Business Planning Process

For an effective business plan, the following steps can be followed:

• Idea Generation
• Environment Scanning
• Feasibility Analysis
• Drawing up a Functional Plan
• Project Report Preparation
• Evaluation, Control & Review

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 (Flyvbjerg et al. 2002, 2005). Reference class forecasting was developed to curb optimism bias and strategic misrepresentation and thus arrive at more accurate cost and revenue estimates in business plans.

Eight Steps to a Winning Business Plan

By Tim Berry

Executive Summary

The Executive Summary is the most important of your chapter summaries. It is the doorway to the rest of the plan. Get it right or your target readers will go no further. The best length is a single page. Emphasize the main points of your plan and keep it brief. Don't leave the reader to wonder what problem you are solving, or why this is a good business. A reader should understand your whole business idea, from business model to marketing strategy to operations from reading this summary.

Company Summary

Include the essential details, such as the name of the company, its legal establishment, how long it's been in existence, and what it sells to what markets. Make sure you include details about your company and facilities that are relevant to your industry. For instance, if you are describing a manufacturing business for bankers or investors, or anybody else trying to value your business, make sure you provide a complete list and all necessary detail about capital equipment, land, and building facilities. This kind of information can make a major difference to the value of your business.

Products

A complete business plan describes what you sell: either products, services, or both. List and describe the products or services you sell. For each business offering, cover the main points, including what the product or service is, how much it costs, what sorts of customers make purchases, and why. What customer need does each product or service line fill? You might not want or need to include every product or service in the list, but at least consider the main sales lines.

It is always a good idea to think in terms of customer needs and customer benefits as you define your product offerings, rather than thinking of your side of the equation -- how much the product or service costs, and how you deliver it to the customer.

As you list and describe your sales lines, you may run into one of the serendipitous benefits of good business planning, which is generating new ideas. Describe your product offerings in terms of customer types and customer needs, and you'll often discover new needs and new kinds of customers to cover. This is the way ideas are generated.

Market Analysis Summary

A standard business plan should explain the general state of the industry and the nature of the business. Whether you're a service business, manufacturer, retailer, or some other type of business, you should do an industry analysis describing:

It's important that you do as much research as possible for this section. You want to make sure that when the time comes to present your plan and idea to an investors you don't get caught off guard with a question they ask about your "space". An extremely common mistake is to assume because no one has the exact same product or service, there is no competition. If there is a need for your product or service there is competition. Think about when FORD launched the first car. They could have said there was no competition but in fact the horse and buggy was its main competition.

Strategy and Implementation

Strategy is focus. Across the entire business, over the whole range of possibilities involving different products and services, different target customers, different kinds of financing, different levels of growth, what are your choices? What are your priorities?

The illustration below shows a view of what it takes to develop and implement a business plan. I call this planning for implementation. There are some important factors beyond the plan that are also critical:

1. Is the plan simple? Is it easy to understand and to act on? Does it communicate its contents easily and practically?

2. Is the plan specific? Are its objectives concrete and measurable? Does it include specific actions and activities, each with specific dates of completion, specific persons responsible and specific budgets?

3. Is the plan realistic? Are the sales goals, expense budgets, and milestone dates realistic? Nothing stifles implementation like unrealistic goals.

4. Is the plan complete? Does it include all the necessary elements? Requirements of a business plan vary, depending on the context. There is no guarantee, however, that the plan will work if it doesn't cover the main bases.