business planning...


A Business Plan is a formal statement of a largely enforced business goal, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals.

The business goals being attempted may be for-profit or non-profit. For-profit business plans typically focus on financial goals. Non-profit and government agency business plans tend to focus on service goals.

Business plans may also target changes in perception and branding by the customer, client, tax-payer, or larger community. A business plan that has changes in perception and branding as its primary goals is called a marketing plan.

Business plans may also be internally or externally focused. Externally focused plans target goals that are important to external stakeholders, particularly financial stakeholders. They typically have detailed information about the organization or team attempting to reach certain unrandom goals. In the case of for-profit entities, external stakeholders would include investors and customers.

External stake-holders of non-profits include donors and the clients of the non-profit's services.

In the case of government agencies, external stakeholders would include tax-payers, higher-level government agencies, and international lending bodies such as the IMF, the World Bank, various economic agencies of the UN, and development banks.

Internally focused business plans target intermediate goals required to reach the external goals. They may cover the development of a new product, a new service, a new IT system, a restructuring of finance, the refurbishing of a factory or a restructuring of the organization.

An internal business plan will often be developed in conjunction with a balanced scorecard or a list of critical success factors. This allows success of the plan to be measured using non-financial measures. Business plans that identify and target internal goals, but provide only general guidance on how they will be met are called strategic plans.

Business Plan Contents:

Though business plans have many different presentation formats, business plans typically cover five major content areas:

  • background information
  • a marketing plan
  • an operational plan
  • a financial plan
  • a discussion of the decision making criteria that should be used to approve the plan.

Some of these content areas may be more or less important depending on the kind of business plan. There is no fixed content for a business plan. Rather the content and format of the business plan is determined by the goals and audience. A business plan should contain whatever information is needed to decide whether or not to pursue a goal.

Once a business plan has been developed, the key decision making points are usually summarized in an executive summary.

Executive Summary

The executive summary summarizes the key points of the business plan. It should define the decision to be made and the reasons for approval. The specific content will be highly dependent on the core purpose and target audience. To get a sense of the difference the purpose and target audience can make, here are three different sets of key points for an executive summary - one for a loan request, one for a start-up seeking venture finance, and one for an internal plan. Items unique to a particular kind of plan are highlighted in bold:

A loan request executive summary might contain the following information:

  • company information: name of company, years in business, legal structure, minority and majority owners
  • brief description of project
  • amount and length of loan
  • objective reasons why the bank should be confident that the loan will be paid back. This likely will include
    • financial track record
    • the future revenue stream
    • any contracts in place that might guarentee the revenue stream is more than just a forecast.

For a new venture, the executive summary might contain:

  • company information: name of company, proposed legal structure, current legal structure, minority and majority investors.
  • amount of investment requested
  • expected terminal value
  • description of market opportunity
  • objective reasons why the market opportunity can be exploited by this particular team

For an internal project plan, the executive summary might look like this:

  • company information: not applicable
  • description of project
  • project mandate: who requested the proposal, who is being assigned to carry it out
  • strategic, tactical and financial justifications
  • summary of resources needed: staff, funds, facilities

In some cases information will overlap. For example, some of the reasons why a loan is likely to be repaid might equally as well be used as justification for the kind of extraordinary return expected by venture capitalists.

In some cases the business plan as a whole contains similar information, but for one type of plan it is mere detail and for another it is a key decision making factor. For instance, both start-ups and internal projects need staff and facilities. However the staffing and facilities needs are considered details in a plan for start-up financing. In a plan for internal projects they are key elements and, in fact, may be the only resources needed.

Organizational Background

In a written plan information may appear in a separate section, an appendix, or may be omitted all together depending on the nature of the plan. If the plan is directed at people outside of the company, a brief synopsis may appear in the executive summary. This will be supplemented with a more detailed discussion else where in the plan.

Mission Statement

Current Status

  • number of employees
  • annual sales figures
  • key product lines
  • location of facilities
  • current stage of development (start-ups)
  • corporate structure (options are:
    • Sole proprietor
    • Partnership
    • Joint Venture
    • Publicly traded corporation
    • Limited liability company
    • Public utility
    • Non-profit organization

  • names of the majority investor, if any


  • founding date
  • major successes
  • strategically valuable learning experiences

Management Team

  • Board members
  • Owners
  • Senior managers
  • Managing partners
  • Head scientists and researchers

Marketing Plan

The marketing plan has five objectives:

  • to identify revenue generating opportunities
  • to provide a rationale for revenue forecasts.
  • to define marketing goals.
  • to define a set of concrete steps for reaching those goals.
  • to describe current progress towards those goals, if any.

The rationale behind revenue projections is developed by describing the market associated with each product covered by the business plan. In addition the business's current and likely future competitive position must be discussed.

Specific marketing goals and the steps involved in achieving them are covered by describing plans for pricing, promotion, demand management, distribution, and brand development.

Product Portfolio

  • Core product lines relevant to venture or project
  • For each relevant product line,
    • Life cycle management plan
    • Versioning possibilities
    • Revenue potential

Market Size and Structure

  • allied markets (substitute products)
  • major players: customers, vendors, regulatory agencies, etc
  • balance of power among vendors, customers, regulatory agencies, other

Competitive analysis: Existing Markets

If the product has an existing market, a table or set of paragraphs explaining the following may be needed:

  • name, features, why proposed product is better
  • switching costs
  • customer loyalty to/brand premium of competitors
  • why the product will overcome switching costs and customer loyalty
  • the competitive strategy:
    • staying power (common for second mover large corporations)
    • expertise in mass distribution (another large second mover advantage)
    • niche for which competitor has no suitable strengths
    • monopoly rights to improved product, i.e. patents, exclusive contracts
    • richness of alliances
    • novel and hard to copy business process/culture

  • time line for growth in market share

Competitive analysis: New Markets

If the product is a new product with no existing market, one must identify all substitute products. For each significant substitute product one must explain:

  • name, features, why substitute, why proposed product better
  • switching costs and why new product justifies switching
  • expected adoption dynamics
  • expected role once market begins to develop (see above for existing products)


  • chosen price points
  • proposed Pricing strategy
  • research supporting chosen price points

Demand Management


  • Distribution strategy
  • List of major distributors
  • Current status of negotiations

Promotion and Brand Development

  • Promotion strategy

Operational Plan

Current Product/project status

Research and development plan

Manufacturing/Deployment plan

  • Supply chain requirements
  • Production inputs
  • Facility requirements - size, layout, capacity, location
  • Equipment requirements
  • Warehousing needs for raw materials, finished goods
    • space requirements

Information and Communications Technology Plan

  • Systems needed
    • Operations: Billing, HR, SCM, CRM, Knowledge bases, etc
    • Websites: internal, public

  • Security and privacy requirements
  • Hardware requirements
  • Off-the-shelf software needed
  • Custom development requirements

Staffing Plan

Staffing Needs

  • list of roles
  • management structure
  • for each role
    • number of employees
    • proposed compensation
    • availability

Union issues

Training Requirements

Hiring Time Table

Staffing Budget

Business Process Outsourcing Plan

Asset Development Plan

Intellectual Property Plan

  • intellectual property inventory
  • portfolio development plan

Acquisition Plan

Some business plans gain competitive advantage by buying companies up and down the value chain. Some gain competitive advantage by buying up companies and consolidating them. Sometimes a business plan will seek to earn a superior return by adding superior management talent to an existing weak company.

When acquisitions form a major part of the business strategy, the acquisition plan needs to be included in the business plan.

  • acquisition strategy
  • proposed acquisition targets
  • effect on market structure (if consolidation plan is being proposed)

Organizational Learning Plan

The organizational learning plan discusses what lessons will be learned from the marketing, operational, and finance plans and how those lessons will be consolidated to gain strategic advantage.

  • market sensing - organization's method for collecting information about customers (George Day)
  • Strategic Staircase - the accumulation of future competencies by building on existing competencies. (Michael Hays, Costas Markides)

Cost Allocation Model

If variable costs play an important role in the business plan, it may be helpful to include a cost allocation model. This is particularly true if one has a unique business model that creates competitive advantage by transforming traditionally fixed costs into variable costs.

  • Fixed cost
  • Variable costs

Financial Plan

Current Financing

  • key investors or owners
  • angels, friends, and family
  • existing loans and liabilities
    • terms, obligations

Funding Needs

Funding Plan

  • IMF
  • World Bank

Financial History

Financial Forecasts

  • sometimes called pro formas
    • balance sheet
    • income statement
    • cash flow statement

  • 1-3-5-7 year projections (depends on length of project)
    • for loans, repayment period determines length of projections, i.e. a six month loan doesn't need seven year forecasts
    • for investments point at which returns stabilize (terminal value) determines length of forcast

  • annual, quarterly, and monthly versions should be provided
  • graphs of key values often helpful: gross revenue, EBITDA, NPV, etc.
  • financial portions of the marketing, asset development, and operations are often placed in this section rather than in the section discussing th plan. They are viewed as elaboration on the various line items in the pro-formas.


Risk analysis

Risk Evaluation

  • market risks
    • new entrants to market
      • easy of entry
      • potential threat to market share

    • slower than expected adoption

  • operational risks
  • staffing risks
    • availability of skilled workforce
    • union issues

  • financing risks
    • liabilities
    • poorly worded investor contracts at risk for litigation
    • investor pull-out
    • lack of follow-on funding to complete project

  • managerial risks
    • poor board or investor dynamics
    • agency risk particular to the venture

Risk Management Plan

Detailed plans are more often found as part of in internal plans. Plans written for funders may need to include a high level description if there are significant controllable risks.

  • methods and procedures to limit liabilities
  • reserve funds
  • continuity of operations plan

Decision Making Criteria

  • Break even analysis
  • NPV
  • IRR
  • Balanced Scorecard

source: wikipedia