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It all starts with an idea. That’s how new companies are born. The success of the company depends on the completeness of the up-front analysis, the correct targeting of the product or service, the business strategy, a little luck, and a lot of hard work.
Typically, an entrepreneur is someone who sees a need for a product or service and has a goal for how the company can fulfill that need. However, that’s just the beginning. In order to be successful, the entrepreneur prepares a business plan to assist in achieving that vision. The business plan is the structure that supports and enhances the idea to improve the ability to succeed.
Just as in life, involvement in a new business has its share of highs and lows. During the high times the business plan is a reminder that the vision set out in the beginning is in process. The business plan serves as a way to stay on track during the low times. Mostly, it is a tool to keep the vision on track by providing the necessary planning to see the company from infancy to maturity.
To compete in today’s marketplace, a plan provides the way to negotiate the twists and turns associated with growing a business. Growing a business takes dedication and a commitment to succeed. A plan provides the direction and overall strategy.
Anyone who has prepared a business plan will tell you that the business comes together during the analysis and writing phase. A lot of information is gathered which makes it possible to develop an overall strategy. When the plan is finally produced the CEO will use the results of the analysis in targeting the product or service. Clarity surfaces as the result of all the analysis. While the information contained in the plan is important, it is the information obtained by producing the plan which is the most valuable because the CEO and management team have spent enough time to thoroughly research and develop the idea.
First, look at the marketplace to research industry trends. View opinions of industry researchers to determine statistics that apply to the product or service. Identify the changes in the market and any market segments that are particular to the industry. This helps to identify the actual need for the product or service and will help in the forecasting of market share and the preparation of financial statements.
Perform an in-depth competitive analysis. Learn everything possible about the competition. If possible, try to meet them. In these days of strategic partnerships, a competitor might very well be a business partner.
It is important to spend a considerable amount of time analyzing the competition. Go to the competitors’ Web sites. Learn about the companies by researching what they are saying about their companies. Include any financial information that the competitor offers in the analysis. This helps a CEO learn about the marketplace, competitor’s successes and failures, and the ability to position the product or service more appropriately based on what is learned through this analysis.
At this point, it’s a good idea to go back to the original idea and see if the product or service should be modified based on what has been learned. Based on everything learned so far, it will be possible to see niche markets, the uniqueness of the idea, and how to deliver to the market.
Build the management team to achieve the vision. A CEO cannot be all things at once when forming a business. Not only are different strengths needed, but also it is impossible to achieve the goals within a limited amount of time without sufficient resources.
It takes a diversity of skills to achieve the vision. If there is a need for funding, the investors will be especially interested in the management team. Any investor will carefully look at the management team and past success when determining whether or not to fund a new business. In this section, address the history of the business, why the company was formed, and the organizational structure.
Form a Board of Directors of established experts to help guide your company. These people have experience and are interested in helping others learn how to grow. Typically these people bring advisory skills to help the company mature.
Marketing and Sales
In an ideal world the CEO or the management team writes a Marketing Plan and includes the summary of this plan in the Business Plan’s Marketing and Sales section. The Marketing Plan is as comprehensive as the Business Plan but focuses on how to obtain business through its marketing and sales efforts. A lot can be learned from how the competition is getting its name out and obtaining business. Prior to writing the Marketing Plan, research must be performed.
Marketing research evaluates pricing, positioning, corporate image, advertising evaluations, and market segmentation studies. Prepare a forecast model to indicate market share of the company versus the competitive market share. This will be valuable information when organizing financial statements.
Prepare the research on customers and how they feel about current service and satisfaction within the industry. If appropriate, perform feasibility and usability studies to determine the level of customer satisfaction with a prototype.
Several methods are used to obtain the necessary research: focus groups, in-depth interviews, telephone, and mail surveys. Performing a customer analysis will improve the likelihood that your product or service meets customer expectations, which further increases chances of success.
Financial statements lay out the expectations of the company by forecasting income. Monthly profit and loss statements show income and expenses for an overall picture of the company’s financial health. The Balance Sheet lists assets and liabilities.
Investors will want to see a healthy return on investment as well as an exit strategy. They will want to know how they will be paid back, what their return will be, and what the revenue requirements are for the business.
This section lists assumptions and comments prepared as part of the financial statements. It lists pricing, projections, revenues, assets, and liabilities. Investors will want to see audited financial statements performed by a reputable firm.
A strategy to pay the CEO and management team as well as development costs and business expenses are prepared to show where the company is going and what it will cost in dollars to get there. Identify the risks associated with the business and how the company will overcome those risks.
Strategy is one of the most crucial aspects of a plan because it links all of the sections of the business plan together. It combines an analysis of all the sections to produce tactics that ensure success. It is this aspect that separates the successful companies from those that are unsuccessful. The strategy is a customized solution based on careful analysis of the marketplace, the need for the product or service, financial benefits, how to differentiate from the competition, how the management team will grow the business, and what the marketing and sales solution is for the product/service.
The Executive Summary is the last section of the plan to be written because it summarizes all of the findings and plans at the highest level. It also contains an overview of cash flow projections and a summary of the market. In just a few pages, a summary of the entire plan is prepared.
When all of the information is compiled, make a few copies and distribute them to friends and associates for a reality check and feedback. CEOs become impassioned with their business and outside resources provide the necessary feedback to make sure the business is on track.
Once the plan is in place, a lot of the background information is held within the plan but new information is always learned during the course of any enterprise. As the business grows, it makes sense to revisit the plan. In fact, before the product or service reaches maturity, it will be time to develop another idea and start the planning process to develop a brand new idea while revenues are generated from the first product or service.
Just as a product or service needs a good requirements definition and design, the business plan is the first step in clarifying the concepts of what the company will offer. As in any project, it is important to be clear on the concept. The upfront analysis on the needs, the vision, and the means to get there will save time, money, and resources, and ultimately contribute to implementation of company direction and business triumphs.
A business plan is the compass used to achieve the goals and objectives of the business. It starts with the vision and an unshakable commitment. It is the structure, as well as adapting to changing conditions, that allows CEOs to achieve victory in a competitive marketplace.