Business Planning

A well thought out Business Plan is essential before embarking on the risky path to business success. A business plan provides:

A focused strategy

Information to investors and lenders

Milestones to measure success

If you cannot explain how the business will succeed on paper, most likely it will not succeed in implementation.  By carefully considering all aspects of the business needed to complete the business plan, many of the pitfalls a young company may experience can be avoided.  Once the plan has been developed, it will provide a strategic blueprint to guide the development of the business.

If a business requires outside funding; either through investments or loans, the investors and lenders will require a business plan to determine how their funds will be used and if in fact the plan is sound.  If the business is a start-up; with no assets or track record, a business plan and the strength of the management team may be all the investors have to go on.  The plan is therefore a marketing document; it will be used to market the business to investors.

A vital part of any plan is to lay out the means by which progress can be measured.  The ultimate goal of any business is to make a profit and grow, however, if the time to profitability is long, other indicators of progress must be used so that managers and investors can gauge whether the business is performing according to plan. 

All business plans are flawed.  Until someone comes up with a way to accurately predict the future business plans will contain information that will turn out to be inaccurate.  Providing the most reasonable estimates of the future, and allowing for contingencies if these estimates are incorrect, will protect the business from future events and allow it to proceed without significant interruption.  Too much contingency allowance results in an expensive plan, too little results in unnecessary risk.  It is the skill of the business planner that determines what is appropriate.  No business plan is perfect, it is up to the entrepreneur to know what assumptions were made and be prepared to defend them in front of investors.

bizplan

A basic flow diagram for the business plan is presented in the figure above.  Click on the Business Plan, Product or Service or Marketing Plan boxes to get more detailed information on those subjects. The blue boxes are actual documents and the green boxes represent processes.  The business plan is shown to consist of four primary components: the Product or Service to be sold, the Marketing Plan, the Financial Plan and the Management Team.  With these four components in place the business plan will lay the ground work for a Focused Strategy, provide a compelling value proposition to potential Investors and set up Metrics by with the progress of the business can be measured.  In the end, a well-written business plan will lead to improved Business Performance.

Many scientists/entrepreneurs feel constrained by the concept of planning their activities out two to five years.  What is the use of long range planning when business conditions change, which they inevitably will?  Why lay long range plans when a better product may be discovered?  Won’t long range planning discourage creative product development?  Ideally, an entrepreneurial effort will generate new product ideas, products that can be brought to market and that will add to the company’s bottom line.  However, with long development times and limited resources available to an early stage company, establishing a plan of action, and implementing on this plan, is often the shortest path to profitability.  A business plan is a living document, one that must be updated and improved as new ideas and better information become available. 

The following links will direct you do a business plan outline and an example business plan:

Business Plan Outline

Example Business Plan