Business plan
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This is a summary article that covers many topics related to business plans - their content, how they are used, legal issues, and spoofs of business plans, among others. - please see individual sections for links to detailed discussions of various topics relating to business plans.
A business plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals.
The business goals being attempted may be for-profit or non-profit. For-profit business plans typically focus on financial goals. Non-profit and government agency business plans tend to focus on service goals.
Business plans may also target changes in perception and branding by the customer, client, tax-payer, or larger community. A business plan that has changes in perception and branding as its primary goals is called a marketing plan.
Business plans may also be internally or externally focused. Externally focused plans target goals that are important to external stakeholders, particularly financial stakeholders. They typically have detailed information about the organization or team attempting to reach the goals. In the case of for-profit entities, external stakeholders would include investors and customers.[1]
External stake-holders of non-profits include donors and the clients of the non-profit's services.[2]
In the case of government agencies, external stakeholders would include tax-payers, higher-level government agencies, and international lending bodies such as the IMF, the world bank, various economic agencies of the UN, and development banks.
Internally focused business plans target intermediate goals required to reach the external goals. They may cover the development of a new product, a new service, a new IT system, a restructuring of finance, the refurbishing of a factory or a restructuring of the organization.
An internal business plan will often be developed in conjunction with a balanced scorecard or a list of critical success factors. This allows success of the plan to be measured using non-financial measures. Business plans that identify and target internal goals, but provide only general guidance on how they will be met are called strategic plans.
Operational plans describe the goals of an internal organization, working group or department.[3] Project plans, sometimes known as project frameworks, describe the goals of a particular project. They may also address the project's place within the organization's larger strategic goals.[4][5]
Contents |
[edit] Business Plan Content
- For more details on this topic, see Business Plan - Content.
Business plans are decision making tools. There is no fixed content for a business plan. Rather the content and format of the business plan is determined by the goals and audience. A business plan should contain whatever information is needed to decide whether or not to pursue a goal.
For example, a business plan for a non-profit might discuss the fit between the business plan and the organization’s mission. Banks are quite concerned about defaults, so a business plan for a bank loan will build a convincing case for the organization’s ability to repay the loan. Venture capitalists are primarily concerned about initial investment, feasibility, and exit valuation. A business plan for a project requiring equity financing will need to explain why current resources, upcoming growth opportunities, and sustainable competitive advantage will lead to a high exit valuation.
Preparing a business plan draws on a wide range of knowlege from many different buiness disciplines: finance, human resource management, intellectual property management, supply chain management, operations management, and marketing, among others.[6]. It can be helpful to view the business plan as a collection of sub-plans, one for each of the main business disciplines.[7]
[edit] Business Plan Preparation
[edit] Support services
- books, portals, and other sources of written information
- consultancies
- electronic planning templates (software)
- face to face help: mentoring programs, training courses
- USA: SCORE, SBA centers
- Other countries: needs research
[edit] Researching facts and figures
[edit] Internal corporate records
[edit] Free information
- published statistics on the web
- free articles and abstracts from consulting firms
- alumni resources - many undergraduate and graduate programs provide access to library and/or campus business center services as part of their package of alumni services.
[edit] Fee-based services
- marketing reports from subscription services
- archive and journal services
[edit] Strategic Analysis
- Industry Assessment
- Competitor Analysis
[edit] Forecasts: Modelling Techniques
[edit] Presentation Formats
The format of a business plan depends on its presentation context. It is not uncommon for businesses, especially start-ups to have three or four formats for the same business plan:
- an "elevator pitch" - a three minute summary of the business plan's executive summary. This is often used as a teaser to awaken the interest of potential funders, customers, or strategic partners.
- an oral presentation - a hopefully entertaining slide show and oral narrative that is meant to trigger discussion and interest potential investors in reading the written presentation. The content of the presentation is usually limited to the executive summary and a few key graphs showing financial trends and key decision making benchmarks. If a new product is being proposed and time permits a demonstration of the product may also be included.
- a written presentation for external stakeholders - a detailed, well written, and pleasingly formatted plan targeted at external stakeholders.
- an internal operational plan - a detailed plan describing planning details that are needed by management but may not be of interest to external stakeholders. Such plans have a somewhat higher degree of candor and informality than the version targetted at external stakeholders.
[edit] Revisiting the Business Plan
[edit] Cost overruns and revenue shortfalls
Cost and revenue estimates are central to any business plan for deciding the viability of the planned venture. But costs are often underestimated and revenues overestimated resulting in later cost overruns, revenue shortfalls, and possibly non-viability. During the dot-com bubble 1997-2001 this was a problem for many technology start-ups. However, the problem is not limited to technology or the private sector; public works projects also routinely suffer from cost overruns and/or revenue shortfalls. The main causes of cost overruns and revenue shortfalls are optimism bias and strategic misrepresentation.[8][9]
[edit] Legal and Liability Issues
[edit] How Business Plans are Used
[edit] Venture Capital
- business plan contests - provides a way for venture capitals to find promising projects
- venture capital assessment of business plans - focus on qualitative factors such as team.
[edit] Within Corporations
[edit] Fundraising
[edit] Total Quality Management
For more information see Total Quality Management
[edit] Management by Objective
For more information see Management by Objectives
[edit] Strategic Planning
For more information see Strategic Planning
[edit] Education
[edit] K-12
Business plans are used in some primary and secondary programs to teach economic principles.[10]
[edit] Higher Education
- BA, MBA programs
- integrative team projects
- projects for specific course work
- Business plan contests
[edit] Satires of Business Plans
The business plan is the subject of many satires. Satires are used both to express cynicism about business plans and as an educational tool to improve the quality of business plans. For example, Five Criteria for a successful business plan in biotech uses Dilbert comic strips to remind people of what not to do when researching and writing a business plan for a biotech start-up.
- Gnomes (South Park episode) - this episode satires the business plans of the Dot.com era. It features the three-part business plan: 1. Collect underpants 2. ??? 3. Profit!
- Scott Adams has written numerous critiques of business practices, including business planning:
- Dilbert.com - Games has a mission statement generator that satires the wording often found in mission statements.
- The Dilbert Principle – A Cubicle’s Eye View of Bosses, Meetings, Management Fads & Other Workplace Afflictions - by Scott Adams, Harper Business, 1996. This book discusses the foibles of management and their plans as depicted in the Dilbert comic strips by Scott Adams.
[edit] References
- ^ United States Small Business Administration (SBA) business plan outline for small business start-up
- ^ Center for Non-profit Excellence non-profit business plan
- ^ State of Louisana, USA government agency operational plan
- ^ Visitask project framework
- ^ Tazmanian government project management knowledge base government project plan
- ^ Boston College, Carroll School of Management, Business Plan Project The business school advises students that "To create a robust business plan, teams must take a comprehensive view of the enterprise and incorporate management-practice knowledge from every first-semester course." It is increasingly common for business schools to use business plan projects to provide an opportunity for students to integrate knowlege learned through their courses.
- ^ Eric S. Siegel, Brian R. Ford, Jay M. Bornstein (1993), 'The Ernst & Young Business Plan Guide' (New York: John Wiley and Sons) ISBN 0471578266
- ^ Bent Flyvbjerg, Mette K. Skamris Holm, and Søren L. Buhl (2002),"Underestimating Costs in Public Works Projects: Error or Lie?" Journal of the American Planning Association, vol. 68, no. 3, 279-295.
- ^ Bent Flyvbjerg, Mette K. Skamris Holm, and Søren L. Buhl (2005), "How (In)accurate Are Demand Forecasts in Public Works Projects?" Journal of the American Planning Association, vol. 71, no. 2, 131-146.
- ^ Pennsylvania Business Plan Competition - competition intended to teach economic principles to K-12 students
