How to start a Business Plan (cont’d)
In our first article in the series How to Start a Business Plan, we discussed how to take the first steps of writing a business plan. We determined the
• The type of business of business we want
• Revenue and profit expectations
• Balance of time commitment and lifestyle
• Does it have a cause (environmentally sustainable, helping the disadvantaged etc)
• Other factors determining how we would like the business to operate
This broad view is the start of a business plan and provides a skeleton of the business plan. It gives a clear direction for the next level of detail for the plan. It is now to put the meat on the bones to develop a plan to achieve the business objectives we have set.
To do this we segment the business into four areas or departments. We use the four generic elements you need in the business of:
The decisions you make in managing each of these departments will determine the type of business that will be created. Keep true to your broad plan to get the business you desire. Planning on a departmental level allows for deeper analysis of the business. It provides greater opportunity for analysis and management. It sets a solid foundation of sophistication ready for future growth.
What is the financial structure of the business? Will you raise funds through a loan or an investor, or will you self-fund. What financial infrastructure will the business require? Will customers pay cash, use EFTPOS, Paypal or direct transfer?
The financial plan addresses the model in terms of margins the business will generate. What will be the gross profit of each the business sells (the sale price – the cost to produce). What are the operating costs of the business (fixed costs such as rent, wages, utilities etc). How many units does the business need to sell to make a profit.
The marketing plan addresses the 4P’s of marketing:
Product – what the business will sell, what quality, benefits and features, after sale service etc
Price – will it be priced at market rates, at a premium or discount, value pricing or cost plus pricing etc
Promotion – How will you promote the product? Direct marketing, advertising, strategic alliances. Who will the business target? What offers will you make to them? Will you have loyalty programs? What messages need to be conveyed to the market? Is it a new product or concept where you need to educate the market of the benefits, or is it an innovation of an existing product.
Placement – What distribution channels will the business utilise to get the product to its customers. Is it only available direct from the business, or will you have distributors and retailers selling the product?
The decisions combine to form the overall marketing strategy.
This covers what the business requires to deliver the promises it makes to its customers in the marketing of the product. Do you need an office, a warehouse, a vehicle, same day delivery, 24 hour support etc.
The operation plan outlines how the business will organise and manage all of these components
How many people does the business need to operate the business? What skills and qualifications are required, when are where are the people and skills required. How will the business recruit these people, will they be employees or contractors.
We have now progressed from starting the business plan to having a more detailed business plan than most businesses in Australia.
Good Luck, and I’ll post the final How to Start a Business Plan part 3 soon.