making a business plan

making a business plan

Developing an Effective Business Plan

1. Executive Summary

Your executive summary should be a two to three page distillation of your business plan, highlighting the key points from each of the other sections. It is the principle means by which an investor will decide whether or not to proceed with your plan. It should, at the least, provide an overview of the business idea, potential market, the product or service itself, economic considerations, the management team, and a clear exit strategy. One of the most important aspects to highlight in this section is the strength of your management team. Often times, if an investor has an in-depth knowledge in the area of your business, they might consider the management team above all other factors. Therefore, it is essential that you can prove that your team has the necessary skills and in-depth knowledge to lead the company and product to success. If you’ve already got people on board in the advisory board, or the board of directors, be sure to name them and describe the skills they bring to the table. A successful business plan is not a static document, it is something that should evolve as your company grows and changes. What you learn and find in the course of creating the plan will make it easier to steer the company in the right direction. Therefore, it is important to reassess and update your business plan regularly, and use it as a tool for decision making, not something written in stone. Continual proactive management in reference to the plan is the key to running a successful business.

2. Market Analysis

The next step is to very important and often requires primary research, it is to build an image of a potential target market in which a product or service will be sold. This is a context of a marketing decision of a particular market targeting in which a product or a service can be introduced to achieve a sustainable competitive advantage. It is vital as a wrong step in a wrong direction can waste valuable resources and time. This can be done using the STP analysis a segmentation of the market, selection of a target of a selected segment and positioning of a product in a mind of the consumer of a particular segment. An effective use of the STP model helps identify the differential advantages and a successful strategy. During the implementation of this stage it is important to remember that the actual customer is the heartbeat of a successful business. Only ventures that have a clear understand of the consumer and the changes in the consumer in the market have a chance to build a competitive advantage some of the successful companies have today.

After completing a PEST analysis of the industry, you can then work on a micro-environment analysis of a specific part of the industry. In most cases a new business will not be able to compete in an industry as a whole. More often it will be a small company or a part of a larger organisation representing a brand. In this situation it would be best to fill out a different Pest analysis for the brand or a SLEPT analysis which is a way of addressing the same points from a micro-level focusing on the changes in a smaller market of a larger industry.

PEST analysis is a way of looking at the general environment a company may be considering, it is a useful tool and is often used alongside SWOT analysis. Here you are trying to build a picture of the current situation in the industry you want to enter. You will need to look for details of the past (up to 5 years if possible) affecting the markets that determine the success or failure of the industry e.g. Legislation, technological development. Try to find characteristics of the industry life cycle which can affect its when your business will enter the market e.g. growth in the industry indicates a greater potential for a new business. An overview of the industry or a sector of a larger industry can be found from trade publications often called librarian research which can be an excellent source of secondary data. The secondary data will be an important part of the analysis often providing the context of specific research illustrated in consumer behaviour of a particular market for example.

This is the section of your business plan where you get to build a picture of the market and the customers that you want to sell to. This picture will help you make the decision as to whether your chosen market is a right choice for you to start a venture. You will need to find out as much as you can about the heating and ventilation industry in which you are looking to start a business. Use the first macro-environment circle to conduct a PEST analysis on the whole industry. This will provide a good backdrop to you focus on the micro-environment of a particular part of the industry that you want your business to be a part of.

3. Business Strategy

Business strategy looks at the effective orientation and conduct of business in order to make informed decisions on the direction a business takes and its eventual success or failure. This involves making the most effective use of the company’s resources in a changing environment. Strategic planning helps determine a company’s direction by analyzing their resources and determining how these resources can be best used to achieve their goals. This will often involve a not so dramatic shift from what they are doing now, towards providing different products or entering new markets. It is not unusual for an organization to assess its strengths and weaknesses and attempt to exploit a strength in a particular market. This would not necessarily be a change in strategy, but would involve the need to change something within the organization, to move towards the exploitation of the strength. A change of strategy would involve using the same resource differently. This might be to move from a perceived as low cost and low quality position, toward a higher quality position with higher prices with the hope of increased profitability. This too however would involve changing the resource base i.e. production and marketing.

4. Financial Projections

Financial projections. The financial part of the business plan is an overview of your planned business’s finance in the future. It is a prediction of the future, both in income and expenses, so that you can know if your business is right for you. The financial part is the business plan may be divided into two parts. The first one is a compilation of the past and the present of the business, to be used to forecast the future. The second is your business forecast for the future based on the past and the present. This is a highly detailed section of your business plan so the reader will know your expected run of the business in the future. This is determined by a profit and loss analysis. A profit and loss analysis is a documentation that allows a projection for your business for a certain period of time. It is a planned income and expenses of your business, and allows you to know whether your business is in a good financial situation. Basically your business should be earning more than it expends, but it is ok for a projected loss in a certain period if the business is just starting up. The second part of your business forecast is a cash flow analysis. This is documented by a monthly projection of when your business will be receiving money, and when your business will be spending money. The aim is to – obviously earn more money than is spent, and a misjudgment can be fatal to the business. This is a preventative measure to avoid a situation where your business is in a loss with no money to recover. Both these analysis today are drawn on the increasing amounts of small business accounting software, with a profit and loss analysis generated automatically from your business accounts data.

5. Implementation and Action Plan

Follow up – the last step is to monitor the implementation continuously and to take feedback from the personnel assigned in order to check if the implementation is taking place as per the plan. Then assess whether each and every activity is on the right path and if there is any deviation, then take corrective action.

Create a marketing plan – In some of the alternatives, it may be necessary to have a marketing plan to implement the alternative. The built example is large consumer credit card company; is a simple cash from alternative used by customers to borrow from company.

Time scheduling – Once the personnel are assigned, a time schedule is to be prepared for the implementation. This is a step-by-step plan to specify the time taken for each activity of the implementation. This is a very crucial step as the delay in the implementation can lead to the increase in the cost and sometimes it may miss the opportunity.

Assignment of personnel – After determining the resources, the personnel are to be assigned for each step of the implementation of the alternative. These personnel are to be assigned different responsibilities and a clear plan of action is communicated to these personnel.

Define the resources – In this step, the resources required for the implementation of the alternative are to be determined. These resources can be in the form of human resources, physical resources, technical resources or financial resources. These resources are necessary to turn the theory of alternative into a practical work to get benefited.

Following evaluation and recommendation of alternative solutions, now it’s the time to take advances to put them into practice to attain the aimed organizational goals. This is a complete process in itself and includes different steps.