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Business Plan Guide
1-Executive Summary
Although this topic appears first in the plan, but normally its written last. This topic shall include the main highlights.
As a general rule, the first paragraph shall include the following points:
Underlying statement, summarizing the whole plan. Sales and profit projections are normally included. Unit sales and profitability. Include the news you do not want anyone to miss.
Second paragraph:
Highlights of Business Plan (future project, competitive advantage and “bottom line” in a nutshell- preferably one page maximum). Business loans sought.
Third paragraph:
Conclusion & wrap-up.
By default, this topic shall be followed by a highlight chart, which shows sales, gross margin, and profits. The objective of the executive summary is to convince the Board of Directors to approve your business plan. An effective executive summary describes all of the key elements of a business plan in two pages or less.
2-MISSION Statement
Use your mission statement to establish your business' fundamental goals for the quality of your product, customer satisfaction, employee welfare, and so forth. A good mission statement can be a critical element in defining your business and communicating to employees, customers, and owners.
For example, customers' service experts frequently point out the need for a mission statement that explicitly states the importance of customer service, so that employees understand how much the company values its customers. Quality assurance experts will also turn to a mission statement as a fundamental plank of quality control. A company needs to state its goals and priorities so the people charged with carrying them out can know and understand them.
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The mission statement is also a good opportunity to specifically define what business you are in. This can be critical to understanding your keys to success. For example, a book publisher is in the business of knowledge, or entertainment, or both, not just the business of making and selling books.
As another option, experts in value-based marketing recommend a mission statement that includes what they call a "value proposition." The value proposition summarizes what benefits you offer, to whom, and at what relative price. Using this reasoning, a tire company might be selling the benefit of highway safety to safety-minded consumers at a premium price. A luxury car might actually be selling the benefit of prestige to status-conscious consumers at a premium price.
The main points that should be included in the mission statement are:
What business we are in? What customers do we serve? How to be customer driven? What are our values and priorities? Why does this organization exist? Where we want to be? (How does this tie to the Group statement?)
3-The Company
Current status; (In brief)
What are the existing product lines? How many employees does the company have? Where does it stand in its industry and market place? Are sales on an upswing, level, or in a decline? Briefly, describe your position in the market.
Future;
Where the company is heading? What are its objectives and goals? What are the plans for new markets and products?
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4-SWOT & PEST Analysis
A) SWOT
Strengths
Any internal asset (know-how, motivation, technology, finance, business links), which will help to meet demands and to fight off threats.
Key Questions: What are you good at? What are your advantages? What do you do well? How are we doing competitively? What are our resources?
Examples: Well-trained manpower Well-established knowledge base Good contact to target group Technology, etc.
Weaknesses
Internal deficits hindering the organization in meeting demands.
Key Questions: What are you doing badly? What annoys your customers most? What could be improved? What should be avoided?
Examples: Lack of motivation Lack of transport facilities Problems in distribution of services or products Poor information system (The lack of a particular strength)
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Any external circumstance or trend that favors the demand for an organization's specific competence
Key Questions: What changes do you expect to see in demand over the next years? What are the good chances facing you? What are the interesting trends?
Examples: Increasing purchasing power Development of new markets for high quality products New technologies that favor our product Strategic location
Threats
Any external circumstance or trend, which will unfavorably influence demand for an organization's competence
Key Questions: What do other people do that you don't? What future changes will affect your organization?
Examples: Establishment of strong competitors Political instability Governmental regulations that limit free distribution of your product
SWOT-Analysis focuses on the following questions:
What are your objectives? What do your customers want? How do you distinguish yourself from competitors? How can you improve your services? How can you distinguish internal framework conditions (strengths and weaknesses) from external framework conditions (opportunities and threats)
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Summary SWOT
STRENGTHS WEAKNESSES OPPORTUNITIES THREATS
FINANCIAL CUSTOMER INTERNAL GROWTH
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B) PEST
Political Factors
The political arena has a huge influence upon the regulation of businesses, and the spending power of consumers and other businesses. You must consider issues such as: 1) How stable is the political environment? 2) Will governmental policies influence laws that regulate or tax your business? 3) What is the government's policy on the economy? 4) How does it affect your market?
Economical Factors
Managers need to consider the state of a trading economy in the short and long-terms. This is especially true when planning for international business. You need to look at: 1) Interest rates. 2) The level of inflation employment level per capita. 3) Spending and purchasing power. 4) Multilateral and bilateral agreements. 5) Cost of living.
Social Factors
The social and cultural factors have influence on business. It is very important that such factors are considered. Factors include: 1) Traditions and habits. 2) Customers' trends. 3) ِAging.
Technological Factors
Technology is vital for competitive advantage, and is a major driver of globalization. Consider the following points: 1) Does technology allow products to be made cheaper and to a better standard of quality? 2) Do the technologies offer consumers and businesses more innovative products and services such as Internet banking and E-Commerce? 3) How is distribution changed by new way to communicate? 4) Rate of company's dependency on technology?
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5-Strategic Goals
The strategic goals determined through the SWOT & PEST analysis and the market's inputs and what the company is looking forward to achieve, and the strategic goals usually cover the following items:
1-Output
New product New packaging Modifying & developing the existing product Product range
2-Human Resource
Hiring qualified staff New training programs Incentives & promotions
3-Operations
Production planning (capacity requirements) Quality standards & control Cost control & reduction New equipments IT entry Raw material treatment.
4-The Market
Increasing market share Entering new markets Positioning Increasing sales Upgrading delivery system Customer satisfaction
5-Environment
Free trade (WTO, FTA, Arab common market) Globalization Borderless markets Intellectual property E-commerce Telecommunications IT
Business Planning & Development Department 6-Investment
-) Re-Organization -) Joint ventures & Acquisitions -) New projects
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7-Financial analysis
-) Profit -) Capital -) Financial support
These goals should be S.M.A.R.T; Specific Measurable Achievable Realistic Time bounded
6-Competitive Edge
What is your company competitive edge? How is your company different from all others, in what way does it stand out? How you are positioned in the market? Why do customers buy your products instead of the other products offered in the same general category? Is there a sustainable value, something that you can maintain and develop over time. The classic competitive edge is based on proprietary technology protected by patents. Sometimes market share and brand acceptance are just as important, and know-how does not have to be protected by patent to be a competitive edge.
7-The Market Growth Strategy
The market section of the business plan should begin by describing the company’s market. Essentially, this means answering several basic questions, including:
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-What is the market? This question is usually answered in term of a particular category of buyer. Beyond that, each market has characteristics that determine where customers are located, when they buy, how they pay for their orders,… -How large is the market? Every company needs to provide some data as how many individuals or businesses make up the market you are trying to reach. -Where is the market headed? Each company needs to indicate whether the market is growing, staying level, or shrinking. -Market trends. What factors seem to be changing the market, or changing the business? What developing trends can make a difference? -Positioning statement. Should include a strategic focus on the most important target market, the market’s needs, how our products meet that need, what is the main competition, and how your product is better than the competition. -What is the competition? Have a list of the companies that will be our primary competitors and assessing their respective strengths and weaknesses, and compare these with ours. In this topic, we should discuss how we are positioned in the market. Why people buy our products instead of the other products offered in the same general categories? What benefits do we offer at what price, to whom, and how does our mix compare to others. Thinking about specific kinds of benefits, features, and market groups, comparing where we think we can show the difference. -Market strategies. Pricing? Promotion? Distribution? -What motivate buying decisions? To be aware of the factors that determine how buying decisions are made, and describe the decisions-making process for the company’s product in the business plan. -How is the market segmented? Market segmented is very important and frequently overlooked. We cannot assume that because a product’s price varies over a wide range; its customers are distributed evenly over that range. -Market needs. We have to remember that all marketing should be based on underling needs. For each market segment include in our strategy, we should explain the market needs that lead to this group’s waiting to buy our product. Other positioning considerations include: *Product philosophy. Do you aim for the high-priced, high-quality, or does the company try to make an adequate product that can capture a large market share by selling at a low price?
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-What is your defensive strategy? The company must consider what will be the reaction, when the competitors fight back.
8-Sales & Promotion
The business plan must explain in details how we are going to sell our product. The description of the selling process should cover three aspects:
Selling methods:
How the product will be sold? The distribution channels? Methods of distribution? International sales? Selling cost?
Serving the sellers:
The sellers need help, they need training, descriptive brochures, and other selling aids.
Aggressive promotion:
Here we have to choose the suitable promotion way for our product, which gives better results and lower cost.
9-Human Resource
General descriptive of the organization HR? HR strategy: -) Recruitment standards. -) Training Techniques. -) Objectives.
Listing the Management Team. Organization structure chart.
This section should explain any shortcomings in the management team. Are there any critical skills your team lacks? If so, how will you recruit people possessing these skills? How will your company operate in the interim period without these skills in management?
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10-Future Plans
Present an outlook for future plans. Is there a long-term plan strategy? How are new plans developed, selected, and designed. Is there a relationship between market segments, market demand, market needs, and plan development?
11-Financial Information
The financial section of the business plan is written last, after key data on costs and potential revenue have been assembled. The funding request. Here the company has to determine how much money it needs? Why? And what the company will do with it?
The financial statements. The company’s financial statements are the cores of the business plan’s financial-information section. They present both the company’s past results and its forecasts for the future. The board of Directors wants the balance sheet, income statement, and cash-flow statement for the previous three years, along with five years cash flow, income statement, and balance sheet forecasts. The following are the main considerations in putting the forecasts together: Forecast assumptions. A forecast should represent the best estimate of the future operations. To enable the Board of Director to evaluate the reliability of that estimate, you must provide the assumptions used in preparing the forecast. The cash-flow statement, income statement, and balance sheet must be based on the same assumptions. The first step in preparing a forecast is to establish the necessary assumptions, which should be supported by facts, market surveys, or detailed analyses, and reflect conditions in the industry. They should also reflect past performance. The forecast should include a brief description of the major assumptions used: Sales. Sales may be forecast on a unit or value basis. Cost of Sales. Here we should analyze the material, labor, and overhead elements that go into making the product. Inventories. Estimate the level of inventory needed to support our estimated sales volume. This will depend on the length of the manufacturing process and can be expressed either as a
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turnover rate or as a production cycle. The timing of the inventory purchases will be a major factor in forecasting the cash needs. Account receivable. Estimate the length of time between a sale and collection of the related receivable. This can be expressed as an average collection period, or a turnover rate per year. Cash. Estimate a minimum amount of cash to be maintained over the forecast period. Property and depreciation. Describing what assets you have and the major assets you plan to buy, and when you will buy them. Debt and interest expense. It should indicate the expected sources of borrowed funds and the assumed interest rate. Account payable. Estimating the period over which the company expects to pay its bills. Marketing expense. Expenses should be based on a detailed marketing plan. This plan should include a personnel forecast and the related costs, sales commission arrangements, trade-show costs, promotional campaigns, and overall advertising costs. This can be estimating marketing expense as a percentage of sales. General and administrative expenses. To forecast these costs, each company has to prepare a detailed schedule of the major general and administrative expenses. Taxes on income. Estimate each year’s effective tax rate. Apply this rate to each year income before taxes. Sensitivity analysis. In preparing this analysis, you should identify the most critical assumptions that you used and then determine what the impact would be if those assumptions were changed. That means every time you change a number, you can instantly see the impact on all other numbers. The sales assumptions are critical to most forecasts. If you projected a 50% annual growth rate each year, what would the results be with a 30% growth rate? Or, what if production costs are 5% higher than anticipated?
12-Key financial indicators:
Sales, gross margin, operating expenses, inventory turnover, and collection days. Gross margin is in percentage terms, collection days are in days (how many days do you wait to get the money), and inventory turnover is in terms per year (cost of good sold divided by average inventory).