HCA 620 Media: Business Plan Overview Business Plan Overview A business plan is a formal document stating specific business goals, the reasons why...
HCA 620 Media: Business Plan Overview
Business Plan Overview
A business plan is a formal document stating specific business goals, the reasons why these goals are achievable, and a detailed guide of the pathway to success. A thorough business plan provides a comprehensive strategy and a specific time-line for the implementation and operations of a company or non-profit organization. A typical business plan model can also be adapted when a company plans a large project. It is an effective method of communicating a company’s vision, mission, and goals to the stakeholders that will help launch and grow the business: Suppliers, partners, customers, patients, employees and board members. A well developed business plan also enables companies to gain a better understanding of the opportunities and challenges in their market and industry. Further, a skillfully crafted business plan that contains the elements described below will allow a company to develop strategies that chart the route to success.
There are many different business plan models. It is not a “one-size-fits-all” proposition. Business plans need to be tailored to the nature of the business or project. The specific needs of a particular business or project will determine which plan is best. While there are many different models, there are many similarities between business plans. The wording may vary, but several components are common to virtually all of them; you will soon become familiar with these similarities.
Here are the sections of a typical business plan with seven sections:
Executive Summary
Company Description
Product or Service
Market Analysis Components
Strategy and Implementation
Management Team
Financial Analysis
Here are the sections of another business plan with twelve sections:
Executive Summary
Vision and Mission Statement
Business Industry and Profile
Business Strategy
Company Products and Services
Marketing Strategy
Competitor Analysis
Financial Forecasts
Loan or Investment Proposal
Location and Layout
Description of Management Team
Plan of Operation
Descriptions of Typical Business Plan Elements:
Executive Summary
The executive summary is perhaps the most important segment of any business plan. It is not an abstract of the business plan. Rather, it is an independent document that is engaging, clear, and logical. It must provide the audience with the key elements of the business, the reasons for approval, and a rationale for the project to be implemented. It needs to include sufficient detail for someone to decide if they want to read further.
Think of it like an elevator speech: You get on the elevator with someone you think might invest in your company and you only have until you reach the tenth floor to convince them to talk to you further. The executive summary is that five minutes you need to pique someone’s interest enough to read the entire business plan and give it a chance. Because this section is so important, you should write it last; it is a summary of your entire plan.
An executive summary is usually two pages in length, briefly describing your organization, and the product or service you intend to provide. It should be written in a positive and forceful manner, with the intent of convincing your readers why your service or product is needed. Many executive summaries will contain the company’s mission and vision, along with marketing and financial information. The management team and implementation strategy are often included as well. Like the business plan itself, the content of the executive summary is dependent on the nature of the product or service the company provides. Choose a format that works best for you.
Mission and Vision
As you are certain to discover in your research, virtually all business plans contain mission and vision statements. An organization’s mission is the purpose for the organization’s existence. An organization’s mission statement is a succinct and cogent explanation of precisely what the organization does. It is the origin of the organization’s strategic decisions. An organization’s vision is a critical, empowering concept. It defines what business the organization is in, and paints with a broad and sweeping stroke the overall direction of the organization.
Many vision statements are contained in a single sentence. Here are the vision and mission statements of Grand Canyon University:
Vision: Grand Canyon University is the premier Christian University educating people to lead and serve.
Mission: Grand Canyon University prepares learners to become global citizens, critical thinkers, effective communicators, and responsible leaders by providing an academically challenging, values-based curriculum from the context of our Christian heritage.
Business and Industry Profile
Understanding the industry and market in which you wish to compete is essential. Is your venture feasible? Do you have a potential competitive advantage that can be exploited? To develop a strategic plan on growing your business, you need to identify the market, customers, competitors, and strategic opportunities. Essentially, you need this information to be able to identify the competitive advantage you can offer that will allow you to enter this market and be successful. (Scarborough, 2011).
One highly effective method of evaluating your industry and market is the SWOT Analysis: Strengths, Weaknesses, Opportunities, and Threats.
Strengths are “positive internal factors that a company can draw on to accomplish its missions, goals, and objectives (Scarborough, 2011). These factors include:
Product: Your product and features of your product that can provide a strategic advantage.
Service: How can you manage your organization and sell your product in a way that provides you with a competitive advantage? What extra can you provide?
Pricing: How will you market your product and strategically place it for competitive advantage?
Resources: Your people and the skills, experience, and education they bring to the venture; the capital you have available to invest and innovate.
Weaknesses are negative internal factors that can prevent or inhibit a company from reaching its goals. These are the same factors examined under Strengths, but are those aspects that decrease your ability to gain a competitive advantage. For example, your product could be of lower quality than your competitors’ because you do not have adequate capital and human resources to produce that level of quality.
Opportunities and Threats are external to your company.
What opportunities and options exist that you can take advantage of and exploit?
What threats or potential pitfalls are facing your company?
To fully evaluate your strengths, weaknesses, opportunities, and threats, you need to have information about yourself, your company, the industry, the market, and the economy. Start with your economic sector, which is the broad category of service: Manufacturing, retail, or distribution. Next, identify the specific industry or industries. Within the industry, consider the following: Market size, growth rate, potential growth trends, stage of maturity of the industry, the effect of economic conditions on the industry, financial characteristics, technological advances on the horizon, and regulation or certifications related to the industry (Abrams, 2003).
Description of Service
How do you plan to set yourself apart from your competition and develop a successful venture? Describe your product or service. Outline specifically what you are going to do, sell, or provide. Are there any patents, trademarks, or copyrights? How does your product or service compare to your competitors? What are the key features of your product or service that will provide a benefit to your customers? If it is a product, where will you buy it or how will you produce it? Products or services that are technical or unusual will need to be explained in detail. Drawings or schematics are appropriate if they enhance the picture you want to create of your product (Abrams, 2003). However, make sure you describe your product with sufficient detail to entice investors, but do it without giving away proprietary or sensitive information that would reduce your competitive advantage. This is your chance to clearly explain the product or service to be provided. In its simplest form, this section will explain to the reader what you plan on doing. It will contain detailed descriptions of products and or services your company or organization will provide. This section explains in detail where you are now, where you want to go, and how you want to get there. It is essentially your strategic plan for success.
Market Analysis
Regardless of the heading names in a business plan, you will always find some type of marketing information. Make sure you define your customers in detail. Who are your customers? Where do they live, what do they buy, and how many potential customers are there for your product or service? You should include details from the following categories: Demographics, geographic description, lifestyle and business style description, psychographic characteristics (e.g. technologically savvy, conservative, socially conscious etc.), purchasing patterns, and their view on the importance of quality, price, and convenience (Abrams, 2003).
After you have identified your customers, you need to determine how you will reach them. What is the best form of advertising to reach the kind of customers you have described? What is the message you will deliver through your advertising? How much will you spend? Think about using market research in your plan.
How will you sell your product and who will sell it? Your sales force will be the people representing you to your customers. What kind of sales force will you have and what personal characteristics do you want them to have? How will you train them and compensate them?
The following list is typical of the elements of a market analysis:
Market trends, size, and growth rate
Target market
Competition
Industry analysis
Market profitability
Sum of the revenues of participants.
Advertizing and promotional plans
Financial Analysis
Every business plan contains some type of financial data. The exact nature of this data is dependent on the nature of the product or service. You will need to show financial forecasts for several years to demonstrate the potential success of your venture. These estimates need to be realistic and show a well-designed operational plan that takes into account all the expenses related to purchasing or producing your product and selling your product or service.
The business plan should include Pro Forma Financial Statements, including an Income Statement, Cash Projection Schedule, and Balance Sheet. Pro forma means the statements do not follow Generally Accepted Accounting Principles specifically, but may include the use of estimates. Pro forma statements will only include recurring items. For example, if you had a fire one year and a large casualty loss, you would not include those on pro forma statements because it is not a usual and expected expense (Kimmel, Weygandt, & Kieso, 2009).
The figures on your financial forecasts will represent decisions you have made about factors such as product, price, location, customers, and strategy. It is important to be realistic about potential sales and earnings. Be conservative and consistent; choose an appropriate accounting method for your industry and form of business (Abrams, 2003).
Many business plan financial sections will include the following information:
Income statement (also called a profit and loss statement)
Current funding
Net present value (NPV)
Balance sheet
Profit and loss projection
Key performance indicators
Break-even analysis
Balance-sheet forecast
Risk analysis
Business ratio analysis: profitability ratios, return on sales, return on investment, and liquidity ratios
Measurement
Your business plan needs to spell out how you intend to measure the performance of your program, when you will measure, how you will measure, what tools you will use to report, and the frequency of reporting.
A well written business plan must include some type of measurement data. How will you measure success? There are many ways to measure the effectiveness of any program, and you will need to decide which metrics make the most sense. Generally there are two types of metrics: descriptive and predictive. Descriptive metrics tend to be ones that are fairly general and give a good overview of a program’s performance, whereas predictive metrics are narrower and give an indication of how a descriptive metric will turn out.
There are many tools that you can use to report your performance. In healthcare the two most common methods are charts and balanced scorecards. The term chart is often interchanged with graph. The two most common charts are column charts and line charts. Column charts have vertical bars while bar charts are horizontal. In either case, they are most useful for comparing data that is for a single point of time or for metrics where you are expressing the data as a percent of the whole.
A second tool for reporting is a balanced scorecard. As the name implies, a balanced scorecard shows metrics reflective of more than one category. Balanced scorecards typically measure quality, service, employee satisfaction and financial data. By looking at more than one area, you can make your decisions regarding the performance of a program from more than one viewpoint. These viewpoints are often conflicting, and therefore a balanced score card provide a more complete look at your program. Balanced scorecards are especially valuable in healthcare, as decisions often need to be made on more than just financial performance and quality.
Whatever metric you choose, it needs to be easily understood. The data needs to be comprehensible, meaningful, and relevant. Careful consideration needs to be given to the amount of detail presented: Give just enough information for your reader to understand the significance of the data. Sometimes “less is more.”
Plan of Operation
The operational plan deals specifically with the internal operations and equipment necessary to produce a product or provide a service. It needs to answer several questions: Where will your business be located? What type of building is needed? How big does it need to be? What about office and storage space?
The operational plan also deals with specific equipment issues. This section describes the types and prices of the equipment necessary for your business to be successful. Will you purchase or lease? Where will you obtain and store needed materials? Outline your key suppliers, the purchasing process, and any other relevant supply concerns.
In addition to describing your equipment needs, the operational plan also outlines the human element. How many employees are needed? Are they full or part-time? Are they salaried or hourly? How much will they earn? What will their work hours be? How will you recruit the type of people you need? This section deals with roles, job descriptions, management structure, and training issues. As with the other elements of the business plan, the exact nature of the business will dictate what information is needed and relevant.
References
Abrams, R. (2003). The successful business plan (4th ed.). Palo Alto, CA: The Planning Shop.
Kimmel, P. D., Weygandt, J. J., & Kieso, D. E. (2009). Accounting: Tools for business decision-making (3rd ed.). Hoboken, NJ: John Wiley & Sons, Inc.
Scarborough, N. M. (2011). Essentials of entrepreneurship and small business management (6th ed.). Boston: Prentice Hall.
U. S. Small Business Administration (SBA). (n.d.). Small business planner. Retrieved August 24, 2010, from http://www.sba.gov/smallbusinessplanner/index.html
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