Business Plan
What is the business plan and why it is created
Business plan is basically the plan, of how you’re going to manage your future business. It includes the list of various things, such as:
These were the most general things, that business plans include. There are several reasons why business plans are written:
There’s no fixed content for the business plan and different facts may be included on the individual basis. There are also different types of business plans, for example, there are business plans for profit making and non-profit organizations. The main difference is that those business plans for profit making organizations are usually concentrated on the financial plan and how the business is likely to make as much profit as possible without loosing the quality and its reputation. For non-profit organizations the main trend is to concentrate on service goals. Business plans may also be internally integrated and be in the interests of the shareholders within the company or be externally integrated and be in the interests of external stakeholders. The most obvious reason is for the business owner to have a better understanding of what the owner wants to achieve by opening up his own business considering all risks, advantages and disadvantages. In addition to this, banks, creditors or investors may also ask a business to provide a business plan as an evidence of what the business borrows money for. Some of the banks or investors, for example, might not give the money to a businessman, because they might find financing the venture is too risky, and there’s a high chance that the business will fail, and the debtor will be unable to pay the money back. So, again, business plans are also used to give reassurance to the banks that you’re able to pay the loan back, and provide them with information about how the money they lend is going to be used, to avoid their fears and minimize the risks for the bank.
Outlining different parts of the business plan Introduction The introduction part of the business plan needs to introduce the person (Bank, investor) to your business, summarise the main objectives of your business and show what makes your business stand out and what makes it an interesting offer from the investor perspective.
Marketing Plan This is the part of the business plan, which includes planning how you’re going to achieve your marketing objectives, advertise and promote your product or service. It can be a part of the overall business plan. It has to show that you have a full understanding of what the market, where you’re planning to introduce your product, is. You also need to show that you have an understanding of who your current competitors are, their market share, and the market share that you’re planning to achieve over a certain period of time. For this part of the business plan you also need to know in details, the groups of your customers and the type of your market. For example, if your product is related to the FMCG (Fast Moving Consumer Goods) market, then you have to explain all current trends on this market, consumer groups targeted, e.g. people from 6-18 years old, and provide up-to-date information, in accordance to your own research, of what their current needs and wants are. In this part you must also identify your current and potential competitors on the market, and discuss what their product range is, their advantages and disadvantages, and how your products are going to differ from theirs. You also need to provide some information about how your competitors advertise and promote their products as well as how you’re going to do this, and what marketing or PR strategy you’re going to use to make your method more effective, that will allow you to compete on the market. In this part you also need to discuss how you’re going to provide your product or service. E.g. via internet, outlets, newsagents, face to face, home delivery. You need to explain what your unique point of sale is going to be. You also need to discuss how you think you will take payment e.g. by credit/debit card, cash, cheque, standing order, on-line payment, buy and pay later or any other possible scheme.
Production plan
This part of the business plan involves estimating how many items (products) you’re going to sell or how much or long are you going to provide your service for. You have to consider your price, production costs, your profit margins, and the most important- Break Even point or basically how many products you need to sell to cover your costs of production. For the production plan you also need to work out what the capacity of your factory or your production department is, and work out the most efficient way to use your production capabilities. E.g. efficient use of land at the factory, use of robots instead of people, computerization, dividing the production process into several little tasks, and other methods which will help you produce your products or provide your services more efficiently. This may also include introduction of Quality Management methods, and certification of the products in accordance to ISSO and other international quality standards.
HRM plan
For this part, firstly you will have to consider how many workers you will need to employ, in order to produce your products or provide your service, how many managers you will need, what certain qualifications you want them to have, whether they will have to speak certain languages in case you go international and many other factors. You will also have to estimate what their wages are going to be and how much of the money you will be able to spend on their wages, whether you will offer them any free training, social packages, and bonuses. For this part, you will also have to design your own method of interviewing, testing and employing new workers, and how and where you will look for the workforce and advertise available vacancies. HRM plan also involves a legal part, which includes producing induction programs, person specifications, motivational packages, employment contracts and many other important documents in accordance to all current laws and legislations.
Finance plan
Is a plan for spending and saving future income. It may be similar to a budget. This part of the business plan involves providing approximate profit and loss and cash flow forecasts, purchase arrangements, estimating fixed and variable costs, working out the break even point, and approximate profits, which are likely to be made in the first three years. Financial plan can also be an estimation of the cash needs of the company and how to raise the amount of cash in the company by, for example, selling some equipment. In this part, you have to explain and discuss how you’re going to fund all of business ventures, your current and future business assets. In addition to this, you may also have to go into deep details and estimate your approximate renting/leasing costs, costs of buying equipment, electricity bills, costs of advertising and all taxes which will apply to your business and the products or service which your business will be providing. You may also have to include an information about how you’re going to keep all of your financial data secure.
Describing the business plan sample provided by BARCLAYS
The first section of this business plan is asking you to provide personal details, such as: your identity, your home address, telephone number, educations, work experience and training. The second part is called ‘Business details’ and is asking you to identify and describe your business idea and equipment and resources that you will need in order to get started, and the name of your business and date when it has or will be started. The third part is called ‘Knowing your business’ and basically requires you to show your future business plans, goals and objectives over the next three years. The next part is requiring you to write about your unique selling preposition and your pricing strategy and cost/price estimates. The fourth part of the ‘Barclay’s’ business plan is called ‘Knowing market’ and requires you to provide information about the current trends on the market where your product is going to be sold, info about potential customers, their demand, needs and the list of the reasons why they need your product or service and what they would use it for. The next section is called ‘Competitors’ and tests whether or not you can identify your current competitors on the market and compare some of their attributes, such as price, quality, location, their strengths and weaknesses, promotion, availability and other important factors affecting demand for your products. The sixth section is called ‘Location’ and is asking you to identify the best location for your chosen business, considering all advantages/disadvantages and other influential factors affecting your choice. The next section is called ‘Promotion’ and is requiring you to discuss the strategy and methods that you’re going to use in order to promote your products or services. The eighth section called ‘Finance’ is asking you whether or not you have completed profit and loss and cash flow forecasts. After this, it asks you for your sales projections, and your fixed and variable costs estimates as well as your purchase arrangements, your current and future business assets and how you’re going to fund your business. In addition to this, it asks you to estimate your break even point, taking into the account all possible factors such as: taxes, electricity bills, wages, insurance, maintain costs, advertising costs and etc. Although these are only the estimates, which don’t necessarily mean that it will be the truth, you have to be realistic and optimistic at the same time, because e.g. the bank or investor has to see how much risk there’s in investing their money into your business or giving you a loan. In the end of the business plan given by ‘BARCLAYS’ it also asks you to provide some information about how you’re going to keep your financial records secure and up-to-date, which is also vitally important for the bank or investor to know, as they need to see how you’re getting on and whether you need any additional help. (They want to help to you as much as possible, because they want their money with interest back). In the very end, it also contains some of the legal information such as: Business Banking Code and Data Protection Act, feedback and ‘Barclays’ services and facilities for disabled customers, providing you with all information necessary to contact ‘Barclays’ and ask them any questions should you have any. PESTEL analysis- is about analysing different macroeconomic factors, which may potentially affect your business. It is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations. A PESTEL analysis can also be a useful document to have available at the start of a business planning process. It can provide the management team with background and context information about targets towards growth, new product development and brand positioning.
Political - is basically about key political factors, what is happening politically in the environment in which you operate, including areas such as tax policy, employment laws, environmental regulations, trade restrictions and reform, tariffs and political stability,which can potentially benefit or affect the business. It’s all about Worldwide, European and Government directives, funding council policies, national and local organisations' requirements, institutional policy.
Economic - is about what is happening within the economy, for example; economic growth/ decline, interest rates, exchange rates and inflation rate, wage rates, minimum wage, working hours, unemployment (local and national), credit availability, cost of living, funding mechanisms and streams, business and enterprise directives, internal funding models, budgetary restrictions, income generation targets.
Sociological- what is occurring socially in the markets in which you operate or expect to operate, cultural norms and expectations, health consciousness, population growth rate, age distribution, career attitudes, emphasis on safety, global warming. Societal attitudes to education, particularly in relation to government directives and employment opportunities. Also general lifestyle changes, changes in populations, distributions and demographics and the impact of different mixes of cultures. Legal- what is happening with changes to legislation. This may impact employment, access to materials, quotas, resources, imports/ exports, taxation etc. For example- Children’s Act or Minimum Wage. Environmental - what is happening with respect to ecological and environmental aspects. Many of these factors will be economic or social in nature.
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