How Do We Create a Business Plan?

What is this? This tutorial suggests a methodology for developing a business plan. What is the purpose? In order to create sound business decisions, you must first have a cohesive plan that supports clearly defined success measurements. Your product positioning, marketing, production, and finance plans should all align strategically in support of one objective (Example: 50%=Profit, 30%=Stock Price, 20%=Market Share). In Capstone®, your professor decides whether to dictate one standard of success measurements, or allow each team to select their own objectives. How do I use it? Once you have completed the "Situation Analysis" detailed in Chapter Four of your Team Member Guide, review the tutorial entitled "Capstone® Strategies and Mission Statements," then develop a business plan for your company. Business planning is the process of developing a strategic vision for the organization. In Capstone®, all teams start with an identical profile. Your company has a history, but no specific business philosophy. Your job is to determine the future nature of your organization. Describe where you want the business to go and how you intend to get it there. Business plans may be generated in many different formats. Much depends on to whom the plan is designed to appeal. For example, a business plan designed to inform employees of the company's long-term strategic intents may be promulgated differently from one intended to appeal to bank lenders and venture capitalists. Regardless of format, there are four major phases to business planning: Determine the current state of the industry and the market (Situation Analysis). Identify SWOT (Strengths, Weaknesses, Opportunities, and Threats). Set forth a strategic vision for the company (make sure it aligns with your success measurements). Determine the specific tactics within each of the company's functional elements (R&D, Marketing, Production, and Finance) that you believe will best support the strategic vision. Monitor progress by establishing benchmarks and conducting competitor analysis comparisons. In Capstone®, the purpose of your business plan is to get all members of your executive team working together for one goal: to establish and maintain a competitive advantage based on a specific set of success measurements. With that in mind, you probably won't want other teams to see your plan. Following is a sample business plan format: EXECUTIVE SUMMARY Summarizes the main themes of your strategic vision in a few paragraphs — what the company will do and why. Broadly describe how you intend to gain competitive advantage. VISION STATEMENT A brief summation (usually one paragraph) of company philosophy — easily understood by employees and customers. RESEARCH AND DEVELOPMENT Detail plans for product repositioning and new product introduction. Answer these questions: Which — if any — of your existing products will be repositioned, and where? Which will be phased out? Will you introduce new products? If so, how many, when and in which market segment(s) will they be positioned? What will you do with the products' MTBF ratings, which have a direct impact on material costs? MARKETING Detail your plans for pricing, promotion, and selling tactics. Answer these questions: Will you price above, at, or below industry averages? If you are going to price high, how will you justify those prices? If low, how will you keep margins large enough to turn a profit? Will pricing strategies be different for each market segment? Will you spend a lot on advertising and sales, or very little? What do you hope to achieve with your advertising expenditures? Do you want 100% customer awareness, or will 50% suit your needs? Are you a cost conscious company or are you willing to spend whatever is necessary to be well known by every potential customer? PRODUCTION Describe investment and or liquidation plans for your factories. Answer these questions: Will you be better off investing in automation, capacity, or both? Will you keep overtime to a minimum, or will you run a lot of overtime as an alternative to capacity expansions? Which of the factories will you liquidate — if any — and will you do it gradually or all at once? When launching new products, will you build expensive highly automated factories or low-tech labor intensive plants? FINANCE Detail plans for raising capital, debt load distribution, and stock/dividend policies. Answer these questions: Will you raise capital through short-term debt, long-term debt, stock issues, factory liquidation, or a combination of these means? Will you be fairly conservative and maintain a substantial cash reserve to stave off high interest emergency loans, or will you aggressively seek to make every dollar work for maximum return? There are many different resources available to help you develop business plans. The Small Business Administration offers links to several good places to start at http://www.sba.gov.