Developing A Business Plan

Overview
The importance of planning should never be overlooked. For a business to be successful and profitable, the owners and the managing directors must have a clear understanding of the firm's customers, strengths and competition. They must also have the foresight to plan for future expansion. Whether yours is a new business or an existing business in the process of expanding, money is often an issue. Taking time to create an extensive business plan provides you with insight into your business. This document can serve as a powerful financing proposal.
This article will take you through the step-by-step process of developing a business plan. A business plan is very specific to each particular business. However, while each business needs a unique plan, the basic elements are the same in all business plans. To complete an effective business plan you must dedicate time to complete the plan. It requires you to be objective, critical and focused. The finished project is an operating tool to help manage your business and enable you to achieve greater success. The plan also serves as an effective communication tool for financing proposals.
At the completion of this exercise, you should be able to:

• Describe the importance of a business plan
• Identify the elements of an effective business plan
• Write a business plan

Outline:

1. Why Write a Business Plan?
2. Who Should Write the Business Plan?
3. Business Plan Components
1. Executive Summary
2. The Product/Service
3. The Market
4. The Marketing Plan
5. The Competition
6. Operations
7. The Management Team
8. Personnel
4. Financial Data
5. Supporting Documentation
6. Summary
7. Resources

I. Why Write a Business Plan?
Why should a business go through the trouble of constructing a business plan? There are five major reasons:

1. The process of putting a business plan together forces the person preparing the plan to look at the business in an objective and critical manner.
    
2. It helps to focus ideas and serves as a feasibility study of the business's chances for success and growth.
    
3. The finished report serves as an operational tool to define the company's present status and future possibilities.
    
4. It can help you manage the business and prepare you for success.
    
5. It is a strong communication tool for your business. It defines your purpose, your competition, your management and personnel. The process of constructing a business plan can be a strong reality check.
    
6. The finished business plan provides the basis for your financing proposal.

Planning is very important if a business is to survive. By taking an objective look at your business you can identify areas of weakness and strength. You will realize needs that may have been overlooked, spot problems and nip them before they escalate, and establish plans to meet your business goals.
The business plan is only useful if you use it. Ninety percent of new businesses fail in the first two years. Failure is often attributed to a lack of planning. To enhance your success, use your plan! A comprehensive, well constructed business plan can prevent a business from a downward spiral.
Finally, your business plan provides the information needed to communicate with others. This is especially true if you are seeking financing. A thorough business plan will have the information to serve as a financial proposal and should be accepted by most lenders.
Back to Outline
II. Who Should Write the Business Plan?
You, the owner of the business, should write the plan. It doesn't matter if you are using the business plan to seek financial resources or to evaluate future growth, define a mission, or provide guidance for running your business -- you are the one that knows the most about the business.
There are a number of software packages in addition to this article that can assist you in the formatting process: Business Plan Pro, Palo Alto Software, $89.99 and Small Business Advantage, Encore Software, $39.99 are only two of many available.
Consultants can be hired to assist you in the process of formulating a business plan, but in reality you must do a majority of the work. Only you can come up with the financial data, the purpose of your business, the key employees, and management styles to mention a few items. You may still choose to use a consultant, but realize that you will still need to do most of the work, so why not tackle the plan yourself? If you need further help in one area, then seek the assistance of the consultant.
Back to Outline
III. Business Plan Components
The Executive Summary
The first page of your business plan should be a persuasive summary that will entice a reader to take the plan seriously and read on. The Executive Summary should follow the cover page, and not exceed two pages in length.
The summary should include:

• A brief description of the company's history
• The company's objectives
• A brief description of the company's products or services
• The market the business will compete in
• A persuasive statement as to why and how the business will succeed, discussing the business's competitive advantage
• Projected growth for the company and the market
• A brief description of the key management team
• A description of funding requirements, including a time-line and how the funds will be used

The Product or Service
It is important for the reader to thoroughly understand your product offering or the services you currently provide or plan on providing. However, it is important to explain this section in layman's terms to avoid confusion. Do not overwhelm the reader with technical explanations or industry jargon that he or she will not be familiar with.
It is important to discuss the competitive advantage your product or service has over the competition. Or, if you are entering a new market, you should answer why there is a need for your offering.
If appropriate, discuss any patents, copyrights and trademarks the company currently owns or has recently applied for and discuss any confidential and non-disclosure protection the company has secured.
Discuss any barriers that you face in bringing the product to market, such as government regulations, competing products, high product development costs, the need for manufacturing materials, etc.
Areas that should be covered in this section include:

• Is your product or service already on the market or is it still in the research and development stage?
• If you are still in the development stage, what is the roll out strategy or timeline to bring the product to market?
• What makes your product or service unique? What competitive advantage does the product or service have over its competition?
• Can you price the product or service competitively and still maintain a healthy profit margin?

The Market
Investors look for management teams with a thorough knowledge of their target market. If you are launching a new product, include your marketing research data. If you have existing customers, provide an analysis of who your customers are, their purchasing habits, their buying cycle. For more information, see these companion articles: Conducting a Marketing Analysis and Prepare a Customer Profile.
This section of the plan is extremely important, because if there is no need or desire for your product or service there won't be any customers. If a business has no customers, there is no business.
This section of the plan should include:

• A general description of your market
• The niche you plan on capitalizing on and why
• The size of the niche market. Include supporting documentation
• A statement and supporting documentation as to why you believe there is a need for your product or offering by this market
• What percentage of the market do you project you can capture?
• What is the growth potential of the market? Include supporting documentation
• Will your share of the market increase or decrease as the market grows?
• How will you satisfy the growth of the market?
• How will you price your goods or services in the growing competitive market?

The Marketing Strategy
Once you have identified who your market is, you'll need to explain your strategy for reaching the market and distributing your product or service. Potential investors will look at this section carefully to make sure there is a viable method to reach the target market identified at a price point that makes sense.
Analyze your competitors' marketing strategies to learn how they reach the market. If their strategy is working, consider adopting a similar plan. If there is room for improvement -- work on creating an innovative plan that will position your product or service in the minds of your potential customers. The most effective marketing strategies typically integrate multiple mediums or promotional strategies to reach the market. The following are some promotional options to consider. For more in-depth information on these media, see the article called Create a Promotional Package.

• TV
• Radio
• Print
• Web
• Direct mail
• Trade shows
• Public relations
• Promotional materials
• Telephone sales
• One-on-one sales
• Strategic alliances

If you have current samples of marketing materials or strategies that have proved successful, make sure you include them with your plan.
Developing an innovative marketing plan is critical to your company's success. Investors look favorably upon creative strategies that will put your product or service in front of potential customers. Spend time developing this section.
Once you have identified how you will reach the market, discuss in detail your strategy for distributing the product or service to your customers. Will you mail order, personally deliver, hire sales reps, contract with distributors or resellers, etc.?
The Competition
Understanding your competition's strengths and weaknesses is critical for establishing your product's or service's competitive advantage. If you find a competitor is struggling, you need to know why, so you don't make the same mistake. If your competitors are highly successful, you'll want to identify why. You'll also want to explain why there is room for another player in the market.
Specific areas to address in this section are:

1. Identify your closest competitors. Where are they located? What are their revenues? How long have they been in business?
    
2. Define their target market.
    
3. What percentage of the market do they currently have?
    
4. How do your operations differ from your competition? What do they do well? Where is there room for improvement?
    
5. In what ways is your business superior to the competition?
    
6. How is their business doing? Is it growing? Is it scaling back?
    
7. How are their operations similar to yours and how do they differ?
    
8. Are there certain areas of the business where the competition surpasses you? If so, what are those areas and how do you plan on compensating?

Analyzing your competitors should be an ongoing practice. Knowing your competition will allow you to become more motivated to succeed, efficient and effective in the marketplace.
Operations
Now that you have had an opportunity to really sell your idea and wow potential investors, the next question on their mind is how will you implement the idea. What resources and processes are necessary to get the product to market? This section of the plan should describe the manufacturing, R&D, purchasing, staffing, equipment and facilities required for your business.
You'll want to provide a roll out strategy as to when these requirements need to be purchased and implemented. Your financials should reflect your roll out plan.
In addition, describe the vendors you will need to build the business. Do you have current relationships or do you need to establish new ones? Who will you choose and why?

VI. Summary
The completed business plan should be bound. For internal purposes three-ring binders work well. Additions and changes can easily be placed in the binders. For the business plan that is to be circulated to a lender and/or investor, many types of appropriate folders and binders can be purchased at office supply stores.
Once the business plan is completed, it should become an operational tool to measure the success of the business. This plan should be updated as milestones are reached. Often companies will spend enormous time, energy and financial resources to complete this arduous task just for the purpose of obtaining additional capital. The companies that shelve the business plan after its completion and presentation to lenders lose out on the real value of this useful tool in the growth and development of small and large businesses.

 

 http://www.va-interactive.com/inbusiness/editorial/bizdev/ibt/business_plan.html

 

Developing and Implementing a Strategy for Technology Deployment

Understanding the strategy of the organization is a must for developing an effective IT strategy. If the IT strategy does not fit with the overall organization's vision, there will be constant conflict. Top leadership will need to invest valuable time in articulating the organizational vision and determining how IT will help with meeting and sustaining that vision.
While the organizational vision will drive the IT strategy, progressive-thinking leaders should also be cognizant of how IT strategy can influence the organizational strategy. Technology redefines opportunities and the choices executives make to exploit those opportunities and establish new capabilities. As a result, organizations are able to evolve current business models and, in some cases, build new ones.
Development of a strategic plan for technology begins with getting full support from appropriate senior management. This support begins with the appointment of a team to develop the strategic technology plan, along with the appropriation of resources needed to develop the plan. This assures the organization that all interests are carefully considered during the planning process. It also strengthens the ability of the IT professional staff to gain cooperation among units within the organization during the development and implementation of the plan.
Technology awareness, use, and expectations can be found in varying degrees throughout the organization. The team charged with developing a strategic technology plan should comprise individuals representing all the functional units of the organization. Participation in the planning process by these members ensures that the technology plan coincides with the mission and goals of the organization as a whole, takes advantage of resources throughout the organization, and meets the needs of operational staff.
Understanding the Enterprise Architecture
The alignment between business processes and IT is a major issue in most organizations, as it directly has an impact on the organization's agility and flexibility to change to meet business needs. The concepts upon which alignment is perceived are addressed in what today is called the "enterprise architecture," bringing business and IT together. Microsoft Data Network's "Enter-prise Architecture Alignment Heuristics" describes the tour fundamental components of enterprise architecture: business architecture, information architecture, application architecture, and technical architecture:
1. Business Architecture
The business architecture is the result of defining business strategies, processes, and functional requirements. It is the base for identifying the requirements for the information systems that support business activities. It typically includes:
* The enterprise's high-level objectives and goals
* The business processes carried out by the enterprise as a whole, or at least in significant part
* The business functions performed
* Major organizational structures
* The relationships among these elements
2. Information Architecture
The information architecture describes what the organization needs to know to run its processes and operations, as described in the business architecture. It provides a view of the business information independent of the IT view of databases. In the information architecture, business information is structured in "information entities," each having a business responsible for its management and performing operations such as acquisition, classification, quality control, presentation, distribution, assessment, and so on.
3. Application Architecture
The application architecture describes the applications required to fulfill two major goals:
1. Support the business requirements
2. Allow efficient management of information entities
Application architecture is normally derived from the analyses of both business and information architectures and typically includes:
* Descriptions of automated services that support the business processes
* Descriptions of the interaction and interdependencies (interfaces) of the organization's application systems
* Plans for developing new applications and revision of old applications based on the enterprise's objectives, goals, and evolving technology platforms
Applications also have required attributes, such as availability (up time), scalability (ability to alter capacity and function to meet future needs), and profile-based access (ability to identify who does each task).
4. Technical Architecture
Technical architecture alignment is mostly dependent on the technology itself. This component is beyond the scope of this article.
Developing the Strategic Plan
After identifying the major architectural components from an alignment point of view, the relationships among these components should be addressed. Going through this process will make it evident where the organization is versus where it needs to be. People involved in these discussions should list what deficiencies are preventing the organization from achieving its overall mission and goals. It is only through a clear understanding of the organizational mission, objectives, and strategies that an effective technology plan can be developed.
The technology plan should be clear, concise, and understandable by non-IT professionals. The right level of details should allow enough flexibility so that the IT group will be able to adjust implementation details to meet changing needs and requirements without rewriting the entire plan. While each organization is unique, there are some general guidelines that can be followed when developing a strategic IT plan.
An IT strategic plan outline would include:
1. Organization mission objectives and strategy briefly describes the mission, objectives, and strategy of the organization.
2. Information inventory provides a summary of the various business processes, functions, data entities, and information needs of the organization. This inventory will define both current and expected future information requirements.
3. Mission and objectives of information technology includes a description of the primary role IT will play in the organization to transform the organization from its current to future state. While it may later be revised, it represents the current best estimate of the overall role for IT within the organization. This role may be as a necessary cost, an investment, or a strategic advantage.
4. Constraints on IT development briefly describes limitations imposed by technology and current level of resources within the company: financial, technology related, and human resources.
5. Overall systems needs and long-range IT initiatives presents a summary of the overall systems needed within the organization and the set of long-range (two to five years) initiatives chosen by the IT department to fill the needs.
6. The short-term plan shows a detailed inventory of present projects and systems and a detailed plan of projects to be developed or advanced during the current year. These projects may be the result of the long-range IT initiatives or of requests from managers that have already been approved and are in some stage of the development life cycle.
7. Conclusions contain likely but notyet-certain events that may affect the plan, an inventory of business change elements as presently known, and a description of their estimated impact on the plan.
Budgeting
Budgeting for technology should be treated as an investment, not an expense. As the strategic plan is developed and projects are identified and prioritized, estimated financial returns should be included to ensure the organization maintains profitability. To accomplish this, the organization will need to adopt a methodology for doing value analysis. While this is difficult in the ever-changing IT environment, an organization cannot set priorities without considering its financial constraints. Every organization has finite resources, and management has a responsibility to seek the best return for its technology investments.
Methodologies used in determining value are described below. Intangible benefits should also be taken into consideration when allocating funding for systems acquisition and development.
* Cost-benefit analysis is calculated to determine how well, or how poorly, a planned action is expected to turn out. A cost-benefit analysis finds, quantifies, and adds all the positive factors. These are the benefits. Then it identifies, quantifies, and subtracts all the negatives. These are the costs. The difference between the two indicates whether the planned action is advisable. The real trick to doing a cost-benefit analysis well is making sure to include all the costs and all the benefits and to properly quantify them.
* Net present value caculation is useful when determining whether the total present value of a project's expected future cash flows is enough to satisfy the initial cost. The basic assumption is that money spent today has more value than money received in the future. So, future earnings or returns from an investment are discounted to provide meaningful comparison of cash flows for the acquisition or expense.
* Return on investment is the measure of the net income received from the new system to its total cost. Return on investment is calculated by dividing net profits by total assets.
* Payback is used to identify the time for an investment to be repaid by the revenue stream generated by the investment. In this analysis, there is no consideration for the time value of funds, therefore no discounting of cash flows.
* Value analysis separates the benefits measured in terms of costs. The value of the benefits would be described with the intent of showing the decision makers an accurate picture of what they are getting along with the net present price.
Controlling IT Maintenance Costs
Controlling maintenance costs begins at the inception of a project through project identification, planning, analysis, design, and implementation. A significant portion of the expenditures for information systems is not incurred during the development of new systems; it comes during the maintenance of existing systems. There are four types of maintenance activities:
1. Corrective - changes made to repair defects
2. Adaptive - changes to evolve functionality to changing business needs
3. Perfective - making enhancements to improve processing performance and interface usability
4. Preventive - changes made to reduce the chance of future system failure
The majority of maintenance effort falls under corrective, which adds little or no value. Therefore, to mitigate corrective maintenance, carefully scrutinize system development life cycle methodology. Understanding maintenance costs and activities, and applying this knowledge during the system development activities, will lead to a system with fewer maintenance issues and associated maintenance costs.
Deciding Whether to Build or Buy
As the organization aligns IT strategy with its business strategy, it is faced with several options for procuring software:
1. Develop in-house
2. Use in-house system with vendor supplements
3. Choose best of breed
4. Customize a vendor system
5. Use selected vendor modules
6. Use a full vendor system
7. Use an application service provider
To determine the best option, the following steps should be taken:
1. Identify what needs the organization is trying to satisfy. This involves meeting with customers, vendors, suppliers, insurance providers, and business units to find out their specific needs and goals.
2. Separate these needs and goals into long-term, medium-term, and immediate.
3. Make sure that stakeholders agree with this assessment.
4. For each option, estimate how much time, effort, and money this will involve.
Managing the Project Portfolio
According to author Gary Bolles in the CIO Insight article "Technology: Optimization," portfolio management is critical for understanding the demands continually placed on IT. By providing a centralized and consolidated view of programs and projects, managers can evaluate and prioritize activities across the organization. Effective portfolio management makes it possible to maximize productivity, minimize costs, and keep activities aligned with strategic objectives.
To distribute risk outside the organization and ensure the staff always delivers IT services for the best possible value, organizations must not overlook outsourcing as a key part of the IT portfolio. However, before the decision is made to outsource, the staff must make sure it has squeezed all possible costs out of the operations being considered for outsourcing. Outsourcing offers the opportunity to speed up the development process, bring into play specialized technicians, and focus internal staff on critical and strategic applications. However, outsourcing also brings with it risks. Contractors may not be able to deliver what they promise, and the level of commitment is generally not as high as with in-house staff.
Addressing security Issues
Security is a matter of degree rather than absolute. A single security measure in isolation will not likely be successful; therefore, an organization should evaluate and enact multiple defensive measures that meet its needs and goals. Elements of information security include the following:
1. Security policies - Specify not only what people should avoid doing because it is dangerous, but also what people should do to be safe. Remember that this will be a living document and must be accessible to the people who are expected to comply.
2. Firewalls - Obviously, unauthorized access to the network must be prevented, but at the same time, external authorized access to those that need it must be provided. Therefore, a firewall must be constructed to facilitate legitimate interactions while preventing illegitimate ones.
3. Authentication - There must be a balance between a strong authentication policy and reasonableness. For example, the requirement for a password that is a combination of numbers and letters and that must be changed weekly seems to provide extra security, but because it will encourage users to write their passwords on paper, it will increase the risk of unauthorized system access.
4. Encryption - Modern encryption technologies are very good and provide a high degree of protection against the vast majority of potential attackers. By setting up encryption at both ends of a connection across public networks, an organization can extend its secure private network (virtual private network or VPN). This is crucial not only for communicating across public networks, but also within a single building hosting a wireless network.
5. Patching and change management - Keeping track of the variety of systems in an organization's infrastructure, security weaknesses, available patches, and whether patches have been applied is a major task. Detecting a change in a file size or finding a file that should not be there would be an obvious sign of intruder activity. Best practice calls for keeping detailed records of all files that are supposed to be on a production system.
6. Intrusion detection and network monitoring - Intrusion detection and network monitoring work together to help network administrators recognize when the infrastructure is or has been under attack. Along with formal change management, which provides a baseline description of the organization's system configuration, the information logged by intrusion detection systems can help quickly reconstruct exactly what an intruder did.
Evolving the Plan
Without a sound strategy, efforts will be wasted. No organization has the time or money for wasted efforts. Therefore, a structured methodology for developing a strategy will increase the likelihood for a sound plan consistent with the organization's goals. This plan should be a living document and on the top of executives' desks at all times, and its effectiveness should be evaluated and adjustments made to it annually.