Saturday, August 17, 2013

Organizing a Business Plan: What You Need

As I've recently taken a look at business plans, I found that some people are misinformed about them. So, let me go over a few helpful tips, in hopes that you become better educated on what is needed.

Every business should have an agenda, plan, purpose, mission, etc.

  1. Overview: This section is going to be the same as the last ("summary") section. You need at least to explain the market opportunity, the company's leadership role, and (the most specific) cash amount required to breakeven at X.
  2. Market: This section is your hardest work and should cover a lot of information. Answering questions, such as, "why does the world need this product or service?" would be just one of the few questions to answer. It should be described in a way that it has several characteristics. The market segment should be emergent, which means it shouldn't be larger than your company (by definition). With the market boundaries movable, you should aim to be the share leader of the defined market.

    Therefore, you should begin describing the opportunity for the market, and you should stress the market need, so it's defined enough that your company's product or service offering is exactly fit for the market.

  3. Product or Service: This section should detail the company's product or service. It needs to be exactly fit for the market, as previously noted.

  4. Technology: This section needs to establish the proprietary nature (such as free, premium, licensed, etc.) of the product/service, and also note any information about intellectual property.

  5. Distribution: This section should described how your company will not only market the product/service, but sell it also. It should include any previous sales/service successes to date, and then pricing strategy should be noted also.

  6. Competition: Noting your competition is critical. There is usually no such things as "no competition". Usually, there is some level of competition somewhere, so pick and choose the particular, narrow band of competition. If you have a broad band of competition, note that also.

    If the market section is done correctly, this section is easily created. There is a such thing as too much competition. It's usually best to only have a couple of main competitors, and then letting all the other extremely narrow or broad ones drop off of the list. Try to narrow it down, but make it realistic. You don't want to confuse investors or businesspeople, if they read your business plan in the future.

  7. Management: This section has two different places in the business plan. If the management is established and has credibility, leave it here in the business plan. However, if the management is new and seeking credibility, then this section should be just behind the overview. It's best to let people identify the management, if they're new, first - to make sure what to expect.

  8. Financials: This section is importantly about cash flow, balance sheet, and a profit-and-loss statement. This information should go back two years (if possible) and forward three years. Usually the period to note would be monthly or quarterly for recent and near future periods.

  9. Capitalization: Who owns what and for how much?

  10. Risks: This section should attempt to concisely identify the top risks (usually three-to-five) to the success of your company's plan. Investors and other businesspeople will understand these risks.

  11. Summary/Conclusion: This should be similar to the overview, except that it should explain the same information in a concluding way.

Note that each section should be well transitioned, and should not bleed into each other. The ideas should flow smoothly, as well. Make sure, also, that you don't place information from one section into another section. Each section should contain its own information. Don't let the reader have to jump all over the place or become confused.

By the time you end up with a completed business plan, and have edited it several times to near-perfection, you'll probably end up with 8-15 pages worth of information or more. But, usually, it's best to stick within the 8-12 page range.

Hopefully, these tips have been helpful. Comment or question below.

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