The Business Plan Mission Statement and the Business Environment
The business plan describes the purpose of a business & its management philosophy. Writing a brief mission statement helps the entrepreneur to be more focused. An analysis of the business environment is critical and includes industry trends & local economic trends.
A mission statement is a concise well- defined explanation of the purpose of the business & managements philosophy. A mission statement of 50 words or less forces the entrepreneur to be focused. The statement should state the product/service, targeted customer(s), geographic region covered.
The mission statement provides direction for the company & prevents the company from diversifying into areas that do not serve the companys purpose. A mission statement should be the first step in developing a business plan.
Each business will be affected by different national trends. Examples of national trends include changes in demographics, life style changes, technology, & legislative trends.
Industry trends include large increases or decreases in sales or shifts in how the business operates. National trade associations are good sources of information concerning industry trends.
Consider trends in the community in which the business will locate. Local trends often have more of an impact on a business than national trends.
Major topic headings include: Executive Summary Mission Statement Business Environment Marketing Plan Operations including location, distribution, supplies Legal Form of Organization Insurance Management and Personnel
Major topic headings include: Financial Projections Cash Budget Profit and Loss statement Opening day balance sheet
This is exactly what the name states: a summary. It should be brief, no more than two pages. It should also be single-spaced. Most importantly, it should be written only after the rest of the plan has been written and follow the outline of the business plan. (Note: This section is single-spaced.)
The marketing plan consists of several different parts focused around the product, the customers, and how you plan to attract customers to your product. The parts included in the marketing plan are the following: product or service, customers, competitors, competitive advantage, pricing, and promotion.
Provide a brief, but complete description of your product or service. The description should be clear and detailed enough for any reader to envision. Unless you are dealing with a truly unusual product or service, a paragraph should be sufficient.
Describe fully the people to whom you plan to sell your product or service. Use accurate demographics such as age, income, education, and geographic location. Other ways to describe your customers might be: people who are moving, people who are getting married, people who must use a wheelchair. Accuracy is critical because this description will help you to estimate how many customers you have, how much money you can charge, how you are going to get the product or service to them, and how you are going to tell them about your product or service.
In this section, you must develop a list of either specific competitors (contact names, phone numbers and locations of businesses) or groups of firms which will be competing for your customers. Competitors should be separated into Direct and Indirect. Direct competitors are those selling essentially the same product or service that you intend to provide. For example, if your service is swamp tours, you would list all others who are providing swamp tours. Indirect competitors are those who are trying to attract customers away from your type of business (swamp tours) to a different type of business (fishing trips, water parks).
Describe in one or two sentences why people are going to use your product or service instead of that of your competitors.
In this section you must describe the different versions of your product or service and the prices you will charge for each. You also may be planning to sell to different groups of customers for which you might charge different prices. For example, if you were providing landscaping services you might sell to homeowners and corporations, you might have two different pricing schedules. Accuracy in pricing is critical because it is the foundation of your revenue estimates, and ultimately your profitability calculations.
Promotion consists of all the ways you inform, persuade, and remind current and potential customers about your company, product or service. Methods of promotion include the following: personal selling, advertising, sales promotion, publicity, word-of mouth, and networking.
Personal Selling Includes calling customers at their place of business, serving them at the counter and on the telephone. Networking and word-of-mouth programs are included in this category. 1. Develop a list of potential customers. 2. Call and make contact. 3. Send letter or brochure. 4. Make telephone call and schedule personal visit. 5. Make visit and bring samples. 6. Follow-up with thank you phone call.
Advertising Is a non-personal form of communication. Advertising media include, but are not limited to, print (newspapers, fliers, Yellow Pages), broadcast (radio, television), direct mail, signage, and Internet websites.
Sales promotion Consists of tours, contests, cooperative advertising, point-of-purchase advertising, specialties (e.g., calendars, T-shirts, mugs), and sales incentives.
Publicity Consists of free coverage in the news media, work in trade association activities, community involvement and charitable sponsorships. For example, you might get a local newspaper or TV station to feature your business. You might volunteer your product or service for some special event such as the Chamber of Commerce or Special Olympics.
Word of Mouth Promotion occurs when you get a new customer and that customer has heard about your product or service from someone else. A successful word-of-mouth program consists of several elements: offering an outstanding product or service; handling complaints promptly; developing champions who will tell others about your business; and a system for rewarding champions.
Networking Is the process of developing business relationships with other individuals or organizations for mutual benefit. Develop a list of beneficial organizations (such as the local Chamber of Commerce or an industry-based association), join them and become an active participant in them.
The Operations section describes some of the details of how you will actually conduct your business on a daily basis. The critical aspects are legal issues, location, logistics, suppliers, and insurance.
Legal Issues There are a number of legal issues which need to be considered when planning a new venture. Select the appropriate form of organization and complete documents. Review leases and contracts for buildings, vehicles, etc. Review franchise agreements Advise on intellectual rights and contracts To advise on or register patents and trademarks To advise on the use of a company name To advise on or prepare an employment contract To advise on or review any/all contracts
Location The actual location of your business should be provided here. This section should also explain why this location is a particularly good one. Is it close to your customers? Is it close to transportation like highways or the airport? Is it close to suppliers?
Logistics Logistics refers to how you plan to move materials and products in and out of your business. How will you get the product to your customers? Explain your choice of distribution of your product or service. Will you have your own delivery service? If you are in the pet grooming business, will you provide house service? Or will the customers have to come to you?
Suppliers Whether you are providing a product or service, you will probably need materials to operate successfully. Who are your suppliers? Where are they located relative to your business?
Insurance Another important legal issue is insurance. There are a variety of possible insurance needs: product liability, property insurance and workmens compensation. Again, the need for these and other types of insurance should be determined after discussing your business with a qualified specialist.
Your qualifications are the most important part of this section. You should include any experience or skills you have that demonstrate that you will be successful operating your business. Any special training or education you have received would be important. Positions you have held in other companies that are relevant to your business should also be included.
If you anticipate hiring any employees whose skills or qualifications are critical to the success of your business, you should include a list of those employees and a description of their qualifications. If you hire others to work for you, an organizational chart should be included to show the relationship between you and those individuals.
Acronym for the members of your professional team: B anker A ccountant I nsurance L awyer You should list the names and locations of these individuals.
Appendices may include many things such as: Detailed list of pricing Competitors Financial Statements Acquisitions for the Businesses
Lists the particular items that will be purchased for the operation of your business. Information specific to each acquisition may be the following: Item description Category (i.e. equipment, inventory) Vendor Name Manufacturers Number Number of Items Price of each item
Perhaps the most critical part of the business plan is the demonstration of the financial success of your business. To demonstrate your financial success, you should include three different financial statements: cash flow statement, profit and loss, and balance sheet
Cash Flow Statement This is essentially a list of all the sources of actual money coming into the business and the outflows of cash on a monthly and annual basis. Sources would be cash from sales, cash from the sale of assets like, funds from loans, and money from your personal bank accounts. Outflows would include paying for supplies, services (utilities), loans or the purchase of assets. Note: This statement should be prepared using Microsoft Excel.
Profit and Loss: This statement essentially provides a financial description of all the activity which occurs during a year and should include an exhaustive list of all revenues collected and all expenses incurred. The P&L statement is usually prepared on a monthly basis for the first year of operation, and annually for the second and third years of operation. Sources of revenues should be rather obvious, but you will need accurate estimates of the volume of sales and accurate pricing information (Revenue=price X volume). Expenses can be identified by referring to examples in the textbook or by carefully thinking through the regular operation of your business. Note: This statement should be prepared using Microsoft Excel.
Balance Sheet: While the P&L statement is a description of action, the balance sheet is more like a photograph showing what your company looks like at the beginning and end of the year. It contains a listing of three major categories of financial information: assets, liabilities and equity. These three types of information are related in the following manner: Assets = Liabilities and Equity. Assets include such things as cash, inventory, equipment, land and buildings. Liabilities include various kinds of IOUs: loans to banks and accounts payable to suppliers. Equity is your personal interest in the business. Note: This statement can be prepared using Word.
Revenue Statement Detailed list of estimated revenue from capital acquisitions through loans, sales, and gifts