After creating a clear purpose and a compelling vision, the next step for the entrepreneur is to have a very good business plan. It is a wise thing to do in order to chart the course of the business properly and to focus the efforts of the entrepreneur. In our previous post, the entrepreneur was asked to prepare an outline of the business plan and keep it handy for any revision and adjustment that needs to be done along the way. Now, the entrepreneur must flesh out, into more specific details, the information that a good business plan contains. Likewise, it is important to know what the business plan’s purpose is: for whom it is being written (target audience), and what would be the coverage of the business plan (in terms of depth and breadth).
The purposes of a business plan are:
- Entice partners, investors, and bankers to fund a business venture.
- Communicate what the enterprise is all about, what market it wants to serve.
- Show what financial returns it could muster.
The business plan should contain important information about the following:
- the business itself;
- the organizers;
- the management and technical people;
- the financial structure;
- its market potential;
- its target market;
- its projected sales, expenses, and profits; and
- its probable risks.
The business plan should begin with the business concept and the vision for the enterprise in the next three to five years.
It should then declare the business purpose or the mission statement of the enterprise. This could be accompanied by a statement of values or business philosophy. The business plan should proceed to an enumeration of business objectives, key result areas, and performance indicators. An overall enterprise strategy should then be articulated to show how the performance indicators could be attained. Next, the business plan should contain an executive summary of the following:
- the organizers and the key people behind the business and why these people have the resources, talents, skills, and technology to achieve success;
- the market being targeted and why there is enough market potential to justify the business;
- the products or services to be offered and why they are right for the market;
- how the business will be operated and organized, including all outsourcing, subcontracting, franchising, and licensing agreements;
- the investment capital required for the business and what exactly it would be used for;
- the technology, the technical expertise, the equipment, and materials suppliers to be utilized;
- the capital structure (short and long term debt, stockholders’ equity) of the business;
- the operating budget, financial projections (income statement, balance sheet, cash flow), and return on investment prospects; and
- the risks in the business and the contingency measures to counteract them.
The business plan should then elaborate the contents of the executive summary. Each content must be justified convincingly by analyzing relevant information and making logical conclusions.
Also, for each of the major functional disciplines, such as marketing, operations, finance, human resources, and general administration, there should be a functional strategy that would show how the desired results could be obtained.
The concluding portion of the business plan should highlight the key messages for the intended readers of the plan.
For the investors, they should be given “fearless forecasts” on expected profits, dividends, and market values. The rights and obligations of investors must be spelled out.
For the financial institutions and other financiers, the financial statements must be synthesized in order to capture both the upside and downside prospects. Due diligence must be evident in the analyses and conclusions made.
For government readers, the business plan should provide compliance statements with all laws and regulatory provisions.
