The Critical Elements Or An Effective Business Plan Business Essay
Now let us get into break-even analysis. This analysis estimates the running costs that the company will incur will be to the tune of Rs.91700/month. This will include the full payroll, compensation as well as the benefits, rent and utilities, training, supplies, sales & marketing, and various other miscellaneous expenses associated with production and ancillary activities.
Now the Variable costs of the company would include exclusively those expenses which are directly attributed to activities like packaging & delivery of the product to the retail stores and the customers and are expected to average just about 10 per cent of the total licensing revenue.
The chart that is included below clinically exhibits the total break-even revenue that is to the tune of Rs. 94,500 every month. From a conservative point of view, the company is expected to serve at least 165 customers by the month of May in the 2nd year while the total business is expected to be Rs. 73,125 with a licensing fee of Rs.22,500. Thus, the break-even point is arrived and crossed in the month of May and thus, any more income from this point in time onwards will denote profit in the books of the company according to the classical theory of break-even point analysis.
THE CRITICAL ELEMENTS OR AN EFFECTIVE BUSINESS PLAN
Description of Business
As the title of this section states, this is the most critical part of a Business Plan for it is the cornerstone around which the entire plan would revolve. The clarity and the simplicity of this part will go a long way in attracting an investor. Hence, attention should be paid to make this part as simple yet informative and as clear as possible for the investors to understand the bottom line of the business and gauge their Return of Investment (RoI).
The basic answers that this section will deal with are:
The nature of business
Status of the business – startup, take-over or expansion
Form of the business – Sole proprietorship, corporation, limited or partnership
Products and services
The end customers
Additional questions (for startup business) that the section deals with are:
The reasons for success of the business
The pertinent experience that entrepreneur has
What is the Unique Selling Product (USP) of the business
Additional questions (in case of purchases of existing businesses) that the section deals with are:
Who founded the business and when
The reason behind the sell off
The process that determined the cost of the purchase
The present financial condition of the business and the likely trend
The way the new management might adopt to make the business profitable
Product or Service
The title of this section is self-explanatory. It describes the product or service that is being offered to the end customers. This section should describe the features of the product or service along with an overview of the uniqueness of the technology that makes it so special. However, too much technical description or technology-oriented script might make the chapter rocket science for an investor who might not be so much technically sound. Hence, along with an overall description of technology, emphasis must also be given on the benefits and the value-added features, which will lure the customers into availing the product or service.
For a majority of businesses, the products and the services are not entirely unique or the first-of-its-kind. However, in case a business that is being planned so, it is highly imperative to take the benefit of such a ‘first-of-its-kind’ venture and plans for counter the competition and various situations should be chalked out accordingly. One thing that must be kept in mind in this case is that, it might be difficult to take the help of previous case studies or instances of past performances and hence the business will have to be all in its own, sans the help of any previous example(s).
If case the products and service are not the first-of-its-kind, then again the business will encounter new challenges. In this case, the marketing plan as well as the products will have to have something special that will evoke interest amongst the investors. The products mush have something unique that will help differentiate the product or service with the rest of the lot and give the business an edge over its competitors. The uniqueness can be in terms of quality, price-effectiveness, customer service, in time delivery and so on.
The basic questions that this section generally deals with are:
The type or nature of products or services that the business is planning to offer to its customers
The features & benefits of the products that are on the offing
The locus standi or the status of the business in the market
The way the products or the service differs from its competitors in the market
What the USP of the product or service that give it edge in the market
The exact reasons why the customers would prefer the product or service
For every business, no matter whether it is a startup or an existing one, understanding the market is the first step. Your understanding of the market needs to be conveyed properly to the investors so that they are convinced that they are not investing on a white elephant. Again, things do not end just with understanding the market. Close on the heels of market understanding, comes clinically analyzing the market dynamics. This forms the basis on which an effective marketing plan is drawn and this, in the long run, helps in forecasting the sales figures. Existing businesses heavily rely on the past performances and consider them as indicators of future.
In case of startups, the challenge is even stiffer as they have to primarily depend on results of various market studies conducted by libraries and trade associations instead of real-life scenarios. However, statistics, facts and figures created by government bodies, various surveys conducted by private organizations also help the startup businesses in developing effective business plans. Whatever may be the case, for every type of business – both existing as well as startups, market analysis should be pertinent to institute the feasibility of the venture and the equanimity of sales estimation.
An existing business should deal with:
Identification of current customers
The products they would be looking for from the business
The reason why they will opt for the products
The purchasers and the type of products ( this should cover the geographical, demographic as well as the psychographic characteristics)
The size of the market and finding out whether it is a stagnant one or growing
The share of the market that the business is likely to enjoy, the means to increase that share and the time needed to do so
The outlook of the industry
Pinpointing any segment of the market that has so far been untouched
Analyzing whether any of these virgin sectors poses any opportunity for the business
This section of the plan would primarily deal with highlights of the plan in details. The plan should consist of the following elements of Marketing Plan:
The product or services including the value addition that the business would provide and the status the business enjoys in the market
Identification of the target market
Means to reach out to the target market and ways to motivate the customers in buying the product or service
The plan to develop the products, fixing the price and outline the promotional strategies and Product Strategies.
Again, when it comes to dealing with the product strategies, the following topics need to be addressed:
Defining the packaging mechanism of the products
Underlining the product line
Selecting the new products that are to be launched
The position or the image that the business is looking to reinforce in the market
Setting the correct price that will make the product/service cost effective and the strategy to set such a realistic price.
Comparing with the competition and the likely response of the target customers
Evaluation of the reasons why the price determined will be just for the customers and ascertaining whether they will pay the price and the reason behind that
Ascertaining the credit policies
Evaluating the factors that will insulate the business from the price competition
Likelihood of value addition and other parameters of competition excepting price
This element of a marketing plan deals with the following aspects:
Pinpointing the target markets
Evaluation of various means to reach out to the target market including the media to be used in doing so
Means of motivating and luring the market in purchasing the product or service
Evaluation of the cost of marketing plan implementation including the time needed for that
This element of a business plan should entirely deal with the location of the business in respect to the target market and the site of production. Selection of the location should be solely based on the fact that the rent or purchase value of the land or building is directly proportional to the customer footfall. However, another school of thought suggests that location with a higher rate of customer traffic reduces the advertisement cost. This is particularly true in case of retail businesses in which traffic count and accessibility to the market are pragmatically critical.
This element of business plan essentially deals with the following questions:
The business address
The nature of the business – it is leased or owned. In case it is leased, the terms and conditions
Whether the business needs any renovation or modification and so, the cost involved
A thorough description of the business property including the neighboring area
The reason why the location is deemed good for the business – including the salient features of the location
This is one of the most critical elements of an effective business plan. In the critical analysis of this very element, lies the heartbeat of a business. It is one of those factors on which the success and failure of a business entirely depend. Naturally, the very factor that an investor would look into is – competition. It is the very nature of any business to be competitive. In the market, you will hardly find any business that is entirely new. Even if you come across any new business, there must be a handful of players who have been in the market for quite some time. Hence, the survival of the new business depends on how effectively it can take on its more fancied competitors. Again, there is another side of this coin as well. If there is no or little competition, then this absence of competition can act as a deterrent to excelling, inviting a satisfaction. Any business should look for customer satisfaction – not its own satisfaction. If satisfaction creeps in, that can well be the death knell of the business. From an alternative point of view, lack of competition can be alarming as it may denote that there is no efficacy of the product or service offered, in the market. Therefore, competition is a two edged sword that needs to be handled in a proper way in navigating the business in the right direction. Plausibly, this element of a business plan deals with the following factors:
Identification of the largest competitors
Ways to excel the operation
If the operation lacks anything compared to the competitors, identification of the pain areas and plugging the loopholes
Gauging the performance of the competitors
Tapping the sales figures and profits of the competitors
The response of the competitors to the entry of the new business into the market
Management & Operations
One of the most notorious events that lead to business problems and failures is management failure. Hence, this is extremely important to discuss management and related issues in a detailed way in business plans.
This section should include various likely problem areas of management and ways to overcome them. This section should also discuss the qualifications and experience of the management personnel and the hierarchical structure of the management. As supporting data, resumes of business heads, board of directors (if any), CEO and other big shots of the company should also be included. In case, the business has only a few staffs and depends heavily upon outsourcing then a detailed account of everyone involved should also be included.
In case the business is in need of a great deal of financing, the documents should also include various personal financial documents and statements in form of supporting credentials.
The basic topics that this section deals with are:
The extent of relevant experience under the belt of the management team
Highlighting and discussing the functional areas that the business may have
Detailed discussion of the ones who are accountable for each of these functional areas
The reporting hierarchy
The salary structure for each profile in accordance to the qualification and experience
Availability of management resources (If any) from outside
The method of production (this should include a thorough description of the manufacturing process, the proprietary technology involved, supply chain management system that is working within the company and the relation with the key suppliers)
Success is business does not only depend upon the effectiveness of production but on effective man management. And when we say man management, it involves talent acquisition (recruitment) and an effective induction of the new employees into the company, training, streamlining the trained staffs in an efficient way, retention of quality employees and minimizing the rate of attrition. The basic parameters that this section deals with are:
The present as well as the future requirements of the employees
The required skill levels and extent of training to be imparted to the employees
Availability of talents
The compensation and the fringe benefits that these talents should enjoy
Application & Effect of Investment or Loan
This is the section of a business plan that primarily deals with whether there is any need of a loan or any outside investment in form of equity or otherwise or whether the business demands any personal investment from the owner himself. The primary areas that this section generally covers essentially are:
The amount of total investment or loan needed to float the business
The ways the investment or loan can be utilized
The optimal use of the investment or loan so as to make the business in question more profitable
The terms and conditions of repayment of the loan
In case there is any need for equity the percentage share of the company that will be forfeited
The possible Rate of Return (RoR) of the investment
Projected Financial Documents & Statements
The principal objectives of this element of a business plan are:
Establishing the potential of profit in the business in question with reasonable assumptions depending upon the market dynamics
Determination of the capital that the business would need and the ways it can be utilized
A proof that will clearly establish the fact that the business will be in a position to generate inflow of cash that would facilitate in-time repayment of loan
Generally, these financial statements are projected on the basis of month and this may cover a period of up to 12 months till the business effectually turns out to be profitable with a credible extent of stability in terms of revenue generation.
Now, if there is any need to project or highlight any activity that may last beyond the tenure of one month, in that case the monthly details can be projected in a summarized form rather than in details. Generally, these summaries come out annually or quarterly. At the same time, financial projections that the typical business plans include cover a period of two to four fiscal years.
However, before developing the estimated monetary statements of a business it is highly imperative to gather as much information as possible to make sure that whatever data is being fed in the statements are absolutely foolproof and more importantly up to date. Pertinence is another aspect that these financial statements need to follow.
Thanks to the internet, development of these financial statements have become easier nowadays. Internet and the advanced software available are excellent tools not only to download data collected from the internet but to prepare the reports in a much simpler way with the help of graphics and figures that explain things more explicitly than words. The modern computers, equipped with software like spreadsheets are fantastic tools for creating customized financial forecasting models. In fact, a number of specialized software packages are available in the market. These software tools are capable of generating basic templates that help in projecting financial statements.
Again, the class of projection is directly dependent on how accurate are the assumptions. The business in question, like any other business, would obviously depend upon the financial results of the past as against the financial forecasts. In case of startup business¸ the challenges are on a higher side as the startup businesses always face higher challenges than the established ones. Therefore, financial projections of startup businesses demand extensive research so as to prove the equanimity as well as effectuality of the facts and figures.
THINGS TO AVOID WHILE MAKING A BUSINESS PLAN
Time and again, failure of businesses are attributed to unsuccessful drawing of business plans. On the other hand, planners are often left flabbergasted upon failure of a plan not knowing really what had gone wrong. However, failures can be kept at bay by sticking to certain basics and avoiding obvious errors while creating a business plan.
These errors in preparation & presentation of a business plan undermine the very credibility and efficacy of the plan so much so that it might affect funding and the operation itself. Let us discuss these errors in fairly details.
Submission of a "Rough Copy" sometimes with stains of coffee and typo errors, scribbles at the back of the pages. This depicts a sorry state of affairs within the management and conveys a message that the management is not that serious with planning.
Putting outdated information and data, drawing unrealistic comparisons, mentioning fictitious case studies will invariably imbibe doubts in the minds of investors and other stake holders of the business about the planning abilities as well as business capacity of the entrepreneurs.
Unconfirmed assumptions can seriously impair a business plan and substantiate a business venture. It is compulsory for the owner to explain the facts and figures mentioned in the plan to add to the credibility of the plan. Hence, whatever assumptions are mentioned in the plan must be substantiated from every quarter to underline the efficacy of the plan.
More than normal ‘blue sky’ will again be considered as a failure in taking into account the prospective pitfalls of the business. This will again imbibe doubt into the readers’ mind regarding the reality of the idea.
Not understanding the financial information is another error that makers of business plans at times commit. This is more evident when the planning is outsourced. Even in case planning is done by a third party vendor, it is extremely essential for the owners of the business to understand it properly so as to be able to explain the plan and the financial information to the investors and others if and when required.
Lack of detailing and specification in strategy outlining is another common mistake that results in business plan failure. Including general strategy statements sans any specification or customization is one of the most lackluster ways of designing business plans. Lack of proper details and vital statistics will be summarily dismissed as fluffy materials. This is more particular in case the plan is being prepared to attract an investor or a lender.
If the plan does not have any suggestion that the owner of the business has any stakes on the business then it definitely creates doubts in the minds of the investors. This will only prove that the owner lacks the determination to excel or put an effort to take the business to the next level. Besides, the lender or the investor would also expect the owner of the business or the entrepreneur to invest some amount of equity capital in the business in question.
Reluctance in personally guaranteeing any loan is something that the investor would not expect from an entrepreneur. Why should an investor or a lender have the sole responsibility of lending if the owner of the business is not ready to stand personally for the company? The financial institutions or the investors will get a boost to invest if they realize that the owner of the business is also ready to support the business financially. If the plan does not suggest anything in this line, that will have a negative impact on the investors.
Mentioning some unrealistic amounts of loans or terms & conditions in the plan will again jeopardize the business. Hence, there is an ardent need of doing some extensive research and homework before setting loan amounts and terms & conditions so that the entire plan depicts a sane and realistic picture depending upon the market dynamics with pertinence to the condition prevailing in the market.
Focusing extensively on collateral in the plan will again be a mistake. Even in case of loans that are cash-secured, the bankers and the investors always look forward to the projected profits for loan repayments. That is the reason why a clear picture of cash flow should be emphatically mentioned in the plan to make the investors understand the source of loan repayment.
Writing business plans are not that difficult if certain guidelines are followed. Now that we have discussed all the don’ts of writing business plans, the above mentioned predicaments can surely be avoided.
After discussing the don’ts, let us discuss the dos of writing a business plan. Sticking to certain ground rules will not only make the business plan look attractive and effective but it will also make writing the plan much easier.
WRITING AN EFFECTIVE BUSINESS PLAN – SOME TIPS
In this section, we will elaborate on certain tips or ground rules that will make a business plan effective as well as appealing to those concerned.
Writing the plan from the audience’s perspective: This is the most important ground rule of writing a business plan. The plan should be written from the audiences’ perspective. The first thing that is needed to be taken into account is the purpose behind preparing the plan. The writer should at first determine for whom the plan is being written. Accordingly, the plan needs to be tailored to meet the specific requirements of the target audience. For example, an investor will be looking for clear cut explanations that will deal with the likely return of investment and the potential time period needed to get the return.
A thorough market research: A comprehensive and exhaustive market research makes writing business plans easier as well as foolproof. Experts are of the opinion that the investors mainly put maximum emphasis on the market dynamics and therefore, the entrepreneurs would need a thorough and elaborate research on the market and need to make sure the plan reflects the same in true sense and the facts and figures depicted in the plan reflects the reality. It is imperative that the entrepreneur undertakes extensive analysis and market research to make sure that the business plan makes reference to the size and prospect of the market and its likely path of growth. The plan also has to show ways of gaining easy and timely access to the said market in a proper way. A proper understanding of the Competition: Another integral part of preparing business plan is to understand the environment of the business and the competition prevailing in the market in terms of nature. Besides, it is also important to judge the market dynamics – gauging whether there is too much competition or no competition at all. If yes, it is a must to understand the nature of the competition and the way the incumbents are competing. Determination of the price leader index is a must along with a solid understanding of the platform or the base on which the business is thriving to compete.
An Eye for Details: Like every other aspect of a business this is important when it comes to chalking out the business plan as well. The plan has to be concise yet detailed. That is the reason, the planner will have to give maximum emphasis on the details and make it as precise as possible to make sure that the reader has enough information to take a concrete decision. Assuming that the writer of a business plan plays an extremely pivotal role in success or failure of the business, especially running of the business, the plan should be a perfect example of professionalism with no grammatical errors, spelling errors, sentence construction error or any amateurish expression that may confuse the reader.
The facts and figures depicted in the plan should be strictly based on realistic assumptions and credible projections along with accurate contents based on a thorough market research and analysis. The formal of a classical business plan will have to be maintained along with a back up presentation plan based on Power Point to highlight the important sectors.
Emphasis on Opportunity: In order to lure investments in the business, it is highly imperative to clearly discuss the opportunities of investments. There is no reason to think that the investors would prefer investing if no window of opportunity is provided. Hence it is extremely important to declare the USP of the business to lure investors into investing rather than leaving their hard earned funds in their bank accounts and shares.
Making sure that the plan covers all the key areas of the business: While designing a business plan, emphasis must be put to ensure that no important aspect of the business are left out or uncovered by the B-plan. The plan will have to take into account different preferences of the readers when it comes to collating the data, facts and figures. Certain parameters of business – profile of the company, products and services offered, market dynamics, skill and experience of the management team, marketing formula to be followed along with various operational and financial aspects, should be discussed in a lucid form to generate the readers’ interest. While the plan should predominantly be textual, it should also include colored charts, graphical presentation and spreadsheets.
Realistic Numbers: One of the biggest draws of a business plan is number crunching – be it a sales projection or a simple projection of the demography study. No matter to what extent the plan is stuffed with contents, the numbers are always subjected to intense scrutiny from every quarter. Therefore, the numerical figures mentioned in plan should be accurate and based on facts. There is no place of hypothetical approach while drawing a business plan. Proximity to reality and results based on market research are keys to success and failure of a business in terms of revenue earning and selling.
Putting stress on the Executive Summary: Arguably, the executive summary of a business plan is the most important component, which lures the time-pressed reader (investor to be precise) into reading the entire document by invoking a sense of interest. This is the part which is actually where the entire plan is projected in a nutshell and acts as the foundation of a plan. Hence, it is utterly important that the summary carries a "wow factor’ in it that would entice the reader into reading. In tune with this, there should also be a short overview known as an ‘elevator pitch’ that should be a five to six minute show depicting all the value added features and the key advantages offered by the product or service.
A thorough review process: This comes into play after the entire plan is being drawn. A through, rational and independent review is extremely important to pinpoint and plug any loophole(s) that the plan might contain. For that, it is important to select a neutral individual who is in no way associated with the business or reparation of the plan. It is also important to select an individual who has the expertise and the experience to judge the quality of a plan and provide valuable feedbacks and constructive criticism on various aspects of the plan. Based on this review fine tuning of the plan is needed so as to make sure that there no lacuna in the plan that may cause hindrance to the investment.
Implementation of the plan: Last but not the least, it is imperative to consider a business plan as a living set of facts and figures which contain certain specifics regarding deadlines, dates and responsibilities related to business. It is a set of documents that need continuous reviewing as well as updating to keep the contents in tune with the changing market scenario. A business plan should be the yardstick of discussion on plan vs. actual. As a proper business plan ostensibly depends upon people who are taking actions and is being held accountable for them, it definitely helps business owners and entrepreneurs in eschewing failures and meeting the business objectives.
While these are some of the effective business tips which can help in creating a foolproof business plan, there is another part of the story as well. These tips are applicable when a customized plan is being prepared for a specific business. But what about those ready-made plans that are nowadays readily available on the internet? It is not that these plans are good for nothing. They are extremely useful if picked up wisely and customized in accordance to the requirements of the specific business. It asks for quite bit of expertise as well as knowledge to pick the right plan for the right business. And most importantly, since all these plans are not at par with each other from the qualitative point of view, that has be taken into account during selection as well. In the next section, we shall discuss some of the tips that help in wisely picking up a proper business plan from amongst a hoard that is available online.
CHOOSING A PERFECT BUSINESS PLAN – THE IDEAL WAYS
A business (new as well as an existing one), a franchise or an independent one goes a long way in achieving new level of financial and social stature. And to thrive in business, the planning has to be picture perfect. Choosing a business plan may have been not a very critical issue a good fifteen or twenty years back. In those days, experts were hired to write a business plan for a specific business.
However, nowadays entrepreneurs and business houses, with a view to cut costs prefer to pick up business plans which are readily available on a variety of platforms available online. With this leverage available, all they have to do is customize the plan as per the respective business needs. However, when it comes to choosing the right business plan, the task asks for a thorough analysis of the plans that are found online and evaluation of different parameters of these plans. Plans that have been prepared in the past for any other business can also be taken into account but again, suitable modifications and customization are required to streamline the plan to suit the business in question. Let us discuss some of the ideal ways of selecting a proper business plan.
Introspection: The first step to choose a plan is introspection. Choosing a proper business plan is not a matter of time. A good deal of time investment is needed to choose wisely. Hence, a good amount of enthusiasm as well as determination is the need of the hour when it comes to meticulously evaluating the pros and cons of plans available online. Determination is another thing that is needed to sell a set of ideas (which may well be in a nascent stage) to the prospective customers, suppliers, investors as well as other stakeholders.
Research Skill: A good amount of research skill is needed here. As things need to be done pretty quickly, some basic research is needed to make sure that the only relevant plans are evaluated instead of beating the bush. Besides, one should also know the basis or the guidelines of research so as to ascertain pretty quickly, which of the plans available online will be relevant to the business and are suitable for customization. In this, determining the parameters of the research is important as that would form the basis of the research.
Evaluation of Research possibilities: At this stage, looking out for choice of plans is very important. Taking into account the determination and passion to excel in the business, it is essential that only those business plans are picked up which have similarity in terms of parameters and genre. One needs to look for those plans which have a clear cut business vision in writing and a list of business brokers along with forums of potential partnership that will facilitate evaluation of different choices. Upon singling out a specific number of plans, listing them down should follow in order to further narrow down the search.
Discussion with the stakeholders: Once a definite list of plans has been formed, talks should be held with the stakeholders regarding the efficacy of each of them. The investors will have to taken into confidence before zeroing out on a definite plan and customize it as per the needs. In case of the startups, the bankers, financial institutions and other stake holders are better placed (in terms of experience) in weighing the viability of a plan. On the basis of their opinion the list show should narrow down to not more than 5 plans. Once that is done, the final review will commence.
Examination of the Financials: After the search has been narrowed down to 5 plans, it is essential to evaluate the financial statements in each of these plans This would include determination of the time frame that will be needed for attaining the break-even point, measuring the margin of profit, RoIs and various other economic indicators. Also, one needs to estimate the resources that are needed to sustain business operations.
Taking the final decision: This is the final step in which the advisers would come into play. In consultation with the advisers, the search needs to further narrow down the search to three plans. Once that is done, the pros and cons of each of these plans should be discussed with absolute rationality and from an experts’ point of view. Once that is done, it is finally time to select the one that is deemed to be the best and the most fitting. It’s not that the plan that is selected is an ideal one, but here is where the need of customization arises. That is another story.
ROLE OF RESOURCE PLANNING IN WRITING A BUSINESS PLAN
Identification of the business resources is one of the key elements of business planning. Prior to starting a business or more technically speaking, before even drawing the business plans it is absolutely essential to identify the resources which are needed to be brought into the venture. These resources might be in the form of staffs, machinery and equipment, and funding. Whatever be the resources, thorough planning is a prerequisite to starting off with a venture.
When we say resource planning, the term has a wider perspective that includes calculation of the preliminary equity capital, a brief account of the machinery and other equipment needed for production, taking stocks of furniture and fittings, and taking stock of banks or investors, evaluation of staff selection process and so on. When it comes to staffs, again the business has to decide on the number of staffs required and the place where to acquire them from. All these fall into the gamut of resource planning that is needed to obtain the required personnel, machinery and equipment and hard cash to meet the capital expenses.
Again, these are not all in a business venture. The mentors, trainees and the advisers are the key figures around which the human resource of the business revolve. These factors are considered as the non-tangible resources; the value of which is immense in a business. All these resources need to be channelized and institutionalized in a proper way so as to optimize their use in the fledging business. Only a proper planning can couch each of them in term of value addition, moving ahead.
Therefore, this is indeed a precondition to assess the technical assets & requirements, a term which can well be defined Enterprise Resource Planning (ERP) or simply resource planning. While some variety of businesses relies more profoundly on technology other than anything else, there are businesses which are essentially intimidated by various up-front expenses. Whatever may be the case, technically speaking ERP is the marriage between various departments or segments of a business into a single but multifaceted conglomerate that meets the multifarious demands of different departments of the business or the organization in question. The classical benefits of ERP include a better liaison and interconnectivity between various departments to facilitate smoother and smarter ‘start-to-finish’ functions.
Some of the end results of resource planning are described below:
Task Completion: ERP facilitates faster tracking of activities right from the point of production till the product or service reaches the end user.
Let us get into an example. An XYZ company can use its online ordering system for its products. Using the ERP, a customer of that company can vouch for a product online and make payment. Once the order is generated, it moves on to the sales department of the company which in turn checks with its inventory. Once the order reaches the inventory, the product is moved out to the packaging department, and finally to the mailing department (assuming that the company has not outsourced dispatch and delivery). Once that is done, the product is dispatched to the intended customer. Hence, here we can see a seamless system that acts silently but smoothly like a conveyor belt which includes very few individuals but a centralized ordering system that triggers a chain of activities resulting in a complete business transaction. All this is the result of an effective ERP system.
Communication Barriers: EPR helps in breaking down the so called traditional barriers of communication between various departments that an organization is comprised of. Again let’s take the help of an example. We take into consideration the Sales, Purchase and Shipping & Receiving Departments of an organization. Each of these departments had their individual limitations and identity. Now by using classical EPR software, the company nullifies all these segmentations or barriers of communication & product delivery, imparting a smooth and uninterrupted flow of work flow management. It implies that each and every subsection of a business acts in a concurrent way on the common platform of ERP.
Price of Resources: Finally, the significance of an effective ERP on the business is that it facilitates the net downslide of the price of Price of resource coupled by a reduction of data management cost required for the functioning of the business. When a common management system is in force, it requires lesser management practices to be maintained. This means it reduces the number of technicians required to maintain the database as a single computer system run by a single software platform and controlled by a single person to take care of the entire management. This cohesively reduces the infrastructural as well as human resource cost to drastic extent. So an effective ERP can reduce the price of resources without actually interfering with the quality of the service rendered.
IMPORTANCE OF GOING FOR ONLINE BUSINESS PLANNING – AN ALTERNATIVE WAY
Of late, people are more and more opting for online business mainly due to the fact that online businesses have far greater reach in terms of customer satisfaction, market tapping and revenue earning compared to the conventional brick and mortar businesses. Under these circumstances, entrepreneurs are more of the opinion that in case of online businesses, the plans should also be derived from online sources.
This apart, one good thing about the online business plans is that they can be downloaded for free though there are certain plans which need to be paid for before they are being downloaded. As and when an aspiring entrepreneur starts to toy with the idea of downloading an online business plan, the idea should essentially include topics that are profitable as well as interesting to the readers. This will have to be kelp in mind while looking for the plans which are available online. Technically speaking, these topics are called – ‘niche’ on which the concept of a business is based. This involves scrutinizing all the business plans that are available online and looking for the ones that will suit the niche of business that has been selected. At this stage, it is highly imperative to opt for the plan that will provide solutions to the problems and answers to the question that are particularly pertinent to the selected niche.
Once that is done and a suitable plan is downloaded, it is now time to assemble all the technical pieces of the business together with the help of the plan, customizing it in accordance to respective business requirements. This should include creating suitable web pages and pages that will provide sufficient information regarding the products and service. All these components will be readily available in the online plans. It is only about customizing the entire stuff in a proper way in accordance to the business and its requirements. The idea that should act as a driving force behind this entire set of activities is to make the plan as simple but at the same time informative to invoke the interests of the investors.
As already mentioned earlier in this section, the entrepreneurs of online businesses are thriving for online business plans more than anything else. The process may involve some fairly elementary steps, but when we speak about online plans, things to not get restricted to those plans that are available online. If one takes into account the number e-books, CD and DVDs related to business planning available in the market, the collective numbers derived at, will really be jaw-dropping! Frankly speaking there are more online business plan resources than anything else these days – a fact that will help any business venture get access to a standard business plan so that the entrepreneurs can add valuable contents from these plans while processing blueprints of their businesses. This perhaps will not be an overstatement to say at this juncture, that this new concept has put to rest the age old idea by the virtue of which the then business plans written in bunch of papers used to rest on shelves forever and gather dust.
Another school of thought, which speaks for this welcome change in ideas state that it is wiser to keep the plans online so as to stop them from becoming overwhelming. Instead of watching the entire plan at one go, assimilating which can be quite intimidating, plans can be downloaded in segments. This will facilitate a gradual coaching of the persons concerned along with accountability. Physical plans on the other hand would put unnecessary pressure on the entrepreneurs when it comes to applying them in real life scenarios. Besides, as mentioned earlier, people develop a knack of putting the plans on shelf, not using or following it as and when needed. Online plans on the other hand constantly get changed, keeping in tune with the changing business needs and dynamics, providing space for newer business concepts to be evolved and incorporated. This provides dynamism to the business itself, which is an extremely important factor for surviving the cut throat competition prevalent in the business world.
Another USP of the online business plan is that they fit into any schedule with little bit of customization, particularly when an entrepreneur in starting off with an online business, which is in vogue today. When someone is considering an online business plan, it should take into account a number of critical details. Following are three most important critical details that make an online business plan so unique:
Imparts in Saving
Online business plans are all about capturing the interest of the entrepreneurs through emails and at time through certain social media sites. Hence, to start off, the entrepreneurs often do not have to shell a vast amount from their coffer.
Building a solid relationship between the investors, customers and the house of production
This is arguably one of the most important aspects of online business plans. As they are dynamics and are subject to change in accordance to the changing dynamics of the market they go a long in establishing a long term relationship between the ‘customer-investor-business’ triangle – often referred to as the golden triangle that is needed for a business to thrive.
Provide valuable inputs and solutions to the business
That conducting a business is not easy is an understatement. Business efforts are often plagued by challenges which are at times stiff enough to cause a stalemate. Online business plans, by the virtue of its dynamism provide unique solutions and inputs that help the entrepreneurs in overcoming the problems without much fuss. Needless to say, this again takes us back to saving the business from unnecessary expenditure – a phenomenon which invokes interest of the investors.
However, when it comes to optimizing the use of the online business plans, three steps are needed to be followed.
Integration of the business website with the plan
Assuming that a business has an official website (which every business – small, medium or big has nowadays), the marketing strategies, description of product and services, facilities, and all the business derivatives will have to be connected and integrated with the website. The planning as well as the website needs to be in perfect harmony with each other. Once that takes place, there is better chance of making optimum use of the online planning and its various tools to promote and market the business in a proper way.
For a business (especially online) to succeed content management plays an extremely important role. This is all the more evident if online business plans are being used to promote the business. Web browsers as well as the customers like change. If they find the same content for a multiple time, their interest will wane off. Hence, keeping in line of the changing faces of business, the contents need to be changed regularly to maintain the interest level of the existing customers and inviting newer ones. With online business plans, the entire effort of content management becomes a lot easier. The dynamism of the online business plans helps to make content management easier and result oriented and facilitates uploading fresh contents quite regularly. This understandably facilitates newer traffic inflow into the business.
A Sound Market Knowledge
When the scope created by internet is taken into account, the size of the market suddenly seems to attain infinity. This is evident from the dynamism of the online marketing plan, which helps in picking up the right market for the right product. Once a solid knowledge about the market is attained it becomes easier to focus on that market instead of opting for a universal effort that may omit the key ingredients. An online marketing plan is the most perfect tool in understanding these ingredients and deploying them effectively so as to facilitate optimum results.
DEALING WITH RISKS
If we think everything will run just smoothly as per the plans in a business then it’s quite certain that you are unaware of the risk factors that every business always carries. If a plan is prepared to run a business, it should give ideas of how to deal with unpleasant situation that will invariably crop up during the course of the business. Truly, every business venture is associated with some degree of hazards and in order to counter them, there has to be a set of contingency steps included in the entire planning.
In order to include these contingency steps in the planning, it is utterly important to visualize as well as outline various types of scenarios and likely risk perceptions that the business might face. If that is done, not only will it prove the foresight of the business runners but will also demonstrate the efficacy of the plan in understanding the associated risk factors and means of mitigating the same. The plan hence should have the details of steps that need to be taken so as to address and minimize the risk factors. Here, it is important not to forget the basic logic behind preparing a business plan. The plan is nothing but an effective tool to help start & manage a business. That is why the planner should have a free hand to incorporate all the identified as well as hidden risk factors in all the respective sections of the plan. This is to denote that every step of a business has got a threat perception associated with it.
Let us discuss some of the scenarios which often give rise to embarrassing situations for the management and results in furor amongst the employees and dissatisfaction amongst the customers.
The department which is most prone to unpleasant situations is the HR Department. One of the most common concerns this department faces is scarcity of skilled labor – a phenomenon, which has a direct impact on production or for instance, attrition which takes toll on the goodwill of the company in the employment sector. In order to have contingency plans, the planning will have to be done in an honest way and should include steps to overcome the hurdle.
Let us consider some questions, the answers to which must be provided by the plan:
What might be the likely risks that the company faces within the industry and what evasive measures can be taken?
How to manage the risk perceptions from the investors’ perspective?
What might be the likely health & safety issues at the business or the site of production and what are the means to counter them?
What will be the steps taken by the investors if it is suddenly discovered that an accrued business carries a considerable amount of liabilities with it? For instance, what will be the steps if a business taken on lease is found to be carrying a sizeable amount of outstanding balance in its books of accounts?
What steps should the investors take if it is seen that the board or commission for compensation of provincial workers have some unsettled issues?
What will be the steps if the demand for the product or service suddenly takes a nosedive in the market?
How to tackle the issue of a sudden increase in the number of competitors in the market?
Identification of the risks associated with the production of goods or services and means to counter them
Taking into account the marketing plan that has been outlined, what can be the likely risks and hindrances and the ways to counter and overcome them respectively?
What will be the contingency plans in case the major advertisements campaigns fall flat?
Identification of the risks the human resource might face, taking into account the management team, employees, investors and the advisors who are associated with the business directly or indirectly.
How to stem the issue of attrition in case it takes an alarming proportion?
What will be the means to overcome any risk associated with the suppliers? What should be the stand of the investors and other stake holders in case the suppliers get into any rough weather and back off? How to look out for backup plans and look for other suppliers overnight?
How to tackle health and accidents issues within the production site or office premises?
What will be the stand of the investors in case the business runs short of cash mid way through the production? What should be the likely steps that the business can take?
What will be the steps if the business is suddenly found to be causing environmental risks though its process of production? How to take care of the environmental issues? What if the business is not found to be in compliance with the government or municipality rules and regulations?
Conclusion of a Business plan
Having taken into account all the risk factors and the ability of the business to counter them, there should a conclusion or a verdict that the plan must close with. At this point, it is important to take note that the business plan should always be considered as a vital as well as a critical set of documents, and should be as important as the business itself. If the situation demands or if the plan suggests so, it is imperative to restate and reset the business goals & objectives to optimize the results. If the very purpose of a business plan is to acquire financing – the amount required should be stated clearly along with the purpose. The conclusion section of a business plan should be crisp concise, and clear that will leave a positive impression amongst the investors and stake holders.
After all these discussion regarding business planning and the technicalities thereof, let us conclude the proceedings with the properties of a well structured business plan. In nutshell, an ideal business plan should accomplish certain objectives that are described below:
Build a strong sense of commitment
Create a sound base for communication
Guarantee consistent decision making
Support effectual & proficient resource allocation
Assist in establishing the criteria of performance along with creating benchmarks for meeting business objectives
Explain properly the ways of strategy implementation
Discuss in details the sources investments can be harvested from
Establish a strong and result oriented business model
A proper business plan acts as a bridge between designing strategies and implementing them in a meaningful way. Naturally, the critical elements a business plan comprises of would provide a structure that would facilitate studying, analyzing, and fiddling with various business concepts. Etching out a business plan is a continuous learning process that asks for an in-depth concept about business. In order to create a successful business plan, one has to have the knowledge to:
Evaluate & analyze various aspects of a business
Take stock of the background of the management team and critically analyze the market and the potential customers
Assess the quality of products, services and the marketing campaign to meet the customers’ needs
Production of documents as well as operational management scenarios
Projection of the financial standing of the business along with the need for funding
Hence, a business plan created by a competent and a qualified individual having all the above mentioned qualities would help in getting started with a business venture with a high note. Concise and clear documents of a plan capture the investors’ attention, invoking their interest and answering all their queries in a satisfactory way.
We do sincerely hope that chapters discussed in this book would provide valuable insight of the technicalities of business planning, providing valuable tips of writing business plans. Before signing off, let us reiterate that while revisiting a business plan after its completion; never forget the 3 Cs - clarity, coherence, and conciseness. Do not forget to make things as simple and as straightforward as possible. Put yourself into the shoes of a busy reader or a time-stressed investor, who would like to run through all the information and take an instant decision. Get rid of unwanted redundancies, clichés and phrases. Make sure, the plan has the finesse and the professionalism. Maintain all these vital points and come out as a winner in the world of business where your effort will set an example for others to follow.