Writing+successful+business+plan.


 * Module 11**


 * Writing successful business plan**

A business plan is a formal written document about the expected development path and goals of the new business. The purpose of the business plan is to convince the investors to put money in the start up company. According to Professor Sahlman from Harvard business school a successful business plan should be a complex framework, based on the following pillars:


 * The people - founders, management team, people involved in the proposed business
 * The opportunity - conditions which determine the chances for success and return on investment
 * The external context - economical macro-environment from which the opportunity arises
 * The deal - the legal, contractual relationship between the start up, its supply chain (providers of the complementary resources) and venture capital.

For most of the investors //**the people**// are the most important factor when it comes to decide whether to go with investment or not. They would like to know who are going to run the business. Who are the key people, founders, management team? What is their background, previous accomplishments? To what degree their knowledge, skills and experience match the raising opportunity? An old adage in venture capital circles says "I'd rather back an 'A' team with 'B' idea than 'B' team with 'A' idea".* //**The opportunity**// is the other factor crucial for the investors. The question is what is the nature of the opportunity and considering given management team, how capable they are in using the opportunity and converting it to money. In that context the most important point is what is the market for the new product/service and how likely it will evolve. By market is understood the mutual relation between the offering, the customers and the competition.Of course, everybody wishes to have blue ocean (an unexplored area of opportunities), but it is not always possible. Thus, the realistic market forecast is essential for the outcome of the investment decision. //**The macro-environment**// is important because the opportunity exists in the macro-environment and the macro-environment is the one that shapes the opportunity. There are periods of economics booms when markets are more favorable for investment and chances for harvest are higher. The opposite periods of economic recession offer fewer opportunities for starting new business, the investors find the eventual investment more risky and consequentially are less willing to put the money in. //**The deal**// is all about the share of the expected profit that each participant (entrepreneur, investor, suppliers) is going to appropriate. Usually it is very sensitive issue and good deal should reflect rather trust than formal legalese.


 * The structure of the business plan**

The business plan is a formal document that follows generic and widely accepted structure:
 * 1) Executive summary
 * 2) Company/business description
 * 3) Product and/or services
 * 4) Market analysis - macro and micro environmental analysis
 * 5) Marketing plan
 * 6) Operational plan
 * 7) Financial plan
 * 8) Management and organization
 * 9) Attachments

Executive summary The executive summary summarizes the main points of the business plan and it is usually written at the end. It should not be longer than two pages.

Company/business description It is something like company's ID card. What is the vision and mission statement of the company? What is business philosophy of the owners. What is the core competences? To which industry it belongs.

Product and/or services This section covers detail description of the new product and/or service. Is it intended to the other business (B2B), or to the end users (B2C). What is the competitive advantage of the new offering? How it can add value to the customers? What will be the level of the quality.

Market analysis - macro and micro environmental analysis Extensive analysis about the environment in which new company is going to operate. Macro-environmental analysis are focused on the **P**olitical, **E**conomical, **S**ocial, **T**echnical, **E**nvironmental and **L**egal conditions of the targeted market. They are also known as PESTEL analysis. Micro-environmental analysis or industry analysis examine market forces that shape the market and directly affect perspectives of the new company. They are: Threat of the new competition; Threat of substitute product or services; Bargaining power of customers; Bargaining power of suppliers; Intensity of competitive rivalry. They are also known as Porter five forces, named after Harvard professor Michel E. Porter who first introduced this sort of analysis.

Marketing plan Marketing plan also follows some standard format. It emphasizes the way in which new product is going to reach the customers. The method is called marketing mix and consists of eight elements (8P) related to customer's experience: Product, Price, People, Physical evidence, Processes, Productivity, Place, and Promotion. However it is not very common practice to use all eight elements. More convenient way is to select four elements most relevant to particular product and/or service. It is usually reduced to Product, Price, Place and Promotion. Promotion means all methods of communication that marketeer may use in advertising the product to the targeted audience. Place is synonym for distribution and refers to the various (or one) distribution channel(s) chosen for the proposed business model.

Operational plan Operational plan outlines daily operations, equipment, processes, supply chain requirements, quality control, customer service, inventory control, product development, location, amount of space needed for premisses.

Financial plan Financial plan is bloodstream of the business plan. It contains detail analysis of the expected costs and revenues and trace the growth potential of the company. The formal parts of the financial plan are: Start up (initial) expenses, opening balance sheet, income statement, cash flow statement, break-even analysis and profit loss projection for few years (depends of the project).

Management and Organization It is all about the people, who is who and will do what in the new organization. While financial plan is bloodstream, management and organization is hart of the business plan and for the majority of the investors most important part of the business plan.

Appendeces Everything that can support the business plan like advertising materials, market research studies, photos of the locations and planned equipment, articles from the magazines related to the business and/or product, letters of support from the future customers...

There are lot of online resources and free samples describing how to write successful business plan. http://www.myownbusiness.org/s2/ http://web.sba.gov/busplantemplate/BizPlanStart.cfm http://www.score.org/system/files/u209922/Business%20Plan%20for%20a%20Startup%20Business%202011.pdf


 * My point here is whether a 'B' team could have a 'A' idea. Great ideas come to great people. That is what make them great and distinguish them from the other people... (It is point for discussion)