What information do you think a business plan must represent?
1. Skim through the text 2 and think of the suitable title.
A business plan is a detailed written statement that describes the nature of the business, the target market, the advantage the business will have in relation to competition, and the resources and qualifications of the owner(s).
It may be months or even years between the birth of an idea and the starting of a business. During this time the would-be entrepreneur should be developing and refining the business plan. The business plan is likely to highlight problem areas in a proposed business. There are three reasons for this:
1. A thorough investigation into the costs, markets and available finance, clearly presented will identify the areas of weakness in the original idea and allow them to be eradicated before they cost money or lead to failure.
2. A good business plan will impress people like bank managers, both in its information and the business-like qualities of the person who has drawn it up.
3. The discipline of drawing up a business plan can draw attention to the areas in which the business lacks experience.
Contents of a business plan
Summary of the plan. A brief description of the business will include the goods it intends to offer to its customers, an indication of its market and its sources of supply. How brief this introduction is will depend upon the business. For a small, one person start-up business a hundred words might suffice. A more complex organisation will need a more detailed, and therefore a longer description. This part of the business plan is important if it is to be used to support a request for external investment. Many organisations offering capital to new businesses specialize in certain types of business activity. If they are going to reject a plan it is in the interests of the entrepreneur that they do so quickly. Then she/he can seek more sympathetic organisations without too great a loss of time.
2. Management. Information relating to the personal experience of the entrepreneur will indicate the chances of success to the bank manager or anyone being approached for capital. Banks and other lenders will need to understand the quality and experience of the management of the company. This section will contain details of the names, ages, experience, qualifications of the management, weaknesses and how to deal with them.
3. Personnel. Information relating to the rotation and personnel recruitment, i.e. employment of new managers, regional sales managers, sales people for the new regional structure. Arrangement and implementation of training for all staff concerned with the new production line etc.
4. Products and pricing. A detailed description of the product would include production costs and the proposed selling price. It should also try to isolate what sets this product apart from all similar products on the market. This will normally be very detailed, listing each product or service and saying why the company is producing or offering it, what market it is designed to reach and how successful it has been. It will also say how those products have been priced and how the company intends to increase or decrease the prices over the next few years.
5. Marketing. The business plan should also include a description of the market at which the product is directed. This will include the geographical area over which it is to be sold, the number of competitors and the special points which will set this business apart from its competitors. It should also indicate the potential for growth in the area.
6. Operational details. The location chosen for the business should be stated and explained. The explanation might include details of premises and the site chosen in terms of costs and in relation to the market, suppliers, manufacturing facilities and equipment needed.
7. Financial analysis. The business plan should also include the amount of funding that will be required. If the plan is intended to persuade people to invest in the business it should also state the return the investors can expect. For an existing business this statement should be accompanied by the financial statements of the business over several years. A new business might include projectedfinancial statements of what is expected to happen.
2. Read text 2 more carefully. Try to guess the words underlined from the context. Then use your dictionary to check the words.
3. Comprehension check.
Working in pairs, take turns answering the questions:
a) What are the reasons why a business plan is important to the success of an enterprise?
b) What are the major headings that should be included in a business plan?
4. Study the scheme of a business plan, using your dictionary to help with new words.