Thursday, 20 October 2011
Bankable business plan template and more
Today few entrepreneurs with the need for a business plan will attempt the writing of their business plan with out the use of a business plan template, business plan software or at least the use of a sample business plan. As the business plan writing process becomes ever more technical and both banks and investors are increasingly asking fore more in depth detail in the documents presented to them by entrepreneurs and small business owners it may be useful to consider what is it exactly that needs to go into such a document.
Answering this question is of course not as straight forward as you may want to imagine, The type of business plan may differ depending on whether it is aimed a bank or investor, what type of industry the business is operating in, how long it has been in existence and of course other key information such as trading figured, potential customers, patents granted and the list goes on.
But what exactly is your business plan for. A whole range of scenarios can be true.
If you're starting a business, a business plan can help you:
• Turn your ideas and capital into a viable business
• Secure financing from lenders and investors
• Identify strengths, weaknesses, opportunities, and threats
If you're managing an existing business, a business plan can help you:
• Communicate your vision to your employees and external parties
• Develop accurate financial forecasts
• Compare planned vs. actual performance
If you're growing your business, a business plan can help you:
• Raise capital to expand
• Create a strategy to manage growth
• Take advantage of opportunities and mitigate risks
If you're exiting your business, a business plan can help you:
• Develop a plan to transfer ownership, sell your business, or close your business
• Establish a timeline for the transition process
• Identify financial and regulatory requirements
What should be included in a business plan?
Although business plans vary in terms of length and scope, all successful business plans contain common elements. The plan should take into consideration your particular business and its environment. Here are some sections that you may want to include in your business plan:
On this page…
1. Executive Summary
2. Business strategy
3. Marketing Strategy
4. Operational plan
5. Strengths, weaknesses, opportunities and threats analysis
6. Human resources plan
7. Social responsibility strategy
8. E-business strategy
9. Financial forecasts and other information
10. Additional Resources
Executive Summary
The executive summary is an overview of the key points contained in your business plan and is often considered the most important section. It is usually the first section that a potential investor or lender will read, and may be the only section to be read if it is not prepared properly. This important summary should:
• Include highlights from each of the other sections to explain the basics of your business
• Be sufficiently interesting to motivate the reader to continue reading the rest of your business plan
• Be short and concise - no more than two pages long
You will want to describe your business concept, competitive advantage, legal structure (e.g. sole proprietorship, corporation), the market, and your own experience.
Although the executive summary is the first section of the plan, you should write it last.
Business strategy
This section should briefly but clearly describe what your business is all about. This segment should include the following elements:
Introduction
This section should give readers a very brief overview of your business - where you've been, where you are now, and where you're going in the future.
Include:
• A short history of your business - is it a new business venture, are you purchasing an existing business, or are you expanding an existing business?
• The purpose of your business - discuss your vision and the main objectives of your business.
• A description of your products and services - what will you offer?
• Your business' legal structure - are you a sole proprietorship, a partnership, a corporation, or a cooperative?
Current Position
• Your current position - what stage of the business lifecycle is your organization in?
• Your industry - is it growing, stable, or contracting?
• Your achievements - what have you achieved so far?
Competitive Advantage
• Your competitive advantage - what is your advantage over the competition (e.g. innovative products, strong business model, or appeal to niche markets)?
• Your competitors - who are they and what are their strengths and weaknesses?
• Your business model - why is it effective?
Growth Plan
• Growth timeline - where do you see your business in a year from now? Three to five years down the road?
• Milestones - what objectives have you set for your business and when do you expect to achieve them?
• Goals - what are your short-term (the upcoming year) and long-term (the next 3-5 years) goals?
You should also include the date the business was registered/incorporated, the name of the business, its address, and all contact information.
• Forms of business organization Find out which type of business structure is right for your business.
• Growth Find ways to grow your business and learn about activities that can help you get there.
• Benchmarking How does your business measure up to others that are similar to yours?
Benchmarking allows you to evaluate your performance and ensure that your company is operating at an optimum level.
Marketing Strategy
Describe the activities you will use to promote and sell your product or service. You should touch on each of the “four Ps” of the marketing mix:
• Product - how does your product or service meet the needs of your target market?
• Price - how much will you charge for your product or service and why?
• Place - how are you going to get your product to your customers?
• Promotion - how will you connect with your target market?
Your marketing strategy should also include information about your budget - how much money have you budgeted for marketing and sales costs?
You may also want to include a profile of your “ideal customers”. You can create profiles based on customer type - consumers, retailers, or wholesalers - or base your segments on demographic information such as age, location, or income level.
Keep in mind that solid market research is the backbone of an effective marketing strategy. You will want to back up your statements with facts - explain how you reached your conclusions and include statistics from reliable sources.
• Marketing basics Brush up on key marketing concepts, learn how to develop a marketing plan, and assess strategic marketing options for your company.
• Guide to market research and analysis Discover how market research can help your business succeed and learn how to conduct a variety of market research activities.
Operational plan
Your business plan should outline your current operational requirements as well as your projected requirements for the next three to five years. Your inventory management and accounting systems should have the ability to produce up-to-date reports.
You can include:
• Day-to-day operations - provide a general description of the day-to-day operations of the business, such as hours of operation, seasonality of business, suppliers and their credit terms, and so on.
• Facility requirements - identify your requirements in terms of size and location. Include any related documents in the appendix of your business plan, such as lease agreements or supplier quotations. Detail any special requirements associated with the facility and include any licensing documentation in your appendix.
• Management information systems - indicate how you plan to control stock, manage accounts, control quality and track your customers.
• Information technology (IT) requirements - identify the IT systems you will be using for your business. As this is a key factor for most businesses, indicate if you are using a consultant or IT support service and outline any planned IT developments.
You may also want to include your operations manual as an appendix to your business plan.
• Management and Operations Find out how you can structure your business, manage production processes and avoid risks.
Strengths, weaknesses, opportunities and threats analysis
Conducting a SWOT analysis is an important part of business planning. A properly prepared SWOT analysis shows investors that you have realistically and objectively considered these elements.
Banks and other lenders understand that businesses will encounter difficulties at some point, and want to know how you will deal with these challenges. Remember that overestimating strengths and opportunities or ignoring potential problems will undermine your credibility.
Putting time and effort into conducting a comprehensive SWOT analysis can help you:
• Make sound decisions and future plans
• Anticipate problems and make the necessary changes
• Set aside resources to take advantage of potential opportunities
• Assessing your business' health A periodic business health assessment should be a staple of your ongoing business planning cycle.
• Identify opportunities arising from your current business Are you sitting on a golden opportunity for growth? Your current operations may be more fruitful than you think.
Human resources plan
This section addresses how you plan to manage your employees and human resources processes. You should also discuss your short and long-term plans for employee recruitment, training, and retention. If appropriate, discuss any advisors, mentors, consultants that offer you support.
You may want to include:
• A brief organizational layout or chart of the business
• Who does what, with a brief job description of each position
• The essential skills required for each position
• Information on your employee training program
• Any other relevant information related to personnel (e.g. gaps in your team, training budget)
Don't underestimate the importance of this part of your plan. Investors need to know that you and your staff have the necessary balance of skills, drive and experience to enable your business to succeed. It is also advisable to outline any recruitment or training plans, including timelines and costs.
• Hiring and Managing Staff Employees are the lifeblood of your business. Learn how to recruit and manage your staff to maintain organizational vitality.
• Business support organizations You don't become an expert business manager overnight. Seeking the advice of peers, professional business counsellors and coaches can help your transition from new business owner to experienced entrepreneur.
• Develop your management team Find out the processes and methods you will need to set up your management team.
Social responsibility strategy
Implementing good environmental and social practices is good business - it can give you a competitive advantage and help foster goodwill toward your business. In this section you should discuss ways in which your business honours ethical values and respects people, your community, and the environment.
You may want to include information about:
• Your company's environmental policies and initiatives
• Your company's contributions to your community
• Relevant certifications, such as fair-trade certification, organic certification, or Leadership in Energy and Environmental Design (LEED) certification
• Environment and Business Find environmental programs and resources that could impact your business, from greening your business to finding funding to become environmentally efficient.
• Corporate social responsibility In order to stay competitive in today's market, you might want to consider where corporate social responsibility fits into your operations.
E-business strategy
Effectively using information technology is an important part of managing a business. In this section, you should outline how you plan to use internet technologies to reach customers, manage your business, and reduce costs. You should include information about:
• E-commerce activities (selling your product or service online)
• Website development
• Hardware and software requirements
• Relationships with external information technology specialists
Keep in mind that implementing e-business strategies can save money - if this is the case for you, you may want to highlight potential savings in this section.
• Planning for e-business The first step in any project is planning. Look at what you want to get out of e-business and the different ways for making that happen.
• What is e-business? Discover what e-business is.
Financial forecasts and other information
This section of your business plan essentially turns your plans into numbers. As part of any business plan, you will need to provide financial projections for your business. Your forecasts should run for the next three to five years. However, the first 12 months' forecasts should have the most detail, including assumptions both in terms of costs and revenues, so investors can clearly see your thinking behind the numbers.
As you put your plans down on paper, remember the importance of thinking objectively. Analyzing your venture from three points of view - optimistic, pessimistic, and realistic - can give you a solid idea of what to expect as you move forward.
Your financial forecasts should include:
• Cash flow statements – this is a cash balance and monthly cash flow pattern for the first 12-18 months. Include working capital, salaries and sales.
• Profit and loss forecast – this is the level of profit you expect to make, given your projected sales, the costs of providing goods and services, and your overhead costs.
• Sales forecast – this is the amount of money you expect from sales of your product and/or service.
Things to consider:
• How much capital do you need, if you are seeking external funding?
• What security can you offer to lenders?
• How do you plan to repay any borrowings?
• What are your sources of revenue and income?
Your forecasts should cover a range of scenarios, and you should include the contingency plans you've developed to offset any risks. You can also review benchmarks and averages for your type of business and discuss your business' position.
• SME Benchmarking Tool Find out how your firm measures up to comparable small businesses within your industry.
Additional Resources
You'll want to thoroughly review your plan once it's done. Try to avoid using jargon - the person reading your plan may not understand your businesses as well as you do. You can ask friends, family, associates, and mentors to review it. Don't be afraid to seek advice from professionals such as lawyers and accountants. You may also want to consider hiring a professional proof-reader to check for errors.
Remember, your business plan represents you business, so you want it to be as professional as possible.
To get answers to frequently asked questions and see sample business plans and templates, visit the resources below.
• Business plans - templates and samples The organizations listed here provide free templates, writing guides and sample plans to help you develop a professional business plan.
• Business planning frequently asked questions Find the answers to questions often asked about preparing a business plan.
This should give you a good indication of what needs to go into a business plan. Using the type of business plan template with some quality market research, good product knowledge and a good helping of common sense should see you right in your next attempt of writing a business plan. Best of luck.
Thursday, 24 March 2011
Planning a Business with business plan services
Ensuring that there is appropriate planning done before your business starts or sources business funding should be a key focus for any entrepreneur. Whetehr you are starting a digital marketing agency, a fintech startup or a paving contractor in Johannesburg, both banks and investors will insist on a well thought out business plan before the business gets funded. You as the business owner of course have the choice to use a business plan services to guide you in the planning process or even use many of the sample business plans available today to ensure that you consider everything that needs to be addressed within the plan.
Structured planning can make all the difference to the growth of your business. It will enable you to concentrate your resources on improving profits, reducing costs and increasing returns on investment.
In fact, even without a formal process, many businesses carry out the majority of the activities associated with business planning, such as considering growth areas, competitors, cash flow and profit.
Converting this into a cohesive process to manage your business' development doesn't have to be difficult or time-consuming. The most important thing is that plans are made, they are dynamic and are communicated to everyone involved. See the page in this guide on what to include in your annual business plan.
The benefits of business planning
The key benefit of business planning is that it allows you to create a focus for the direction of your business and provides targets that will help your business grow.
It will also give you the opportunity to stand back and review your performance and the factors affecting your business. Business planning can give you:
* greater ability to make continual improvements and anticipate problems
* sound financial information on which to base decisions
* improved clarity and focus
* greater confidence in your decision-making
What to include in your annual business plan
The main aim of your annual business plan is to set out the strategy and action plan for your business. This should include a clear financial picture of where you stand - and expect to stand - over the coming year.
Your annual business plan should include:
* an outline of changes that you want to make to your business
* potential changes to your market, customers and competition
* your objectives and goals for the year
* your key performance indicators (KPIs)
* any issues or problems
* any operational changes
* information about your management and people
* your financial performance and forecasts
* details of investment in the business
Business planning is most effective when it's an ongoing process. This allows you to act quickly where necessary, rather than simply reacting to events after they have happened.
A typical business planning cycle
There are a number of key steps you should consider incorporating into your business planning routine. Below is an example of a typical business planning cycle:
1.
review your current performance against last year/current year targets
2. work out your opportunities and threats
3. analyse your successes and failures during the previous year
4. look at your key objectives for the coming year and change or re-establish your longer-term planning
5. identify and refine the resource implications of your review and build a budget
6. define the new financial year's profit-and-loss and balance-sheet targets
7.
conclude the plan
8. review it regularly - for example, on a monthly basis - by monitoring performance, reviewing progress and achieving objectives
9. go back to step 1
Budgets and business planning
New small business owners may run their businesses in a relaxed way and may not see the need to budget. However, if you are planning for your business' future, you will need to fund your plans. Budgeting is the most effective way to control your cashflow, allowing you to invest in new opportunities at the appropriate time.
If your business is growing, you may not always be able to be hands-on with every part of it. You may have to split your budget up between different areas such as sales, production, marketing etc. You'll find that money starts to move in many different directions through your organisation - budgets are a vital tool in ensuring that you stay in control of expenditure.
A budget is a plan to:
* control your finances
* ensure you can continue to fund your current commitments
* enable you to make confident financial decisions and meet your objectives
* ensure you have enough money for your future projects
It outlines what you will spend your money on and how that spending will be financed. However, it is not a forecast. A forecast is a prediction of the future whereas a budget is a planned outcome that your business wants to achieve.
Benefits of a business budget
There are a number of benefits of drawing up a business budget, including being better able to:
* manage your money effectively
* allocate appropriate resources to projects
* monitor performance
* meet your objectives
* improve decision-making
* identify problems before they occur - such as the need to raise finance or cashflow difficulties
* plan for the future
* increase staff motivation
Creating a budget
Creating, monitoring and managing a budget is key to business success. It should help you allocate resources where they are needed, and should not be complicated. You simply need to work out what you are likely to earn and spend in the budget period.
Begin by asking these questions:
*
What are the projected sales for the budget period? Be realistic - if you overestimate, it will cause you problems in the future.
*
What are the direct costs of sales - ie costs of materials, components or subcontractors to make the product or supply the service?
*
What are the fixed costs or overheads?
You should break down the fixed costs and overheads by type, eg:
*
cost of premises, including rent or mortgage, business rates and service charges
*
staff costs - eg pay, benefits, National Insurance
*
utilities - eg heating, lighting, telephone or internet connection
*
printing, postage and stationery
*
vehicle expenses
*
equipment costs
*
advertising and promotion
*
travel and subsistence expenses
*
legal and professional costs, including insurance
Your business may have different types of expenses, and you may need to divide the budget by department. Don't forget to add in how much you need to pay yourself, and include an allowance for tax.
Your business plan should help in establishing projected sales, cost of sales, fixed costs and overheads, so it would be worthwhile preparing this first. See the page in this guide on planning for business success.
Once you have figures for income and expenditure, you can work out how much money you're making. You can look at your costs and work out ways to reduce them, as well as seeing if you are likely to have cashflow problems, and giving yourself time to do something about them.
You should stick to your budget as far as possible, but review and revise it as needed. Successful businesses often have a rolling budget.
Key steps in drawing up a budget
There are a number of key steps you should follow to make sure your budgets and plans are as realistic and useful as possible.
Make time for budgeting
If you invest some time in creating a comprehensive and realistic budget, it will be easier to manage and ultimately more effective.
Use last year's figures - but only as a guide
Collect historical information on sales and costs if they are available - these could give you a good indication of likely future sales and costs. It's also essential to consider what your sales plans are, how your sales resources will be used and any changes in the competitive environment.
Create realistic budgets
Use historical information, your business plan and any changes in operations or priorities to budget for overheads and other fixed costs.
It's useful to work out the relationship between variable costs and sales and then use your sales forecast to project variable costs. For example, if your unit costs reduce by 10 per cent for each additional 20 per cent of sales, how much will your unit costs decrease if you have a 33 per cent rise in sales?
Make sure your budgets contain enough information for you to easily monitor the key drivers of your business such as sales, costs and working capital. Accounting software can help you manage your accounts. See our guide on accounting software.
Involve the right people
It's best to ask staff with financial responsibilities within the business to provide you with estimates of figures for your budget - for example, sales targets, production costs or specific project control. If you balance their estimates against your own, you will achieve a more realistic budget. This involvement will also give them greater commitment to meeting the budget.
What your budget should cover
You should first decide how many budgets you really need. Many small businesses have one overall operating budget which sets out how much money is needed to run the business over the coming period - usually a year. As your business grows, your total operating budget is likely to be made up of several individual budgets such as your marketing or sales budgets.
What your budget will need to include
Projected cashflow - your cash budget projects your future cash position on a month-by-month basis. Budgeting in this way is vital for small businesses as it can pinpoint any difficulties you might be having. It should be reviewed at least monthly. See our guide on cashflow management: the basics.
Costs - typically, your business will have three kinds of costs:
* fixed costs - items such as rent, rates, salaries and financing costs
* variable costs - including raw materials and overtime
* one-off capital costs - for example, purchases of computer equipment or premises
To forecast your costs, it can help to look at last year's records and contact your suppliers for quotes.
Revenues - sales or revenue forecasts are typically based on a combination of your sales history and how effective you expect your future efforts to be.
Using your sales and expenditure forecasts, you can prepare projected profits for the next 12 months. This will enable you to analyse your margins and other key ratios such as your return on investment. See our guide on how to forecast and plan your sales.
Use your budget to measure performance
If you base your budget on your business plan, you will be creating a financial action plan. This can serve several useful functions, particularly if you review your budgets regularly as part of your annual planning cycle.
Your budget can serve as:
* an indicator of the costs and revenues linked to each of your activities
*
a way of providing information and supporting management decisions throughout the year
* a means of monitoring and controlling your business, particularly if you analyse the differences between your actual and budgeted income
Benchmarking performance
Comparing your budget year on year can be an excellent way of benchmarking your business' performance - for example, you can compare your projected figures with previous years to measure your performance. See our guide on how to forecast and plan your sales.
You can also compare your figures for projected margins and growth with those of other businesses in the same sector, or across different parts of your business.
Key performance indicators (KPIs)
To boost your business' performance you need to understand and monitor the key 'drivers' of your business - a driver is something that has a major impact on your business. There are many factors affecting every business' performance, so it is vital to focus on a handful of these and monitor them carefully.
The three key drivers for most businesses are:
* sales
* costs
* working capital
Any trends towards cashflow problems or falling profitability will show up in these figures when measured against your budgets and forecasts. They can help you spot problems early on if they are calculated on a consistent basis.
Review your budget regularly
To use your budgets effectively, you will need to review and revise them frequently. This is particularly true if your business is growing and you are planning to move into new areas.
Using up-to-date budgets enables you to be flexible and also lets you manage your cashflow and identify what needs to be achieved in the next budgeting period.
Income and expenditure
There are two main areas to consider when reviewing your budget - income and expenditure.
Your actual income - each month, you should compare your actual income with your sales budget. To do this, you should:
*
analyse the reasons for any shortfall - for example, lower sales volumes, flat markets and underperforming products
*
consider the reasons for a particularly high turnover - for example, whether your targets were too low
* compare the timing of your income with your projections and check that they fit
Analysing these variations will help you to set future budgets more accurately and also allow you to take action where needed.
Your actual expenditure - regularly review your actual expenditure against your budget. This will help you to predict future costs with greater reliability. You should:
* look at how your fixed costs differed from your budget
* check that your variable costs were in line with your budget - normally variable costs adjust in line with your sales volume
* analyse any reasons for changes in the relationship between costs and turnover
* analyse any differences in the timing of your expenditure - for example, by checking suppliers' payment terms
If you actually made it to this part of the article, well done, you need some praise for your sense of endurance. The point really is that you now need to go beyond just reading this article and get your business plan done soonest to ensure that you make your mistakes on paper and that the business benefits from your planning and foresight.
Structured planning can make all the difference to the growth of your business. It will enable you to concentrate your resources on improving profits, reducing costs and increasing returns on investment.
In fact, even without a formal process, many businesses carry out the majority of the activities associated with business planning, such as considering growth areas, competitors, cash flow and profit.
Converting this into a cohesive process to manage your business' development doesn't have to be difficult or time-consuming. The most important thing is that plans are made, they are dynamic and are communicated to everyone involved. See the page in this guide on what to include in your annual business plan.
The benefits of business planning
The key benefit of business planning is that it allows you to create a focus for the direction of your business and provides targets that will help your business grow.
It will also give you the opportunity to stand back and review your performance and the factors affecting your business. Business planning can give you:
* greater ability to make continual improvements and anticipate problems
* sound financial information on which to base decisions
* improved clarity and focus
* greater confidence in your decision-making
What to include in your annual business plan
The main aim of your annual business plan is to set out the strategy and action plan for your business. This should include a clear financial picture of where you stand - and expect to stand - over the coming year.
Your annual business plan should include:
* an outline of changes that you want to make to your business
* potential changes to your market, customers and competition
* your objectives and goals for the year
* your key performance indicators (KPIs)
* any issues or problems
* any operational changes
* information about your management and people
* your financial performance and forecasts
* details of investment in the business
Business planning is most effective when it's an ongoing process. This allows you to act quickly where necessary, rather than simply reacting to events after they have happened.
A typical business planning cycle
There are a number of key steps you should consider incorporating into your business planning routine. Below is an example of a typical business planning cycle:
1.
review your current performance against last year/current year targets
2. work out your opportunities and threats
3. analyse your successes and failures during the previous year
4. look at your key objectives for the coming year and change or re-establish your longer-term planning
5. identify and refine the resource implications of your review and build a budget
6. define the new financial year's profit-and-loss and balance-sheet targets
7.
conclude the plan
8. review it regularly - for example, on a monthly basis - by monitoring performance, reviewing progress and achieving objectives
9. go back to step 1
Budgets and business planning
New small business owners may run their businesses in a relaxed way and may not see the need to budget. However, if you are planning for your business' future, you will need to fund your plans. Budgeting is the most effective way to control your cashflow, allowing you to invest in new opportunities at the appropriate time.
If your business is growing, you may not always be able to be hands-on with every part of it. You may have to split your budget up between different areas such as sales, production, marketing etc. You'll find that money starts to move in many different directions through your organisation - budgets are a vital tool in ensuring that you stay in control of expenditure.
A budget is a plan to:
* control your finances
* ensure you can continue to fund your current commitments
* enable you to make confident financial decisions and meet your objectives
* ensure you have enough money for your future projects
It outlines what you will spend your money on and how that spending will be financed. However, it is not a forecast. A forecast is a prediction of the future whereas a budget is a planned outcome that your business wants to achieve.
Benefits of a business budget
There are a number of benefits of drawing up a business budget, including being better able to:
* manage your money effectively
* allocate appropriate resources to projects
* monitor performance
* meet your objectives
* improve decision-making
* identify problems before they occur - such as the need to raise finance or cashflow difficulties
* plan for the future
* increase staff motivation
Creating a budget
Creating, monitoring and managing a budget is key to business success. It should help you allocate resources where they are needed, and should not be complicated. You simply need to work out what you are likely to earn and spend in the budget period.
Begin by asking these questions:
*
What are the projected sales for the budget period? Be realistic - if you overestimate, it will cause you problems in the future.
*
What are the direct costs of sales - ie costs of materials, components or subcontractors to make the product or supply the service?
*
What are the fixed costs or overheads?
You should break down the fixed costs and overheads by type, eg:
*
cost of premises, including rent or mortgage, business rates and service charges
*
staff costs - eg pay, benefits, National Insurance
*
utilities - eg heating, lighting, telephone or internet connection
*
printing, postage and stationery
*
vehicle expenses
*
equipment costs
*
advertising and promotion
*
travel and subsistence expenses
*
legal and professional costs, including insurance
Your business may have different types of expenses, and you may need to divide the budget by department. Don't forget to add in how much you need to pay yourself, and include an allowance for tax.
Your business plan should help in establishing projected sales, cost of sales, fixed costs and overheads, so it would be worthwhile preparing this first. See the page in this guide on planning for business success.
Once you have figures for income and expenditure, you can work out how much money you're making. You can look at your costs and work out ways to reduce them, as well as seeing if you are likely to have cashflow problems, and giving yourself time to do something about them.
You should stick to your budget as far as possible, but review and revise it as needed. Successful businesses often have a rolling budget.
Key steps in drawing up a budget
There are a number of key steps you should follow to make sure your budgets and plans are as realistic and useful as possible.
Make time for budgeting
If you invest some time in creating a comprehensive and realistic budget, it will be easier to manage and ultimately more effective.
Use last year's figures - but only as a guide
Collect historical information on sales and costs if they are available - these could give you a good indication of likely future sales and costs. It's also essential to consider what your sales plans are, how your sales resources will be used and any changes in the competitive environment.
Create realistic budgets
Use historical information, your business plan and any changes in operations or priorities to budget for overheads and other fixed costs.
It's useful to work out the relationship between variable costs and sales and then use your sales forecast to project variable costs. For example, if your unit costs reduce by 10 per cent for each additional 20 per cent of sales, how much will your unit costs decrease if you have a 33 per cent rise in sales?
Make sure your budgets contain enough information for you to easily monitor the key drivers of your business such as sales, costs and working capital. Accounting software can help you manage your accounts. See our guide on accounting software.
Involve the right people
It's best to ask staff with financial responsibilities within the business to provide you with estimates of figures for your budget - for example, sales targets, production costs or specific project control. If you balance their estimates against your own, you will achieve a more realistic budget. This involvement will also give them greater commitment to meeting the budget.
What your budget should cover
You should first decide how many budgets you really need. Many small businesses have one overall operating budget which sets out how much money is needed to run the business over the coming period - usually a year. As your business grows, your total operating budget is likely to be made up of several individual budgets such as your marketing or sales budgets.
What your budget will need to include
Projected cashflow - your cash budget projects your future cash position on a month-by-month basis. Budgeting in this way is vital for small businesses as it can pinpoint any difficulties you might be having. It should be reviewed at least monthly. See our guide on cashflow management: the basics.
Costs - typically, your business will have three kinds of costs:
* fixed costs - items such as rent, rates, salaries and financing costs
* variable costs - including raw materials and overtime
* one-off capital costs - for example, purchases of computer equipment or premises
To forecast your costs, it can help to look at last year's records and contact your suppliers for quotes.
Revenues - sales or revenue forecasts are typically based on a combination of your sales history and how effective you expect your future efforts to be.
Using your sales and expenditure forecasts, you can prepare projected profits for the next 12 months. This will enable you to analyse your margins and other key ratios such as your return on investment. See our guide on how to forecast and plan your sales.
Use your budget to measure performance
If you base your budget on your business plan, you will be creating a financial action plan. This can serve several useful functions, particularly if you review your budgets regularly as part of your annual planning cycle.
Your budget can serve as:
* an indicator of the costs and revenues linked to each of your activities
*
a way of providing information and supporting management decisions throughout the year
* a means of monitoring and controlling your business, particularly if you analyse the differences between your actual and budgeted income
Benchmarking performance
Comparing your budget year on year can be an excellent way of benchmarking your business' performance - for example, you can compare your projected figures with previous years to measure your performance. See our guide on how to forecast and plan your sales.
You can also compare your figures for projected margins and growth with those of other businesses in the same sector, or across different parts of your business.
Key performance indicators (KPIs)
To boost your business' performance you need to understand and monitor the key 'drivers' of your business - a driver is something that has a major impact on your business. There are many factors affecting every business' performance, so it is vital to focus on a handful of these and monitor them carefully.
The three key drivers for most businesses are:
* sales
* costs
* working capital
Any trends towards cashflow problems or falling profitability will show up in these figures when measured against your budgets and forecasts. They can help you spot problems early on if they are calculated on a consistent basis.
Review your budget regularly
To use your budgets effectively, you will need to review and revise them frequently. This is particularly true if your business is growing and you are planning to move into new areas.
Using up-to-date budgets enables you to be flexible and also lets you manage your cashflow and identify what needs to be achieved in the next budgeting period.
Income and expenditure
There are two main areas to consider when reviewing your budget - income and expenditure.
Your actual income - each month, you should compare your actual income with your sales budget. To do this, you should:
*
analyse the reasons for any shortfall - for example, lower sales volumes, flat markets and underperforming products
*
consider the reasons for a particularly high turnover - for example, whether your targets were too low
* compare the timing of your income with your projections and check that they fit
Analysing these variations will help you to set future budgets more accurately and also allow you to take action where needed.
Your actual expenditure - regularly review your actual expenditure against your budget. This will help you to predict future costs with greater reliability. You should:
* look at how your fixed costs differed from your budget
* check that your variable costs were in line with your budget - normally variable costs adjust in line with your sales volume
* analyse any reasons for changes in the relationship between costs and turnover
* analyse any differences in the timing of your expenditure - for example, by checking suppliers' payment terms
If you actually made it to this part of the article, well done, you need some praise for your sense of endurance. The point really is that you now need to go beyond just reading this article and get your business plan done soonest to ensure that you make your mistakes on paper and that the business benefits from your planning and foresight.
Wednesday, 2 March 2011
Creating the project outline
Whether you are sourcing business finance, writing a business plan or getting a new business project of the ground, designing the project plan will be one of the more important processes with which you get involved with. The project plan in many ways will define not only what resources you may need but also what the potential hiccups are that you can expect, how long the project will take and of course who will be involved. If its a start-up project you may not always of accurate data on which you make your decisions so this may be even more challenging.
The project outline is the last step you have to undergo when you are involved in project design and planning. It provides a summary of the project, sometimes called a project brief, and describes in broad terms the goals and in specific terms, the objectives of the project. It also lists down the activities and strategies to achieve the project objectives, the target outcomes, the project evaluation techniques, project monitoring system to be employed and the proposed budget.
A good project outline is one of the bases for funding approval, therefore it should be concise, well-written and include all the important details in an easy to follow and understandable format.
1. The first thing you need to do is write a problem statement. This describes the problems that triggered the need for a project design.
2. Follow that up with the goals or aims of the project. The statement should describe the ultimate aim of the project, in broad terms. They will define the expected results based on the objectives that you have set.
3. Create specific statements for the objectives of the project. Objectives are the details on what you are going to do to achieve the project goals. This is where you outline the strategies and activities you will employ to eventually achieve the long-term project goals. You will define the changes that will eventuate through the employment of strategies to solve the problems that the project aims to address. The objectives will provide the answers to the problem that was stated in the problem statement. Careful thinking is required when you write the objectives because these are the ones that will deliver measurable and realistic results.
4. You should include the ways in which you plan to evaluate the success or failure of the project, with set baselines and indicators in which to measure the results against. The monitoring system should help demonstrate the effectiveness of the project strategies that will be employed and make the project accountable to the donors and supporters.
5. A good project outline should include a description of the monitoring system that will be used to oversee the implementation and progress of the project. It should also include a provision for implementing alternative methods should some of the activities fail to deliver the desired results at any point in the project implementation. The monitoring system will check if the project is on schedule, chart its progress and get feedback from target audiences.
6. Your project outline should also include a workable time line in which to implement the project from start to finish and measure results.
7. Finally, you should include a proposed budget to effectively implement the project. This should include a detailed breakdown on how you plan to allocate finances, and your contingency measures. The budget must follow the guidelines set by the donors and sponsors.
Its important that the outline of the project clearly defines the various elements of the project, what will be done buy who and at which point in time. In addition you also want to be clear on what should be achieved by the implementation of the project, what and how you are going to achieve the aim, ways to monitor, supervise and measure the effectiveness of the project as well as how much you need to launch the project and make it work. Getting this stage of the process right will almost certainly ensure that you save plenty of time and effort later on. Failing to plan in many ways is really planning to fail so make sure you spend the necessary time and effort on this very crucial element.
The project outline is the last step you have to undergo when you are involved in project design and planning. It provides a summary of the project, sometimes called a project brief, and describes in broad terms the goals and in specific terms, the objectives of the project. It also lists down the activities and strategies to achieve the project objectives, the target outcomes, the project evaluation techniques, project monitoring system to be employed and the proposed budget.
A good project outline is one of the bases for funding approval, therefore it should be concise, well-written and include all the important details in an easy to follow and understandable format.
1. The first thing you need to do is write a problem statement. This describes the problems that triggered the need for a project design.
2. Follow that up with the goals or aims of the project. The statement should describe the ultimate aim of the project, in broad terms. They will define the expected results based on the objectives that you have set.
3. Create specific statements for the objectives of the project. Objectives are the details on what you are going to do to achieve the project goals. This is where you outline the strategies and activities you will employ to eventually achieve the long-term project goals. You will define the changes that will eventuate through the employment of strategies to solve the problems that the project aims to address. The objectives will provide the answers to the problem that was stated in the problem statement. Careful thinking is required when you write the objectives because these are the ones that will deliver measurable and realistic results.
4. You should include the ways in which you plan to evaluate the success or failure of the project, with set baselines and indicators in which to measure the results against. The monitoring system should help demonstrate the effectiveness of the project strategies that will be employed and make the project accountable to the donors and supporters.
5. A good project outline should include a description of the monitoring system that will be used to oversee the implementation and progress of the project. It should also include a provision for implementing alternative methods should some of the activities fail to deliver the desired results at any point in the project implementation. The monitoring system will check if the project is on schedule, chart its progress and get feedback from target audiences.
6. Your project outline should also include a workable time line in which to implement the project from start to finish and measure results.
7. Finally, you should include a proposed budget to effectively implement the project. This should include a detailed breakdown on how you plan to allocate finances, and your contingency measures. The budget must follow the guidelines set by the donors and sponsors.
Its important that the outline of the project clearly defines the various elements of the project, what will be done buy who and at which point in time. In addition you also want to be clear on what should be achieved by the implementation of the project, what and how you are going to achieve the aim, ways to monitor, supervise and measure the effectiveness of the project as well as how much you need to launch the project and make it work. Getting this stage of the process right will almost certainly ensure that you save plenty of time and effort later on. Failing to plan in many ways is really planning to fail so make sure you spend the necessary time and effort on this very crucial element.
The real differences between a business plan and a business proposal
There are some very real differences between a business plan and a business proposal. Not only will the audience be very different but the process of creating the document and the type of thinking needed to secure a successful outcome will also be vastly different. A business plan template and a business proposal template for the two documents should be easily found and this may help you to understand the difference more clearly.
Some of the most important distinctions can be made by being clear on the issues below.
1. Know what a business plan is. A business plan is drawn up by anybody who wants to start up a business. In the business plan, the vision, mission and goal of the business should be laid out. Business plans map out timetables on when to expect returns on your investments, marketing strategies to further reach out to as many clients as possible, and predictions on future capital infusion.
2. Know how important a business plan is. Capital is the lifeblood of a business while the business plan is the mechanism that assures that everything functions as planned. Even a small business venture will need a business plan which the owner can check periodically to guide him and enable assessment of his venture's performance and troubleshoot if any is needed.
3. Know what a business proposal is. In general, proposals are in the form of offers made by a seller to a buyer.
4. Know the various types of proposals. Firstly, there is the unsolicited proposal where a seller introduces a product or a service and is usually in the form of fliers or brochures. Secondly, there is the informal proposal. For instance, you plan to have a team building activity for your employees and you call different resorts to inquire. They then send you an email detailing their rates on use of rooms, group meals, etc. And lastly, there is the formal proposal. This will usually entail bidding. Say your food manufacturing business will need additional equipment to meet increased product demand. You then inform these equipment manufacturers or sellers that you're accepting proposal bids to get the best price possible. Formal proposals are more complex and will need detailed information on how the seller plans to meet the buyer's requirements, cost summary and implementation schedule.
Creating the business itself will of course not be a straight forward task but once you have the business plan sorted out, at least you should have a very clear idea on exactly where you are going as well as some of the strategies on how to get there.
Some of the most important distinctions can be made by being clear on the issues below.
1. Know what a business plan is. A business plan is drawn up by anybody who wants to start up a business. In the business plan, the vision, mission and goal of the business should be laid out. Business plans map out timetables on when to expect returns on your investments, marketing strategies to further reach out to as many clients as possible, and predictions on future capital infusion.
2. Know how important a business plan is. Capital is the lifeblood of a business while the business plan is the mechanism that assures that everything functions as planned. Even a small business venture will need a business plan which the owner can check periodically to guide him and enable assessment of his venture's performance and troubleshoot if any is needed.
3. Know what a business proposal is. In general, proposals are in the form of offers made by a seller to a buyer.
4. Know the various types of proposals. Firstly, there is the unsolicited proposal where a seller introduces a product or a service and is usually in the form of fliers or brochures. Secondly, there is the informal proposal. For instance, you plan to have a team building activity for your employees and you call different resorts to inquire. They then send you an email detailing their rates on use of rooms, group meals, etc. And lastly, there is the formal proposal. This will usually entail bidding. Say your food manufacturing business will need additional equipment to meet increased product demand. You then inform these equipment manufacturers or sellers that you're accepting proposal bids to get the best price possible. Formal proposals are more complex and will need detailed information on how the seller plans to meet the buyer's requirements, cost summary and implementation schedule.
Creating the business itself will of course not be a straight forward task but once you have the business plan sorted out, at least you should have a very clear idea on exactly where you are going as well as some of the strategies on how to get there.
Wednesday, 16 February 2011
How to format a business plan?
Depending on who the business plan is targeted at, there may be numerous options on what business plan format to use. Writing a business plan for your own use, may result in a completely different format as that for a bank or investors. The bank may be interested in seeing some key facts and figures first, while the investors may be keen to see what the opportunity is and if your feasibility study is supporting the idea. Although one or two specialist business plan software programs may have a good variety of formats available, it may be useful to understand your options prior to the writing of the plan.
Using Graphs and Charts in Your Business Plan
Many people ask how many graphs or charts they should have in their business plans. As with most other business planning questions, the answer is "it depends." This article discusses the key factors influencing the number of graphs and charts to include in your business plan.
To begin, the key point to consider in developing your business plan is the time restraints of your audience. If your audience is a retired angel investor, he may have few obligations and can spend an hour reviewing your business plan. However, the more likely scenario is that a venture capitalist, corporate investor or loan officer will review your plan while sitting at a desk topped with fifty other business plans. As such, it is critical that your plan conveys its key points quickly and easily - this is where graphs or charts come in.
In determining whether to use a graph or chart, consider the old adage, "a picture is worth a thousand words." The point here is that the picture should save a thousand words. That is, the graph or chart should supplement the text; it should not be explained ad naseum in the text, or that defeats its purpose. Likewise, the graph or chart must be relevant and support the text, rather than detract from it.
In addition to respecting the time constraints of the audience, the business plan must respect the audience's energy level. That is, after reading seven business plans, an investor is likely to skip a page with 400 words of straight text. Even if no charts are applicable to support the page, Growthink business plan consultants suggest using appropriate spacing and/or callout boxes (e.g., key text phrases highlighted in boxes) to make the page more readable.
Clearly, technical drawings and operational designs need to be visually presented in the business plan. Without them, huge volumes of text are often needed to explain relatively simple processes. Importantly, when the text references these charts, the charts should be easily accessible. That is, the chart should be on the same page as the text, rather than forcing the audience to continually turn to an appendix. If the chart is referenced on numerous pages, each page should show the piece of the chart that reflects the text, with the full chart appearing only once in the plan.
Finally, if the business plan is being presented to one or few investors, the amount of graphs and charts should reflect the wants, needs and sophistication of those few readers. For instance, if the plan is being presented only to strategic investors who understand the market, more graphs may be appropriate to convey information for which these investors already have background knowledge.
Conversely, always keep in mind that the plan is not a slide presentation, and too many graphs and charts may position the company as one that is too lazy to complete the process of developing a formal business plan.
To summarize, the amount of charts and graphs used in the business plan must reflect the audience for the plan; an audience that is usually time and energy constrained. The charts and graphs must complement the text, enable the audience to quickly and easily digest the information, and as always, interest the audience in taking the next step (e.g., scheduling an in-person meeting) in the investment process.
Using Graphs and Charts in Your Business Plan
Many people ask how many graphs or charts they should have in their business plans. As with most other business planning questions, the answer is "it depends." This article discusses the key factors influencing the number of graphs and charts to include in your business plan.
To begin, the key point to consider in developing your business plan is the time restraints of your audience. If your audience is a retired angel investor, he may have few obligations and can spend an hour reviewing your business plan. However, the more likely scenario is that a venture capitalist, corporate investor or loan officer will review your plan while sitting at a desk topped with fifty other business plans. As such, it is critical that your plan conveys its key points quickly and easily - this is where graphs or charts come in.
In determining whether to use a graph or chart, consider the old adage, "a picture is worth a thousand words." The point here is that the picture should save a thousand words. That is, the graph or chart should supplement the text; it should not be explained ad naseum in the text, or that defeats its purpose. Likewise, the graph or chart must be relevant and support the text, rather than detract from it.
In addition to respecting the time constraints of the audience, the business plan must respect the audience's energy level. That is, after reading seven business plans, an investor is likely to skip a page with 400 words of straight text. Even if no charts are applicable to support the page, Growthink business plan consultants suggest using appropriate spacing and/or callout boxes (e.g., key text phrases highlighted in boxes) to make the page more readable.
Clearly, technical drawings and operational designs need to be visually presented in the business plan. Without them, huge volumes of text are often needed to explain relatively simple processes. Importantly, when the text references these charts, the charts should be easily accessible. That is, the chart should be on the same page as the text, rather than forcing the audience to continually turn to an appendix. If the chart is referenced on numerous pages, each page should show the piece of the chart that reflects the text, with the full chart appearing only once in the plan.
Finally, if the business plan is being presented to one or few investors, the amount of graphs and charts should reflect the wants, needs and sophistication of those few readers. For instance, if the plan is being presented only to strategic investors who understand the market, more graphs may be appropriate to convey information for which these investors already have background knowledge.
Conversely, always keep in mind that the plan is not a slide presentation, and too many graphs and charts may position the company as one that is too lazy to complete the process of developing a formal business plan.
To summarize, the amount of charts and graphs used in the business plan must reflect the audience for the plan; an audience that is usually time and energy constrained. The charts and graphs must complement the text, enable the audience to quickly and easily digest the information, and as always, interest the audience in taking the next step (e.g., scheduling an in-person meeting) in the investment process.
Wednesday, 26 January 2011
Marketing Plan Template
Writing a marketing plan that is both optimistic and ambitious while still being feasible can be a challenging task. Of course you need to show that the plan will work and is worth perusing, but being unrealistic will mean that the plan is dead before it was ever implemented.
Entrepreneur.com describes the marketing plan as - The written document that describes your advertising and marketing efforts for the coming year; it includes a statement of the marketing situation, a discussion of target markets and company positioning and a description of the marketing mix you intend to use to reach your marketing goals. - Quite a mouth full for the uninformed mind and if you have not done something like this before it may be a step to far. Using the latest small business software may be the answer as it may well save you an enormous amount of time and money in the long term.
It is important that you understand how the process works and we recommend the various steps below as a guide.
Before starting on your written plan, you should answer the following questions:
1. What is the product or service you are selling?
2. Who is your market that will buy the product or service?
3. What need does the above market have for your product or service?
4. What is the basic message that you would like to send to this market in regards to your product?
5. What is the best way of getting in contact with your projected market? (i.e.- T.V, Radio, Print, Online)
After answering the above questions you will ready to start on your marketing plan. When answering question five keep in mind your budget limitations as you do not want to set yourself up for committing too much money to advertising.
Follow the template below using your answers to the above questions to guide you through.
Executive Summary
The Executive Summary can be taken straight from the business plan or it can be newly written for the marketing plan. Below is a suggested list of things to be included.
Description of the Company
The description of the company should include a brief summary of the company including when it was founded and some general details about your company. It should not be more than about 10 lines and should not go into too much detail about the companies mission or products and services as this comes later in the Executive Summary.
Mission Statement
This should not be anything new and should be taken directly from the Business Plan. Most companies have mission statements from day one and this should be included on all marketing plans.
Products and Services
The information in this category could vary depending on the purpose of the plan. If this is a company wide marketing plan then all products and services should be listed briefly giving a good description of what each of them can provide. If this marketing plan were specific to a product, then a description in more detail would better suit the marketing plan.
Financial Feasibility
This section should also come straight from the business plan and give a brief description of the financial outlook of the company and what effects may arise if the marketing is not successful. You should not discuss financial plans for the marketing program in this section of the document.
Strategic Focus and Plan
Mission/ Vision
Not to be confused with the Company Mission, this statement is what you would like to get out of the marketing plan. If this is a marketing plan for a single product, then this statement should state what your company expects out of the product and they plan to achieve this.
Objectives
The objectives of the marketing for the particular product, service or company should be outlined in this section. If one of the objectives is to make 50,000 people aware of your new product then this is something that should be included in your objectives. You can also include company objectives in this section if they are directly affected by your marketing. For instance, if your goal is to make one million dollars in sales the first year, then this is an objective that comes in direct contact with the marketing program.
Competitive Environment
Here is where you need to outline the competitive environment of your market. This would include any competitors whether they are in direct or indirect competition.
Situation Analysis
There are two effective marketing tools that can be used in a situation analysis purpose. The SWOT analysis and the BCG Dot Matrix. (Please refer to article on Effective marketing tools for beginners if you are unsure about these two tools).
For an in-depth analysis include both the SWOT Analysis and the BCG Dot Matrix in the Situation analysis. These diagrams can compare your products to your competitors and help you to determine the best approach for winning your section of the market.
Competitive Analysis
This section differs from the competitive environment as it describes more in-depth how you plan to effectively market against the competition. This section should outline direct competition's weaknesses and how you plan to capitalize on these weaknesses to grab the market share.
.
Market Product Focus
Marketing Objectives
These objectives can work in two different ways depending on what type of marketing plan you are writing. If you are writing a company wide marketing plan, then this section would outline all of the objectives you wish to attain through your marketing program. They should be listed in a number format along with a detailed description of how you wish to accomplish these objectives.
If the plan were being created on an individual product/service basis then the marketing objectives would be what the company expects to gain from this product/service. Once again, objectives should be listed in a number format with a detailed description of how this products/services marketing will tie in with the marketing of the program and how this will be accomplished.
Target Markets
This section will define in detail the market in which you will be marketing your product. It should be described in detail, and should outline how you come to the conclusion that this is the right market for your product/service. You should also state why this market is going to use your product and show what research has been conducted to come to this conclusion.
Marketing Program
Product Strategy
The product strategy should give a detailed description of what your product(s) are and how they are going to benefit your company. You describe which products you think will be most popular and describe which ones you want to be the most popular (The BCG Dot Matrix is very good in helping you determine this). If you are doing an individual product marketing plan, then this section would describe in detail what your product is and what strategies you have to make it beat out your competitors.
Price Strategy
The price strategy is where you will describe your key pricing issues. It is a good idea to state whether you are taking the high cost-low turnover method or the low cost/high turnover method. If you think your key selling point is going to be the price, then explain that here. If you are taking the low cost/high turnover approach then explain how your company will succeed with the low profit-margin on each product. Be sure to include rough estimates of profit-margins, manufacturing costs and end consumer prices.
Promotion Strategy
The promotion strategy is one of the most important sections of the marketing plan. This is where it can make or break a marketing program. This section should include advertising strategies you plan to engage in, any marketing strategies for your products such as attending trade shows, conferences etc. Also you should explain what message you want to promote in all of the items mentioned above. You should send the same message through all channels of communication.
The most important element of the whole process is of course that is is based on solid marketing research and possible field work conducted where your clients are. Make sure that the marketing plan is based on facts and not fiction.
Entrepreneur.com describes the marketing plan as - The written document that describes your advertising and marketing efforts for the coming year; it includes a statement of the marketing situation, a discussion of target markets and company positioning and a description of the marketing mix you intend to use to reach your marketing goals. - Quite a mouth full for the uninformed mind and if you have not done something like this before it may be a step to far. Using the latest small business software may be the answer as it may well save you an enormous amount of time and money in the long term.
It is important that you understand how the process works and we recommend the various steps below as a guide.
Before starting on your written plan, you should answer the following questions:
1. What is the product or service you are selling?
2. Who is your market that will buy the product or service?
3. What need does the above market have for your product or service?
4. What is the basic message that you would like to send to this market in regards to your product?
5. What is the best way of getting in contact with your projected market? (i.e.- T.V, Radio, Print, Online)
After answering the above questions you will ready to start on your marketing plan. When answering question five keep in mind your budget limitations as you do not want to set yourself up for committing too much money to advertising.
Follow the template below using your answers to the above questions to guide you through.
Executive Summary
The Executive Summary can be taken straight from the business plan or it can be newly written for the marketing plan. Below is a suggested list of things to be included.
Description of the Company
The description of the company should include a brief summary of the company including when it was founded and some general details about your company. It should not be more than about 10 lines and should not go into too much detail about the companies mission or products and services as this comes later in the Executive Summary.
Mission Statement
This should not be anything new and should be taken directly from the Business Plan. Most companies have mission statements from day one and this should be included on all marketing plans.
Products and Services
The information in this category could vary depending on the purpose of the plan. If this is a company wide marketing plan then all products and services should be listed briefly giving a good description of what each of them can provide. If this marketing plan were specific to a product, then a description in more detail would better suit the marketing plan.
Financial Feasibility
This section should also come straight from the business plan and give a brief description of the financial outlook of the company and what effects may arise if the marketing is not successful. You should not discuss financial plans for the marketing program in this section of the document.
Strategic Focus and Plan
Mission/ Vision
Not to be confused with the Company Mission, this statement is what you would like to get out of the marketing plan. If this is a marketing plan for a single product, then this statement should state what your company expects out of the product and they plan to achieve this.
Objectives
The objectives of the marketing for the particular product, service or company should be outlined in this section. If one of the objectives is to make 50,000 people aware of your new product then this is something that should be included in your objectives. You can also include company objectives in this section if they are directly affected by your marketing. For instance, if your goal is to make one million dollars in sales the first year, then this is an objective that comes in direct contact with the marketing program.
Competitive Environment
Here is where you need to outline the competitive environment of your market. This would include any competitors whether they are in direct or indirect competition.
Situation Analysis
There are two effective marketing tools that can be used in a situation analysis purpose. The SWOT analysis and the BCG Dot Matrix. (Please refer to article on Effective marketing tools for beginners if you are unsure about these two tools).
For an in-depth analysis include both the SWOT Analysis and the BCG Dot Matrix in the Situation analysis. These diagrams can compare your products to your competitors and help you to determine the best approach for winning your section of the market.
Competitive Analysis
This section differs from the competitive environment as it describes more in-depth how you plan to effectively market against the competition. This section should outline direct competition's weaknesses and how you plan to capitalize on these weaknesses to grab the market share.
.
Market Product Focus
Marketing Objectives
These objectives can work in two different ways depending on what type of marketing plan you are writing. If you are writing a company wide marketing plan, then this section would outline all of the objectives you wish to attain through your marketing program. They should be listed in a number format along with a detailed description of how you wish to accomplish these objectives.
If the plan were being created on an individual product/service basis then the marketing objectives would be what the company expects to gain from this product/service. Once again, objectives should be listed in a number format with a detailed description of how this products/services marketing will tie in with the marketing of the program and how this will be accomplished.
Target Markets
This section will define in detail the market in which you will be marketing your product. It should be described in detail, and should outline how you come to the conclusion that this is the right market for your product/service. You should also state why this market is going to use your product and show what research has been conducted to come to this conclusion.
Marketing Program
Product Strategy
The product strategy should give a detailed description of what your product(s) are and how they are going to benefit your company. You describe which products you think will be most popular and describe which ones you want to be the most popular (The BCG Dot Matrix is very good in helping you determine this). If you are doing an individual product marketing plan, then this section would describe in detail what your product is and what strategies you have to make it beat out your competitors.
Price Strategy
The price strategy is where you will describe your key pricing issues. It is a good idea to state whether you are taking the high cost-low turnover method or the low cost/high turnover method. If you think your key selling point is going to be the price, then explain that here. If you are taking the low cost/high turnover approach then explain how your company will succeed with the low profit-margin on each product. Be sure to include rough estimates of profit-margins, manufacturing costs and end consumer prices.
Promotion Strategy
The promotion strategy is one of the most important sections of the marketing plan. This is where it can make or break a marketing program. This section should include advertising strategies you plan to engage in, any marketing strategies for your products such as attending trade shows, conferences etc. Also you should explain what message you want to promote in all of the items mentioned above. You should send the same message through all channels of communication.
The most important element of the whole process is of course that is is based on solid marketing research and possible field work conducted where your clients are. Make sure that the marketing plan is based on facts and not fiction.
Friday, 21 January 2011
Writing a Business Plan for a Paving Contractor
The business plan is increasingly becoming a crucial element of any startup business. Business raise money for different reasons of course. A fintech startup mught be raising funds to afford digital marketing and seo services in South Africa, while a paving contractor in Gauteng might be looking to grow their business by buying more machinery. Not only for business finance purposes but really important to ensure you have thought through the challenges the new business, clients and environment may through at you. No it’s not a rule book by which you have to keep every step of the way. Yes it is an essential point of reference when making important decisions. The financial and marketing research elements of the business plan is especially important from a guidance perspective.
So how do you go about it? Do you use a business plan template, sample business plans or perhaps the latest in business plan software? Here are a few useful thoughts from Business link to point you in the right direction.
The audience for your business plan
There are many benefits to creating and managing a realistic business plan. Even if you just use it in-house, it can:
help you spot potential pitfalls before they happen
structure the financial side of your business efficiently
focus your development efforts
work as a measure of your success
Many people think of a business plan as a document used to secure external funding. This is important because potential investors, including banks, may invest in your idea, work with you or lend you money as a result of the strength of your plan.
The following people or institutions may request to see your business plan at some stage:
banks
external investors - whether this is a friend, a venture capitalist firm or a business angel
grant providers
anyone interested in buying your business
potential partners
You should also bear in mind that a business plan is a living document that will need updating and changing as your business grows. Regardless of whether you intend to use your plan internally, or as a document for external people, it should still take an objective and honest look at your business. Failing to do this could mean that you and others have unrealistic expectations of what can be achieved and when.
What a business plan should include
Your business plan should provide details of how you are going to develop your business, when you are going to do it, who's going to play a part and how you will manage the finances.
Clarity on these issues is particularly important if you're looking for finance or investment. The process of building your plan will also focus your mind on how your new business will need to operate to give it the best chance of success.
Your plan should include:
An executive summary - this is an overview of the business you want to start. It's vital. Many lenders and investors make judgments about your business based on this section of the plan alone. See the page in this guide on the executive summary.
A short description of the business opportunity - who you are, what you plan to sell or offer, why and to whom. See the page in this guide on your business, its products and services.
Your marketing and sales strategy - why you think people will buy what you want to sell and how you plan to sell to them. See the pages in this guide on your markets and competitors and marketing and sales.
Your management team and personnel - your credentials and the people you plan to recruit to work with you. See the page in this guide on your team's skills.
Your operations - your premises, production facilities, your management information systems and IT. See the page in this guide on your operations.
Financial forecasts - this section translates everything you have said in the previous sections into numbers. See the page in this guide on financial forecasts.
You can read sample business plans at the Bplans website - Opens in a new window or see a library of business plan templates on the Microsoft Office website - Opens in a new window.
The executive summary
The executive summary is often the most important part of your business plan. Positioned at the front of the document, it is the first part to be read. However, as a summary it makes sense to write it last.
It may be the only part that will be read. Faced with a large pile of funding requests, venture capitalists and banks have been known to separate business plans into 'worth considering' and 'discard' piles based on this section alone.
What is it?
The executive summary is a synopsis of the key points of your entire plan. It should include highlights from each section of the rest of the document - from the key features of the business opportunity through to the elements of the financial forecasts.
Its purpose is to explain the basics of your business in a way that both informs and interests the reader. If, after reading the executive summary, an investor or manager understands what the business is about and is keen to know more, it has done its job.
It should be concise - no longer than two pages at most - and interesting. It's advisable to write this section of your plan after you have completed the rest.
What is it not?
A brief description of the business and its products. It's a synopsis of the entire plan.
An extended table of contents. This makes for very dull reading. You should ensure it shows the highlights of the plan, rather than restating the details the plan contains.
Hype. While the executive summary should excite the reader enough to read the entire plan, an experienced investor or businessperson will recognise hype and this will undermine the plan's credibility.
You can read sample business plans on the Bplans website - Opens in a new window.
Your business, its products and services
You must be able to clearly describe what your business does, whether you are writing the business plan for your own purposes or if you want other people to provide funds through investments or loans.
This part of the plan sets out your vision for your new business and includes who you are, what you do, what you have to offer and the market you want to address.
Start with an overview of your business:
when you started or intend to start trading and the progress you have made to date
the type of business and the sector it is in
any relevant history - for example, if you acquired the business, who owned it originally and what they achieved with it
the current legal structure
your vision for the future
Then describe your products or services as simply as possible, defining:
what makes it different
what benefits it offers
why customers would buy it
how you plan to develop your products or services
whether you hold any patents, trade marks or design rights
the key features of your industry or sector
Remember that the person reading the plan may not understand your business and its products, services or processes as well as you do, so try to avoid jargon. It's a good idea to get someone who isn't involved in the business - a friend or family member perhaps - to read this section of your plan and make sure they can understand it.
Your markets and competitors
In this section you should define your market, your position in it and outline who your competitors are. In order to do this you should refer to any market research you have carried out. You need to demonstrate that you're fully aware of the marketplace you're planning to operate in and that you understand any important trends and drivers.
You should also be able to show that your business will be able to attract customers in a growing market despite the competition.
Key areas to cover include:
your market - its size, historical data about its development and key current issues
your target customer base - who they are and how you know they will be interested in your products or services
your competitors - who they are, how they work and the share of the market they hold
the future - anticipated changes in the market and how you expect your business and your competitors to react to them
For further information, see our guides on market research and market reports and how to understand your competitors.
It is important to know your competitors' strengths and weaknesses as compared to your own - and it is good practice to do a competitor analysis of each one. Remember that the market is not static - your customers' needs and your competitors can change. So, as well as showing the competitor analyses you have undertaken, you should also demonstrate that you have considered and drawn up contingency plans to cover alternative scenarios.
Download a guide on getting to grips with your competitors from the Chartered Institute of Marketing website (PDF, 159K) - Opens in a new window.
Marketing and sales
This section should describe the specific activities you intend to use to promote and sell your products and services. It's often the weak link in business plans so it's worth spending time on it to make sure it's both realistic and achievable.
A strong sales and marketing section means you have a clear idea of how you will get your products and services to market.
Your plan will need to provide answers to these questions:
How do you plan to position your product or service in the market place? For further information, see our guide on how to create your marketing strategy.
Who are your customers? Include details of customers who have shown an interest in your product or service and explain how you plan to go about attracting new customers. See our guide: know your customers' needs.
What is your pricing policy? How much will you charge for different customer segments, quantities, etc? See our guide on how to price your product or service.
How will you promote your product or service? Identify your sales methods, eg direct marketing, advertising, PR, email, e-sales. See our guide on sales & marketing: the basics.
How will you reach your customers? What channels will you use? Which partners will be needed in your distribution channels? See our guide on how to reach your customers effectively.
How will you do your selling? Do you have a sales plan? Have you considered which sales method will be the most effective and most appropriate for your market, such as selling by phone, over the internet, face-to-face or through retail outlets? Are your proposed sales methods consistent with your marketing plan? And do you have the right skills to secure the sales you need? See our guide on the sales appointment.
Your team's skills
Your business plan needs to set out your own background and skills and the structure and key skills of both your management team and your staff. It should identify the strengths in your team and your plans to deal with any obvious weaknesses.
The management team
If you're looking for external funding, your management team can be a decisive factor. Explain who is involved, their role and how it fits into the organisation. Include a CV or paragraph on each individual, outlining their background, relevant experience and qualifications. Include any advisers you might have such as accountants or lawyers.
If you're looking to satisfy your bank manager or other investors, you need to demonstrate that your management team has the right balance of skills, drive and experience to enable your business to succeed. Key skills include sales, marketing and financial management as well as production, operational and market experience.
Your investors will also want to be convinced that you and your team are fully committed. Therefore it's a good idea to set out how much time and money each person will contribute to the business and the salaries and benefits you plan to draw. You can find more practical tips in our guide on how to use your business plan to get funding.
Your people
Give details of your workforce in terms of total numbers and by department. Spell out what work you plan to do internally and if you plan to outsource any work. Other useful figures might be sales or profit per employee, average salaries, employee retention rates and productivity.
Your plan should also outline any recruitment or training plans, including timescales and costs.
It's vital to be realistic about the commitment and motivation of your people and spell out any plans to improve or maintain staff morale.
Your operations
Your business plan also needs to outline your operational capabilities and any planned improvements. There are certain areas you should focus on.
Location
Do you have any business property?
What are your long-term commitments to the property?
Do you own or rent it?
What are the advantages and disadvantages of your current location?
Producing your goods and services
Do you need your own production facilities or would it be cheaper to outsource any manufacturing processes?
If you do have your own facilities, how modern are they?
What is the capacity compared with existing and forecasted demand?
Will any investment be needed?
Who will be your suppliers?
Management-information systems
Have you got established procedures for stock control, management accounts and quality control?
Can they cope with any proposed expansion?
For more information, see our guides on stock control and inventory and financial and management accounts: the basics.
Information technology
IT is a key factor in most businesses, so include your strengths and weaknesses in this area.
Outline the reliability and the planned development of your systems.
For more information, see our guide providing an overview of IT and e-commerce.
Financial forecasts
As part of your plan you will need to provide a set of financial projections which translate what you have said about your business into numbers.
You will need to look carefully at:
how much capital you need if you are seeking external funding
the security you can offer lenders
how you plan to repay any borrowings
sources of revenue and income
You may also want to include your personal finances as part of the plan at this stage.
Financial planning
Your forecasts should run for the next three (or even five) years and their level of sophistication should reflect the sophistication of your business. However, the first 12 months' forecasts should have the most detail associated with them.
Include the assumptions behind your projection with your figures, both in terms of costs and revenues so investors can clearly see the thinking behind the numbers.
What your forecasts should include
Sales forecast - the amount of money you expect to raise from sales. See our guide on how to forecast and plan your sales.
Cashflow statements - your cash balance and monthly cashflow patterns for at least the first 12 to 18 months. The aim is to show that your business will have enough working capital to survive so make sure you have considered the key factors such as the timing of sales and salaries. See our guide on cashflow management: the basics.
Profit and loss forecast - a statement of the trading position of the business: the level of profit you expect to make, given your projected sales and the costs of providing goods and services and your overheads.
Your forecasts should cover a range of scenarios. New businesses often forecast over-optimistic sales and most external readers will take this into account. It is sensible to include subsidiary forecasts based on sales being significantly slower than you are actually predicting, with one for sales starting three months later expected, and another forecasting a 20 per cent lower level of sales.
You can download our sample profit and loss forecast template (XLS, 50K) - Opens in a new window.
Risk analysis
Alongside your financial forecasts it is good practice to show that you have reviewed the risks your business could be faced with, and that you have looked at contingencies and insurance to cover these. Risks can include:
competitor action
commercial issues - sales, prices, deliveries
operations - IT, technology or production failure
staff - skills, availability and costs
acts of God - fire or flood
See our guide on managing risk.
Presenting your business plan
To make sure your business plan has maximum impact, there are a number of points to observe.
Keep the plan short - it's more likely to be read if it's a manageable length. Think about the presentation and keep it professional - even if you only intend to use the plan in-house. Remember, a well presented plan will reinforce the positive impression you want to create of your business.
Tips for presenting your plan
Include a cover or binding and a contents page with page and section numbering.
Start with the executive summary.
Ensure it's legible - make sure the type is ten point or above.
You may want to email it, so ensure you use email-friendly formatting.
Even if it's for internal use only, write the plan as if it's intended for an external audience.
Edit the plan carefully - get at least two people to read it and check that it makes sense.
Show the plan to expert advisers - such as your accountant - and ask for feedback. Redraft sections they say are difficult to understand.
Avoid jargon and put detailed information - such as market research data or balance sheets - in an appendix at the back.
You may have detailed plans for specific areas of your business, such as a sales plan or a staff training plan, but it is best not to include these, though it is good practice to mention that they exist.
While it is sensible to seek advice from external advisers, it is not a good idea to get them to write the plan for you. Investors and lenders need to have confidence that you personally understand your business plan and are committed to the vision for the business.
Make sure your plan is realistic. Once you have prepared your plan, use it. If you update it regularly, it will help you keep track of your business' development. See our guides on budgeting and business planning and how to prepare a business plan for growth.
Get as much help and advice as possible
Show the plan to an independent third party - such as friends or family who have run their own businesses - who will be able to point out if anything is missing. It's much better to make mistakes on a practice run than when it really matters.
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