My last article (The Sunday Times, September 2) would have hopefully convinced you, through the example of a software developer of an mCommerce solution in the food retail industry, on the need to prepare a business plan not only to support an application to obtain financing from a prospective investor, but also for you to evaluate the feasibility of the venture.
The article had also accentuated the benefits an entrepreneur gains by being involved throughout the whole business plan formulation process. This article will now focus on a more generic level, on the content and elements that need to be included in your business plan. Each section of the business plan is outlined:
Cover page: The first page of your business plan should present a title that succinctly represents the purpose, type and scope of your business. Given that investors receive hundreds of proposals for evaluation, it is highly recommended that you use a creative, punchy and highly attractive title in order to instigate initial interest from your prospective investor.
Executive summary: This needs to include all the key highlights in the business plan while enticing the investor to read the full version of the plan. It is best to write the executive summary after the plan itself has been completed;
History: In the context where a business plan is supporting the further development of an existing enterprise, it may be appropriate to also include some background of your company, a brief narrative featuring past successes, dates and form of corporation as well as progress achieved since corporation. In particular, you should include highlights of your past successes that are most relevant to your envisaged development.
Products/service description: This section should present an overview of the products and/or services that you intend to offer to your target markets. Investors would particularly be interested in what way your product/service is different from that of your competitor and to what extent prospective customers would value such differentiation. Of particular relevance here is to highlight any research and development initiatives you intend to undertake since this is likely to be viewed favourably by would be investors.
Markets and marketing: Once the business concept has been well articulated, your business plan would need to make a compelling case for the existence of a market opportunity and how you intend to position yourself in such a market. At the outset, you may wish to provide a brief overview of the industry, the current market size and projected market growth. The analysis would further need to identify the key market segments and provide an indication of which target markets will you be prioritising.
Manufacturing/operations: This section should set out what configuration of volume, variety, and variation of products/services is to be provided to your final customer. The entrepreneur would further need to explain how the chosen configuration of volume, variety and variation objectives will be supported by the appropriate resources and activities carried out by the organisation.
Management: A successful venture is as much about a good idea as it is about an outstanding management team. In this context, the business plan would need to include a profile of the key members of management, clarifying, the degree of their control in the company, an overview of their experience, key functions to be performed as well as any gaps in experience and skills in the team that would eventually need to be filled by third parties.
Financials: This section should bring together all the assumptions, actions and initiatives outlined in the previous chapters in the form of feasibility financial projections (readers may refer to a previous article on evaluating the feasibility of the venture).
Risks and rewards: A business plan is rendered more credible to prospective investors if you are honest about the risks and pitfalls that may arise during the course of operation. In this context, it is best to concentrate specifically on the critical assumptions in your business plan. Being honest about such risks and how these could be mitigated is fundamental.
Objectives and milestones: This final section generally provides an outline of key targets and measurable objectives that are expected to be achieved during the course of the business. At this stage, an entrepreneur would also need to include a brief overview of measures of control to be put in place to monitor progress towards reaching these targets, as well as methods to determine how he intends to support investors with tangible evidence that the agreed objectives and targets are in fact being met.
In the case of our software developer, he has been advised to implement a balanced score card, thereby effectively providing a dashboard analysis of the organisation's performance from a financial, customer, operational and learning and innovation perspective.
Having prepared your business plan, you are now ready to start up your operation. However, as an innovative operation, there are still two major issues to consider. These include methods of financing and development of appropriate intellectual property rights.
My next article will focus specifically on accessing alternative forms of entrepreneurial finance and in what cases each form is appropriate.