Creating a Business Plan

Benefits of Creating a Business Plan

• A business plan is a written summary of an entrepreneur's proposed business venture.
• It includes the operational and financial details of the business.
• A business plan outlines the marketing opportunities and strategies.
• It also summarizes the managers' skills and abilities.
• A business plan is the best insurance against business failure or mismanagement.

Essential Functions of a Business Plan

• A business plan guides the company by charting its future course.
• It also defines its strategy for following that course.
• Business plans attract lenders and investors who can provide needed capital.

Three Tests a Plan Must Pass

• The Reality Test proves a market exists for the product or service.
• It also confirms the business can actually build or provide it for the estimated costs.
• The Competitive Test evaluates a company's position relative to its competitors.
• This includes management's capability to create a company that gains an edge over rivals.
• The Value Test needs to prove the venture offers an attractive return or high probability of repayment to investors or lenders.

Key Elements of a Business Plan

• Include a title page and table of contents
• Have an executive summary.
• Formulate a Mission and Vision Statement
• Have a description of a firm's product or service
• Include a competitor analysis
• Formulate a marketing strategy
• Include entrepreneurs' and managers' resumes

Product or Service Description

• Describe the benefits customers get from the product or service
• A feature is a descriptive fact about a product or service.
• A benefit is what the customer gains from the product or service feature.

Competitor Analysis

• Identify the company's key competitors
• Outline their strengths and weaknesses
• Describe their strategies
• Determine how successful they are
• Explain what distinguishes the entrepreneur's product or service from others in the market.
• Explain how these differences produce a competitive edge

Tips for a Good Business Plan

• Use an attractive cover for a positive first impression
• Check for errors
• Include a table of contents with page numbers.
• Show that it will make money
• Tell the truth

Building a Competitive Advantage

• A strategic plan is crucial for creating a sustainable competitive advantage.
• Competitive advantage is the aggregation of factors that set a company apart from competitors.
• It gives the company a unique position in the market which is superior to its competitors.

Define Competitive Advantage

• A competitive advantage considers five aspects of a small company.
• These include the products they sell, the service they provide, and the pricing they offer.
• Also to be considered is the way they sell, and the values to which they are committed.

Strategic Management Process

• Step 1: Develop a vision and translate it into a mission statement
• Step 2: Assess strengths and weaknesses
• Step 3: Scan environment for opportunities and threats
• Step 4: Identify key success factors
• Step 5: Analyze competition
• Step 6: Create goals & objectives
• Step 7: Formulate strategies
• Step 8: Translate plans into actions
• Step 9: Establish accurate controls

Step 1: Develop a Vision and Create a Mission Statement

• Vision is the result of an entrepreneur's dream of something that does not exist.
• It's also the ability to paint a compelling picture of that dream for everyone to see.
• A clearly defined vision provides direction and determines decisions.
• It also inspires people and allows for perseverance in the face of adversity.
• Mission statement: addresses the question: "what business are we in?"
• Mission statement clarifies why and where the business is going.
• It serves as a strategic compass.
• Examples of mission statements include Bongo World, Nisolo Shoes, Badger Mining, Putney, Inc., Clymb

Elements of a Mission Statement

• Answer four key questions.
• What is the business trying to accomplish?
• Who is the business trying to serve?
• How will it achieve its purpose?
• What principles and beliefs form the foundation of the way it conducts business?

Step 2: Assess Company Strengths and Weaknesses

• Use a balance sheet to identify the two.
• Strengths are positive internal factors that a company can use to achieve its mission, goals, and objectives.
• Weaknesses are negative internal factors that inhibit a company’s ability to accomplish its mission, goals, and objectives.

Step 3: Scan for Opportunities and Threats

• Opportunities are positive external factors the company can exploit to achieve its mission, goals, and objectives.
• Threats are negative external factors that inhibit the firm’s ability to accomplish its mission, goals, and objectives.

Step 4: Identify Key Success Factors

• Key Success Factors (KSFs): factors that determine the relative success of market participants.
• These are the keys to unlocking the secrets of competing successfully in a certain market segment.

Step 5: Analyze the Competition

• Small business owners believe they operate in a highly competitive environment where competition levels are increasing.
• 97% of all U.S. businesses do not systematically track the progress of their key competitors.
• Goal of competitive intelligence: to conduct continuous rather than periodic analysis of competition.
• Avoid surprises from existing competitors' use of new strategies and tactics.
• Identify potential new competitors, improve reaction time to competitors' actions,
• Anticipate rivals’ next strategic moves.

Step 6: Create Company Goals and Objectives

• Goals: Broad, long-range attributes that a business seeks to accomplish; should be general.
• Objectives: More specific targets of performance, such as profitability, productivity, and growt.
• BHAGs: Big Hairy Audacious Goals

Step 7: Formulate Strategies

• Strategy: A road map of the actions an entrepreneur draws up to achieve a company’s mission, goals, and objectives.
• Strategy is the game plan for gaining a competitive advantage.

Step 8: Translate Strategies into Action Plans

• Make plans workable by defining their purpose, scope, and contribution.
• Define also resource requirements and timing.

Step 9: Establish Accurate Controls

• The plan establishes standards against which actual performance can be measured.
• The entrepreneur must identify and track key performance indicators and take corrective action.