LECTURE 6
BUSINESS PLAN
A business plan is a written description of your business's future. That's all there is to it--a document that describes what you plan to do and how you plan to do it. If you jot down a paragraph on the back of an envelope describing your business strategy, you've written a plan, or at least the germ of a plan.
Business plans can help perform a number of tasks for those who write and read them. They're used by investment-seeking entrepreneurs to convey their vision to potential investors. They may also be used by firms that are trying to attract key employees, prospect for new business, deal with suppliers or simply to understand how to manage their companies better.
So what's included in a business plan, and how do you put one together? Simply stated, a business plan conveys your business goals, the strategies you'll use to meet them, potential problems that may confront your business and ways to solve them, the organizational structure of your business (including titles and responsibilities), and finally, the amount of capital required to finance your venture and keep it going until it breaks even.
Sound impressive? It can be, if put together properly. A good business plan follows generally accepted guidelines for both form and content. There are three primary parts to a business plan:
- The first is the business concept, where you discuss the industry, your business structure, your particular product or service, and how you plan to make your business a success.
- The second is the marketplace section, in which you describe and analyze potential customers: who and where they are, what makes them buy and so on. Here, you also describe the competition and how you'll position yourself to beat it.
- Finally, the financial section contains your income and cash flow statement, balance sheet and other financial ratios, such as break-even analyses. This part may require help from your accountant and a good spreadsheet software program.
Breaking these three major sections down even further, a business plan consists of seven key components:
- Executive summary
- Business description
- Market strategies
- Competitive analysis
- Design and development plan
- Operations and management plan
- Financial factors
In addition to these sections, a business plan should also have a cover, title page and table of contents.
How Long Should Your Business Plan Be?
Depending on what you're using it for, a useful business plan can be any length, from a scrawl on the back of an envelope to, in the case of an especially detailed plan describing a complex enterprise, more than 100 pages. A typical business plan runs 15 to 20 pages, but there's room for wide variation from that norm.
Much will depend on the nature of your business. If you have a simple concept, you may be able to express it in very few words. On the other hand, if you're proposing a new kind of business or even a new industry, it may require quite a bit of explanation to get the message across.
PURPOSE OF BUSINESS PLAN
The purpose of a Business Plan is to identify, describe and analyze a business opportunity and/or a business already under way, examining its technical, economic and financial feasibility.
Moreover, it should serve as a business card for introducing the business to others: banks, investors, institutions, public bodies or any other agent involved, when it comes time to seek cooperation or financial support of any kind.
A Business Plan has a dual function:
Management Tool.
Planning Tool.
1. Management Tool:
Provides economic/financial projections.
Enhances the monitoring and control of the business by following up the results obtained and analyzing management indicators.
Introduces an analysis of the supply and demand.
Reflects the commercial strategy and the marketing policy.
Identifies the guidelines for the management of human resources.
Analyzes the key factors of success and the risks of a business.
2. Planning Tool:
The company assumes and takes responsibility for the definition of its objectives:
With results-oriented actions.
Strict fulfillment of its economic commitments.
Orients decision-making processes:
Provides qualitative and quantitative information.
Planning conforms to a homogeneous pattern.
Identification of Business Opportunity: Idea Generation and Opportunity!
In general sense, the term opportunity implies a good chance or a favourable situation to do something offered by circumstances. In the same vein, business opportunity means a good or favourable change available to run a specific business in a given environment at a given point of time.
The term ‘opportunity’ also covers a product or project. Hence, the identification of an opportunity or a product or project is identical and, therefore, all these three terms are used as synonyms. The Government of India’s “Look East Policy” through North East is an example of ‘opportunity’ to do business in items like tea, handicrafts, herbals, turmeric, etc.
IDEA GENERATION
Sources of Ideas:
In a sense, opportunity identification and selection are akin to, what is termed in marketing terminology, ‘new product development.’ Thus, product or opportunity identification and selection process starts with the generation of ideas, or say, ideas about some opportunities or products are generated in the first instance.
The ideas about opportunities or products that the entrepreneur can consider for selecting the most promising one to be pursued by him/her as an enterprise, can be generated or discovered from various sources- both internal and external.
These may include:
(i) Knowledge of potential customer needs,
(ii) Watching emerging trends in demands for certain products,
(iii) Scope for producing substitute product,
(iv) Going through certain professional magazines catering to specific interests like electronics, computers, etc.,
(v) Success stories of known entrepreneurs or friends or relatives,
(vi) Making visits to trade fairs and exhibitions displaying new products and services,
(vii) Meeting with the Government agencies,
(viii) Ideas given by the knowledgeable persons,
(ix) Knowledge about the Government policy, concessions and incentives, list of items reserved for exclusive manufacture in small-scale sector,
(x) A new product introduced by the competitor, and
(xi) One’s market insights through observation.
In nutshell, a prospective entrepreneur can get ideas for establishing his/ her enterprise from various sources. These may include consumers, existing products and services presently on offer, distribution channels, the government officials, and research and development.
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