Howtos > How to complete a business plan assignment?
Why do people need a business plan?
Many people who are just starting out in business or have been doing business for a while are quick to ask this when someone questions them. Just like you draw up a plan when you’re going to war, building a house, or even going on vacation, you need to draw up a plan for your business. This tutorial will help you to clearly see where you are and make it possible to understand where you’re going. Creating a business plan opens doors to new opportunities more than anything, especially when there is an assignment at school.
Importance and Benefits of Writing A Business Plan
The impact a well-written, comprehensive, and easily understandable startup business plan can never be undermined. A simple business plan is what you need to be able to expand your business by attracting investors. If you want to make sound decisions in your business you would need a marketing plan that opens up all the benefits to help you establish and progress a useful plan that will always be available for you to use. With a business plan, you will be able to identify potential weaknesses when you share it with people who can help point out all the errors. Need shareholders to take you seriously? The best and fastest ways to do this is writing a business plan.
Business plans are not just important for your development as an entrepreneur; they are also very beneficial for establishing strategies. It can be hard to stick on a working strategy unless you have a simple business plan template that reminds you all the time, so you can always re-visit. The plan will also make your business objectives clear, priorities will make more sense, and your educated guesses will be much better.
Tip: A business plan makes it easier to manage team members and cash flow to ensure success.
Components of a Business Plan
When writing a business plan your intention is to make it short, simple, and precise. You want to make sure that your readers and listeners have a complete understanding of the message you’re trying to pass so you will be able to easily impress them. These elements are the most important components of every valuable business plan.
1. Executive Summary
Most people who are going to read your business plan are very busy and have a very short attention span. To get their interest running as quickly as possible, you need to put up a summary of all that your business represents. This includes your business strategy, plan, marketing, and everything in between. Even if people don’t get to read everything, the executive summary should explain your entire business structure to them. You should also include your organizational and executive goals here to help the readers understand where you’re heading to.
A good executive summary should also contain your mission statement, goals, and the direction you’re taking for future plans. It will also help to give a brief explanation on why you’re starting the company and details of experience in the industry you are in or you’re trying to enter. With all of this information, anyone that picks up your business plan will realize that you have deep insight to what you’re planning to venture into and they are more confident that investing in your business won’t be a mistake. Make sure that small bits of every relevant information in your entire write up is mentioned in the executive summary so you can be sure that you covered everything from the beginning.
For this reason, it is advisable for you to write the executive summary as the last element, so you can have a recap of everything you already have written and then deliver it in a simple and decisive manner.
As a last element, provide your contact information and some links to supporting information about your business (website, reports).
Tip: Never assume people will read your business plan cover-to-cover.
2. Company Description
Your company description gives you the opportunity to describe the most important aspects of your business in full details. The description makes your business look original and anyone who reads it won’t have any problems understanding the scope of your business idea and projections. When writing your business description you need to be able to captivate your audience and gain their attention. You want to make sure that you answer all of their questions as pertaining to who, what, where, why, how, right there are quick to make sure you don’t lose them.
Describe who you are, including your business name and your very own name. Investors are not just interested in the business but the person that started it; the source of the original idea. Here, you also need to describe who your target audience or customer is and how your business is able to appeal to them. Everything must be presented in a simple, stylish, and enticing manner that will make investors want to continue reading. You also have to let them know what you’re selling, the products and services that you’re offering. They want to know the significance of your business in the lives of people and how it impacts them. You also have to describe where your company is currently located because, as you may already know, location is very important when it comes to making important business and investment decisions.
If you are just starting out you also need to include when you’re planning to launch out in your business. Investors want to know if you have a time strategy in place, which is obviously essential for the survival of any business. Why should people buy from you instead of your competition? This question must also be well addressed in this section to make your potential investors understand the unique selling points of your products and services. You should also explain the type of business structure you will be putting up and how it’s going to help you improve sales at the end of the day. Business advisory, interviewing and hiring employees, managing payroll systems are all vital elements of businesses you would need to include in this section of your business plan.
Tip: Think of why should people buy from you instead of your competition?
3. Sales Strategy
If anyone is ever going to invest in your business they want to know how you’re going to sell whatever you’re producing. You are definitely going to have competition, but what sets your business apart is the sales strategy you put up to attract people and make them want to consume your products and services. Even if you have just a small business plan, your sales strategy must meet the needs of the reader in terms of making them understand your unique selling point and how you’re going to use it to approach your market and guarantee consistent sales.
An effective sales strategy should contain a full description of the products and services you have to offer including the physical attributes. You must be able to describe how the products differ from what your competitors have to offer. Your pricing strategy also needs to be adequately outlined to make it easier for investors to calculate if you’ll be able to reach your profit target margin, which is essential for determining and calculating profit. Also, you shouldn't forget to indicate if your pricing is going to be higher or lower than what your competitors offer, and your plans in justifying for the difference.
Your sales strategy should also indicate where your business will be selling – that is the location of the distribution. Will you be selling online or supplying products to local stores? Your plan should have a simple projection of how many copies you’ll be able to sell in each of these locations. A comprehensive and detailed business plan sales strategy must also include a description of your intended product promotions and advertising, how much business you anticipate of getting from each form of advertising, and your plans in the offering of coupons, giving incentives, and running campaigns. Describe the sales team, including their qualities and abilities, and how they will be working to make your sales strategy a success. You should also mention if you’ll be doing sales training, rewarding customer service representatives and if you plan to measure customer satisfaction.
Tip: During sales you attempt to influence the buying behavior of your customers. Don’t forget that advertising in only one way of promoting your business.
Understanding the market you’re planning to sell your goods and services on and providing statistics and information about what goes on in there is an important aspect of a simple business plan example. This section is one of the most important for investors because it gives them the confidence that you know what you’re doing and you have an in-depth understanding of what is going on in your market. You should also add links to files and web pages to the sources of the data you can provide to help make the whole story more believable.
A solid marketing analysis for a business plan must include very important elements including the overall industry outlook. This should express specific data and information on the industry trends, growth projections, outlook, and size. You should also incorporate information about your target market, where you will find your customers, and details of their purchasing power. Give insight into their demographics, age, gender, lifestyle, and income level to have a complete scope of what it will all entail.
Carry out an extensive and independent market research, as part of your initial investigation. This detailed test result with all the supporting analysis and test process must be added to your new business plan to further strengthen the authenticity of the document. Your market analysis must also include research on your lead time – the time it takes you to deliver a product to your consumer after a purchase. Try to insert details of how you’re going to handle individual purchase as well as bulk orders.
Tip: the societal environment can be examined using the PEST analysis. Examine every political, economic, sociocultural and technological factor to mitigate risks.
Porter's Five Forces Framework
Porter's Five Forces Framework enables you to analyze the competition of a business. It derives five forces that determine the competitive intensity and at the same time, attractiveness of an industry. An industry considered to be unattractive if these five forces reduce overall profitability:
1. The bargaining power of customers
2. The bargaining power of suppliers
3. The threat of new entrants
4. The threat of substitute products
5. Intensity of competitive rivalry
More info on this topic: Community Features
If you’re seeking financing and investments you have to provide financial projections for your business. Investors want to know what they are going into, so they can calculate their profit expectation and how your business is going to grow.
The financial projection part of your business plan should include a sales forecast for at least three years, including a detailed monthly breakdown. Your forecast should also present how many customers you hope to reach and the number of units you hope to sell. Your business plan should also include the cost of goods sold and your strategy for pricing your products and services. In addition to your forecast you should also explain your expense budget for the whole period. Ensure that your budget includes fixed costs (like the rent for your location) and variable costs (e.g. expenses for your marketing). There is no need to have a list for every item that you plan to purchase, an estimate of groups of items should be fine. What the investor wants to know in this section is the justification for your costs.
You also need to include your income statement of projection detailing how much you hope to earn in the coming years. You have to create monthly income for your first year of business and quarterly statements for the second year. For the following years annual income statements are enough. Another financial analysis that must be in this section of your business plan is the cash flow statement. This is similar to checking the account register to understand how much money will flow in and out of your account. At the end of the period, you should be able to indicate profit or loss monthly, quarterly, and annually.
Tip: Be as honest as possible. This section may show you, why you should or should not start the business. Try not to waste your time and money!
If you plan to ask for funding for your business you must include this section even if you create only a small or short business plan. There are several businesses trying to get the attention of investors today and obviously the hottest topic is funding. This section must include information on your future financial plans, and the reasons why an investor should take the risk with their money with you.
The funding section should start with an outline of your business. Even though you already have done that, you should remind the reader again by providing a quick recap here, to jump-start their memory. Provide your business details, information about your target audience, and business structure, ownership, members’ information, and the success you’ve had to date. After that, you can then provide the reader with a summary of your current financial situation, which should include any loans, debts, and your ROI.
The investor would also be interested in how much you need, not just now but also in the future. You should also indicate how funds will be used. Have a list of all the things you need and how much you will require to get them. Your funding requirements section should also include your decisions on loan repayments, relocations, selling the business, and how the investor can exit the deal. Don’t just write one funding request for all your financial sources, provide a customized document that relates to each investor.
Tip: Keep your funding sources in mind when requesting and make sure you ask for enough money; don’t be ambitious and at the same time avoid being greedy.
Investors want to know about your competition and want to be sure that you also know them. Why is this necessary? They are the ones who can affect your business the most, in terms of getting customers, and you want to make sure that you understand them as much as you can. The competitive analysis section of your business plan is one of the trickiest parts because the only way to complete this is to deeply investigate every competitor.
To write this part first find out who your competitors are. You need to have a good understanding of the markets they serve, the benefits they offer, and what makes their customers remain with them; their pricing, promotions, products, services, etc. Visit the competition several times, look around, and see how they treat their customers. Check out their prices to know a thing or two about them. You can also try to talk to their customers directly (in person) to determine how they feel about the service.
The internet may also have information about your competitors’ business so it makes sense if you check their website, comments on social media, and their overall presence on the media; find out anything they lack. Provide a complete analysis of your competitors and how you’re planning to compete with them. Is there a segment they have overlooked? Is there something the customers are demanding but they are not getting? This can be the source of your big break into the business so you can make a mark.
You also need to do a SWOT analysis which will include information about their Strengths, Weaknesses, Opportunities, and Threats. The Strengths of the company includes the things they do well, internal resources, tangible assets, and overall qualities. You should also know about their Weaknesses, which may involve the things they lack or omit, and the Opportunities in the market within your area like emerging need for products, press coverage, and underserved markets. Threats should include other competitors like you that are coming up, changing customer attitudes, and changing regulations.
The table below illustrates how to make a SWOT analysis.
Production Branding Staff Profit Growth
Marketing R&D Cash flow Funding Costs
Customer service Social media Cleaner environment Economic independence
Risk of use New technology High inflation Declining demand
Have all of this information entered into a worksheet to make it easier for you to analyze and digest. With this detail, it will be easy for you to find opportunities you can take advantage of, like popular features in products and services you can implement. Sometimes, a SWOT analysis can reveal strengths from different competitors, which you can combine to form your own products and present it to investors as a superior delivery. Apart from making SWOT about your competitors you also need to make for yourself also, to have a complete understanding of your marketing approach.
Tip: make a SWOT-analysis for your business and every relevant competitor. This is how you can identify your competitive edge!
Description of Products and Services
Every company that wants to succeed must provide a unique product or service that consumers will find irresistible. The products and services section of your business plan is the golden opportunity you have to completely convince investors that this is the best investment they can ever make. Every investor is also a consumer so they know through your description if your products and services sound great to their ears, and if other people may also like it. Here is what you need to include in this section.
Describe your products and services features. Help the reader understand how the product works and why it is easy to use or implement. Don’t forget to include any attributes that make it better than any other products in the market including being faster, bigger, smaller, more colors, specials features, etc. People want to pay less for quality products so include pricing that is reasonable and competitive within the market or industry. People also buy products that help save their time so make sure you indicate this in your writing and describe how your product does that. Your products description should also include how your products can easily be transported, availability, and the opportunity for training and support.
You shouldn’t stop there. Does your business offer a new or cutting-edge technology? Don’t forget to mention it. You should also compare your products and services with other products and services of your competitors, highlighting all the features that make it look better. Other issues you must indicate includes customer service, reputation, knowledge, education, experience, awards, etc.
Tip: Always consider risks regarding your product or service. Think of obtaining a liability insurance for protection or joining an industry association to become an accredited business to reduce these costs.
Organizational and Management Structure
This section is a summary of your business structure and organization of your business. It should discuss everyone working in your company, their duties and expertise, education and qualification. If you are a partner or multi-member company, this section is highly important. If you run a home business or you’re the single-person business, it is much easier. If you outsource jobs to copywriters, virtual assistants etc., you should mention them as well. Include ownership and management information, the board of directors’ information; and the skills, background, experience, name, and title of your support professionals.
Tip: Make sure that every information you provide is accurate and easy to understand.
Business plans offer you the very best opportunity to present yourself in front of investors when asking for funding. Make sure that all of the sections mentioned above are clear in the document; also include any further sections you might think relevant. Also, you can have a different small business plan for investors; could be the same write-up but with custom elements depending on who you are targeting. Be open to ideas and ensure that you take advantage of all the opportunities made available to you. Only use data and statistics that are verifiable, to boost the confidence of the investors in your business. After the first version of your business plan is complete you will need constant improvement and evaluation, to make it better – this is a work you should never stop if you want your business to constantly evolve. Don’t forget to include proper risk analysis in your plan, making sure that the likelihood of an adverse effect happening is properly analyzed and concluded.
Authors: Samantha Smithy & Zoltan Fabian
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