How to Create a Successful Business Plan

For Entrepreneurs, Scientists, Managers and Students

Dan Galai, Lior Hillel

• Publisher: WSPC
• Year: 2016
• ISBN:
  9789814651530
• Topic: Business
• Subtopic: Business Strategy
• Index: Business

How can all the nuts and bolts of a business be analyzed effectively in one comprehensive model and translated into a business plan? At various points in the life of a business, entrepreneurs will need to take stock of their ideas and plans and reformulate them in business and financial terms. How to Create a Successful Business Plan is about dynamic planning for businesses and provides a structured approach to business planning that focuses on the main components of the business model, while addressing key issues often raised by investors and potential business partners. It gives the company order and structure and helps managers optimize team integration and resources. The book provides a framework in which professionals from a broad range of backgrounds can work together on a successful business plan. Readers will find that the business model is discussed in depth, yet in accessible and easily understood terms.

Contents:

• An Introduction to the Business Plan:
  • What is a Business Plan?
  • The Goals of the Business Plan Process
• Planning the Business:
  • Gathering Information and Analyzing the Business Environment
  • Planning
• The Written Business Plan:
  • Writing the Business Plan
  • Confidentiality and Disclosure
• Getting the Most Out of Your Business Plan:
  • Promoting Your Business Plan

Readership: Undergraduate and graduate business and management students; independent entrepreneurs; executives (in high-tech firms or in the more established industries); investors (such as angels or venture capitalists); and other potential business partners and service providers.

Part 1: An Introduction to the Business Plan

Chapter 1

What is a Business Plan?

1.1 Defining the Business Plan

The business plan is a crucial component in planning a new enterprise or in evaluating an existing one. It serves as an essential tool when contemplating major strategic changes or introducing new innovations in a business. Based on a comprehensive review of a business’s various elements, including the technology, production, marketing and management of the proposed product or service, a good business plan presents a course of action and the forecasted financial results. Above all, a business plan should clarify the business’s prime focus and targets, and propose the means for achieving them.

A successful business plan must be a concise document, generally ranging from 20 to 50 pages, which can convince the reader that the plan is realistic and feasible. The document should analyze the business’s strengths and weaknesses and unique capabilities, and demonstrate convincingly that this is a viable business that can thrive over time in the designated business environment.

Initially, a business plan should be written as an internal document that is used as a work tool by the entrepreneurs and management in charge of the business. Once it has been revised and reworked it can serve as an external document to introduce the business to outsiders for creating strategic business ties, raising capital and promoting the business in numerous other ways.

The business plan’s scope must be broad and it must discuss long-term goals, highlighting the business strategy at the core of the business. Over the course of its lifetime, a company will generate many other plans and documents, including periodic plans and reports to the management and board of directors. All of these relate to specific tasks, goals and accomplishments within a given time frame, such as on a quarterly or annual basis. Ideally they will be evaluated against the milestones determined in the business plan, and these milestones in turn will be adjusted as the company progresses and new opportunities arise. However, the business plan is often the only document that presents the company’s long-term strategy along with a detailed roadmap towards its essential business goals. And that is precisely what makes a business plan unique and invaluable.

While a business plan presents a long-term view, it still requires constant revision, as the company is certain to experience many changes, internal and external, throughout its lifetime. Using the business plan as a dynamic document and updating it periodically will ensure that it stays relevant. Changes in the company’s capabilities, operating environment, competitive environment or legal environment, as well as new opportunities that will arise, will all necessitate reassessments and revisions of the business plan. It is especially important to provide potential investors, even those who have been fully updated verbally, with an amended, up-to-date business plan. An outdated business plan can potentially harm the company by steering it off course and undermining the company’s position.

The business is ultimately evaluated on a financial basis, and the bottom line will be the economic justification for the new enterprise. Even when an enterprise’s goals are social or philanthropic rather than a return on capital invested (eg. in the case of non-governmental organizations — NGOs), investors and interested parties should be able to evaluate the business plan and compare it with other options using economic parameters. This will ensure that the valuable time and money invested are put to the best possible use.

This book is entitled How to Create a Successful Business Plan and it will walk you through all of the phases of planning and decision-making required for preparing the written document called “The Business Plan.” The process, which this book will unravel in detail, is important in its entirety. Shortcuts taken on the way to a written business plan often result in a plan that may sound great, but which lacks a solid, well-thought-out foundation.

1.2 Who Needs a Business Plan?

The business plan is an important tool for any type of enterprise in every possible field, whether it is a bricks and mortar plant, an Internet startup or a social venture. Business plans are essential for completely new innovations as well as for well-established enterprises.

Business plans are advantageous to any business that evolves and changes, and particularly to:

1. New business entrepreneurs.

2. Entrepreneurs and managers innovating within an existing company or organization, also referred to as Intrapreneurs.

3. Managers who are evaluating major strategic changes within a company or organization.

To simplify the terminology, we will use the following terms in a broad sense throughout the book:

• The term “entrepreneurs” will refer to business managers planning new ventures or changes within their companies, as detailed above.

• The terms “enterprise,” “firm,” “business,” “project” or “company” will be used to refer to the business that is being planned, whatever its field and regardless of whether it is a completely new company or a new project within an existing company.

• The term “product” will describe the product or service that the enterprise plans to offer, whatever it may be: a medical device, a web site account, a media application (app), a social event, a cause, a service or a myriad of products and services, many of which we may not even be able to imagine today.

We provide various examples throughout the book. Many are technology based, but the same methodology applies to products which are not necessarily technologically complex.

Chapter 2

The Goals of the Business Plan Process

What is the primary objective of the business plan process? Entrepreneurs may often be under the impression that the business plan is basically a presentation tool for attracting outside investors and partners or developing marketing channels. As we stated in Chapter 1, these are certainly primary functions of a business plan, and a business plan will contribute tremendously to developing ties with investors, banks and business partners.

However, any seasoned investor or business partner will be able to identify an unrealistic or superficial business plan, and a poorly written document will hinder rather than promote potential cooperation. Therefore, the very essence of the business planning process is the gathering of information and its comprehensive analysis by the entrepreneur and the business team. This ensures that they become familiar with the product or service, the real capabilities of the enterprise, its potential customers, the market, the competitors, the economic factors and the business potential. Through the business plan process, the firm can focus on objectives that may be ambitious but are also feasible, and will be able to prepare a realistic plan to achieve these goals. At the completion of this process, the entrepreneur will have become knowledgeable enough and the business plan itself mature enough to stand up to the most meticulous scrutiny of investors and other outside parties seeking to evaluate, and hopefully justify, their participation in the business.

2.1 Internal Goals

There are five primary internal goals in the business plan process. Achieving these goals will significantly improve any entrepreneur’s ability to set up and manage the enterprise and make the right decisions along the way. These goals are:

1) Establishing Order and Structure

In the early days of the dot-com era, startups were renowned for being unstructured, and were characterized by young and inexperienced teams at the helm pursuing many directions simultaneously. This unconventional and flexible environment was thought to enhance creativity and lead to innovation. Venture capital was more easily accessible then. Business plans were often more about the idea and less about the manner of realizing them or about their financial and other implications. This chaotic period ended with the burst of the Internet bubble.

The business plan process that we describe here requires a structured team effort and a methodical approach. This should not curb or conflict with creativity, but rather, should channel the team’s creative efforts in directions that will optimize the business potential.

In an established company, the business plan will serve as a platform for planning strategic changes, revising organizational goals, getting everyone on the same page and working together to fulfill these goals.

2) Objectivity

New companies often begin with an idea, a vision, optimism and a lot of enthusiasm. These are indispensable and valuable assets, especially in light of the risky and rocky road ahead for most new enterprises. On the way to success, the company will have to overcome numerous obstacles and face criticism and doubt, not to mention competitors and initial failures. Without faith and enthusiasm as a positive driving force, most companies would never make it.

However, it is important to be aware that this very enthusiasm may also compromise objectivity, which is very much needed for channeling these positive energies most effectively. An impartial view of the company’s potential will ensure that the entrepreneur neither imparts an overly rosy view of the situation, nor ignores real risks which must be addressed. These risks might be internal or external:

— Internal risks include lack of resources and skills within the company.

— External risks include existing competing products and technologies, potential reactions of competitors and external economic factors.

The business plan process compels the entrepreneur to cope with the objective facts earlier, rather than later in the venture’s development. In many cases, this process may lead the entrepreneurs to revise their original ideas and modify their business outlooks, with the resulting changes ranging from minor to very significant. A good hard look at the objective factors will generate a more descriptive, coherent and less biased view of the business. The resulting decisions will be more rational and resources will be better allocated. As a result, the entrepreneur will be better equipped to face future events, meet risks and seize opportunities.

3) Team Integration

A new enterprise’s team will often include members with different professional backgrounds. The challenge is to work together on one common agenda in order to achieve shared goals, with a clear understanding of the hierarchy and breakdown of responsibilities, as well as of timetables and resource allocation. Numerous issues can arise. What is the division of responsibilities? What is the time-frame for each task? How much will go to development at the expense of other areas such as marketing, and vice-versa? The business plan will serve as an important unifying document guiding these decisions.

Even a seasoned team that has been working together for years experiences conflicting opinions and interests. A new team which has just begun collaborating has not yet established any common ground and may encounter major barriers in communicating differing visions and conflicting needs. Valuable time and resources can be saved by using a business plan to get the team to work together as quickly as possible.

A comprehensive business plan addressing all the aspects of the enterprise will reduce friction and create a stronger team that works together towards shared goals. A business plan demands a clear definition of the business’s scope, with a single, unambiguous perspective. It documents the business’s plans, goals and specific milestones, which are understood and accepted by all team members. The economic value and cost of each element of the business is explicit. This common set of goals will have a decisive impact on the company’s long-term success. We will explain this process step-by-step in this book.

A team approach does not end with the first draft of the written plan, but must become an established and permanent working mode within the company, with team members learning from the business plan process. There must be constant ongoing communication among the different team members so that decisions are made based on the most current information, with periodic reviews and corresponding updates of the business plan. The basis for cooperation is the common goal towards which everyone is working.

4) Identifying and Bridging Gaps

Each member of a dynamic and multi-disciplinary team of entrepreneurs will have a specific skill set. Some members will be novices, and others acclaimed professionals in their respective fields. While some team members in a company may have outstanding skills, others will often lack skills. This shouldn’t come as a surprise; even an expert scientist who has spent years in a particular area of specialization may not have acquired the skills needed to run a complex project over a long period of time. Countless new startups suffer from poor management and from an unrealistic assessment of the skills required. This may not be apparent at first, but will become more problematic as the company faces new challenges, such as investors becoming involved or the company entering new markets.

One of the benefits of the business plan process is that it will map out the tasks and skills required, and employ objective business indicators which have to stand up to the test of time. Even if you are completely new to the business world, you will be compelled to create a complete, comprehensive picture and consider all the factors affecting the venture, and not only technical or scientific ones. The business plan process will help define your plans and goals in business terms appropriate to the specific environment in which you propose to do business, and will enable you to chart a roadmap with clear milestones and indicators for measuring progress. These milestones represent tasks to be performed, time frames to be maintained and specific goals to be reached.

The written business plan will serve as a reference document making it easier to supervise the progress of the project. It will help define under what conditions it is feasible to proceed and how progress can be evaluated at various milestones along the way. It will also help prepare you for establishing partnerships with other parties in order to complete the skill set you need, whether in marketing, development, production or other areas. Eventually, you will be better prepared to meet potential investors and business partners.

5) Intrapreneurship

The first of the internal goals of the business plan process is establishing order and structure as a balancing force in an environment also characterized by creativity and innovation. The business plan process does not conflict with innovation at all; in fact, it enhances it by encouraging new ideas and creating a feeling of partnership and ownership among the team members.

Involving employees in the business plan process can inspire intrapreneurship by increasing employee motivation and strengthening identification with company goals at all l...

Table of contents

• Cover page
• Title page
• Copyright page
• Contents
• List of Figures
• List of Abbreviations
• Image Credits
• Preface
• Part 1: An Introduction to the Business Plan
• Part 2: Planning the Business
• Part 3: The Written Business Plan
• Part 4: Getting the Most Out of Your Business Plan
• Closing Words
• Index