Business plan allows the founder to crystallise business ideas, thinking through the problems that they will face before having to cope with it. These are put in terms of aims and objectives. It also serves as a selling document acting as a vehicle to attract external finance. Advantages include the force to think systematically and in detail about the future of the business, analysing consequences of the actions. However, in order to meet changing opportunities and threat it always needs to be refined and modified.
Here is a planning process:
Conventional plan emphasise market, conventional marketing and developing approaches to address these within capabilities of business. It starts with aims of the founder and mission for the business. Followed by SWOT analysis that is a realistic appraisal of the options open to business. The analysis looks at business strengths and weaknesses, market environment in terms of opportunities and threats, seeking to achieve a match between strategic and core competences and the market opportunity. This feeds into business objectives and the analysis on customers, otherwise defined as market segmentation. Furthermore, marketing strategy (marketing mix) defines a detailed plan for each product and market offering. A detailed budget for the venture is then developed.
Understand where you are
First, one needs to understand how the product is better or worse than those of competitor. This is where the competitive advantage needs to be decided. Is the product competing on price or somehow differentiated in terms of quality, design or other matters. Can the product be easily copied?
Second, new venture creator should be able to identify who the customers are. Can you identify market segments and get to them? One needs to decide upon what’s positive and negative about the marketing mix.
Third, the founder needs to recognise strengths and weaknesses of the business. How good are your people with facilities? Are you capable as a leader and an effective communicator? What are critical success factors and problems the business is facing?
Forth, an understanding of opportunities and threats that the market is present in is another factor to be considered in the planning process. Are the market tastes changing? Is the market growing? Are the changes in social, political or technological environment are likely to affect the business in the future?
Decide where you want to go
New venture creator needs to decide on general aims one has for the business. This includes entrepreneurial type decisions and mission statement. Specific objectives that signals achievement of aims also should be decided upon. Milestones should be quantified and bounded in time, as well as realistically achievable.
Plan how to get there
Strategies enabling one to achieve objectives need to be developed. This involves coordination of different management functions such as marketing, operations, people and finance. Marketing plan needs to be consistent and coherent marketing mix that address issues how to sell the product or serve different customers. Financial budget should address profit and cash flow forecasts to show what financial resources are needed to undertake the plan and to decide if there is a need to attract investors.
Westhead, P., Wright, M. and Mcelwee, G., 2011. Entrepreneurship: Perspectives and cases. Pearson.
Learn what are different exit strategies for private equity firms. One can name a family business successor, sell it outsiders, and lead firm to IPO.
What is the difference between entrepreneur and professional manager? What are transition steps to professional management. Learn more here.
There are different sources of finance: savings, friends and family, crowdfunding, business angels, venture capitalists, corporations and other.
There are different ways of minimizing risks associated with investing: self-financing, contract provision, specialisation syndication.
Three financial statements are described in this article: balance sheet, income statement, statement of cash flow. Learn more here.
Business plan allows the founder to crystallise business ideas, thinking through the problems that they will face before having to cope with it.
What questions to ask an entrepreneur? Clarify current goals, evaluate strategies for attaining those goals and assess capacity to execute the strategy.
How to find opportunities for business? Follow effectuation process, bring the idea to market with close to zero resources, listen to customers.