Riaz Academy
Define business plan. Explain the steps/
procedure/ guidelines for writing a business plan?
ANSWER:
A business plan is a written document
that describes all the aspects of a business venture in a concise manner’’
normally Business plan consist of 25 to 35 pages that describes how a new
business can be completed. In some professional areas the business plan is
referred to as a venture plan, a loan proposal, or an investment prospectus.
There are several important steps or
guidelines that should influence the writing of a business plan. It is
important to remember that a firm’s business plan is typically the first view
of a proposed venture that an investor will see. If the plan is incomplete it
is easy for an investor to refuse the investment. So, it is important to be
sensitive for writing a business plan professionally.
1-
Structure of the business plan:
To make the best impression, a business
plan should follow a conventional structure. investors are very busy people and
want a plan where they can easily find critical information otherwise investor
simply give up and move on to the next plan. Many software packages are also
available for writing a business plan this software are useful and helpful for
writing a plan.
2- Cover page and table of Contents:
The cover page should include the
company’s name, address, phone number, the date, the contact information,
company’s Web site address. The business plan should give clear and concise
information on all the important aspects of new venture. It must be long enough
to provide sufficient information, normally 25 to 35 pages business plans are
sufficient. Business plan should be reviewed for spelling, grammar, and to make
sure that no critical information has been omitted.
3- Style or format of the business plan:
The plan’s appearance must be look sharp
and professional, so when writing the plan, avoid the design elements included
in word-processing programs, such as bold type, italics, different font sizes
and colors, clip art, and so on. There are three types of plan according to the
detail length 1- summary plan, 2- full business plan and 3- operational
business plan.
4- Recognizing the elements of the plan
may change:
A final guide line for writing a business
plan is to recognize that the plan will usually change as it is being written
when an entrepreneur writing the plan and start getting feed- back from others.
This process continues throughout the life of a company, A business plan is a
living, breathing document, rather than something that is set in stone.
5- Executive summary:
The executive summary is a short overview
of the entire business plan on a section-by-section basis. The topics should be
presented in the same order as they are presented in the business plan. it
provides a busy reader with everything she needs to know about the new venture.
An executive summary consists on two single spaced pages.
6- Industry analysis:
The main body of the business plan begins
by describing the industry analysis. Industry analysis include both
environmental and business trends. The most important environmental trends are
economic trends, social trends, technological advances, and political and
regulatory changes. Business trends include issues such as whether profit
margins in the industry are increasing or falling and whether input costs are
going up or down. The industry analysis should conclude with a brief statement
of your beliefs regarding the long-term prospects for the industry.
7- Company description:
This section begins with a general description
of the company such as mission statement, tag line and mile stone It is
extremely important for your reader that you know how to translate an idea into
a business. The legal status and
ownership section should indicate who owns the business and how the ownership
is split up.
8- Market analysis:
The market analysis breaks the industry
into segments and target market to which the firm will try to appear. The
market segmentation is the process of dividing the market into distinct
segments, such like by geography as city, state, country, demographic variables
such as age, gender, income, psychographic variables such as person laity, lifestyle
and values. Competitor analysis is the part of market analysis so it should
include in it. In market analysis we estimate a firm’s annual sales and market
share.
9- The Economics of the business:
This section begins the financial
analysis of a business, it addresses the basic logic of how profits are earned in the business and how many
units of product or service must be sold for the business to “break even” and
then start earning a profit. The cost of goods sold, fixed cost, variable cost,
gross or contribution margin and operating leverage analysis should be
discussed in detail in this section.
10- Marketing:
The marketing plan focuses on how the
business will market and sell its product or service. It deals with the nuts
and bolts of marketing in terms of price, promotion, distribution, and sales.
The final section should describe the company’s sales process or cycle and
specific sales tactics to compete the market.
11- product design and development:
This section focuses on the product
development status of your efforts. If
you are
in the very
early stages of
your business and
only have an idea, you should
carefully explain it. Normally three ways are used for representing product.
Product prototype, service prototype and virtual prototype. At last disclose
the information about design, patents, trademarks, copyrights and trade
secrets, development challenges, intellectual property issues and risks that
will be involved in bringing the product or service to market.
12- Operations Plan:
In this section we write operational elements such as how
your business will be run and how your product or service will be produced. You
have to strike a careful balance between adequately describing this topic and
providing too much detail because your readers will want an overall sense of
how the business will be run. In this section you should list your most
important facilities and equipment and briefly describe how they will be
acquired, in terms of whether they will be purchased, leased, or acquired
through some other means.
13- Management Team and Company
Structure:
Business
investors and others who read
business plans look first at the executive summary and then go directly to the
management team section to assess the strength of the people starting the firm.
The management team of a new firm consists of the founders, board of directors,
board of advisers, organizational chart and important management personnel. A
brief profile of each member of the management team should be provided, starting
with the founders of the firm. Each profile should include the following
information, title of the position, duties and responsibilities of the
position, previous industry and related experience, previous successes and
educational background.
14- Overall Schedule:
A schedule should be prepared that shows
the major events required to launch the business. The schedule should be in the
format of milestones critical to the
business’s success, such as incorporating the venture, completion of prototypes,
rental of facilities, obtaining critical financing, starting the production
operations, obtaining the first sale, and so on. An effectively prepared and
presented schedule can be extremely valuable in convincing potential investors.
15-Financial Projections:
The final section of a business plan
presents a firm’s pro forma or financial projections. The first thing to
include is a source and uses of funds statement that shows how much capital a
firm needs. The second is the assumptions sheet, which is an explanation of the most
critical assumptions that your financial statements are based on. Ratio
analysis such as return on assets and return on sales, ratios are computed by
taking numbers of financial statements. Each ratio has a particular meaning in
regard to the potential of the business.
16- Appendix:
Any material that does not easily fit
into the body of a business plan should appear in an appendix resumes of the
top management team, photos or diagrams of product or product prototypes,
certain financial data, market research reports, etc.
17- Presenting the business plan to an investor:
After completion of the written plan the
next step is the presentation of the plan in front of the investor. The first
meeting with an investor is generally very short, about one hour. If the
investor impressed by the plan he will ask for meeting with directors, the
directors of a new venture should prepare a set of Power Point slides for
presenting the plan in detail.
18-Questios and feedback:
After presenting the business plan the question
should be asked by entrepreneur from investor and try to get feedback about new
venture plan. So, the entrepreneur should well prepared for the question
session.