THE BUSINESS PLAN

The business plan is a succinct document that specifies the components of a strategy with regard to the business mission, external and internal environments and problems identified in earlier analyses. A business plan is not written each time a modification to a strategy is made. It should be written when you develop a new venture or launch a major new initiative. The business plan serves several important purposes:

• It helps determine the viability of the venture in a designated market.
• It provides guidance to the entrepreneur in organizing his or her planning activities.
• It serves as an important tool in helping to obtain financing (Hisrich and Peters 1989, p. 126).

A well-written business plan also will provide broad parameters upon which progress toward goals can be assessed and control decisions made at a later time.

A typical business plan begins with a brief introduction followed by an executive summary. The executive summary is prepared after the total plan has been written. Its purpose is to communicate the plan in a convincing way to important audiences, such as potential investors, so they will read further.

An industry analysis usually follows the executive summary. This section communicates key information -- the collection of which was discussed earlier -- that puts the venture or plan into the proper context.

The marketing plan is the first step in developing any new strategy. It is developed within the context of the company's goals and should be based on a realistic assessment of the external environment, as discussed earlier. The marketing plan is written first because marketing decisions typically determine resource needs in other areas. Obviously, a decision to seek a large share of a market will require a significant commitment of resources of various kinds. How you choose to promote and distribute your product or service will have clear ramifications for your organizational, production, human resource and financial plans.

The organizational plan details how your business is to be configured to most effectively support the marketing objectives. What kinds of skills are needed to carry out your plan? What sorts of skills do you have among managers and employees? What tasks will be done by which employees? What tasks will be contracted out? Many businesses, for example, hire the services of an advertising firm to improve their product promotions but handle their customer relations internally. Roles and responsibilities of each employee need to be clearly specified, as discussed in the section on goal setting.

Develop the production plan and human resources plan along with the organizational plan. Again, you must decide whether or not you will handle all production internally or contract all or part of it to other firms. What equipment will you need to meet the marketing plan? What will be the costs of manufacturing the product? What will be the future capital needs of the enterprise?

Human resource needs are clearly affected by decisions made in production planning. What human resources do you have? Will they be adequate to handle new or changed plans? What additional skills are needed? Will you seek employees who are already trained, or will you hire less skilled individuals and train them? If the latter, what resources will be needed for training, and how long will it take to obtain the desired levels of productivity?

The financial plan underpins this entire system of plans. Three financial areas are generally discussed (Hisrich and Peters, pp. 126-7). First, forecasted sales and related expenses need to be summarized. Monthly figures generally need to be estimated for a period exceeding one year, although the appropriate period will vary depending on the nature of the product and the stability of the market. Second, cash flow figures need to be estimated over the same period. A business needs to pay its bills in a timely fashion; many successful ventures end when suppliers refuse to extend additional credit to a business that hasn't paid its bills. Finally, a projected balance sheet that shows the financial condition of your business at a specific time needs to be prepared.

Usually an appendix is included in a business plan. This generally contains supporting information, documents and details that would interfere with clear communication in the body of the plan. Examples of this type of information include price lists, economic forecasts, demographic data and market analyses.