Entrepreneurship - Lesson

Development of a Business Plan

Every business owner needs a way to organize and present information about how he or she intends to develop, grow, and manage his or her business. A business plan is the perfect tool. When well-crafted, a plan will catch the attention of potential investors and customers while encouraging them to support the business. When seen this way, a business plan becomes the foundation for any successful business.

Why Write a Business Plan?

1. The process of putting a business plan together forces the person preparing the plan to look at the business in an objective and critical manner.
2. It helps to focus ideas and serves as a feasibility study of the business's chances for success and growth.
3. The finished report serves as an operational tool to define the company's present status and future possibilities.
4. It can help you manage the business and prepare you for success.
5. It is a strong communication tool for your business. It defines your purpose, your competition, your management and personnel. The process of constructing a business plan can be a strong reality check. 
6. The finished business plan provides the basis for your financing proposal.

Business Idea

•      The Business Idea section sells the business’s vision and briefly outlines how that vision will be accomplished.

•      A basic idea can be expanded into a plan by including three key elements:

Business Summary – A simple description of the business, the need for its product or service, its intended audience, and its competitive advantage.

Keys to Success – A series of short statements that describe the value the business promises to deliver to its potential customers.

Management and Staff Summary – Short statements that draw attention to the personal strengths of the people who will be part of running the business.

Market Analysis

•      Before taking on the risks of a business, it is important for business owners to know general market conditions, where the new business will fit inside a particular industry, who their customers will be, and who will be the competition.

Marketing Strategy

•      Analyze your competitors' marketing strategies to learn how they reach the market. If their strategy is working, consider adopting a similar plan. If there is room for improvement -- work on creating an innovative plan that will position your product or service in the minds of your potential customers.

•      A good strategy should include these four P’s:

What specific Product or service does the business offer?

What Pricing structure will be used?

Where your business will be located (Place)?

What will be done to Promote the business?

•       The most effective marketing strategies typically integrate multiple mediums or promotional strategies to reach the market. The following are some promotional options to consider.

•      TV, Radio, Print, Direct mail, Public relations, One-on-one sales

Financial Analysis

If a business is selling a lot of product but still losing money in the long run, the business will fail. Based on the previous information collected, the business owner can provide a fairly accurate estimate of the business’s costs and what will affect them.

•      Start-Up Costs – All businesses need some starting capital (money invested in the business) to deal with initial costs. These are the items that are one-time purchases.

•      Monthly Expenses – These are the ongoing costs like inventory, utilities, and insurance. Also included in this section is a breakeven point analysis (what the business needs to make to cover costs and show a profit).

•      Financing Options – These are the possible sources for the capital to start a business.

•      Sales Forecasts – This is an estimate on how much product the business will need to sell to cover expenses, and what can reasonably be sold based on the market research conducted earlier.