Entrepreneurial Business Plan Dreams of Glory!

The business plan often maligned as "dreams of glory" is probably the single most important document for the entrepreneur at the start-up stage. Potential investors are not likely to invest in a new venture until a business plan is furnished.

In addition, the business plan helps maintain perspective for the entrepreneur of what needs to be accomplished. Business plan can be defined as doing something today to achieve something tomorrow based on what has been achieved yesterday.

A business plan can be defined as a written document describing all relevant internal and external elements and strategies for starting a new business. It is often an integration of all functions like marketing, finance, human resource and production.

The business plan or game plan or road map - answers the questions like: Where am I now? Where am I going? How will I get there? Potential investors, suppliers, and even customers will request for a business plan.

The entrepreneur should consider external factors such as new regulations, competition, social change, changes in consumer needs and new technology. The entrepreneur should also consider internal factors like manufacturing, marketing and employing of personnel in the new venture.

Writing a business plan: Primarily, a business plan is prepared by the entrepreneur. However lawyers, accountants, marketing consultants, engineers, and teachers are other sources who can help in preparation of a business plan. Sometimes trade associations can also help. The Internet also provides wealth of information as well as templates or outlines for business plan preparation. Most of these sources are free of charge or have minimum fees for workshop attendance or to purchase or download any information.

Readers for the business plan: Employees, investors, bankers, venture capitalists, suppliers, customers, advisors and consultants will read the business plan. Since each of the groups read the plan for different reasons, the entrepreneur must be prepared to address all their issues and concerns.

However there are three perspectives that should be considered when preparing a plan. First is the perspective of the entrepreneur who understands better than anyone else the creativity and technology involved. Second is the marketing perspective. Too often an entrepreneur will consider only the product or the technology and not whether someone will buy it.

Third the entrepreneur should try to view his or her business plan through the eyes of the investor. Sound financial projections are required.

In short it can be said that a business plan is important because it helps determine the viability of the new venture in a designated market. It provides guidance to the entrepreneur in organising his or her planning. It also serves as an important tool to help obtain financing.

The process of preparing a business plan also provides a self-assessment for the entrepreneur. Usually he or she feels that the new venture is assured of success. However the planning process forces the entrepreneur to bring in objectivity and ask questions like “Does the idea make sense? Will it work? Who is my customer? Does it satisfy customer needs? What kind of protection can I get against imitation by the competitors? Can I manage the business? Whom will I compete with?" etc...

If most of the answers to the above questions are positive and if the entrepreneur is confident of success he or she should continue or if the answers are negative and if there is no confidence, it is better to terminate the business idea before investing further money and time.

Presenting the business plan: A business plan is always detailed; the more serious and more expensive the project more will be the details. It is always typed out. It should be presented well. The typing, binding and look should be impeccable. There should be no mistakes.

Remember a plan is known by its dress and address that is how it looks and what it communicates. Also diagrams, charts and tables should be used liberally. Like the saying goes; a picture is worth a thousand words. While quoting facts and figures it is always better to give references. Giving references builds up the readers’ confidence. Always explain technical terms. Every person who reads the plan is not an expert in that field. Simplicity is always appreciated. The entrepreneur should also remember the KISS principle. That is “keep it short and simple.”

One should always try to address the plan at the least common denominator that is pitch the business plan at the level of the audience with the least education. Also it is better to always keep a soft copy of the business plan so that if anyone asks for any clarification or any further information it can be furnished immediately.

Introductory page

This is the title or cover page that provides a brief summary of the business plan's contents. The title page sets out the basic concepts that the entrepreneur is attempting to develop. Investors consider it as very important because they can determine the amount of investment needed without having to read through the entire plan.

Executive summary meant for the top level decision makers

Executive summary is prepared after the actual business plan is written. It should be about two to three pages in length. First the business concept should be described and second any data that supports the opportunity for this venture should be stated briefly. After establishing the reality of the opportunity the executive summary should then state how this opportunity would be pursued. Finally the executive summary should highlight some of the key financials that can be achieved from implementing the marketing strategy.

Environmental analysis

Analysis has to be conducted to identify trends and changes occurring in national and international level impacting the new venture. Then the entrepreneur should conduct industry analysis that will focus on specific industry trends. Industry demand and competition should be considered. The last part of this section should focus on the specific market which would include details such as information about who the customers are, what the specific market segment is, and what is the geographic area that the venture will compete in.

Description of venture

It should be detailed. This section should begin with the mission statement or company statement of the new venture. This statement briefly describes the nature of the business and what the entrepreneur hopes to accomplish. Location of the business is vital to its success, particularly if the business is retail or involves a service. An enlarged local map may help and might provide some perspective with regards to roads, highways, access and so forth.

Production or operational plan

If the new venture is a manufacturing operation, a production plan is necessary. It should describe the manufacturing process and should also include subcontractors and their names and address if any part of the production process is subcontracted. If the venture is not a manufacturing operation but is a retail store or a service this section should be titled operational plan and the entrepreneur would need to explain the chronological steps in completing a business transaction.

Marketing plan

All four P's (Product, Price, Promotion and Place) need to be explained. Potential investors regard the marketing plan as critical to the success of the new venture. Investors should be explained what the goals of the venture are and what strategies are to be implemented to effectively achieve these goals.

Organisational plan

It describes the venture's form of ownership that is proprietorship, partnership or corporation or any other form. If it is a partnership the terms and deed of partnership should be included. If the venture is a corporation, it is important to detail the shares of stock authorised, as well as names, addresses and resumes of the directors and officers of the corporation need to be furnished.

Assessment of risk

It is important that the entrepreneur makes assessment of risk. First he/she should indicate the potential risks. Next there should be a discussion of what might happen if these risks become reality. Finally the entrepreneur should discuss the strategy that will be employed to prevent, minimize or respond to the risks should they occur.

Financial plan

The entrepreneur should summarize the forecasted sales and the appropriate expenses for at least the first three years with the first year's projections provided monthly. The next major area of financial information that should be furnished is the cash flow figures for three years. It is important to determine demand for money on monthly basis especially for the first year. The entrepreneur should clearly indicate the borrowing of short-term capital to meet fixed expenses such as salaries and utilities. The last section in the financial plan is the projected balance sheet.

Appendix

The appendix of the business plan contains back up material that can’t be included in the main part of the business plan. References to any of the documents in the appendix should be made in the plan itself. Letters from the customers, distributors or subcontractors are examples of information that should be included in the appendix. Any documentation of information that is secondary data or primary research data to support plan decisions should be included. Lease, contracts, and price list from suppliers and competitors may also be added.

By:Dr M Anil Ramesh

The author is a Professor -Marketing, Chairman, Training and Consultancy, and Chief Controller of Examinations at Siva Sivani Institute of Management, a premier B-school in Secunderabad. Send your queries to manil [email protected] and [email protected].