The Elements of a Business Plan
Content
The Elements of a Business Plan Overall Presentation: Black print on plain white paper is adequate and preferred, unless you are selling your presentation skills. Colour example sites and diagrams are acceptable. Use a good quality printer and print on only one side of the paper. Cover: Businesslike and professional. Remember it is the content that counts. It is acceptable to include professional artwork or a logo on the cover. A good quality binding helps to lend a professional air to the plan. Page I: Business name and contact details of the major players in your plan. Page II: Your µSam Goldwyn¶ summary, followed by a few brief paragraphs that explain what the business is about in more detail. You should cover all the main points of the plan, as a quick guide for people who just don¶t have the time to go through the whole thing. Page III: Section titles and page numbers. Use an easy to follow layout and plenty of white space. Section 1: Directors backgrounds and areas of expertise. Include yourself here. Give a page for each director, and make sure you are going to be working with good people. Try to pick people with good experience in the real world. A small warning here ± research at Manchester University over a lengthy period shows that the ability to perform well at interview may be a negative predictor of success in the workplace. On the other hand, those who did best in practical tests of ability, had greater success than expected, even if they performed badly at interview. So if you are looking for a sales director, make sure that he or she can sell. If you need an accountant, make sure he or she can add up. Section 2: Benefits of the Business. This is where to put your arguments about the need for the business, and the service you will be providing. Don¶t forget that every business, besides being a sales business (even if it is your own skill you are selling) is also a service industry. List the benefits that your customers will achieve by using the service you intend to provide. Section 3: Research & Competition. Detail the research you have done which shows that the demand for your goods or services is real, and establish clearly that you know everything there is to know about the competition and what advantages your business will have over the others. - How many new competitors started up last year, and how many are still in business? - How well are the survivors doing? - How does their business model compare to yours? - What are your unique selling points? Can you do it better, cheaper, faster or bigger than the competition? If there is no competition, clarify why not, and show that you can establish a market for your goods or services. Remember that it is always more difficult to break new ground than to dig over cultivated earth. It is also im portant to ensure that what you will be offering for a fee cannot be obtained free of charge. Your research should have covered that. It is also worth looking at how you can work with competitors to your mutual advantage. What can you offer them, and what can they offer you? At Response Control PR, we often work with competitors, collaborate at trade shows and marketing fairs and swap ideas. We are always open to learn from what others are doing, and if you can show that you have that open attitude, you can establish another point in your favour. Section 4: Clarify your objectives. What do you hope to achieve in one, two and three years time, and how do these objectives fit with your business model? Allow yourself room to manoeuvre. It is particularly important not to be overoptimistic about when you expect to go into profit, because that puts you on the road to disappointing your backers. Better to plan for slow steady growth, and exceed that, than to aim for instant success and never achieve what you led everyone else to believe. In e-business, as in any other type of business, a good customer database can take many months to build up. Thus, it is important that you can predict long -term success, but it is equally important to be realistic about when that will happen. It may also be important to point out, if this is not your first Internet based venture that you have learned from your mistakes. As John Powell said, ³The only real mistake is the one from which we learn nothing. Section 5: The Marketing Plan. Here you need to explain exactly how you will achieve profitability in the long term through marketing your business. You should cover all of the following points in the marketing plan.
- What objectives must you achieve to become profitable, and how will you go about making them happen? - How did you obtain your profitability model, and why is it credible? - What expert help can you call on to help you achieve your objectives? - Will you need ongoing financial boosts? - How much of your plan is fixed, whatever happens, and how much depends on the success or failure of your plans? Also, how will you modify your plans to take changing circumstances and customer reaction into account? - What can you offer investors in exchange for funding? This usually involves issuing equity shares, but you have to work out a value for your company to know how many shares is equal to 1% of your company, or what percentage of your company you will give away for a certain investment. - What is the minimum investment you will accept? Yes, you are keen for money, but you need to be thinking of a few major investors who will get seats on the board rather than hundreds of small investors. That gives you less people to keep happy, less to deal with, and more control over what happens to your company. It is also worth pointing out in the plan that you will accept only supportive investment. Don¶t make the shares too easily redeemable, or you may attract quick profit takers. Make sure your investors are serious about wanting your compan y to succeed. As before, this will also help to reassure investors that you won¶t suddenly be in a crisis because of withdrawal of funding. - How many products/services will you sell, and how will you decide what to concentrate on? - Where will you keep stock? Can you put in place a Just in Time (JIT) stock model? - How have you decided on a pricing model for the product/service you will be selling? - How will you get customers to pay, and what will you do about those who don¶t pay? - What are your Unique Selling Points? - What is your projected cost of acquiring each customer, and what do you calculate will be the lifetime value of each customer? - How do you plan to collect customer statistics from your website, and use those stat istics to help build your business? You should already know your customers from your research, but you need to show how you will get to know your target customers well enough to create user profiles. - How many customers are you aiming to get in the first year? How many potential customers are in the market for the product or services you will provide, and how frequently do you think they will buy from you? Justify your answers. - Where are your customers located? - How will you turn new customers into rep eat customers? - How will you publicise your business? What forms of advertising will you use, and how much will that cost? - What are your long-term aims for the business? Diversification? International expansion? Stock market listing? Be sure to actually have long-term aims. Section 6: The Website. Here is where you present your online requirements and identify key design and technical features matched to your present and future needs. You will need to translate your business requirements into technical implementation and cover both the business-oriented requirements of your site and the customer oriented requirements. True scalability is obviously a prerequisite, because the requirements of online businesses always grow with time. If your solution is not scalable, you may have to start from scratch when you want to upgrade. Try to ensure that the solution you decide on is kept as simple as possible. Flash intro's look great, but lose customers became of the time they take to download. Remember, you are i n charge. Your website is probably not the place for the graphic designer to create a showcase of his/her multimedia skills.
There are also a number of other questions you need to answer about your solution:
y y y y y y y y y y y y y y y y y y
What will be your business domain name? What are you going to sell? (You need to reiterate here). What information will you provide for each product? Will you show pictures? If so, how will you obtain them? Are you going to need a transactional or a display site? Will you have multiple departments or just one? Will it be a vortal, a portal, a shopping mall, or a single shop? Is web-space an issue? Will you be taking credit-card details? If so, who will be your Payment Service Provider, and what will be your security arrangements? Will you be letting out web space on your site to others as a way of increasing revenue streams, or not? Are you aiming for a worldwide market, or a local market? How will you achieve search-engine registration and maintenance? What will the site look like? (A storyboard should be included, showing the initial layout and elements of your site.) Who is going to run, update and maintain the site? How will you keep customer information safe? If you are not using an Applications Service Provider, what will you do about data backups; how will you provide telephone support for visitors to your website, and how will you deal with problems? How will you keep track of stock and orders, arrange delivery and deal with complaints, returns, refunds, out of stock items, and order tracking? What shipping options will you offer? Will you have a special offers area? How can you generate additional revenue through your website? Advertising? Subscriptions? Affiliations?
Affiliation: If you are going for affiliation, there are obviously things that need to be decided: Are you going to put your entire database into the affiliation system, or just part of it? Do you want to bring people into your website thro ugh highly profitable items, or through loss-leaders? You will also need to decide on commission levels for your affiliates, and there are various ways for this to work. You can pay for clicks through to your website, or you can pay for actual sales gener ated through your affiliates websites. Usually, it's better to pay for the sales - it's less prone to abuse, and you can more easily factor the costs into your budget. You can pay a straight percentage on all sales, or you can vary the percentage according to the sales made - for example, you could reward affiliates for achieving a certain level of sales by increasing the commission for affiliates who earn over, say £1000 per month. Don't forget the affiliation company's override, which usually works out to between 25% and 50% of affiliate's earnings. That can add up to a substantial amount every month. However, you get what you pay for. The better systems can put you on more websites, and they are more popular with affiliates. It's a matter of factoring everything into account when you are working out how much commission you are going to pay affiliates. Don't forget that even if it means you make no profit on a particular sale, you've gained a customer who has a credit card, likes buying on line, trusts you, and will be open to more offers from you. Affiliation fees can therefore be seen as a part of the cost of customer acquisition, and they are usually a worthwhile part if you are selling in competition with others. As your company becomes bigger, and better known, you will be able to increase your profit margins by reducing your affiliates percentage of the sale, by sourcing your products cheaper, and by making a higher percentage of your sales through other routes. Section 7: Funding requirements. How much do you need? How much do you already have and what funding avenues have you already explored? What interest have you raised so far? What options depend on the funding you can raise, and why can¶t you do this with your own money? You will need to show commitment here. Andy Kitchener, CEO of Shopcreator, started the business in 1998 by remortgaging his house. He believed in what he was doing. Do you have the same level of belief in what you are doing? How will you keep your costs under control? Get do wn to the practical details here and cover everything from the premises you hope to acquire, to the people who will be answering the telephones. It is difficult to get this right, because there are always unforeseen costs, but you should allow a generous sum for contingency. Aim, if you can, after all costs are taken into account, to have a full year¶s cash reserves on hand. A major reason for business failure is low cash reserves. If you are waiting to be paid from a company, and they take twice as long as they should (it will happen), you still want to be able to pay the wages.
You should also list your wages here, and those of your other directors. What, if anything, will you pay executive and non-executive directors, and what other incentive can you give them to want to be a part of what you are doing. Section 8: Summary. This section should be no more than one page that reiterates the most important aspects of your business plan.
y y y y y y
Who your customers are and how you have identified them. Why there is a need for your product, and why customers will buy from you. Repeat your Unique Selling Points. When you will have the business up and running, and when you expect to go into profit. What will be your business domain name, and how will you set up the website? Through an Applications Service Provider, or on a DIY basis? How you will achieve a turnover? How you will build the business to achieve long-term profitability? How investors will ultimately profit? Include a contact number at the en d of your business plan in case anyone loses the contact details page. Think everything through and get to know your plan well ± you are certain to get some very detailed and penetrating questions.
Remember, we provide the most effective PR in the busine ss. Include a budget for Response Control PR in your business plan, and we will help with every aspect of your business!
- What objectives must you achieve to become profitable, and how will you go about making them happen? - How did you obtain your profitability model, and why is it credible? - What expert help can you call on to help you achieve your objectives? - Will you need ongoing financial boosts? - How much of your plan is fixed, whatever happens, and how much depends on the success or failure of your plans? Also, how will you modify your plans to take changing circumstances and customer reaction into account? - What can you offer investors in exchange for funding? This usually involves issuing equity shares, but you have to work out a value for your company to know how many shares is equal to 1% of your company, or what percentage of your company you will give away for a certain investment. - What is the minimum investment you will accept? Yes, you are keen for money, but you need to be thinking of a few major investors who will get seats on the board rather than hundreds of small investors. That gives you less people to keep happy, less to deal with, and more control over what happens to your company. It is also worth pointing out in the plan that you will accept only supportive investment. Don¶t make the shares too easily redeemable, or you may attract quick profit takers. Make sure your investors are serious about wanting your compan y to succeed. As before, this will also help to reassure investors that you won¶t suddenly be in a crisis because of withdrawal of funding. - How many products/services will you sell, and how will you decide what to concentrate on? - Where will you keep stock? Can you put in place a Just in Time (JIT) stock model? - How have you decided on a pricing model for the product/service you will be selling? - How will you get customers to pay, and what will you do about those who don¶t pay? - What are your Unique Selling Points? - What is your projected cost of acquiring each customer, and what do you calculate will be the lifetime value of each customer? - How do you plan to collect customer statistics from your website, and use those stat istics to help build your business? You should already know your customers from your research, but you need to show how you will get to know your target customers well enough to create user profiles. - How many customers are you aiming to get in the first year? How many potential customers are in the market for the product or services you will provide, and how frequently do you think they will buy from you? Justify your answers. - Where are your customers located? - How will you turn new customers into rep eat customers? - How will you publicise your business? What forms of advertising will you use, and how much will that cost? - What are your long-term aims for the business? Diversification? International expansion? Stock market listing? Be sure to actually have long-term aims. Section 6: The Website. Here is where you present your online requirements and identify key design and technical features matched to your present and future needs. You will need to translate your business requirements into technical implementation and cover both the business-oriented requirements of your site and the customer oriented requirements. True scalability is obviously a prerequisite, because the requirements of online businesses always grow with time. If your solution is not scalable, you may have to start from scratch when you want to upgrade. Try to ensure that the solution you decide on is kept as simple as possible. Flash intro's look great, but lose customers became of the time they take to download. Remember, you are i n charge. Your website is probably not the place for the graphic designer to create a showcase of his/her multimedia skills.
There are also a number of other questions you need to answer about your solution:
y y y y y y y y y y y y y y y y y y
What will be your business domain name? What are you going to sell? (You need to reiterate here). What information will you provide for each product? Will you show pictures? If so, how will you obtain them? Are you going to need a transactional or a display site? Will you have multiple departments or just one? Will it be a vortal, a portal, a shopping mall, or a single shop? Is web-space an issue? Will you be taking credit-card details? If so, who will be your Payment Service Provider, and what will be your security arrangements? Will you be letting out web space on your site to others as a way of increasing revenue streams, or not? Are you aiming for a worldwide market, or a local market? How will you achieve search-engine registration and maintenance? What will the site look like? (A storyboard should be included, showing the initial layout and elements of your site.) Who is going to run, update and maintain the site? How will you keep customer information safe? If you are not using an Applications Service Provider, what will you do about data backups; how will you provide telephone support for visitors to your website, and how will you deal with problems? How will you keep track of stock and orders, arrange delivery and deal with complaints, returns, refunds, out of stock items, and order tracking? What shipping options will you offer? Will you have a special offers area? How can you generate additional revenue through your website? Advertising? Subscriptions? Affiliations?
Affiliation: If you are going for affiliation, there are obviously things that need to be decided: Are you going to put your entire database into the affiliation system, or just part of it? Do you want to bring people into your website thro ugh highly profitable items, or through loss-leaders? You will also need to decide on commission levels for your affiliates, and there are various ways for this to work. You can pay for clicks through to your website, or you can pay for actual sales gener ated through your affiliates websites. Usually, it's better to pay for the sales - it's less prone to abuse, and you can more easily factor the costs into your budget. You can pay a straight percentage on all sales, or you can vary the percentage according to the sales made - for example, you could reward affiliates for achieving a certain level of sales by increasing the commission for affiliates who earn over, say £1000 per month. Don't forget the affiliation company's override, which usually works out to between 25% and 50% of affiliate's earnings. That can add up to a substantial amount every month. However, you get what you pay for. The better systems can put you on more websites, and they are more popular with affiliates. It's a matter of factoring everything into account when you are working out how much commission you are going to pay affiliates. Don't forget that even if it means you make no profit on a particular sale, you've gained a customer who has a credit card, likes buying on line, trusts you, and will be open to more offers from you. Affiliation fees can therefore be seen as a part of the cost of customer acquisition, and they are usually a worthwhile part if you are selling in competition with others. As your company becomes bigger, and better known, you will be able to increase your profit margins by reducing your affiliates percentage of the sale, by sourcing your products cheaper, and by making a higher percentage of your sales through other routes. Section 7: Funding requirements. How much do you need? How much do you already have and what funding avenues have you already explored? What interest have you raised so far? What options depend on the funding you can raise, and why can¶t you do this with your own money? You will need to show commitment here. Andy Kitchener, CEO of Shopcreator, started the business in 1998 by remortgaging his house. He believed in what he was doing. Do you have the same level of belief in what you are doing? How will you keep your costs under control? Get do wn to the practical details here and cover everything from the premises you hope to acquire, to the people who will be answering the telephones. It is difficult to get this right, because there are always unforeseen costs, but you should allow a generous sum for contingency. Aim, if you can, after all costs are taken into account, to have a full year¶s cash reserves on hand. A major reason for business failure is low cash reserves. If you are waiting to be paid from a company, and they take twice as long as they should (it will happen), you still want to be able to pay the wages.
You should also list your wages here, and those of your other directors. What, if anything, will you pay executive and non-executive directors, and what other incentive can you give them to want to be a part of what you are doing. Section 8: Summary. This section should be no more than one page that reiterates the most important aspects of your business plan.
y y y y y y
Who your customers are and how you have identified them. Why there is a need for your product, and why customers will buy from you. Repeat your Unique Selling Points. When you will have the business up and running, and when you expect to go into profit. What will be your business domain name, and how will you set up the website? Through an Applications Service Provider, or on a DIY basis? How you will achieve a turnover? How you will build the business to achieve long-term profitability? How investors will ultimately profit? Include a contact number at the en d of your business plan in case anyone loses the contact details page. Think everything through and get to know your plan well ± you are certain to get some very detailed and penetrating questions.
Remember, we provide the most effective PR in the busine ss. Include a budget for Response Control PR in your business plan, and we will help with every aspect of your business!
