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Running your own business is a highly rewarding, but often a risky endeavor. As with anything else, increasing your chances of success begins with preparation. And when it comes to transforming your dream into reality, the key to successfully jump starting your business is simple: plan the work and work the plan. Whether you’re just getting a new business off the ground, expanding the business you have, or purchasing a business, devote plenty of time to planning:

• Begin with a discovery process to confirm the viability of your venture.

• Do your homework.

• Uncover fundamental objectives, insights, opportunities and risks.

• Research the market.

• Examine your offering, market conditions, trends, and the competition.

• Excavate potential problems.

• Outline your goals and objectives.

• Compile the business intelligence you need to create a solid foundation of actionable

information to chart your present and future direction.

The next logical step is to develop a plan—a strategic business plan that functions as a living document to define your objectives, guide your business, and take you from Point A(where you are today) to Point Z (where you’d like to be). But remember—a strategic plan is about more than securing funding—it’s essential to jump starting your business. And once you’ve written your business plan, follow it up with an action plan that spells out your short and long-term objectives and how you’ll achieve them.

Just remember this—there is no underestimating the power of planning. As the former CEO of Octel and Lucent Technologies notes, “People usually plan their vacations more carefully than they plan their careers. I’m a compulsive planner, but there were times when I had no idea what I was doing.”

Even when you have no idea what you’re doing, developing and implementing a plan improves your chances of achieving your goals. This article outlines the fundamental components of crafting a strategic plan to take your business to the next level.

What is a strategic plan?

Strategic planning is the process by which the key stakeholders (you and your partners) in an organization

envision its future and develop the procedures and operations that will enable you to achieve that vision.

A strategic business plan serves two purposes. First it’s an internal document that defines your goals, strategies, and tactics. Second, it’s a tool for raising capital. However, you need a plan, whether you’re looking for capital or not. Without a plan you won’t know where you’re going and you have no way to benchmark or track your progress.

With a strategic plan you have a roadmap that enables you to look ahead, allocate resources, focus on key points and prepare for problems and opportunities.

A well-articulated strategic business plan clearly outlines your vision, goals, priorities, strategies, products, services, and financing needs. It also provides relevant information about your company, your management team, and short- and long-term objectives. Highlighting both the positive and negative aspects of your business opportunity, your strategic plan should look ahead from three to five years.

How do I write a business plan?

As they say, there’s more than one way to skin a cat. Likewise, there’s more than one way to write a business plan. Formats, outlines, and lengths vary. But they all tend to share a generally accepted format and certain standard components.

Your plan must be clearly written, logically organized, and convincingly worded. It should target a specific audience. It should outline the details of financing, competition, strengths, weaknesses, and forecasted financial performance. As a rule of thumb, when writing your plan, include the following components:

• Cover letter—write a cover letter to introduce you and your business plan to your audience.

• Title page—include a title page that details the content of your plan, your name, address, phone number, names and positions of the executive team, date and contact information.

• Table of contents—add a table of contents to make it easy for readers to find information.

• Statement of purpose—include a clearly stated explanation of your company’s goals and how you’ll achieve them. For example, your statement of purpose may be “to provide quality, reliable landscaping services for less in the Phoenix metropolitan area”. Describe your value proposition, whether it’s price, convenience, service or another attribute, how much capital you’ll need, and how you’ll repay it.

• Executive summary—this is the most important part of your business plan. Include a brief summary that highlights the major points of your plan. Provide background on your business, the market, your value proposition, key team members, projected ROI (Return on Investment), internal rate of return, and current and potential risks.

• Market information—describe your target market(s). Substantiate statements with facts and supporting detail. Include market research on initial and future markets, key market segments, past growth rates, anticipated trends and changes.

• Company—describe your company, its type, history, legal structure, industry, market, principals, revenue size and growth rate.

• Product/service description—describe your offering, relevant business benefits, stage of development, how your product/services will satisfy a real business need and enable you to compete.

• Management team—include detailed information on the core members of your team—the people who will run the company, as well as senior partners, attorneys, financial and business advisors. Include names, titles, experience, skills, responsibilities and compensation.

• Potential risk factors—include an assessment of the risks facing the company. Describe the worst-case scenario and anything that could go wrong today and in the future. Offer strategies for overcoming risk.

• Execution/action plan—describe how you’ll translate your business plan into actionable results down to the finest detail. Describe how you will obtain licenses to do business, open an establishment, get products on the shelf, hire employees, and forge partnerships. Describe production schedules, delivery processes, and customer service policies in order to set operational benchmarks to measure progress.

• Financial information—Include a section that projects future revenues and profits three to five years out. Base this information on best-case, worst–case and most likely-case scenarios. Summarize financial data like cash flow, income statements, balance sheets, banking relationships, terms and rates of loans, financing plans and working capital requirements.

• Legal preparation—includes corporate bylaws, patents and trademarks, licenses to do business, employment agreements, and customer contracts. Anticipate the legal and documentary setup your business will require. Writing a business plan can seem like a daunting task. However, there are many resources available to help you prepare a sound plan. You can find books in your local bookstore, software programs and templates online and in local computer/software stores or you can work with a consulting firm, a nearby Small Business Development Center or a local business school.

No time like the present to start to plan your work and work your plan. Happy planning…

The interest concerning the study of the forces that impact a company via the usage of competitive advantage is constantly growing. In 1980s Porter elaborated some principles and models which are based on the idea that competitive advantage comes from the ability to gain profit via investment in an industry sector with higher than the average return. There exists no company which can achieve the advantage over its competitors according to all commercial characteristic features of a product, as well as means of its promoting in a market. Every organisation needs to choose its priorities and to elaborate the most suitable company’s strategy. The strategy should effectively use strong sides of company’s activity and it can be applied to the tendencies of market development. Despite tactical planning in a market, the strategy of a competitor must be aimed at ensuring the company’s advantages over the competitors in a long-term outlook – 3-5- years (Porter 1980).

The analysis of competitors includes two major stages: evaluation of main competitive forces in an industry and formulation of primary variants of competitive strategies. Porter believes that the market share and the profit level of a company depend on how well it can react to effective competitive forces: new competitors with similar products; threat of substitute products; existing competitors; impact of suppliers and impact of buyers.

Porter’s five forces theory is based on factors outside an industry that influence the nature of competition within it and on factors inside the industry that influence the way in which companies compete. The researcher has conducted an examination of the industry profitability and competitive forces. This investigation is regarded as a valuable contribution to the market examination. However, Porter’s five forces model does not take into consideration technology and innovation. The research refers mainly to the situation that existed in 1980s and should be used with reserve to the above mentioned factors. This article is aimed at examining the current situation of the market and Porter’s theory relevance to the present day businesses. The article defines and evaluates Porter’s five forces model in terms of its being up to date for businesses. A company has to understand the dynamics of its industries in order to be competitive in a market. Porter’s five forces theory that is based on the intensity of competition and the determination of relative strengths of these forces is a helpful guide towards this aim.

We really get tired of seeing the same old tired ads for business planning.  It appears that what is being sold is “business in a box.”  The suggestion that once completed, you will have a full business plan that any banker will fund, is false and misleading.  Here are the facts:  If you are writing a business plan just to get a loan, STOP, rethink your business.  Getting a loan should be your last reason for writing a plan. 

The Value of Planning

Anyone who has been in business, or part of a corporate management team, knows the value of planning.  However, we understand the problem.  For those who are new to the process and overwhelmed by the sear magnitude of a business plan, let’s clear the air.  Writing a business plan is simple – provided you build the plan in logical stages.  The first thing you have to do however is to relax; you will never have all the right answers, and the variables are infinite.  Unless you can see into the future, you will never know everything that is going to happen.  

Breathing Life into Your Ideas

A business plan – properly done, is a “living” study of how a business entrepreneur intends to organize an entrepreneurial endeavor.  A business plan formulates the activities necessary and sufficient for the venture to succeed, or as my associate says – “a business plan puts you’re scattered – napkin and scrap paper ideas into a format that others will understand.” 

Business plans are best used internally for the management of the operation.  The operational plan sets the tone of the business for the employees and advisors who will be working to make the business successful.  The operational plan starts everyone out on the same page. 

One common belief within business and venture capital circles is that the actual plan itself has little value, but it’s the act of planning that has the real merit.  A fact that most people ignore, is that if a business idea is good, a business plan makes it workable – but if the idea is garbage – no amount of planning can make it good or fundable.   

We said that the process of building a business plan is made simpler if you build it in logical stages.  By logical we mean build the plan as you thought of it.  For example, the first thought someone usually has is “I have an idea.”  The next question then becomes – is your idea feasible?  You prove it by developing the feasibility study. 

Overview of the Feasibility Study. 

Just like in building, the most important part of any plan is the foundation.  The feasibility study is that foundation.  When consulting with a business plan client regarding a new business, the feasibility study is generally the first document I write, as it is less formal, and cost the client less to build.

 A feasibility study is the process of testing ideas against known factors.  A feasibility study asks – is the business idea sound?  Is the product or services wanted by others?  Who wants it? What other company is currently selling the same product?  For what price?  And, how do they sell them?  We test our answers – not just say yes or no to them.  The test is general research to prove the hypothesis – stopping just short of a full blow research study.

A feasibility study may only be one to 15 pages in length depending on the business idea, and includes cursory attention to such key matters as business concept (above), preliminary financing needs and a brief marketing section.  It serves as the base plan, and later – as a valuable prelude to a full-length plan if the idea takes off. 

If all the answers in the feasibility study are good and the decision is made to go forth, the ways and means of selling the product or service are required.  You have done the preliminary ideas in the feasibility study; now flesh them out in the Marketing Plan. 

Overview of the Marketing Plan. 

Once you have the feasibility studies completed and have concluded that you want to go forth with the business you will need to know a little more detail for the cost of marketing and selling the product or service.  We fully flesh out the preliminary marketing plan we did in the feasibility study.

The marketing plan sections points out the Who, What, When, Where, and How of marketing the product or service.  From this marketing plan, you can determine your budgeting requirements.  The marketing plan also discusses the web requirements of your business, and how the internet will be used.  Get expert advice here and work with a full service internet developer to help you determine the direction you need to go.  In other words, don’t get sucked into the hype surrounding pay-per-click, or ad-words until you know if you can afford these and your business model warrants these methods. 

From the answers derived in the planning, you will be able to develop a cost of marketing estimate.  The next step is the Working or Operational Plan.

Overview of the Operational Plan. 

The third stage of the logical planning solution answers the question of “what will it take to run the business.”  If you have never been self-employed, then the operational knowledge will come from advice received from consultants, business advisors and prospective managers you will be hiring to help run the business.

As with the feasibility study, you can afford a somewhat higher degree of candor and informality when preparing a working plan.  The working plan is an operational plan that conveys your requirements and sets the tone for future employee policies.

Once you know how you are gong to run the business, the next question is “how are you going to fund it?”  Stage two of the operational plan sets the funding requirements.  The funding portion is based on the knowledge you have gained in the previous stages. 

We know what we are going to sell, we know to whom we are going to sell it to and we know the resources we will need to operate the business.  We can project assumed costs and thus the expected profits out of this information.  Pretty simple huh?  The question we want to solve at this stage is – can we sell our product or service for the price needed to make a profit and stay in business? 

In addition, the drafting of the funding plan allows us to map out the exit strategy, a part of planning often never discussed.  (Right alone with contingency plans and business life insurance)  Look for my up coming article on Contingency Planning.  The simple explanation for an exit strategy is how you plan to terminate your ownership of the company, or some part of the company.  You and your investors pre-plan ways of recouping the capital that will be invested in the company.

Once the answers are determined in the strategy meeting with your advisors, the final decision is – will you self-fund, use private investors, or do you need venture capital?  If the outside capital route is the answer, then say hello to the Presentation Plan. 

Overview of the Presentation Plan. 

The Presentation Plan is a compilation of the Feasibility Study, the Marketing Plan and the Operation plan with projected profit and loss analysis.  The formalized version is the one suitable for showing to bankers, investors and others outside the company.  It should be in both printed and electronic format for ease of use, e.g. presentation over a web broadcast to a remote lender. 

A Word of Caution Regarding Planning Software

The use of computer software to develop you business plan is a good alternative for people who are more serious about their business then they are in learning how to write.  But planning software has its drawbacks – the biggest is that is makes you lazy.  Good planning software offers you advice for strategic aspect of t

he plan, but this advice should in no way be the only advice you seek when planning your business.  It simply mimics what is written in often-copied planning manuals. 

I will stop short of recommending software for I have seen and used both good and bad software over the 20 plus years I have been helping people write their business plans.  I also want to caution you in using the sample plans.  I can tell you this.  Every serious investor knows the difference, has seen the sample in countless other plans, and the minute they see the same old hackneyed answers; the plan goes in the garbage.  Save yourself the time and the embarrassment.  The bottom line is that if you cannot plan out your own business, using your own words, then you probably should consider staying an employee. 

Conclusion.

Business planning is easy once you decide to build your business plan on paper and in stages. Actually, it is more enjoyable then running the business.  When you see your ideas come to life on paper and you prove each question or solve each problem as they come up, you are setting yourself up for future management decisions.  If you get half way through and don’t go any farther then the operational portion, you are still better off then if you had just jumped into business without a plan.   

Staged Business Planning is the solution to the question of “How do you eat an elephant?”  The answer of course is “one bite at a time.”