Assignment: Business Planning
Learning Objectives
After completing this chapter you will be able to
• Describe the purposes of business planning
• Describe common business planning principles
• List and explain the elements of the business plan development process outlined in this book
• Explain the purposes of each of the elements of the business plan development process outlined in this book
• Explain how applying the business plan development process outlined in this book can aid in developing a business plan that will meet entrepreneurs' goals
• Describe general business planning guidelines and format
Overview
This chapter describes the purposes of business planning, the general concepts related to business planning, and guidelines and a format for a comprehensive business plan.
General Business Plan Format
Title page
Include nice, catchy, professional, appropriate graphics to make it appealing for targeted readers
Executive summary
• Can be longer than normal executive summaries, up to three pages
• Write after remainder of plan is complete
• Includes information relevant to targeted readers as this is the place where they are most likely to form their first impressions of the business idea and decide whether they wish to read the rest of the plan
Table of Contents
List of Tables
Each table, figure, and appendix included in the plan must be referenced within the text of the plan so the relevance of each of these elements is clear.
List of Figures
Introduction
• Describes the business concept
• Indicates the purpose of the plan
• Appeals to targeted readers
Business Idea
• May include description of history behind the idea and the evolution of the business concept if relevant
Vision
• Generally outlines what the owner intends for the venture to be
• Should inspire all members of the organization
• Should help stakeholders aspire to achieve greater things through the venture because of the general direction provided through the vision statement
Mission
• Should be very brief-a few sentences or a short paragraph
• Indicates what your organization does and why it exists-may describe the business strategy and philosophy
Values
• Indicates the important values that will guide everything the business will do
• Outlines the personal commitments members of the organization must make, and what they should consider to be important
• Defines how people behave and interact with each other.
• Should help the reader understand the type of culture and operating environment this business intends to develop
Major Goals
• Describes the major organizational goals
• Ensures each goal is:
o Specific, Measurable, Action-Oriented, Realistic, and Timely [SMART]
o Realistic, Understandable, Measurable, Believable, and Achievable [RUMBA]
• Perfectly aligns with everything in plan
Operating Environment
Trend Analysis
• Includes an analysis of how the current and expected trends in the political, economic, social, technological, environmental, and legal (PESTEL) factors will impact the development of this business
o Consider whether this is the right place for this analysis: it may be better positioned in, for example, the Financial Plan section to provide context to the analysis of the critical success factors, or in the Marketing Plan to help the reader understand the basis for the sales projections.
Industry Analysis
• Includes an analysis of the industry in which this business will operate
• Commonly uses the Five Forces Model (Porter, 1985)
o consider whether this is the right place for this analysis: it may be better placed in, for example, the Marketing Plan to enhance the competitor analysis, or in the Financial Plan to provide context to the industry standard ratios in the Investment Analysis section
Operations Plan
• Answers several key questions:
o What are your facility plans?
- Where will your facility be located?
- expressed as a set physical location
- expressed as a set of requirements and characteristics
- How large will your facility be and why must it be this size?
- How much will it cost to buy or lease your facility?
- What utility, parking, and other costs must you pay for this facility?
- What expansion plans must be factored into the facility requirements?
- What transportation and storage issues must be addressed by facility decisions?
- What zoning and other legal issues must you deal with?
- What will be the layout for your facility and how will this best accommodate customer and employee requirements?
o What constraints are you operating under that will restrict your capacity to produce and sell your product?
- Given these constraints, what is your operating capacity (in terms of production, sales, etc.)?
o What is the workflow plan for your operation?
o What work will your company do and what work will you outsource?
Operations Timeline
• Outlines several key questions:
o When will you make the preparations, such as registering the business name and purchasing equipment, to start the venture?
o When will you begin operations and make your first sales?
o When will other milestone events occur such as moving operations to a larger facility, offering a new product line, hiring new key employees, and beginning to sell products internationally?
• May include a graphical timeline showing when these milestone events have occurred and are expected to occur
Start-up
• What is required to start up your business, including the purchases and activities that must occur before you make your first sale?
• When identifying capital requirements for start-up, a distinction should be made between fixed capital requirements and working capital requirements.
Fixed Capital Requirements
• What fixed assets, including equipment and machinery, must be purchased so your venture can conduct its business?
• This section may include a start-up budget showing the machinery, equipment, furnishings, renovations, and other capital expenditures required prior to operations commencing.
• If relevant you might include information showing the financing required; fixed capital is usually financed using longer-term loans.
Working Capital Requirements
• What money is needed to operate the business (separately from the money needed to purchase fixed assets) including the money needed to purchase inventory and pay initial expenses?
• This section may include a start-up budget showing the cash required to purchase starting inventories, recruit employees, conduct market research, acquire licenses, hire lawyers, and other operating expenditures required prior to starting operations.
• If relevant you might include information showing the financing required ... working capital is usually financed with operating loans, trade credit, credit card debt, or other forms of shorter-term loans.
Operating Processes
• What operating processes will you apply?
• Depending upon the type of business for which you are creating your plan, you will need to describe different things:
o Retail and wholesale operations
- How will you ensure your cash is managed effectively?
- How will you schedule your employees?
- How will you manage your inventories?
- If you will have a workforce, how will you manage them?
- etc.
o Service operation
- How will you bill out your employee time?
- How will you schedule work on your contracts?
- etc.
o Manufacturing operation
- How you will manufacture your product (process flow, job shop, etc.?)
- How will you maintain quality?
- How will you institute and manage effective financial monitoring and control systems that provide needed information in a timely manner?
- How will you manage expansion?
- etc.
Facilities
• May include planned layouts for facilities
Organizational Structure
• May include information on Advisory Boards or Board of Directors from which the company will seek advice or guidance or direction
• May include an organizational chart
• Can nicely lead into the Human Resources Plan
Human Resources Plan
• Answers key questions:
o How do you describe your desired corporate culture?
o What are the key positions within your organization?
o How many employees will you have?
o What characteristics define your desired employees?
o What is your recruitment strategy? What processes will you apply to hire the employees you require?
o What is your leadership strategy and why have you chosen this approach?
o What performance appraisal and employee development methods will you use?
o What is your organizational structure and why is this the best way for your company to be organized?
o How will you pay each employee (wage, salary, commission, etc.)? How much will you pay each employee?
o What are your payroll costs, including benefits?
o What work will be outsourced and what work will be completed in-house?
o Have you shown and described an organizational chart?
Leadership and Management Strategies
• What is your leadership philosophy?
• Why is it the most appropriate leadership approach for this venture?
Training
• What training is required because of existing rules and regulations?
• How will you ensure your employees are as capable as required?
• In which of the following areas will you provide training for your employees?
o Health and safety (legislation, WHMIS, first aid, defibulators, etc.)
o Initial workplace orientation
o Management
o Financial systems
o Sales
o Contracts
o Product features
o Other
Performance Appraisals
• How will you manage your performance appraisal systems?
Health and Safety
• Any legal requirements should be noted in this section (and also legal requirements for other issues that may be included in other parts of the plan)
Compensation
• Always completely justifies your planned employee compensation methods and amounts
• Always includes all components of the compensation (CPP, EI, holiday pay, etc.)
• Outlines how will you ensure both internal and external equity in your pay systems
• Describes any incentive-based pay or profit sharing systems planned
• May include a schedule here that shows the financial implications of your compensation strategy and supports the cash flow and income statements shown later
Key Personnel
• May include brief biographies of the key organizational people
Market Analysis
• Usually contains customer profiles, constructed through primary and secondary research, for each market targeted
• Contains detailed information on the major product benefits you will deliver to the markets targeted
• Describes the methodology used and the relevant results from the primary market research done
• If there was little primary research completed, justifies why it is acceptable to have done little of this kind of research and/or indicate what will be done and by when
• Includes a complete description of the secondary research conducted and the conclusions reached
• Describes potential customers
o Define your target market in terms of identifiable entities sharing common characteristics. For example, it is not meaningful to indicate you are targeting Canadian universities. It is, however, useful to define your target market as Canadian university students between the ages of 18 and 25, or as information technology managers at Canadian universities, or as student leaders at Canadian universities. Your targeted customer should generally be able to make or significantly influence the buying decision.
o You must usually define your target market prior to describing your marketing mix, including your proposed product line. Sometimes the product descriptions in business plans seem to be at odds with the described target market characteristics. Ensure your defined target market aligns completely with your marketing mix (including product/service description, distribution channels, promotional methods, and pricing). For example, if the target market is defined as Canadian university students between the ages of 18 and 25, the product component of the marketing mix should clearly be something that appeals to this target market.
o Carefully choose how you will target potential customers. Should you target them based on their demographic characteristics, psychographic characteristics, or geographic location?
• Identifies how your targeted customers make their buying decisions
o You will need to access research to answer this question. Based on what you discover, you will need to figure out the optimum mix of pricing, distribution, promotions, and product decisions to best appeal to how your targeted customers make their buying decisions.
Competition
• Fully describes the nature of your competitors
o However, this information might fit instead under the market analysis section.
• Describes all your direct competitors
• Describes all your indirect competitors
• If you can, includes a competitor positioning map to show where your product will be positioned relative to competitors' products
• Identifies your competitive advantage
o What distinguishes your business from that of your competitors in a way that will ensure your sales forecasts will be met?
o What is your venture's value proposition?
- You must clearly communicate the answers to these questions in your business plan to attract the needed support for your business. One caution is that it may sound appealing to claim you will provide a superior service to the existing competitors, but the only meaningful judge of your success in this regard will be customers. Although it is possible some of your competitors might be complacent in their current way of doing things, it is very unlikely that all your competitors provide an inferior service to that which you will be able to provide.
Marketing Strategy
• Covers all aspects of the marketing mix including the promotional decisions you have made, product decisions, distribution decisions related to how you will deliver your product to the markets targeted, and pricing decisions
• Outlines how you plan to influence your targeted customers to buy from you (what is the optimum marketing mix, and why is this one better than the alternatives)
Format your assignment according to the following formatting requirements:
1. The answer should be typed, double spaced, using Times New Roman font (size 12), with one-inch margins on all sides.
2. The response also includes a cover page containing the title of the assignment, the student's name, the course title, and the date. The cover page is not included in the required page length.
3. Also include a reference page. The Citations and references should follow APA format. The reference page is not included in the required page length.
Attachment:- Chapter-5.rar