CREATING A BUSINESS PLAN
A
comprehensive business plan is crucial for a start-up business. It defines the
entrepreneur’s vision and serves as the firm’s resume.
There
are many reasons for writing a business plan:
·
To convince oneself that the new venture is
worthwhile before making a significant financial and personal commitment.
·
To assist management in goal-setting and
long-range planning.
·
To attract investors and get financing.
·
To explain the business to other companies
with which it would be useful to create an alliance or contract.
·
To attract employees.
A
business plan can help an entrepreneur to allocate resources appropriately,
handle unexpected problems, and make good business decisions.
A
well-organized plan is an essential part of any loan application. It should
specify how the business would repay any borrowed money. The entrepreneur also
should take into account all startup expenses and potential risks so as not to
appear naive.
However,
according to Andrew Zacharakis, a common misperception is that a business plan
is primarily used for raising capital. Zacharakis, a professor of
entrepreneurship at Babson College, suggests that the primary purpose of a
business plan is to help entrepreneurs gain a deeper understanding of the
opportunity they envision. He explains: “The business plan process helps the
entrepreneur shape her original vision into a better opportunity by raising
critical questions, researching answers for those questions, and then answering
them.”
Some
entrepreneurs create two plans: a planning document for internal use and a
marketing document for attracting outside investment. In this situation, the
information in each plan is essentially the same, but the emphasis is somewhat
different. For example, an internal document intended to guide the business
does not need detailed biographies of the management. However, in a plan
intended for marketing, the background and experience of management may be the
most important feature.
A
standard business plan is usually about 40 pages in length. It should use good
visual formatting, such as bulleted lists and short paragraphs. The language
should be free of jargon and easy to understand.
The
tone should be business-like and enthusiastic. It should be strong on facts in
order to convince people to invest money or time in the new venture.
The
basic elements of a standard business plan include:
1.
Title Page
2.
Table of Contents
3.
Executive Summary
4.
Company Description
5.
Product/Service
6.
Market and Competition
7.
Marketing and Selling Strategy
8.
Operating Plan
9.
Management/Organization
10.
Financing
11.
Supporting Documents
The
executive summary is the cornerstone of a good plan. This is the section that
people read in order to decide whether to read the rest. It should concisely
summarize the technical, marketing, financial, and managerial details. More
importantly, it needs to convince the reader that the new venture is a worthy
investment.
The
company description highlights the entrepreneur’s dream, strategy, and goals.
The
product/service section should stress the characteristics and benefits of the
new venture. What differentiates it from its competition? Is it innovative?
The
financial components of a new venture’s business plan typically include three
projections: a balance sheet, an income statement, and a cash-flow analysis.
These require detailed estimates of expenses and sales. Expenses are relatively
easy to estimate. Sales projections are usually based on market research, and
often utilize sales data for similar products and services produced by
competitors.
Writing a business plan may seem
overwhelming. However, there are ways to make the process more manageable.
First, there are many computer software packages for producing a standard business
plan. Numerous books on entrepreneurship have detailed instructions, and many
universities sponsor programs for new businesses.
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