Business Plan

A business plan is as much a management tool as it is a document. It helps management to think through the business issues facing them, including what is the product or service, why it is needed, where it is needed, how much is needed and who needs it. 

The plan should also outline what the team has to and will do to deliver the goods and services to the customer. The entire management team should participate in the development of the plan. 

Good plans show a systematic approach to analyzing the market opportunity and showing that management is capable of executing the plan. Content should always take precedence over form. If you are unsure as to what we are looking for here is an outline
to assist you. 

The Business Plan Outline

1. Executive Summary - A 2-3 page overview of the business plan. The Executive Summary should outline what the company has done so far and what it plansto do in the future. 
Areas to cover should include; 

• What the product or service is 
• Why is it in demand 
• Who will pay money for it and how much 
• How large the market is 
• What progress the company has made in terms of product development 
• Historical revenues and financial measures achieved
• Background and experience of management team 
• Financing required and the uses planned for it 

And of course, who to contact and how to contact the company. 

2. Industry & Market Analysis - This section explains the basis for the need for the company's product or service, how urgent the need is and how large the need is. 
Questions covered are; 

• Is the industry new or well-established 
• Is the need well-established or is it waiting to be discovered 
• Who are the customers; consumers, government or businesses 
• Who are the competitors - what are their weaknesses/strengths, why they have succeeded/failed, what is their market share, what is their strategy 

A competitive matrix maybe useful here to benchmark yourself to competitors in terms of financial performance and resources, target markets, product functionality, product pricing, areas of strength and weaknesses and key customers to name a few. 

3. Target Market - Questions to be answered include; 

• What is your target market and why? 
• What are its dynamics, size, locale, etc? 
• Is it stable or evolving rapidly? 
• Who makes the purchasing decisions? 
• How long is the typical sales cycle? 
• How much of the market can you expect to gain with the resources that you plan to have? 
• What is the competitive pricing situation? 
• What are industry gross margins? 
• What barriers to entry face players in the industry and what regulatory issues must be handled? (If this company is in a regulated industry such as medical or telecommunications, the regulatory section may need to be separate) 
• Are any customers critical, or do any account for a disproportionate share of your current or forecasted revenues? 

4. The Company & Management - This section should cover the following; 

• Offer a brief history of the company 
• Explain what business the company plans to be in 
• Highlight the areas the company does particularly well in 
• Provide an Organization Chart i.e. the management and board 

You should also provide summary resumes of each of the key management team member (complete resumes can be provided in the appendix). If there are key positions that are not filled you should state your plan to fill it. 

Information on the board of directors is also useful. 

An ownership table showing all shareholders, the number and type of shares, their percent of ownership, and the options granted and available is another important part of this section. 

5. Product/Services Offered - In this section you explain the following; 

• What are you are selling or planning to sell 
• Do you have any "unfair" advantages such as patents, copyrights, and the like 
• Why should customers choose you over the competition, and have they so far 
• How long should this advantage last if you do nothing more 
• What will you need to do to create, maintain, or expand upon the advantages (R&D, sales team development, customer partnerships, law suits, etc)
• What is the current R&D effort and what are its goals and milestones? 
• What R&D efforts are underway at competitors? 

6. Marketing & Sales Plan - This section explains how you plan to reach your target customers. 

You need to provide answers to the following; 

• How will you acquire customers 
• How much will that cost 
• What distribution channels do you plan to use 
• What methods of marketing communication make sense 
• Will you build an internal sales force, use independent reps, use telemarketing, etc., and how will you compensate each 
• What is your revenue and unit break-even, and how
does that tie to your sales strategy? 

7. Manufacturing/Operations/Logistics - This section should cover how you design, develop, manufacture the product or provide the service(s). 

You will need to answer the following questions; 

• Manufacturing - done internally or by subcontractors 
• Key subcontractors - what is their expertise and background 
• How proprietary is the design and manufacturing component 
• ISO 9000/9001/GMP or any other quality management systems - is it important to your organization, and if so, how do you manage the process Is manufacturing capital-intensive or people-intensive 
• Capacity - What is it? Utilization on average and at peak 
• Economies of scale - Is it possible 
• Critical suppliers - Do you have any? Who are they? What do they supply? Do you have alternatives? 

8. Financial Data - You should provide historical financial data such as income statements, balance sheets and cash flow statements for the past 3-5 years if available. Year-to-date results should also be provided. You should explain significant items in the results, and analyze the trends and key ratios. 

The other major component of the financial section is the forecast. Here you should project the next 3-5 years (including the current year) of performance for the income statement, balance sheet, cash flow statement, and if appropriate, provide detail on capital expenditures. The projections should be done on both an annual as well as either quarterly or monthly basis, since cash needs during the year can often far exceed cash needs at the end of a year. 

The major assumptions behind your projections should be explained. Changes in key ratios from historical results should also be explained. Often it is helpful to show some sensitivity analysis - the effect of changes in key variables such as growth, gross margins, sales cycle, and the like on the income statement and cash position. 

9. Appendices - Here you should include resumes of the key management members, any product literature or brochures, analyses of the market or industry, or relevant articles that would help an outsider understand the significance of your company and the need that you are meeting.