What is a Business Plan and Business Plan Outline?
A business plan is a document that defines what needs doing, by when, by whom, and the resources to fund the goals and an outline is a summary of this document. The main purpose of a business plan is to create a road map, mission, vision, values, and prioritized plans for action to start or take a business from one level to another, often a higher and advantageous level. It is a tool for focusing necessary actions to achieving goals and can serve as an instrument for soliciting funds. When starting a new business or seeking to expand or refinance an ongoing business, a formal business plan is necessary.
A business plan is generated from strategic planning exercise and it is the main product of strategic planning. Strategic planning and business planning, therefore, go together in the sense that one feeds the other. However, strategic planning and business planning are not completely synonymous. Strategic planning is an exercise that involves thinking, brainstorming and creativity while business planning is about the application of the information from the strategic planning into an organized and coherent game plan. The outputs of strategic planning inform the formulation of a business plan. The document that is produced after strategic planning (thinking) and business planning is a business plan which can also be interchangeably referred to as a strategic plan. Strategic planning is about creating strategic information and business planning is about using this information to create a business plan or a road map.
Business planning is about planning your business using information that has been generated through strategic thinking or planning process. Planning is about thinking and deciding ahead of time, what is needs doing and why, when it is to be done, how it is to be done, who is going to do it, and the resources required to achieve desired goals. This process of planning writes and documents exactly, how to accomplish specific goals. Business planning is financially oriented and involves projecting resources required and future operating results based on analysis, experience, data collection and mixing these with strategic ideas that originate from the strategic planning process.
In a nutshell, a business plan defines in detail where the business wants to be going forward (vision), where it is currently as well as the new or revamped old product or service, the customer, the competition, how the business will operate and make money (business model), the marketing and selling plans, distribution and delivery means, the growth potential and the financial targets and sets out all the resources (people, facilities, systems, and processes), steps to be taken and all the activities to be carried out to start and run a business successfully or to expand or upgrade an existing business. Performance measures to be used to track the progress of the plan are also part of the business plan. A business plan should show exactly how the business will start, run and make money in the short and the long run. If the plan is for expansion, it must show how the expansion will be implemented and how it will result in the growth of revenue and profit.
A business plan serves five main purposes as follows:
- It is a road map for managing the business and as a road map, it must put together in writing all the plans, activities, materials and finances required to commence and run the business or to upgrade or expand the business.
- Like a roadmap, it is a communication tool that articulates and communicates the following: 1) Mission, vision, and values, 2) Justification, 3) Goals/objectives, strategies and action plans, and 4) Financial plan.
- It serves as a tool that can be used to solicit financing for the business. Few if any financiers will lend their money without looking at the business’s business plan. A financier has to see exactly how your business will run and make money and whether it has the potential to repay the loan that is being sought. The business plan must show exactly this in words and numbers to the financier;
- When done properly, the business plan can also serve as a motivation tool that can be used to motivate staff; and
- Because it has targets, the business plan can also be used as a control tool to monitor progress and get the business back on track fairly quickly if anything is seen to be going out of plan along the way.
A business can, of course, be started and carried out without a business plan. However, having it in whatever form enhances chances of smooth and successful take-off into the charted path. A business plan is prepared at last, after the strategic planning has been completed to ensure that every aspect of the strategic plan is covered. A business plan is normally used, instead of a strategic plan, to communicate the company’s intentions and the roadmap to all stakeholders including financiers when funding is required. At the end of it all, the written business plan should cover the following aspects:
Executive Summary
This captures the essentials of the proposed business and should tell the overall game plan concisely and precisely in two to three pages. It usually includes the business’s highlights, the solutions the business is bringing into the market, and how it will make money. If the business plan is to be used to solicit funds, this section should include a conclusion part that states why your proposal stands out and why it should be funded. This summary section is usually written last after the sections below.
Business description
This is where you give information concerning the business you want to start mentioning what is unique about it and how it differs from rivals. The information should include what problem the product or service will sort out for people. This section provides an overview of the industry in which your business will join incorporating trends, the main group of actors in the industry, and projected sales. You also provide how your business fits in the industry including your estimated market share and your competitive advantage.
Strategic Plan
This is a description of your contemplated business in strategic terms. It is simply a description of a carefully considered and chosen set of methods that if implemented faithfully are expected and should deliver a unique mix of value or desired results such as achieving a business goal or solving a problem for customers. Ideally, it should cover mission, vision, values and main goals/objectives and strategies. This is where you capture the rationale of or the thinking behind the business and how it makes business sense. The duration of the plan such as three to five years should be stated here.
Critical Success Factors
These are factors that are essential in your business and would make or break your business. In a poultry project, for instance, these would be things like housing and ventilation, security from predators, source of water, source, and type of nutrition and disease prevention.
Ownership and Management
This describes the legal format of the business (sole proprietorship, partnership or corporation), name, location(s) and ownership structure including details of the directors and their shareholding. This section features governance and management of the business and will include management team; organization structure and establishment, employee numbers, their roles or positions, qualifications, skills, experience, and emolument packages. This is also where professional service providers like an advisory board, business advisors and coaches, accountants, bankers, and external auditors are included. Suppliers and all other service providers the business needs or has to work with are captured here as well.
Marketing, sales and distribution/delivery Summary
A marketing plan is the marketing strategy that explains how customers will be attracted and retained and how these clients’ prospects will be turned into revenue. The summary should include the salient features of market research and competitor analysis reports. It should also directly address overall marketing strategy that includes branding and the 7ps of marketing (product, promotion, pricing strategy, place or distribution channels, people, processes, and physical evidence) not forgetting strategies for sales and customer care or service.
Operating Plans
This explains how the business will operate on a day to day basis in terms of facilities and systems. The key elements of this section include a description of the business’s physical location, manufacturing or production processes, facilities, supply chain, inventory requirements, operating systems, processes, and quality control. This section should also capture the design and development plan of the product or service. Included here too are risk and business continuity management as well as policies, procedures, and manuals. This section can also contain legal and regulatory requirements that have to be complied with.
Financial Plan
This section reduces everything above into numbers and covers, sales forecasts, start-up, and operating costs forecasted accounts and financial statements (i.e. statement of comprehensive income, statement of financial position and cash flow projections), revenue forecasts, financial ratios, budget, inventory list, gross margins, forecasted profit potential, break-even analysis, and funding requirements and plans. The financial statements are projections of how the business will look like financially on day one of business and at each year-end over the next three to five years.
Budget
A budget states the voted amount for each selected activity in the form of revenues, expenses and profit for the next two to three years.
Implementation Plans
This contains an overall detailed implementation plan (action plan) and actual operational activities that have to be carried out to get the business up and running. An implementation plan is a framework that captures the objectives (goals), strategies, and detailed action plans to be implemented in the business. It includes implementing parties to carry out action plans. This should also include an implementation monitoring framework that captures performance measures that will be used to measure performance. The frequency of reviewing performance and revising the strategic plan can also be stated here.
Appendices
This could contain references, assumptions and other detailed write-ups, financial tables, figures, charts and details of service providers like bankers, lawyers and accountants, and insurance covers. It can also contain details of any of the above elements such as the implementation plan.
