New businesses should have a written business plan. Besides it being a blue print, a business plan is essential for applying for business loans, grants and looking for investors. If anything, a business plan forces the entrepreneur to give a lot of thought about the business they are getting into. A business plan that has been given more thought tends to be more comprehensive and will have far more intricate details about virtually everything. Each point is important as it would be informed by the previous point and will in turn influence ho one should proceed to get to the next point.
A typical plan would contain a synopsis and have sections on marketing, sales, operations, purchasing, personnel and a financial section. There also needs to be clear objectives for each of the units and steps to be used to measure the success of each planned activity.
Let’s look at the individual elements of a basic business plan:
A synopsis is a short summary that describes what is contained within the business plan. A business plan is not a sales document, it needs to be factual and read like a formal document.
Sales and marketing
This section should analyze the competition and discuss how sales will be achieved. This is often the section where most people would do a strength, weakness, opportunity and threat analysis (SWOT) in relation to their niche markets. In this section one will also have to identify how sales will be produced, by who or what and why. In addition to all that some thought should be given to potential problems that may arise and solutions that would be applied in the event that such problems do come up.
The operations and production
This section is particularly important for a business that sells actual products. It should detail how the products that are to be sold will be sourced. It should provide a clear picture of how the sourcing will be done as well as why that particular mode of sourcing products will be most effective. For a service business, this could be a section where those things that will enable you to render the service are listed. You could specify what you need these things for, as well as where you would buy them from.
In this section, the decision to source products from a particular vendor should be laid out. In addition to that the volumes should be specified as well as the real cost of the products. For a service business you will need to detail things like equipment and tools of the trade, specify how many you will need and what they cost. The prices you attach should not be estimated prices but real costs. This information is important in determining the initial start-up capital for your business.
Name and briefly give details of the people who will be involved in the business. Discuss the knowledge they bring into the business, their qualifications and experience. In this section you should also include information about other expertise you may need and your future recruitment plans.
The financial section
This is a section that most people find daunting. It is a very critical section of a business plan. Every section that has been discussed above now has to be presented in terms of monetary value. For a start up, the profits and losses are to be forecasted over a period of three months to five years. In addition to profit and losses, a cash flow statement needs to be drawn up. Each assumption made in the preceding sections of the business plan should be taken into account in the final financial analysis.