In it you:
- Describe your project or business and state why it will succeed
- Demonstrate that a Market exists for the goods or services you will offer
- Define your Strategy for accessing the proven Market
- Show how your business will be Organised and Managed
- Explain your Production and Operations functions
- Discuss your Costings, Finance and Financial Assumptions
- Lay-out your Financial Statements: Cash-flow Analysis; Profit & Loss Account and Balance Sheet.
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Keep the document brief and to the point. If it is a simple business the plan should reflect this. If it is a complex business you may need to prepare a more elaborate, but equally realistic document.
The plan should be typed and bound with a table of contents. It should be written to communicate rather than impress, easy and simple to follow, with accurate text and figures.
The executive summary is an overall view of your business and its potential. It is a very important part of the plan. Many readers of plans tend to skim through sections which are not of particular interest to them and focus only on the areas which they have specialist knowledge. The will, however always read the executive summary. It is essential, therefore that you include the essence of your plan in a few short paragraphs at the start so that, even if much of it goes unread, the thrust of what you intend to do, your objectives and the way you are going to achieve them will be clear to the reader. It is important to highlight the ways in which the plans meet the assessment criteria of the reader.
Background and Description of the Business
In this section you should set out the rationale behind the business. If the plan is for an existing business this section will provide a brief synopsis of the business history to date. It is important to present the reader with a clear, unambiguous statement of what you propose to make or sell and why you perceive this product or service to be appropriate at this time.
Management and Organisational Structure
In this section you should tell how your company will be organised and managed. Clearly link the people in the business to the objectives set out in the plan. If the business is going to be initially organised and run by you as a sole trader, state this and provide a brief resume that summarises your relevant experience and establishes your suitability for business. If you are planning to set up a larger company with a management team you must provide much greater detail of the organisational structure of the company. This should include information about professional advisers and/or technical experts you have retained to help you overcome particular weaknesses and provide you with on-going assistance as you develop your business.
Market Research and the Marketing Plan – Is there a market for the product or service?
You may have collected your information for this section in a variety of ways. It is possible that you have obtained advance purchase commitments from buyers. You could be a retailer who has based your market research on a study of traffic and pedestrian flows, activity patterns and competition. If you are a painter decorator you might have piloted the service for a number of months and now have a good basis for setting a realistic sales target. Whatever your business or method of researching it, you should now be in a position to answer the following questions.
This includes both the need for your product or service and the extent of this need. Evidence of the need must be clearly shown. You should also indicate whether your product or service is a repeat item which will be purchased again and again by your customers or wheter sales will be once-off. Indicate if the product or service is likely to be in demand over a long period of time or if it is a short-lived fad.
This is the market you intend to seek for your product or service. The larger your potential market the better but, more importantly, you need to know if its growing, leveling out or declining.
Regardless of the product or service that you offer you will always have competition. Reaction by your competitors may alter some of the assumptions you may have made in relation to price, service, promotion or advertising.
Detail the product range that will be introduced. It is important to highlight the unique selling points (U.S.P) of your product or service. It may be a totally unique product for instance; it could be a service which includes a specialsed knowledge.
Pricing has to be carefully considered because the price you select has an important effect on the image of the product or service you are offering. If you choose one price it positions your product for one market. At a lower price or a higher price the same product would be perceived entirely differently.
Channels of Distribution
You must decide the geographical area in which you will market your product or service and whether it is better to sell directly yourself, go to retail outlets or use wholesalers. You can sometimes beat the competition or generate much more profit by using a unique distribution system.
How will the product or service be promoted?
Specify in the plan the papers, magazines, directories such as Golden Pages, radio or TV that you have identified as most appropriate for targeting your customers. The advertising message should be planned carefully and repeated consistently for maximum impact.
A personal selling strategy is particularly effective and necessary when a product must be explained in order that it is fully understood by the potential customer.
Sales promotion includes such schemes as free samples, contests and introductory offers. It is very important to link promotion to your cash flow.
The promotion of your business is divided between advertising, personal selling and sales promotion.
- Who will conduct the selling for your business and are they professionally trained to sell?
- What selling methods will you employ, for example telephone selling, cold calling, following up leads from mailshots, advertising etc.?
- What sales volume and activity targets, such as calls per day etc., have you set for each salesperson or selling method?
- How long is the sales process from the customer becoming aware of your product or service to making the buying decision, recieving the product or service and finally paying for it?
- What procedures do you have for handling customer complaints?
- Will you make the product yourself or buy in either ready to sell or as components for assembly?
You will need to prepare a sales forecast on which you can base monthly cash flows and budgets. While it is not always easy for a start-up company to accurately project sales you should use your market research to give as clear a picture as possible. the realism of the assumptions behind your sales forecasts is one of the most critical factors in the success or failure of the venture. Make sure you give sufficient time to this.
The operations’ plan – how will you guarantee product/service quality?
“Operations” is the general name given to all the activities required to implement strategy. Once you have decided what to sell, to whom and at what price you may still need to find someone to make your product, sell it and deliver it.
Do not confine this section of your plan to a list of equipment you are proposing to purchase. Describe instead the type and function of the equipment you are buying so that the reader will have a clear image of your operational environment. Describe the manufacturing process to be used and, if appropriate, explain how your principal competitors go about their manufacturing. Include the following information:
- A description of the equipment that will be required and its capabilities
- A drawing of the layout of your production unit showing the path of materials and finished goods.
- Procedures for monitoring and controlling quality
- Raw material sourcing – list your principal suppliers, the terms of trade and any possible vulnerability in this area
- Employment – the proposed number of employees if any and the initial training to be provided.
The Financial Plan
This section of the business plan will provide the reader with the following information:
- The total funding required to start the business and the sources
- A detailed set of cash flow forecasts for the business
- A projected profit and loss account for the business
- Details on the costing and pricing of your product or service
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