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BusinessplanWikipedia,thefreeencyclopedia

Businessplan
FromWikipedia,thefreeencyclopedia

Abusinessplanisaformalstatementofbusinessgoals,reasonstheyareattainable,andplansforreaching
them.Itmayalsocontainbackgroundinformationabouttheorganizationorteamattemptingtoreachthose
goals.
Businessplansmaytargetchangesinperceptionandbrandingbythecustomer,client,taxpayer,orlarger
community.Whentheexistingbusinessistoassumeamajorchangeorwhenplanninganewventure,a3to
5yearbusinessplanisrequired,sinceinvestorswilllookfortheirannualreturninthattimeframe.[1]

Contents
1Audience
2BasicStructureofBusinessPlan
2.1MarketAnalysis
2.2PricingandCompetitiveAnalysis
2.3OrganizationalStructure
2.4Financeandthebusinessplan
3Content
4Presentation
5Revisingthebusinessplan
5.1Costoverrunsandrevenueshortfalls
6Legalandliabilityissues
6.1Disclosurerequirements
6.2Limitationsoncontentandaudience
7Openbusinessplans
8Uses
9Notforprofitbusinesses
10Satires
11Seealso
12References

Audience
Businessplansmaybeinternallyorexternallyfocused.Externallyfocusedplanstargetgoalsthatare
importanttoexternalstakeholders,particularlyfinancialstakeholders.Theytypicallyhavedetailed
informationabouttheorganizationorteamattemptingtoreachthegoals.Withforprofitentities,external
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stakeholdersincludeinvestorsandcustomers.[2]Externalstakeholdersofnonprofitsincludedonorsand
theclientsofthenonprofit'sservices.[3]Forgovernmentagencies,externalstakeholdersincludetaxpayers,
higherlevelgovernmentagencies,andinternationallendingbodiessuchastheInternationalMonetary
Fund,theWorldBank,variouseconomicagenciesoftheUnitedNations,anddevelopmentbanks.
Internallyfocusedbusinessplanstargetintermediategoalsrequiredtoreachtheexternalgoals.Theymay
coverthedevelopmentofanewproduct,anewservice,anewITsystem,arestructuringoffinance,the
refurbishingofafactoryorarestructuringoftheorganization.Aninternalbusinessplanisoftendeveloped
inconjunctionwithabalancedscorecardoralistofcriticalsuccessfactors.Thisallowssuccessoftheplan
tobemeasuredusingnonfinancialmeasures.Businessplansthatidentifyandtargetinternalgoals,but
provideonlygeneralguidanceonhowtheywillbemetarecalledstrategicplans.
Operationalplansdescribethegoalsofaninternalorganization,workinggroupordepartment.[4]Project
plans,sometimesknownasprojectframeworks,describethegoalsofaparticularproject.Theymayalso
addresstheproject'splacewithintheorganization'slargerstrategicgoals.[5]

BasicStructureofBusinessPlan
MarketAnalysis
Thedesignofabusinessplanforanyestablished,oroperatingorganization,iscrucialtopresentinga
comprehensivestatement,regardingthevariousformationapplicationsofacompany.Followingthe
companydescriptionamarketanalysissectionillustratesthevariousaspectsoftherelatedindustry,market
awareness,knowledgeandanyresearchfindingsandconclusions.AccordingtotheSmallBusiness
Administration(SBA)intheUnitedStates,industrycontent,shouldnotonlyprovideaconcisedescription
andoutlookoftheindustry,butalsodetailitssizeandhistoricgrowthrate.
Otherinformationwillincludevariousmarketrelatedtrendsanddistinguishingcharacteristicsforexample,
thecriticalneedsofpotentialconsumersandwhetherthoseneedsarebeingmet?Inaddition,the
demographicsofthemarketsegment,theirlocationandanyseasonalorcyclicalpurchasingtrends,witha
potentialinfluenceonthebusiness!Atargetmarketshouldbepresentedinmanageableterms,without
seemingtobeoverappealingandbeyondreasonableresources.
Abusinessplanmustincludethedeterminedsizeofthetargetmarket,aswellasdatarelatedtoannual
purchasesmadeintheparticularbusinesssegmentandthemarketgrowthforecastforit.Itisanessential
aspectofabusinessplanthatitlogicallyprovidesaforecastastothemarketshareacompanycanexpect
itsmarketsharepercentageandconsumernumbersinadeterminedgeographicalregion.TheSmall
BusinessAdministrationhasavarietyofresourcesavailabletohelpinstructuringamarketprofile.

PricingandCompetitiveAnalysis
Pricingstructureswithinaparticularbusinessenvironmentshouldbedefinedintheplan,aswellas
projectedgrossmarginlevels,togetherwithanyproposeddiscountincentives.Shouldtherebeinformation
availablerelatedtoanymarketresearchstudiesortestscompleted,[6]thenfocusshouldbedirected,onlyon
thesefactors,withotherdetailsincludedintheappendix.

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Ascompetitionisanaturalpartofthebusinessscenario,theplanshouldtherefore,includeadetailedand
competitiveanalysisofthisaspect.Theanalysiswillbenefitfromidentifyingthecompetition,byproduct
linesorserviceandthemarketsegment,withvariouscharacteristicsassessedregardingthecompetitive
environment.Theywillincludetheproposedmarketshare,withitsinherentstrengthsandweaknesses,as
wellastheimportanceofthedefinedtargetmarket,inrelationtocompetitors.
Beingpreparedforvariouscontingenciesispartofawelldesignedbusinessplanaccordingly,
considerationmustbegiventoanypotentialobstructionsthatcouldposechallengeswhenenteringthe
marketplace.Furtheraspectsshouldincludespecificsofthedeterminedopportunity,motivatingthe
enteringofthisparticularmarketsegment.

OrganizationalStructure
Theorganizationalstructurewhenrelatedtobusinessplan,detailsinformationconcerningtheownershipof
acompany,variousprofilesoftheactivemanagementteam,aswellasappropriatequalificationsrelatedto
aboardofdirectors.Theresponsibilitiesattachedtothevariousstatedmembers,willbelisted,together
withtheirbackgroundsandthereasonsfortheirparticularstatusasboardmembersoremployees.In
addition,adetaileddescriptionshouldbeprovidedofeachdivisionordepartment,togetherwithits
function.
Althoughthismayappearunnecessaryinrelationtoasmallbusinessorganization,itisnaturalfor
potentiallyassociatedpartiesandbusinesspartners,tobeinterestedinwhomtheyaredealingwithandtheir
pedigrees,especially,financialinstitutions!Otherrelevantinformationshouldstateintentionsregarding
retainingtheservicesofkeypersonnel,suchassalariesandincentives,andspecifyingthebenefitspackages
available.Abusinessplanshouldoffersupportfortheorganizationalstructureofthecompany,with
reassurancegiventhatthosedirectlyconcernedareanintegralandessentialpartofitsoperation.
Forastartupornewbusinessentity,therewillnotbeasmuchinformationandstatisticsavailableasforan
establishedcompanytherefore,thefocusshouldbedirectedtowardsinherentexperience,backgroundand
thedecisionsthatinfluencedtheownertocreatethisparticularenterprise.Anythoroughmarketresearch
andanalysisthathasbeenconductedshouldbespecified,especiallyregardinginformationrelatedto
meetinganeedorfillingagapinthetargetedmarketsegment.Thiscanbeexpandedtodemonstratehow
particularsolutionscanbesuccessful.Itiscrucialthatindependentpartiesareconvincedthatabusinesscan
succeedinitsdeterminedtargetmarket,withfurtherconfidencegeneratedwithspecifiedplansforthe
future.

Financeandthebusinessplan
Foranytypeofbusinessseekingfinancialassistanceinanyform,whetherforastartuporforamajor
expansionanddevelopmentprogram,abusinessplanisacrucialdocumentthathasthepowertoinfluence
favorabledecisions!Appropriatelydesignedandprepared,itisatoolthathelpsabusinessconvince
investorsandlendersthattheenterprise,shouldbeviewedas,aseriousentity.Irrespectiveofwhethera
businessplanrelatestoanewbusinessoronethathasbeenestablishedformanyyears,investors,and
financialinstitutionswillonlyconsiderinvestingtheirtimeandmoney,onbeingconvincedabusiness
enterprisehassuccessfulandprofitablepotential.

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Awellorganizedbusinessplanisavaluableassetthatcanhelpsmallbusinessesandlargeorganizations
attainlongtermgoals.Itnotonlyprovidescontrolanddirectionforabusiness,butdefinesobjectivesand
strategies,designedtoachievetargets,aswellasassistinginthenegotiationofpotentialobstacles.During
thestructuringofabusinessplan,variousaspects,andfactorsthatcouldaffectabusinessanditssuccess,
arerevealed.Itcouldberegardedasanopportunityformanagementtotakeanobjectiveviewofsystems
andstructuresthatareanadvantage,aswellasdeterminingwhereimprovementsareneeded.
Abusinessplanisadocumentthatformsanactiveguidetotheongoingdevelopmentofabusiness,or
organizationandthewellbeingofthoseassociatedwithit,inanyway.Inthecaseofsuccessful
corporationsandsmallbusinesses,theirbusinessplansareregularlyreviewed,toincorporateanygrowth
andchangesmade,withvariouscircumstances,beingupdated.Itisalsoamotivatingtoolthatencourages
theinterexchangeofknowledgegained,originalideasandconcepts,ensuringthatallconcernedparties
providethebestpossiblesupport.

Content
Businessplansaredecisionmakingtools.Thecontentandformatofthebusinessplanisdeterminedbythe
goalsandaudience.Forexample,abusinessplanforanonprofitmightdiscussthefitbetweenthebusiness
planandtheorganizationsmission.Banksarequiteconcernedaboutdefaults,soabusinessplanforabank
loanwillbuildaconvincingcasefortheorganizationsabilitytorepaytheloan.Venturecapitalistsare
primarilyconcernedaboutinitialinvestment,feasibility,andexitvaluation.Abusinessplanforaproject
requiringequityfinancingwillneedtoexplainwhycurrentresources,upcominggrowthopportunities,and
sustainablecompetitiveadvantagewillleadtoahighexitvaluation.
Preparingabusinessplandrawsonawiderangeofknowledgefrommanydifferentbusinessdisciplines:
finance,humanresourcemanagement,intellectualpropertymanagement,supplychainmanagement,
operationsmanagement,andmarketing,amongothers.[7]Itcanbehelpfultoviewthebusinessplanasa
collectionofsubplans,oneforeachofthemainbusinessdisciplines.[8]
"...agoodbusinessplancanhelptomakeagoodbusinesscredible,understandable,andattractiveto
someonewhoisunfamiliarwiththebusiness.Writingagoodbusinessplancantguaranteesuccess,butit
cangoalongwaytowardreducingtheoddsoffailure."[8]

Presentation
Theformatofabusinessplandependsonitspresentationcontext.Itiscommonforbusinesses,especially
startups,tohavethreeorfourformatsforthesamebusinessplan.
An"elevatorpitch"isashortsummaryoftheplan'sexecutivesummary.Thisisoftenusedasateaserto
awakentheinterestofpotentialinvestors,customers,orstrategicpartners.
Apitchdeckisaslideshowandoralpresentationthatismeanttotriggerdiscussionandinterestpotential
investorsinreadingthewrittenpresentation.Thecontentofthepresentationisusuallylimitedtothe
executivesummaryandafewkeygraphsshowingfinancialtrendsandkeydecisionmakingbenchmarks.If
anewproductisbeingproposedandtimepermits,ademonstrationoftheproductmaybeincluded.

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Awrittenpresentationforexternalstakeholdersisadetailed,wellwritten,andpleasinglyformattedplan
targetedatexternalstakeholders.
Aninternaloperationalplanisadetailedplandescribingplanningdetailsthatareneededbymanagement
butmaynotbeofinteresttoexternalstakeholders.Suchplanshaveasomewhathigherdegreeofcandor
andinformalitythantheversiontargetedatexternalstakeholdersandothers.
Typicalstructureforabusinessplanforastartupventure[9]
coverpageandtableofcontents
executivesummary
missionstatement
businessdescription
businessenvironmentanalysis
SWOTanalysis
industrybackground
competitoranalysis
marketanalysis
marketingplan
operationsplan
managementsummary
financialplan
attachmentsandmilestones
Typicalquestionsaddressedbyabusinessplanforastartupventure[10]
Whatproblemdoesthecompany'sproductorservicesolve?Whatnichewillitfill?
Whatisthecompany'ssolutiontotheproblem?
Whoarethecompany'scustomers,andhowwillthecompanymarketandsellitsproductstothem?
Whatisthesizeofthemarketforthissolution?
Whatisthebusinessmodelforthebusiness(howwillitmakemoney)?
Whoarethecompetitorsandhowwillthecompanymaintainacompetitiveadvantage?
Howdoesthecompanyplantomanageitsoperationsasitgrows?
Whowillrunthecompanyandwhatmakesthemqualifiedtodoso?
Whataretherisksandthreatsconfrontingthebusiness,andwhatcanbedonetomitigatethem?
Whatarethecompany'scapitalandresourcerequirements?
Whatarethecompany'shistoricalandprojectedfinancialstatements?

Revisingthebusinessplan
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Costoverrunsandrevenueshortfalls
Costandrevenueestimatesarecentraltoanybusinessplanfordecidingtheviabilityoftheplanned
venture.Butcostsareoftenunderestimatedandrevenuesoverestimatedresultinginlatercostoverruns,
revenueshortfalls,andpossiblynonviability.Duringthedotcombubble19972001thiswasaproblemfor
manytechnologystartups.Referenceclassforecastinghasbeendevelopedtoreducetherisksofcost
overrunsandrevenueshortfallsandthusgeneratemoreaccuratebusinessplans

Legalandliabilityissues
Disclosurerequirements
Anexternallytargetedbusinessplanshouldlistalllegalconcernsandfinancialliabilitiesthatmight
negativelyaffectinvestors.Dependingontheamountoffundsbeingraisedandtheaudiencetowhomthe
planispresented,failuretodothismayhaveseverelegalconsequences.

Limitationsoncontentandaudience
Nondisclosureagreements(NDAs)withthirdparties,noncompeteagreements,conflictsofinterest,
privacyconcerns,andtheprotectionofone'stradesecretsmayseverelylimittheaudiencetowhichone
mightshowthebusinessplan.Alternatively,theymayrequireeachpartyreceivingthebusinessplantosign
acontractacceptingspecialclausesandconditions.
ThissituationiscomplicatedbythefactthatmanyventurecapitalistswillrefusetosignanNDAbefore
lookingatabusinessplan,lestitputthemintheuntenablepositionoflookingattwoindependently
developedlookalikebusinessplans,bothclaimingoriginality.Insuchsituationsonemayneedtodevelop
twoversionsofthebusinessplan:astrippeddownplanthatcanbeusedtodeveloparelationshipanda
detailplanthatisonlyshownwheninvestorshavesufficientinterestandtrusttosignanNDA.

Openbusinessplans
Traditionallybusinessplanshavebeenhighlyconfidentialandquitelimitedinaudience.Thebusinessplan
itselfisgenerallyregardedassecret.However,theemergenceoffreesoftwareandopensourcehasopened
themodelandmadethenotionofanopenbusinessplanpossible.
Anopenbusinessplanisabusinessplanwithunlimitedaudience.Thebusinessplanistypicallyweb
publishedandmadeavailabletoall.
Inthefreesoftwareandopensourcebusinessmodel,tradesecrets,copyrightandpatentscannolongerbe
usedaseffectivelockingmechanismstoprovidesustainableadvantagestoaparticularbusinessand
thereforeasecretbusinessplanislessrelevantinthosemodels.

Uses
Venturecapital
Venturecapitalassessmentofbusinessplansfocusonqualitativefactorssuchasteam.
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Businessplancontestsprovidesawayforventurecapitaliststofindpromisingprojects.
Thebetterthebusinessplan,thebetteryourchancesoflandingthatbiginitialinvestment.
Withincorporations
Fundraisingistheprimarypurposeformanybusinessplans,sincetheyarerelatedtothe
inherentprobablesuccess/failureofthecompanyrisk.
Totalqualitymanagement(TQM)isabusinessmanagementstrategyaimedatembedding
awarenessofqualityinallorganizationalprocesses.TQMhasbeenwidelyusedin
manufacturing,education,callcenters,government,andserviceindustries,aswellasNASA
spaceandscienceprograms.
Managementbyobjectives(MBO)isaprocessofagreeinguponobjectives(ascanbedetailed
withinbusinessplans)withinanorganizationsothatmanagementandemployeesagreetothe
objectivesandunderstandwhattheyareintheorganization.
Strategicplanningisanorganization'sprocessofdefiningitsstrategy,ordirection,andmaking
decisionsonallocatingitsresourcestopursuethisstrategy,includingitscapitalandpeople.
Businessplanscanhelpdecisionmakersseehowspecificprojectsrelatetotheorganization's
strategicplan.
Education
Businessplansareusedinsomeprimaryandsecondaryprogramstoteacheconomic
principles.[11]WikiversityhasaLunarBoomTownprojectwherestudentsofallagescan
collaboratewithdesigningandrevisingbusinessmodelsandpracticeevaluatingthemtolearn
practicalbusinessplanningtechniquesandmethodology.

Notforprofitbusinesses
Thebusinessgoalsmaybedefinedbothfornonprofitorforprofitorganizations.Forprofitbusinessplans
typicallyfocusonfinancialgoals,suchasprofitorcreationofwealth.Nonprofit,aswellasgovernment
agencybusinessplanstendtofocusonthe"organizationalmission"whichisthebasisfortheir
governmentalstatusortheirnonprofit,taxexemptstatus,respectivelyalthoughnonprofitsmayalso
focusonoptimizingrevenue.
Theprimarydifferencebetweenprofitandnonprofitorganizationsisthat"forprofit"organizationslookto
maximizewealthversusnonprofitorganizations,whichlooktoprovideagreatergoodtosociety.Innon
profitorganizations,creativetensionsmaydevelopintheefforttobalancemissionwith"margin"(or
revenue).

Satires
Thebusinessplanisthesubjectofmanysatires.Satiresareusedbothtoexpresscynicismaboutbusiness
plansandasaneducationaltooltoimprovethequalityofbusinessplans.Forexample,
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FiveCriteriaforasuccessfulbusinessplaninbiotech
(https://web.archive.org/web/20120106201111/http://www.mta.ca/rendezvousbiosciences/day3panel
ppt/Roger%20Bernier.ppt)usesDilbertcomicstripstoremindpeopleofwhatnottodowhen
researchingandwritingabusinessplanforabiotechstartup.ScottAdams,theauthorofDilbert,is
anMBAgraduate(U.C.Berkeley)whoseeshumorasacriticaltoolthatcanimprovethebehaviorof
businessesandtheirmanagers.[12]Hehaswrittennumerouscritiquesofbusinesspractices,including
businessplanning.ThewebsiteDilbert.comGames
(http://www.dilbert.com/comics/dilbert/games/index.html)hasamissionstatementgeneratorthat
satirizesthewordingoftenfoundinmissionstatements.HisbookTheDilbertPrincipleACubicles
EyeViewofBosses,Meetings,ManagementFads&OtherWorkplaceAfflictionsdiscussesthe
foiblesofmanagementandtheirplansasdepictedintheDilbertcomicstripsbyScottAdams.
Inthearticle"SouthPark's"InvestingLesson
(http://www.fool.com/news/foth/2001/foth011108.htm),TheMotleyFoolcolumnist"Foolonthe
Hill"usestheUnderpantsGnomestoillustratethefallacyoffocusingongoalswithoutaclear
implementationstrategy.TheUnderpantsGnomesepisodesatirizesthebusinessplansoftheDot
comera.

Seealso
Businesscase
BusinessMotivationModel
Corporatefinance
Costoverrun
Costbenefitanalysis
Marketingplan
Optimismbias
Parkinson'sLawofTriviality
Referenceclassforecasting
Revenueshortfall
Strategicplan

References
1. ^Pinson,Linda.(2004).AnatomyofaBusinessPlan:AStepbyStepGuidetoBuildingaBusinessand
SecuringYourCompanysFuture(6thEdition).Page20.DearbornTrade:Chicago,USA.

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2. ^SmallBusinessNotes(http://www.smallbusinessnotes.com/planning/sbabusplan.html)businessplanoutlinefor
smallbusinessstartup
3. ^TuftsUniversity(http://ase.tufts.edu/yet/pdf/Non
Profit%20Incorporating%20%20The%20Business%20Plan.pdf)nonprofitbusinessplan
4. ^StateofLouisiana,USA(http://doa.louisiana.gov/opb/faf/OPFormatWord_FY01MWLayout.pdf)government
agencyoperationalplan
5. ^Tasmaniangovernmentprojectmanagementknowledgebase
(http://www.egovernment.tas.gov.au/themes/project_management/project_management/knowledge_base)
governmentprojectplan
6. ^"StructureofBusinessPricingandCompetitiveAnalysis"
(http://www.business2sell.co.nz/blogs/2015/01/businesspricingandcompetitiveanalysis.php).Business2sell.
Retrieved21January2015.
7. ^BostonCollege,CarrollSchoolofManagement,BusinessPlanProject
(http://www.bc.edu/schools/csom/mba/academics/bplan.html)Thebusinessschooladvisesstudentsthat"To
createarobustbusinessplan,teamsmusttakeacomprehensiveviewoftheenterpriseandincorporate
managementpracticeknowledgefromeveryfirstsemestercourse."Itisincreasinglycommonforbusiness
schoolstousebusinessplanprojectstoprovideanopportunityforstudentstointegrateknowledgelearned
throughtheircourses.
8. ^abEricS.Siegel,BrianR.Ford,JayM.Bornstein(1993),'TheErnst&YoungBusinessPlanGuide'(New
York:JohnWileyandSons)ISBN0471578266
9. ^HarvardBusinessSchoolPressPocketMentor,"CreatingaBusinessPlan"
10. ^"TenBigQuestions"(http://www.caycon.com/downloads/TenBigQuestions.pdf)
11. ^PennsylvaniaBusinessPlanCompetition(http://www.economicspa.org/products.asp?
cat=15&hierarchy=0%7C2)competitionintendedtoteacheconomicprinciplestoK12students
12. ^TriciaBisoux,"FunnyBusiness",BizEd,November/December,2002
(http://www.aacsb.edu/publications/Archives/novdec02/p1621.pdf)

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