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When you want to start your own company, you have to write a business plan. A business plan is a written description of your companies future. A business plan is used and can help to convey potential investors, who want to invest in your company.
In your business plan you have to mention different aspects; your business goals, the strategies, potential problems and ways to solve them, the structure of your company and the amount of capital required to finance your company. The length of your business plan is up to you. It depends for what you are using it. A complex and long business plan can contains about more than 100 pages and a typical business plan around the 20 pages. So, there is not a norm for the length.
For your business plan there are three primary parts;
Business concept, here discuss you the industry, your product or service, your business structure and how you want to make your business a success.
Marketplace section, here you describe and analyze potential customers and the competition.
Financial section, here you describe your income and cash flow statement, balance sheets and other financial ratios.
A business plan consists of 7 elements:
Design and development plan
Operations and management plan
We will give you a short explanation of all these elements.
The executive summary is probably not longer than a page. It depends of how complicated your business plan is, but normally the summary is no longer than one page. In the executive summary you should tell the reader what you want with your plan. It is important to make it easy for the reader to read. You need to provide a synopsis of your business plan.
The following key elements should be included:
Business concept. Describe your business, the product and the market it will serve. It contains what you will sell, to whom and in what kind of business it will take place.
Financial features. Describe the important financial points of the business.
Financial requirements. This part contains information about the capital you need to start your business. It should consist how the capital will be used.
Current business position. Contains relevant information about the company. E.g. when is was formed, the principal owners and key personnel.
Major achievements. Details about the developments in the company who are essential for the success of the business. It includes items like: location of facility, patents and contracts.
In the business description you begin with a description of the industry. Describe the present situation, but also the future possibilities. You should provide information about new developments or products that could affect or benefit your business. Also, provide information on the markets within your industry and tell or the business is new or already established.
In the business description you should also mention to who you will sell, how the product will be distributed and how you want to promote your product. After you describe the business, you should also give a product description. So, you need to describe the products or services you intend to market. Show the reader your intentions with the product or service. At least, show the reader how you will give your business a competitive edge.
For the investors it is important to know how you want to make profit. Write down how you want to make profit, and why you think you can make profit that way. Explain the factors that you think make your business successful. Just show why your business is going to be profitable and what are the success factors of your business.
The length of the business description will be around the 2 pages, but it depends on the complexity of your plan too.
Define your market in terms of structure, size, growth prospects, trends and sales potential. After you describe the market, the next step is to define the target market. Describe the market is just one step. In the next step you will develop strategies that will allow you to fulfill your objectives. You can do this with the information you have gained through market research. Some strategic questions that you can use are:
How are your competitors positioning themselves?
What specific attributes does your product have that your competitors' don't?
What customer needs does your product fulfill?
After you have answered these questions you can begin with your strategy. It has to point out how you want your product perceived by customers and the competition.
Other elements that you have to describe are;
For more information about these 4 elements: http://www.ehow.co.uk/about_6100931_distribution-pricing-marketing-strategy.html
The competitive analysis is a statement of the business strategy and how it relates to the competition. The purpose is to describe the strengths and the weaknesses of the competitors in your market, make up strategies that will provide you with a distinct advantage and to develop barriers to prevent competition for entering your market.
First identify the current and potential competition. After you identify your competitors, start to analyze their strategies and identify the areas where they are vulnerable. With the competitors analyze you will have to create a marketing strategy that will provide a skill or asset that the competitors do not have.
After you have defined your competitive advantage and know what your key assets and skills are to succeed in the business, you need to place them in a strategic form in these 5 areas;
Design and development plan
In the development plan you have to cover 3 areas: product development, market development and organizational development.
First of all you have to set goals for the overall development plan. From the analysis of the competition and market you probably have some certain goals already. Your goals should be directed, quantifiable, consequential and feasible.
The design and development plan consist different elements.
Scheduling and costs. This element includes the main work elements and the stages the product has to pass before it is ready for the customer. The cost for this must also mentioned in this part.
Development budget. This are the costs about material, direct labor, overhead, G & A costs (salaries of executive and administrative personnel and other offices support functions), marketing and sales, professional services, miscellaneous costs, capital requirement.
Personnel. This element is not about the salaries but about personnel recruiting, how personnel integrate in the development process o.a.
Operation and management plan
The purpose of the operation and management plan is to describe how the business functions on a continuing basis. In the operation plan you have to pay attention to the logistics of the organization. For example what are the responsibilities of the management team? What are the tasks for each employee?
For planning the operation in your company you need two areas; the organizational structure of your company and the expenses and capital requirements.
The organization structure is a important aspect in your business plan. For almost every company you can divided it in different areas;
Marketing and sales (includes customer relations and service)
Production (including quality assurance)
Research and development
After you structured your business, you need to know what the number of personnel is to reach your overall goals. You can calculate this with the formula; C/S=P
C represents the total number of customers, S represents the total number of customers that can be served by each employee and P stands for the personnel requirements.
In the operation plan you pay also attention to develop a set of financial tables. This include, the operating expense table, the capital requirements table and the cost of goods table.
The expenses of the business are usually referred as overhead expenses. The expenses can be divided into fixed costs and variable costs. Next to the expenses there are another expenses too. It is a opportunity to work with 3 tables.
Table 1, for the expenses.
Table 2, a capital requirements table. This is about the money that you need to purchase equipment that you will use to establish and continue operations.
Table 3, cost of goods. These costs consist usually about material, labor and overhead.
The last part of your business plan are the financial statements that you have to include. The three common statements are the income statement, cash flow statement and the balance sheet.
The income statement should be generated on a monthly basis during the first year. It is a report about the financial performance of your business. It contains information about what happens when sales are made and when expenses are incurred. The next subjects should be a part of your income statements; income, cost of goods, gross profit margin, operating expenses, total expenses, net profit, depreciation, net profit before interest, interest, net profit before taxes, taxes and profit after taxes.
The cash flow statement is a kind of schedule of the money that comes into the business and the expenses that need to be paid. The result of the schedule is the loss or profit of the end the year. During the first year do this on a monthly basis. Items that you need to include are: cash sales, receivables, other income, total income, material, production labor, overhead, marketing and sales, R & D, G & A, taxes, capital, loan payment, total expenses, cash flow and cumulative cash flow.
The balance sheet is divided into three sections;
Assets, these are current assets, and long-term or fixed assets. It include: cash, account receivable, inventory, total current assets, capital and plant, investment, miscellaneous assets, total long-term assets and total assets.
Liabilities, are also current or long-term. Current liabilities are: Accounts payable, Accrued liabilities, Taxes, Total current liabilities. Long-term liabilities include: bonds payable, mortgage payable, notes payable, total long-term liabilities, total liabilities.
Equity, this is the difference between total assets and total liabilities.