angels, friends, and family Existing loans and liabilities Terms, obligations [ edit ] Funding Needs [ edit ] Funding Plan IMF World Bank [ edit ] Financial History [ edit ] Financial Forecasts Sometimes called pro formas Balance sheet Income statement Cash flow statement 1-3-5-7 year projections (depends on length of project) For loans, repayment period determines length of projections, i.e. a six month loan doesn't need seven year forecasts For investments point at which returns stabilize ( terminal value ) determines length of forecast Annual, quarterly, and monthly versions should be provided Graphs of key values often helpful: gross revenue, EBITDA, NPV, etc. Financial portions of the marketing, asset development, and operations are often placed in this section rather than in the section discussing the plan. They are viewed as elaboration on the various line items in the pro-formas. [ edit ] Valuation
Risk analysis For more information, see risk analysis . [ edit ] Risk Evaluation Market risks - lack of surgeons; large geographical area so that we don't compete against our own clients; New entrants to market Ease of entry Potential threat to market share- advertising companies Slower than expected adoption Operational risks Staffing risks- imbedding the right candidate for the right surgeon Availability of skilled workforce- x-pharma reps, x-equipment reps Union issues Financing risks Liabilities Poorly worded investor contracts at risk for litigation Investor pull-out Lack of follow-on funding to complete project Managerial risks Poor board or investor dynamics Agency risk particular to the venture [ edit ] Risk Management Plan Detailed plans are more often found as part of in internal plans. Plans written for funders may need to include a high level description if there are significant controllable risks. Methods and procedures to limit liabilities Reserve funds Continuity of operations plan [ edit ] Decision Making Criteria Break even analysis NPV IRR Balanced Scorecard Retrieved from "http://en.wikipedia.org/wiki/Content_of_a_business_plan"
Executive Summary The executive summary summarizes the key points of the business plan. It should define the decision to be made and the reasons for approval. The specific content will be highly dependent on the core purpose and target audience. To get a sense of the difference the purpose and target audience can make, here are three different sets of key points for an executive summary - one for a loan request, one for a start-up seeking venture finance, and one for an internal plan. Items unique to a particular kind of plan are highlighted in bold: A loan request executive summary might contain the following information[ citation needed ]: Company information: name of company, years in business , legal structure, minority and majority owners Brief description of project Amount and length of loan Objective reasons why the bank should be confident that the loan will be paid back. This likely will include Financial track record The future revenue stream Any contracts in place that might guarantee the revenue stream is more than just a forecast. For a new venture, the executive summary might contain[ citation needed ]: Company information: name of company, proposed legal structure , current legal structure, minority and majority investors. Amount of investment requested Expected terminal value Description of market opportunity Objective reasons why the market opportunity can be exploited by this particular team For an internal project plan, the executive summary might look like this[ citation needed ]: Company information: not applicable Description of project Project mandate: who requested the proposal, who is being assigned to carry it out Strategic , tactical and financial justifications Summary of resources needed: staff , funds, facilities In some cases information will overlap. For example, some of the reasons why a loan is likely to be repaid might equally as well be used as justification for the kind of extraordinary return expected by venture capitalists. In some cases the business plan as a whole contains similar information, but for one type of plan it is mere detail and for another it is a key decision making factor. For instance, both start-ups and internal projects need staff and facilities. However the staffing and facilities needs are considered details in a plan for start-up financing. In a plan for internal projects they are key elements and, in fact, may be the only resources needed.
What is Business Plan?
Document that describes your
business and makes detailed
projections about its future
Anticipation of getting a loan
Blueprint for the company
Work in progress/ projections of
A business plan is a formal
statement of a set of business goals,
the reasons why they are believed
attainable, and the plan for reaching
It may also contain background
information about the organization or
team attempting to reach those goals.
Focus on Financial
Focus on service