When starting a new business, it is important to complete a thorough business plan before making decisions.
A Business plan should include the following components:
• Executive summary
• Company overview
• Products and services
• Research
• Company description
• Operational Plan
• Marketing plan
• Company strategy
• SWOT analysis
• Financial plan
• Action Plan
Executive summary
The Executive summary provides a summary of the highlights of the business plan. The executive summary should include the business name, business location, products or services sold (and to whom one intends to sell the product), financial features (sales, profits, cash flows and return on investment), current company position (when formed, owners, personnel), and the purpose of the plan. Some businesses may leave the executive summary to the end, where key sections are emphasized.
Company overview
This should include:
- Company mission statement:
A mission statement is a statement of the purpose of a company, organization or person, its reason for existing.
The mission statement should guide the actions of the organization, spell out its overall goal, provide a path, and guide decision-making. It provides “the framework or context within which the company’s strategies are formulated.
- Goal Setting
Goal setting is an important aspect of planning. Goal setting is the process of deciding what you want to achieve as a desired result. A common method of determining goals is to use the SMART method of setting goals. Goals should be:
• Specific
i.e. Who is involved? What do I want to accomplish? Where-Identify a location. When-Establish a time frame. Which-Identify requirements and constraints. Why-Specific reasons, purpose or benefits of accomplishing the goal
• Measurable
i.e. How will you know if you have achieved the goal? One can set financial goals, where one aims to achieve a specific turnover of cash.
• Achievable
Careful planning can make most goals achievable.
• Realistic
The goal should be realistic in terms of all variables e.g. finances, time, resource allocation etc. Bear in mind that aiming high will create a good, positive work ethic, whilst aiming low may create a poor work ethic!
• Timely
Have specific time frames. One should break goals down into long and short term goals.
Sometimes goals are not tangible if they are set for the too distant future. Set yourself short term goals/ markers, which will positively influence motivation and create a sense of control in what you are seeking to achieve.
Review your goals throughout the year, as you may need to make changes based on whether the business goes according to plan.
Don’t be scared to reward yourself either when you do reach goals!
- Company vision and values
One should not underestimate the importance of determining company values. In management, business value is an informal term that includes all forms of value that determine the health and well-being of the firm in the long run. Business value expands concept of value of the firm beyond economic value (also known as economic profit, economic value added, and shareholder value) to include other forms of value such as employee value, customer value, supplier value, channel partner value, alliance partner value, managerial value, and societal value. Many of these forms of value are not directly measured in monetary terms
- Products and services
The entrepreneur must provide a clear description of the products and services offered. ‘Personal training’ for example is not a clear enough description of the product. In this instance the Personal trainer may describe his/ her product in terms of:
• The type of training system offered
• The type of market which he/ she would like to attract
• The look and feel/ image that one would like to create of the product
• Brand identity
• Price and market segment placement
- Research
Before starting a business, it is essential that the entrepreneur does comprehensive research. Elements that one should include in the research could include:
• An analysis of the market place as a whole, locally and internationally.
• An analysis of the market place that you will be involved in, and industry trends.
• An analysis of possible customers and needs.
• Competition in the market-who are your competitors and what are they offering?
- Company description
• This should include a list of services which you will be providing as well as market place differentiation. Also include:
• Team-members and structure
• All the people resources who are necessary to the success of the plan, as well as roles and responsibilities of each individual.
- A Management systems plan
This can include a list of the founders of the company and their qualifications, a description of who will run the business on a day-to-day basis, and an organisational chart showing the management hierarchy. In a detailed plan one may list the responsibilities of each individual.
- Operations plan
The business should have an Operations manual which details each aspect of running the business. The Operations manual explains the daily operations of the business, resources required (people and equipment) and the processes involved in achieving daily objectives.
Some of the key points that the Operations Plan may include are:
• A description of the operating cycle (i.e. most gyms work on a yearly cycle as sales are determined by predictable sales patterns.
• A description of resources
• A description of skills needed to fulfil tasks required of the organisation
• Financial structure and payments systems
Relationships with other companies who one may be working with e.g. accounting form who handles accounts.
The Operations manual may contain standard operating procedures (SOP’s) / tasks required to operate the organisation effectively i.e. the Operations manual is a collection of all the SOP’s needed to run the organisation. The SOP should provide an overview of the steps involved in completing a task. Each step of the task should be clearly and concisely explained, ensuring that anyone can follow the instructions to perform the given task
- Marketing plan
The marketing plan should define all of the components of the marketing strategy, such as:
• The product (or service) and why it is valuable to customers
• The focused and detailed description of the target market
• The positioning of the product or service – how it should be perceived by customers
• The pricing strategy with specific price points at which the product or service will be sold
• The sales and distribution channels that will be used to get the product or service to the customer
• The promotion strategy including public relations activities, specific promotions, advertising and intended viral marketing activities
The components of the marketing strategy will be discussed in more detail in the marketing strategy section of the notes
- Company strategy
Basically, the entrepreneur needs to explain how he/ she plans to compete in the industry. The positioning of the company is very important in this regard i.e. What marketing segment you will be targeting and why. One should address how you intend on being unique in the market place and what value you offer the customers.
- SWOT analysis
• Strengths
Characteristics of the business or project that give it an advantage over others
• Weaknesses
Are characteristics that place the team at a disadvantage relative to others
• Opportunities
Elements that the project could exploit to its advantage
• Threats
Elements in the environment that could cause trouble for the business or project
It is vital for the entrepreneur to be brutally honest in this section, and use the SWOT analysis to plan for any potential problems which may arise. Business owners will use SWOT analysis to evaluate the business, and possibly make changes where necessary.
- Financial plan
In business, a financial plan can refer to the three primary financial statements (balance sheet, income statement, and cash flow statement) created within a business plan. Financial forecast or a financial plan can also refer to an annual projection of income and expenses for a company, division or department. A financial plan can also be an estimation of cash needs and a decision on how to raise the cash, such as through borrowing or issuing additional shares in a company
- Action Plan
Entrepreneurs are not defined by their ability to come up with good ideas, but rather in their ability to action the ideas and make them a reality. The entrepreneur will provide an action plan, which takes into account the strategic plan, provides specific timelines for completing outcomes, and assigns resources to the completion of each task.