When how to write a business plan is at the top of the SBA list of the ten steps in how to start a business, it tells you something about how important the experts consider it to be. Planning a business and writing a business plan is more than just having a location picked and a product or service to sell. Financing, marketing strategy, and future growth all require a well-researched and thought out business plan. There are many articles and resources available on the Internet explaining how to write a business plan, but writing a business plan is more than merely following a business plan template or copying someone’s business plan
examples. A business plan can be as simple as a few notes scrawled on a paper napkin. It can be a 40-page document with multiple sections and subsections describing every minute detail of its operations, products, and finances. Writing an effective business plan is easier if you take time before starting the writing process to conduct your research and gather the information you need to incorporate into it. Business owners of new startups or established companies can benefit from thinking
through and researching such success-determining issues as: From this list, you quickly realize that a business plan is more than a document a business uses to get financing or to attract investors. It is a roadmap of how your business will operate to succeed. Before you can begin writing your
business planning roadmap, you need reliable information about your industry, your competitors, your product, and your customers for inclusion in it. An industry analysis, competitor analysis, product feature comparison, and market research will give you the information you need. Understanding the market and industry in which your company will do business is accomplished through industry analysis. An industry analysis conducted before you
begin to write a business plan will help you to: Industry analysis is specific to the particular industry in which a business is currently operating or plans to venture. It provides information from which a
business owner can create a long-term strategy to minimize risks and take advantage of growth opportunities. A method developed by Michael E. Porter of Harvard University has become the most frequently used method for analyzing any industry to create a strategy to compete within it. According to Porter, five forces influence all markets and industries. The five forces are: Porter believed that an analysis of the five forces that exist in every industry could help forecast a company’s ability to compete and
remain profitable. You will obtain sufficient information on your industry from the five forces analysis to formulate long- and short-term strategies to incorporate into your business plan. A business plan for startup companies will benefit from an industry analysis that provides ownership with information to make decisions and formulate policy in certain key areas. You should be able to answer the following key questions about the industry and your company’s ability to
successfully compete in it when you have completed the industry analysis: There are several free industry analysis resources and tools available to entrepreneurs preparing to write a business plan. A few of the
more popular sources of industry information include: Industry analysis is not to be confused with a market analysis or a competitor analysis, both of which are included in a business plan
for entrepreneurs. Industry analysis will describe the products offered within a particular industry and the marketplace parameters concerning economic, regulatory, and political issues. An industry analysis establishes the marketplace’s scope; a market analysis tells a business owner if a particular industry’s market will be profitable for a company’s product. Competitor analysis is when a business obtains information to identify and learn more
about key competitors to predict how the competition will react. Competitive analysis plays a vital role in strategic planning, so writing a great business plan becomes easier if you do your research before writing your business plan. Unlike the competitive rivalry factor of industry analysis, a competitor analysis focuses attention on each competitor’s strengths and weaknesses instead of focusing on the overall competitive climate within an industry. A competitor analysis offers a
detailed profile of each competitor along with an analysis of marketing strategies that can be used to counter position your company to improve market share or profitability. Information for competitor analysis is available from several sources, including news stories and press releases, advertising, company websites, promotional campaigns, patent and copyright applications, price lists, and, in the case of publicly traded companies, annual reports, and SEC filings. Sometimes, getting information about a competitor might require a bit of sleuthing on your part. If your competitor has a store that is open to the public, no rules are prohibiting you from visiting it and taking a look around. Becoming a member of a competitor’s mailing list to receive promotional material and updates on new products and pricing is a quick and easy source of information. The information gathered about competitors might not seem like much when looked at separately, but it can be mosaic-like in what it reveals about your competition when viewed as a whole. A random conversation with a supplier might reveal information about a change in a competitor’s product line. The point is to take advantage of every opportunity to acquire data about the marketplace in which your business operates. It might reveal something about your competitors that could be used in developing or refining your marketing strategy. How to do a Product Feature ComparisonA product feature comparison allows you to compare your company’s product with products produced by competitors. Unlike a competitor analysis that allows you to determine how your business measures up to competing businesses, product feature comparisons limit their focus to the products themselves. When used as part of creating an easy business plan, product features comparison data can provide critical information to making marketing decisions. 1. Conducting the ResearchThe first thing you should do is purchase or acquire your competitor’s product. This gives you the chance to evaluate your competitor’s sales process while acquiring the product to test. Using the product, you can compare features on the competitor’s product with your own product. If the features of the competing product give it a performance advantage over your own, you can evaluate how important those features are to determine if your product should be redesigned. Another source of information on the product is the internet. What are consumers saying about your product versus the product sold by your competitor? Product reviews by websites that specialize in testing products could also tell you how your product is faring in the marketplace compared to other products. 2. Product Comparison TablesThe information you obtained through your research and product testing is easier to compare if compiled in a simple table format. Each product’s features can be listed under separate columns for each feature, and each product feature can be judged to determine which one was the best. The best feature gets one point while the other product’s feature gets no points. The winning product is the one that ends up with the most points. Another method of evaluating the features of different products is to assign a score of 1 to 10, with a higher score going to features deemed to be the most important as far as product performance. The winning product is the one that ends up with the highest overall score. 3. Coming to a ConclusionComparing a competitor’s product features with those of your own product is only useful if you use the information to make worthwhile improvements to your product. Redesigning your product just to make it look more like your competitor’s product only makes sense if the redesign meets a customer need that your product is not currently meeting. The conclusions you reach from the data a product feature comparison gives can be incorporated into the market analysis, competitive analysis, and marketing plan sections when writing a business plan. The information will also be useful in guiding decisions made for the future development of new products. How to Conduct Market ResearchMarket research provides businesses with information about their customers and the markets in which they do business. By analyzing its data, business owners offer products that consumers want at competitive prices with other sellers. For the new entrepreneur who is learning how to start a business, market research performed before preparing a business plan can help formulate strategies to reduce risks, recognize marketplace and industry trends, and identify opportunities to increase sales. The marketplace for many businesses is no longer limited to one country. The growth of internet commerce has made it possible for even small businesses to participate in the global economy for many products and services. Market research can help owners of businesses to evaluate the feasibility of expansion into international markets. The data collected through market research should give a business owner the answers to the following questions:
Market Research Tools The methods of gathering information about consumers do not have to be complicated. Frequently used methods include: Steps in Market ResearchAny of the tools used to gather information can be employed using a five-step approach.
The Key Elements in Writing a Business PlanThe answer to the question “How do you write a business plan?” depends upon the type of business and the purpose for which you are going to use it. Too many business owners think of a business plan as they need to convince a bank to lend their company a loan or convince a venture capitalist to invest in it. In fact, business plans come in all shapes and sizes, depending upon the audience for which the plan is intended. For example, a startup company would want a business plan containing all of the bells and whistles to serve as a comprehensive guide for the new owners and management. Should the time come when financing is needed for new equipment or expansion, a revised business plan that focuses on the company’s financial growth and ability to repay, the debt would be needed.
External plans are written for the benefit of an audience located outside of the company. Prospective investors or venture capitalists and lending institutions are examples of the types of audiences for which external business plans are created. These types of plans are created to answer a question or address a particular problem. For instance, prospective investors want a business plan that demonstrates their future growth and profitability to generate a return on their capital investment. How to Write a Business PlanToo many businesses start with inadequate planning. No one goes into business to lose money. If you start a business, you expect that it will be profitable and succeed. Writing a business plan forces you to focus on the strategies that will make your business a successful one. That is why learning how to write a plan is important for new businesses or established businesses that might be venturing into new markets or launching new products. Business plans come in all shapes and sizes, so what you choose to include in your business plan will depend upon your audience, the question it seeks to answer or the problem it seeks to resolve, and your personal preferences. The most frequently included elements of a business plan are the following:
The Executive SummaryRegardless of the business plan format chosen, the executive summary always appears first in the document. Its purpose is to educate and inform the reader about the company. It should explain where the company is at present, where it is going, and how it plans to succeed. In a plan prepared for an external audience, such as investors or bankers, the executive summary is the first opportunity the business owner has to engage the reader’s interest. Even though it appears first in a business plan, the executive summary should be written last. The executive summary is a snapshot of your business plan that a reader can quickly look at to become acquainted with your business. Writing it last allows you to highlight your plan’s strengths in the first section your audience reads. Your executive summary should include the following information
Remember that even though it might be the last thing you write for your business plan, the executive summary is the first thing people will read. You have to grab the reader’s attention and hold it. Think of the executive summary as a highlight reel showcasing your business. One of the reasons for saving the executive summary until last to write is to give you the chance to include the best parts from each of the sections of your business plan in it. Write the executive summary with a particular audience in mind. If you are trying to attract investors, you should focus on those sections of your business plan that establish how your company’s product fills a consumer need. Reference the market research and marketing strategies that demonstrate how your company will take advantage of this. After completing the executive summary, read it aloud. It should convey your intended message is clear, unequivocal terms that flow without sounding like a sales pitch. Business DescriptionA business description tells the reader more than simply, “We sell things.” This section of the business plan is an overview of the company, including its legal structure, its owners and management, a brief company history, information about the products or services it offers, markets the company will serve and other information to demonstrate how the company plans to introduce its product into the marketplace.
Begin the description with a few sentences that give a capsule view of the company, its product, and its position in the industry in which it competes. This is an elevator pitch to get the reader interested in learning more about the company. Let the reader know if this is a new venture or a business for a while. The business description should continue with a statement about the type of business structure adopted by the company. Explain whether it is a corporation, partnership, sole proprietorship, or limited liability company, and list the principals’ names along with brief profiles for each one showing how their presence benefits the company. Part of the business’s description should include information about the company’s products and services, the potential customers, supply and distribution channels, competitive advantages offered by product features, and how the company plans to exploit those advantages. End the business description by explaining the specifics of how the company plans to be profitable. The business description section of a business plan should not be overly long. Depending upon the company’s size and the number of products offered by it, a description that is one to two pages in length should suffice. Business Environment AnalysisBusiness planning is an ongoing process that does not begin and end with writing a business plan. Periodically taking stock of how a company is doing is essential to ensuring that it meets its goals and will become or continue to be successful and profitable. A business plan should be flexible by incorporating tools to analyze company performance compared to other industry businesses.
The environment in which a company operates involves internal and external factors that influence how business is conducted. Internal factors include a company’s business culture, its organizational structure, and the methods by which it is managed. External environmental factors might include government activities such as laws and regulatory actions, economic changes such as recessions, social trends and movements that shift consumer preferences, and innovations in technology that can help or damage a business’s profitability and productivity. A systematic process of analyzing the environment to identify those environmental factors affecting a company determines its impact on the business and developing strategies to take advantage of them or limit their effects. After a business has implemented a strategy, the process will monitor the business environment to ensure that it is working and does not require modification or change. Business plan tools that give management a constant source of current and accurate information about the marketplace and the industry and competitive forces at work in both are essential to an effective analysis of the business environment. Three of those tools are the industry analysis, the competitor analysis, and the market analysis that should be included when writing a business plan. Industry AnalysisThe industry analysis you performed before sitting down to write your business plan can be incorporated into it to provide data on the industry and markets in which your company conducts business. Drawing upon the data you collected using the various industry analysis resources mentioned earlier allows you to identify the risks and opportunities confronting the company as it prepares to enter the marketplace with its products or services. This information permits you to develop strategies to take full advantage of business opportunities while minimizing or avoiding the identified risks. When written as a section of a company’s business plan, an industry analysis can be presented as a five-step process.
Competitive AnalysisYou want your business plan to tell you how your company compares to others in the industry. It is difficult to predict how your company’s product or service will perform in the marketplace without knowing what your competitors are doing. A competitive analysis section draws upon the research you did before writing your business plan to offer the data and analysis to support your performance assumptions. Writing an effective competitive analysis can be accomplished in five steps. Keep in mind that the data you will need about your competitors should have been gathered earlier when you conducted the industry analysis before starting work on creating your business plan.
Market AnalysisYou should use this section of your business plan to describe the market into which you intend to introduce your company’s products or services. This is where you draw from the data you collected earlier when you did your preliminary market analysis before getting to work on preparing your company’s plan. Ideally, the market analysis should offer an overview of the marketplace, the positions held by your competitors, and other facts to support your company’s strategies about marketing, production, and distribution. Some of the key topics that should be addressed in this section include:
Marketing PlanThe purpose of a company’s marketing plan is to attract customers willing to purchase a particular product or product line. Creating a market for the product or service your company offers began with the business environment analysis and continues by developing a marketing strategy. A marketing strategy must be flexible and should be evaluated periodically to determine if it must be reworked due to changes in the marketplace. Marketing plans frequently include strategies for four stages.
The strategies created by a company under its marketing plan are affected by or affect other aspects of the business plan. For instance, a business’s decision to expand into new markets by acquiring a company already selling in the new market might be hampered by a lack of capital to complete the transaction. It might force the company to seek additional capital by adding investors or borrowing money. Operations PlanThe operations plan is closely tied to the team and management plan section of a business plan. An operations plan is the engine that runs the machine you call a business. Without an operations plan, nothing else in your business plan will get done. The operations section of a business plan created to obtain bank financing or some other external purpose does not require the details to go into a plan that will guide ownership and management in running the business. This section should be crammed with details and instructions to direct people within the business’s day-to-day operations. The personnel covered in the team and management plan section of a business plan should refer to the operations plan to carry out the strategies and tasks needed to run the business. An effective way of including an operations plan when writing a business plan is to combine it into a single section entitled “Operations and Management Plan.” Writing the section begins with creating an organization chart showing each business member’s title, duties and responsibilities, and supervisory role. Team and Management PlanThe people who make up your ownership and management team focus on the team and management portion of a business plan for entrepreneurs. Whether intended for internal or external use, readers of this section of a business plan should have a clear understanding of who is in charge. The length and complexity of this section will depend upon the size of the company. The business plan written by a sole proprietor will be much shorter than one prepared for a corporation with multiple management teams, a board of directors, and multiple locations. The team and management section includes a list of owners and key management personnel and a description of the role each plays in running the organization, the compensation and benefits each one receives, and the criteria used for giving promotions and increasing compensation. Brief biographical information for each of the owners, key personnel, and members of the board of directors offers readers insight into the qualifications each person brings to the organization. Other information about the company that should be included in this section includes:
Financial ProjectionsThis section of the business plan provides readers with a picture of where your company has been and where it is going from its finances. Established companies should include financial data on past performance. Banks, venture capitalists, and other lenders usually want at least three years of financial data, but some might want to see up to five years of information.
Regardless of how long a company has been in existence, this section must include projections of its future financial picture. These projections must be supported by data the company has compiled through its research and analysis of the industry, competitors, markets, and products. Financial forecasts should include the following documents:
Assumptions that a company makes about future market trends or other factors that could influence the financial projections should be explained. People outside of a company want to see that financial projections in a business plan are supported by accurate data or an analysis based on assumptions having a historical basis. Financial projections can be supported by graphs, charts, credit history, order history, reference letters, or anything that a business believes will lend credibility and support the plan’s predictions. Such items might work best if they are included in the appendix section of the plan. AppendixThe information supporting projections, strategies, and assumptions made in a business plan will be found within the body of each section of it. An appendix usually contains financial information to which company owners and managers might want to limit access. For example, a company that prepares a plan specifically to obtain lender financing could use the appendix to submit tax returns, credit histories, and confidential data such as customer information only to those lenders requesting it. It can also be used for supporting reports, photographs, and other information that takes up more than a couple of pages. An appendix should begin with a table of contents corresponding to the organization of the business plan sections. Even if it only contains information on some but not all sections of the plan, the appendix should always be located after its last section. Resources on How to Write a Business Plan:Business Plan Exampleshttp://www.bplans.com/sample_business_plans.php Business Plan Writing Resourceshttp://www.carnegielibrary.org/research/business/bplansindex.html Article References on How to Write a Business Plan:
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Which part of a business plan is a description of the key strategic influences of the business?A mission statement is a description of the key strategic influences on the business, such as: All answers correct: -the market it will serve.
What section of the business plan describes the business quizlet?The operations plan section of the business plan outlines how your business will be run and how your product or service will be produced.
Which part of a business plan outlines employees and management levels?Executive summary: This section outlines the company and includes the mission statement along with any information about the company's leadership, employees, operations, and location.
Which part of your business plan should include a description of how the business will run administratively Milady?Mission Statement. A description of the key strategic influences of the business, such as the market it will serve, the kinds of services it will offer, and the quality of those services. Organizational Plan. Outlines employees and management levels and also describes how the business will run administratively.
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Which section of the business plan describes administrative structure of the business?
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