Business Plan Template

IntroductionOnce the broad strategy, business model or growth areas have been determined, the next step is to create a detailed business plan.

The business model describes the revenue opportunity, market size etc at a high level. It provides executive leadership an opportunity to determine whether the competing proposals/ business models are aligned with their objectives.

The next step is to understand how and when this new product or service will be created, what financial return it will bring and what external or internal barriers need to be overcome to make it successful. Great rigor is required to make sure that the estimates are realistic because executives make the go/ no go decision based on the business plan. Further, the business plan is used as the basis for a test, pilot or initial launch. At this stage, the company’s plans may become public so the business plan has to minimize the chance of adverse reactions.

Plan Pilot Launch

Select business model

Develop business plan

Plan for pilot Run the pilot Modify solution & plan for launch

Sof t launch Final launch

ProcessCreating a business plan may take anything between a few days and a few months, depending on the complexity of the industry, the organization and number of resources available. It generally helps to dedicate at least one person to the task, to ensure speed as well as consistency. However, a broader group should be involved in making decisions. Anyone who is expected to contribute to the success of the new venture should have a role. If the leader of the new venture has been identified, he/ she should lead the business planning as well.

A common fallacy is to focus on the “plan” part rather than the “business” part of the business plan. Many analysts get caught up in spreadsheets, projections etc and miss the whole point – which is to answer questions like: “How will this business really work?” and “How will we get it started?”

TemplateWhile there are no rigid templates, there are a few areas that the plan must describe.

1. What is the product or solution offered?

While this should have been defined broadly in the business model, it needs to be explained here in much more detail. The focus now is on:

How does it work?

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Business plan completes the planning stage

What is the delivery model?

What resources are required to build and deliver the product?

2. What is the market size? What are the projected revenues?

A preliminary market size would be available from the previous stage. However, the product definition may have changed somewhat and that may result in a smaller or larger market size. Adding a competitor analysis at this stage will help determine potential market share, price-points and key differentiators.

The revenue projection, in particular, may change a lot at this stage. However, revenue projections tend to be very inexact and hence this shouldn’t be a major focus area.

3. What is the start-up cost?

Even the most successful product will have a period of time before it becomes breaks even. The start-up cost is the cumulative cost incurred till this happens. Major categories of start-up cost include:

Labor

Facilities

Raw material/ inventory/ working capital

Technology – hardware, software and services (e.g. website development)

Marketing

Training

Travel & transportation

Insurance

Vendor and professional fee (legal, financial, consulting etc)

Shipping & mailing

Regulatory & licensing

Other overhead costs

Sometimes there is a trade-off between start-up cost and time i.e. higher cost may enable a quicker start-up.

4. How profitable is the product/ service?

In order for the product/ service to be sustainable, the revenues must exceed the cost. A profitability analysis shows if that is possible, and what level of demand and pricing is required to make it possible. The analysis must be done at two levels:

Gross i.e. including only the variable costs such as labor, raw material etc.

Net i.e. includes overhead costs such as management, branding, corporate support etc

A key consideration in this analysis is whether – and how – to value staff time. In most cases, the staff time should be valued at least at cost.

In many businesses, the gross margin must be high (typically much higher than 10-20%) for the business to be successful overall.

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The profitability analysis is also typically accompanied by a return on investment (ROI) analysis. Comparing ROIs helps executives choose between multiple investment priorities.

5. What are the main risks?

The risk analysis shows reasons why the new business venture may not work. It generally makes sense to divide this into two parts – showstoppers and others. Showstoppers are those risks that could prevent the business from being launched or from being successful. There should be an appropriate mitigation plan for each of these. Other risks may be significant, but can be dealt with as the plan progresses.

Risk estimates are subjective, so it is best to solicit input from different sources.

The main categories of risk are:

Revenue & market risk: What are the chances that it won’t work? What is the potential fall-out? What is the impact on the current revenue base?

Brand risk: How will this impact the company’s reputation in the market - with customers and other stakeholders?

Legal risk: Includes many sub-categories like employment, general liability, tax, industry/ licensing, foreign laws etc

Organizational risk: Competencies available, impact on roles, responsibilities, organizational structure, leadership bandwidth and “change capacity”

Execution (implementation) risk: This category isn’t always used, but may be used by organizations that have a history of starting initiatives and not following through.

Technology risk: Generally used for technology-based or technology-dependent ventures. It refers to the chance that the technology selected will become obsolete or will not be adopted by customers.

6. What is the best organizational form?

The new product or service will be created, marketed and serviced by a team. The key question is – where does this team “fit” in the larger organization? Choices include:

New for-profit company (generally a subsidiary; “company” may include a corporation, partnership, LLC etc)

New non-profit company

New department or division within current company

A new “unit” within the department or division

An added responsibility for existing staff

The first two choices may make sense if the key drivers are liability protection, distinct branding, new management, separate Board of Directors etc. However, they add a lot of time and also some cost into the process. The remaining choices require less time to set up, but make it harder to measure and manage key metrics. They may also require resource-sharing agreements or SLAs between departments, which are complex to create and manage.

7. What is the project plan?

The project plan is generally divided into three stages:

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Planning

Testing (or piloting)

Launch

Project plans have huge value, especially in highly complex environments with high inter-dependence. However, they can sometimes have life of their own. Care should be taken that managing the project plan doesn’t consume more time than actually implementing it.

At a minimum, even a basic project plan should show start and end dates, main dependencies, critical path items and responsibilities for each key item.

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