If your plan isn't too complicated, keep your business description short, describing the industry in one paragraph, the product in another, and the business and its success factors in two or three more paragraphs. When you describe your product or service, make sure your reader has a clear idea of what you're talking about.
Explain how people use your product or service and talk about what makes your product or service different from others available in the market. Be specific about what sets your business apart from those of your competitors. Then explain how your business will gain a competitive edge and why your business will be profitable. Describe the factors you think will make it successful.
If your business plan will be used as a financing proposal, explain why the additional equity or debt will make your business more profitable. Other information to address here is a description of the experience of the other key people in the business. Whoever reads your business plan will want to know what suppliers or experts you've spoken to about your business and their response to your idea. They may even ask you to clarify your choice of location or reasons for selling this particular product.
Begin your market analysis by defining the market in terms of size, demographics, structure, growth prospects, trends, and sales potential. Next, determine how often your product or service will be purchased by your target market. Then figure out the potential annual purchase. Then figure out what percentage of this annual sum you either have or can attain.
Keep in mind that no one gets percent market share, and that a something as small as 25 percent is considered a dominant share. Your market share will be a benchmark that tells you how well you're doing in light of your market-planning projections. You'll also have to describe your positioning strategy. How you differentiate your product or service from that of your competitors and then determine which market niche to fill is called "positioning.
A positioning statement for a business plan doesn't have to be long or elaborate, but it does need to point out who your target market is, how you'll reach them, what they're really buying from you, who your competitors are, and what your USP unique selling proposition is. How you price your product or service is perhaps your most important marketing decision. It's also one of the most difficult to make for most small business owners, because there are no instant formulas.
Many methods of establishing prices are available to you, but these are among the most common. You'll also have to determine distribution, which includes the entire process of moving the product from the factory to the end user.
Make sure to analyze your competitors' distribution channels before deciding whether to use the same type of channel or an alternative that may provide you with a strategic advantage. Finally, your promotion strategy should include all the ways you communicate with your markets to make them aware of your products or services.
To be successful, your promotion strategy should address advertising, packaging, public relations, sales promotions and personal sales. The first step in a competitor analysis is to identify both direct and indirect competition for your business, both now and in the future.
Once you've grouped your competitors, start analyzing their marketing strategies and identifying their vulnerable areas by examining their strengths and weaknesses. This will help you determine your distinct competitive advantage. Whoever reads your business plan should be very clear on who your target market is, what your market niche is, exactly how you'll stand apart from your competitors, and why you'll be successful doing so.
Operations and Management The operations and management component of your plan is designed to describe how the business functions on a continuing basis. The operations plan highlights the logistics of the organization, such as the responsibilities of the management team, the tasks assigned to each division within the company, and capital and expense requirements related to the operations of the business.
Financial Components of Your Business Plan After defining the product, market and operations, the next area to turn your attention to are the three financial statements that form the backbone of your business plan: the income statement, cash flow statement, and balance sheet.
The income statement is a simple and straightforward report on the business' cash-generating ability. It is a scorecard on the financial performance of your business that reflects when sales are made and when expenses are incurred. It draws information from the various financial models developed earlier such as revenue, expenses, capital in the form of depreciation , and cost of goods. By combining these elements, the income statement illustrates just how much your company makes or loses during the year by subtracting cost of goods and expenses from revenue to arrive at a net result, which is either a profit or loss.
In addition to the income statements, include a note analyzing the results. The analysis should be very short, emphasizing the key points of the income statement. Your CPA can help you craft this. The cash flow statement is one of the most critical information tools for your business, since it shows how much cash you'll need to meet obligations, when you'll require it and where it will come from.
The result is the profit or loss at the end of each month and year. The cash flow statement carries both profits and losses over to the next month to also show the cumulative amount. Running a loss on your cash flow statement is a major red flag that indicates not having enough cash to meet expenses-something that demands immediate attention and action. The cash flow statement should be prepared on a monthly basis during the first year, on a quarterly basis for the second year, and annually for the third year.
The following 17 items are listed in the order they need to appear on your cash flow statement. As with the income statement, you'll need to analyze the cash flow statement in a short summary in the business plan. Once again, the analysis doesn't have to be long and should cover highlights only. The idea behind putting together a business plan is to enable owners to have a more defined picture of potential costs and drawbacks to certain business decisions and to help them modify their structures accordingly before implementing these ideas.
It also allows owners to project what type of financing is required to get their businesses up and running. If there are any especially interesting aspects of the business, they should be highlighted and used to attract financing. For example, Tesla Motors. A business plan is not meant to be a static document. As the business grows and evolves, so too should the business plan. An annual review of the plan allows an entrepreneur to update it when taking markets into consideration.
It also provides an opportunity to look back and see what has been achieved and what has not. Think of it as a living document that grows and evolves with your business. How To Start A Business. Initial Coin Offerings. Small Business. Your Money. Personal Finance. Your Practice. Popular Courses. Business Essentials Guide to Mergers and Acquisitions. Business Business Essentials. What Is a Business Plan? Key Takeaways A business plan is a written document describing a company's core business activities, objectives, and how it plans to achieve its goals.
Startup companies use business plans to get off the ground and attract outside investors. Businesses may come up with a lengthier traditional business plan or a shorter lean startup business plan. Good business plans should include an executive summary, products and services, marketing strategy and analysis, financial planning, and a budget.
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Request for Proposal RFP A request for proposal RFP is a project funding announcement posted by a business or organization for which companies can place bids to complete the project. Marketing Strategy A marketing strategy is a business's general scheme for developing a customer base for the product or service the business provides. Scope Scope is a project management term for the objectives necessary to complete a project, allowing managers to estimate costs and time required.
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