Introduction
Business plan refers to an official statement that details organizational goals, strategies to be used in achieving these goals as well as some explanations on why the business believes that it will attain these goals (Deboer 1998). The success of any business venture lies behind the ability of the operator to come up with a feasible business plan (Abrams & Kleiner 2003). By sticking to the established business plan, one is able to work towards attaining the objectives of the business. There are numerous elements that need to be reflected in any business plan for effective management of the business. To start with, no business can be established without the operator coming up with an idea about an unsatisfied need within a specific market segment.
It is this idea that leads to one coming up with a product or service to satisfy the identified want. Other elements found within a business plan are market and competitor analysis, implementation schedule and financial analysis. Each element plays a significant role in guaranteeing the success of the business to be established. This paper aims at critically analyzing each of the identified elements of business plan.
Product’s or service’s idea generation
Basically, any business idea emerges after a person identifies an opportunity in manufacturing or selling a specific product or service (Barrow, Barrow & Brown 2005). Despite entrepreneurs coming up with potential business ideas, they fail to reap from them due to most of them overlooking some vital aspects of the product or service to be developed (Barrow, Barrow & Brown 2005). They fail to ensure that their product or service is unique compared to that offered by the competitors. Mostly, business operators come up with products or services because they have seen others who sell the same products doing well in the business.
They fail to bear in mind the level of development as well as foresee the future changes that might arise in the product or services. Eventually, their products or services become obsolete after a short period leading to them not benefiting from their ventures. It makes no sense coming up with a product or service that faces stiff competition in the market unless the entrepreneur guarantees that he how to position his product or service (Bianchi, Winch & Grey 1998). In addition, the product or service needs to be accompanied by a description of how it would facilitate in fulfilling customer needs as compared to the already available products or services.
According to Woods (October 01, 2010), Bannatyne posits that products and services plays a significant role in the development of any business. Without superior products or services, a business can not be able to successfully satisfy customer needs. Eventually, such a business may end up closing down or undergoing a slow growth rate (p. 5). A good example of a business that has experienced rapid growth due to its products is McDonald Company. The company emphasizes on the need for ensuring that it has produced quality products as well as customer services. As a result, customers have learnt the company’s operations modes and are always aware of what to find once they walk into stores managed by the company (Vijayarani para. 5).
A business plan ought to put into consideration all the regulations and legal requirements. Often, business operators end up closing down their premises due to them not ensuring that they have met all the required regulations. In short, before dealing in any product or services, one have to come up with clear information about customers’ needs as well as identify the target customers (Deboer 1998). This is to help the operators come up with a product or service that effectively meet these needs thus helping him effectively compete for a market share.
Market analysis
Market analysis is a strong element of business plan. It basically entails coming up with clear information about the size of the target market (Chen, Yao & Kotha 2009). A business can only be successful if the target market continues expanding. It is vital to come up with an approximation of the market size, a projection of the total sales as well as the expected unit sales. However, in coming up with these projections, business operators need to use some genuine figures. Overestimation of the business’s unit sales may lead to it having surplus products thus increasing its operations costs in terms of inventory management (Deboer 1998).
Internal and external factors that are likely to affect business performance need to be identified. These are factors such as technology, government regulations and initiatives (Deboer 1998). Due to neglect of these factors, business operators end up not effectively exploiting the potential market despite them identifying business opportunities. To come up with an informed decision regarding the target market, it is imperative that the business operator conduct a thorough market analysis. Failure to conduct a pilot test in the market leads to entrepreneurs coming up with assumptions about the target market. Eventually, they become frustrated on venturing into the market as what they get is totally different from their expectations.
Evaluating the strengths and weaknesses of competitors when coming up with a business plan is of great importance. Different criteria can be sued in assessing competitors. These include evaluating their products or services positioning strategies, determining their market share, identifying their distribution channels among others (Graves 2009). Failure to consider some of these aspects leads to new business operators finding them using the same operation procedures as their rivals. It becomes hard for them to compete successfully in the market. Having clear information about the competitors would help an entrepreneur come up with a strong value proposition thus luring customers to buy from his or her premise.
Through market analysis, McDonald Company has been able to segment its varied target customers based on their needs and preference. The company has also identified some of the strengths and weaknesses of their rival companies thus capitalizing on the weaknesses. Currently, the company is using its abundant supply of finance to incorporate technology in its operations. The company ensures that all its employees have the required skills based on the unsatisfied needs available in the market (Vijayarani para. 7).
To establish a competitive business, entrepreneurs must ensure that they have come up with a strong product positioning strategy. This can only be achieved by ensuring that they effectively identify all the needs of their target market. They also need to segment their target market based on their different needs (Howell 1999). This can help the operators in developing products and services that best meet the different needs for specific market segments. In his Market Management book Kotler posits that a business plan ought to give clear information about product positioning strategy that will be used by the business. The product or service ought to be positioned based benefits, stance, cost and quality (p. 235). He believes that it is through a business plan that an organization can be able to position its products or services thus improving its competitive advantage.
It is also imperative for business operators to devise strong product and service differentiation so as to standout from rival companies (Wyckham & Wedley 1990). Business operators need to understand that a persuasive positioning can not be achieved at once. Rather, they need to regularly evaluate their procedures and implement the necessary changes to get the utmost effect (Wyckham & Wedley 1990).
Implementation plan
For investors to buy into one’s business ideas and resolve to fund it, they would like to understand how one envisions the growth of his or her business (Lavinsky 2010). There are people who seek to achieve business objectives immediately after the business commences operating. Such operators come up with a business plan that is excessively optimistic. The plan fails to consider the different activities within the business that would help in attaining business objectives and their interdependencies (Lavinsky 2010). This makes potential investors fail to trust the viability of the business hence declining to fund it.
It is vital that one avoids coming up with a complex working environment when establishing a business plan (McKeever 2005). A complex working environment makes it hard for one to come up with clear job descriptions. In the end, it becomes hard for the business to recruit the right employees to serve in different capacities. It is vital to understand that yet in times of high redundancy; it is difficult for an organization to find experienced employees.
To come up with an effective implementation plan, there are different questions that one ought to bear in mind. It is important to highlight some of the crucial objectives of the business and the period to be taken in achieving them (McKeever 2005). This is to help the planner give the requisite strategies of achieving these objectives the first priority. It is also vital to ensure that one has identified objectives and activities that are interdependent. This will help in coming up with an implementation plan that closely ties these activities and objectives thus eliminating chances of bottlenecks during their implementation (Siegel, Ford & Bornstein 1993). The implementation plan also needs to have clear classification of business investments based on their duration of achievement. This is to help one ensure that he or she direct business resources to the different investment programs based on timeframe required for their realization.
A good example where implementation plan have helped a company achieve its objectives is in Berger King. Since its inception, the management aimed at ensuring that it has captured international market through establishment of numerous branches across the globe. The company came up with a feasible plan that was to be used in identifying the right franchisees to work with (Reiter 1996).
Financial planning
The main objective of laying down a financial plan for any business before embarking on its commencement is to ascertain if the investment will be profitable (Smith 2006). At this juncture, one projects the cash flow of the business, establishes a profit and loss forecast and also comes up with a projection of the business’s balance sheet. Despite most of the potential investors using the projections of an organization’s balance sheet to determine its future growth, hence deciding on whether to fund it, it is vital that the business plan reflects feasible projections. At times, one may underestimate the business’s expenses while at the same time overestimate its revenues (Smith 2006). This may deceive the investors as well as the business operator about the growth of the business thus ending up venturing into a non-productive business. It is vital that one goes through the entire business plan before coming up with a projection of the business’s balance sheet. One need to evaluate all the assumptions made in the business plan so as to come up with a clear picture of the business’s cash flow.
An effective financial plan helps a business in eliminating some of the unnecessary expenses which are incurred during the normal operations of the business (Reiter 1996). In addition, the plan helps in ensuring that a business has the required fund before it starts operating. By coming up with an accurate financial plan, Barger King was able to venture into international markets. The company ensured that it had all the required funds before liaising with different franchisees (Reiter 1996).
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