Developing a Business Plan

Writing an Executive Summary
Write this section last.
This can be one page
Explain the fundamentals of the proposed business:  What will your product be? Who will your customers be? Who are the owners? What do you think the future holds for your business and your industry?

General Enterprise Description
What business will you be in? What will you do?
Mission Statement: Many companies have a brief mission statement, usually in 30 words or fewer, explaining their reason for being and their guiding principles. If you want to draft a mission statement, this is a good place to put it in the plan, followed by:

Enterprise Goals and Objectives: Goals are destinations—where you want your business to be. Objectives are progress markers along the way to goal achievement. For example, a goal might be to have a healthy, successful Enterprise that is a leader in customer
service and that has a loyal customer following. Objectives might be annual sales targets and some specific measures of customer satisfaction.
Business Philosophy: What is important to you in business?
To whom will you market your products? (State it briefly here—you will do a more thorough explanation in the Marketing Plan section).
Describe your industry.  Is it a growth industry? What changes do you foresee in the industry, short term and long term? How will your Enterprise be poised to take advantage of them?
Describe your most important Enterprise strengths and core competencies. What factors will make the Enterprise succeed? What do you think your major competitive strengths will be? What background experience, skills, and strengths do you personally bring to this new venture?

Legal form of ownership: Registered at Sub county? At District? Why have you selected this form?

Describing Products and Services
Describe in depth your products or services 
What factors will give you competitive advantages or disadvantages? Examples include level of quality or unique or proprietary features.
What are the pricing, fee, or leasing structures of your products or services?

Developing a Marketing Plan
No matter how good your product and your service, the venture cannot succeed
without effective marketing. And this begins with careful, systematic research. It is very dangerous to assume that you already know about your intended market. You need to do market research to make sure you’re on track. Use the business planning process as your opportunity to uncover data and to question your marketing efforts. Your time
will be well spent.

Market research - How?
There are two kinds of market research: primary and secondary.

Secondary research means using published information such as industry profiles, trade journals, newspapers, magazines, census data, and demographic profiles. 

Primary research means gathering your own data. For example, you could do your own traffic count at a proposed location, identify competitors, and do surveys or focus‐group interviews to learn about consumer preferences. 

Economics
Facts about your industry:
•    What is the total size of your market?
•    What percent share of the market will you have? (This is important only if you think you will be a major factor in the market.)
•    Current demand in target market.
•    Trends in target market—growth trends, trends in consumer preferences, and trends in product development.
•    Growth potential and opportunity for a business of your size.
•    What barriers to entry do you face in entering this market with your new Enterprise? Some typical barriers are:

o    High capital costs
o    High production costs
o    High marketing costs
o    Consumer acceptance and brand recognition
o    Training and skills
o    Unique technology 
•    And of course, how will you overcome the barriers?
•    How could the following affect your Enterprise?
o    Change in technology
o    Change in government regulations
o    Change in the economy
o    Change in your industry

Description of Products and Services
In the Products and Services section, you described your products and services as you see them. Now describe them from your customers’ point of view.

Features and Benefits
List all of your major products or services. For each product or service:
•    Describe the most important features. What is special about it?
•    Describe the benefits. That is, what will the product do for the customer?

Identifying Customers
Identify your targeted customers, their characteristics, and their geographic locations, otherwise known as their demographics.
•    Age
•    Gender
•    Location
•    Income level
•    Social class and occupation
•    Education
•    Other (specific to your industry)
•    Other (specific to your industry)

For business customers, the demographic factors might be:
•    Industry (or portion of an industry)
•    Location
•    Size of firm
•    Quality, technology, and price preferences
•    Other (specific to your industry)
•    Other (specific to your industry)

Listing major Competitors
What products and companies will compete with you? List your major competitors
Will they compete with you across the board, or just for certain products, certain customers, or in certain locations?

Will you have important indirect competitors? 

How will your products or services compare with the competition?
Now, write a short paragraph stating your competitive advantages and disadvantages.

Niche
Now that you have systematically analyzed your industry, your product, your customers, and the competition, you should have a clear picture of where your Enterprise fits into the world.
In one short paragraph, define your niche, your unique corner of the market.

Marketing Strategy
Now outline a marketing strategy that is consistent with your niche.

Promotion
How will you get the word out to customers?
Advertising: What media, why, and how often? Why this mix and not some other? Have you identified low‐cost methods to get the most out of your promotional budget?
Will you use methods other than paid advertising, such as trade shows, catalogs, dealer incentives, word of mouth (how will you stimulate it?), and network of friends or professionals?
What image do you want to project? How do you want customers to see you?

Pricing
Explain your method or methods of setting prices. For most small businesses, having the lowest price is not a good policy. It robs you of needed profit margin; customers may not care as much about price as you think; and large competitors can under price you anyway. Usually you will do better to have average prices and compete on quality and service.
Does your pricing strategy fit with what was revealed in your competitive analysis? Compare your prices with those of the competition. Are they higher, lower, the same?
Why?

How important is price as a competitive factor? Do your intended customers really make their purchase decisions mostly on price?

What will be your customer service and credit policies?

Proposed Location
Probably you do not have a precise location picked out yet. This is the time to think about what you want and need in a location. Many startups run successfully from home for a while.
You will describe your physical needs later, in the Operational Plan section. Here, analyze your location criteria as they will affect your customers.

Development of the Operational Plan
Explain the daily operation of the business, its location, equipment, people, processes, and surrounding environment.

Production
How and where are your products or services produced? Explain your methods of:
•    Production techniques and costs
•    Quality control
•    Customer service
•    Inventory control
•    Product development

Location
What qualities do you need in a location? Describe the type of location you’ll have. Physical requirements:
•    Amount of space
•    Type of building
•    Zoning
•    Power and other utilities

Access:
Is it important that your location be convenient to transportation or to suppliers? Do you need easy walk‐in access?
What will be your business hours?

Legal Environment
Describe the following:
•    Licensing  requirements
•    Permits
•    Health, workplace, or environmental regulations
•    Special regulations covering your industry or profession

Personnel
•    Number of employees
•    Type of labor (skilled, unskilled, and professional)
•    Where and how will you find the right employees?
•    Quality of existing staff
•    Pay structure
•    Training methods and requirements
•    Who does which tasks?
•    Do you have schedules and written procedures prepared?
•    Have you drafted job descriptions for employees? If not, take time to write some.
They really help internal communications with employees.
•    For certain functions, will you use contract workers in addition to employees?

Inventory
•    What kind of inventory will you keep: raw materials, supplies, finished goods?
•    Average value in stock (i.e., what is your inventory investment)?
•    Rate of turnover and how this compares to the industry averages?
•    Seasonal buildups?
•    Lead‐time for ordering?

Suppliers
Identify key suppliers:
•    Names and addresses
•    Type and amount of inventory furnished
•    Credit and delivery policies
•    History and reliability
Should you have more than one supplier for critical items (as a backup)? Do you expect shortages or short‐term delivery problems?
Are supply costs steady or fluctuating? If fluctuating, how would you deal with changing costs?

Credit Policies
•    Do you plan to sell on credit?

Management and Organization of the Business
Who will manage the business on a day‐to‐day basis? What experience does that person bring to the business? What special or distinctive competencies? Is there a plan for continuation of the business if this person is lost or incapacitated? If you’ll have more than 10 employees, create an organizational chart showing the management hierarchy and who is responsible for key functions. Include position descriptions for key employees. If you are seeking loans or investors, include resumes of owners and key employees.

Developing a Financial Plan    
The financial plan consists of a 12‐month profit and loss projection, Together they constitute a reasonable estimate of your Enterpriseʹs financial future. More important, the process of thinking through the financial plan will improve your insight into the inner financial workings of your Enterprise.

Monthly Profit and Loss Projection
Many business owners think of the 12‐month profit and loss projection as the centerpiece of their plan. This is where you put it all together in numbers and get an idea of what it will take to make a profit and be successful. Your sales projections will come from a sales forecast in which you forecast sales, cost of goods sold, expenses, and profit month‐by‐month for one year. Profit projections should be accompanied by a narrative explaining the major assumptions used to estimate Enterprise income and expenses.