11 Business: Business Plans

business plans

• comprehensive document that describes a company’s activities, goals, strategies and plans for achieving its objectives

• serves as a guide for running a business

• outlines important aspects, eg:

  • organisational structure

  • financial projections

  • marketing strategies

  • operations plans

• purpose

  • guide the business’s direction, attract potential investors, provide a roadmap for growth and development

  • startups - used to launch ventures, secure funding and attract investors by demonstrating potential for growth and profitability

  • established businesses - helps ensure company stays aligned with its growth objectives and short- and long-term goals

pros and cons of a business plan

pros:

• provides clarity and direction by outlining the company’s vision and long-term goals

• attracts investors by demonstrating potential for profit and increases investor confidence

• helps identify risks and strategies for mitigation

• ensures alignment across the company by clarifying roles and expectations

• facilitates performance measurement by providing benchmarks to track progress

cons:

• time consuming to create and update

• assets such as financial projections may be inaccurate due to unpredictable market conditions

• can overemphasise formality is smaller businesses or rapidly changing industries

elements of a business plan

1. executive summary

2. mission statement

3. vision statement

4. business concept

5. marketing plan (including SWOT analysis)

6. operations strategy

7. human resource management

8. financial plan

executive summary

• contains an overview of the entire business plan and and explanation of the purpose of the plan

• written for business leaders, executives or investors who need to quickly evaluate the viability of the business before reading the full plan

• restate the purpose of the plan, highlight major point, outline conclusions and recommendations

• should include business concept, goals, target market, financial highlights, significant achievements or milestones

• situations it may apply:

  • providing a quick overview to investors when seeking funding

  • entrepreneurs preparing to launch a startup and introduce their business concept, unique value propositions and market opportunities

  • established businesses looking to expand their operations, enter new markets or launch new products

  • communicate key finding, goals and recommendations to senior leaders, eg. CEOs or department heads

pros and cons of an executive summary

pros:

• provides a concise overview of entire business plan

• engages potential investors by highlighting key points quickly

• present information in a clear manner, making complex details easier to understand

• guides readers through the main sections of the business plan, enhancing the document’s usability

cons:

• can deter investors from reading further if it is too vague or fails to capture the business’s true potential

• can be challenging for readers to grasp full value or possible risks if it is oversimplified

• can lead to different interpretations of the business’s strengths as the essential aspects of the business may be subjective for readers

examples of an executive summary

• startup company creating eco friendly water bottles writes an executive summary that outlines its goals, unique selling points, target market and expected revenue growth

• established manufacturing company expanding into international markets uses an executive summary to highlight market opportunities, expected revenue growth and required investment

mission statement

• defines the core purpose, objectives and overall approach of a business

• explains why the company exists, what products/services it offers, and how it intends to make an impact in the market or community

• typically internal and guides management and employees

• can also communicate business’s values and goals to external stakeholders

• should address:

  • markets

  • employees

  • customers

  • entrepreneurship

  • innovation

• situations it may apply:

  • describes company’s reasons for existence

  • aligns employees and management with the company’s goals

  • by setting clear objectives, it ensures that daily business operations are consistent with the company’s purpose

  • communicates the company’s values and purpose to customers, building brand identity and loyalty

pros and cons of a mission statement

pros:

• clarifies business’s purpose

• guides operations, decision-making and strategy

• helps employees and investors understand the company’s main objectives

• promotes unity and motivation by clearly outlining what the company is striving to achieve

• communicates company’s values to customers and partners, reinforcing its market position and enhancing brand identity

cons:

• may be too vague to guide the company’s operations effectively

• may be irrelevant due to changes in market conditions or business strategy if not updated

• often too broad to measure success and whether the company is meeting its stated objectives

examples of a mission statement

• Starbucks - “To inspire and nurture the human spirit – one person, one cup, and one neighbourhood at a time.”

• Nike – “Bring inspiration and innovation to every athlete in the world. If you have a body, you are an athlete.”

• Etsy – “Our mission is to Keep Commerce Human.”

• LinkedIn – “Connect the world’s professionals to make them more productive and successful.”

vision statement

• outlines the long-term aspirations and goals of a business

• serves as a source of inspiration and direction, providing clarity on where the company is headed

• reflects the beliefs and values of the business, aligning with its mission, core values and culture

• communicated both internally to employees, and externally to customers, suppliers and investors

• should be:

  • concise

  • future-oriented and address long-term goals of the business

  • ambitious but realistic

  • inspiring and emotive

• situations it may apply:

  • helps set long-term direction of business

  • ensures all decisions align with overarching goal

  • motivates employees by giving them a sense of purpose and aligning their efforts with the company’s goals

  • can be used in marketing material to communicate the company’s aspiration to customers, which creates a compelling brand image

  • as the business grows, revisiting the vision statement helps asses whether the company is on track to achieve its long-term goals

pros and cons of a vision statement

pros:

• establishes a clear goal that guides decision-making and strategic planning

• motivates and inspires employees to work towards a common goal, boosting morale and productivity

• sets a clear path for growth and helps the company priority activities and allocate resources toward achieving its vision

• communicates the company’s future aspirations to stakeholders, making it easier to gain support from customers, investors and partners

cons:

• may not align with the current market conditions or company goals if it is not regularly reviewed and updated

• an overly ambitious vision statement may seem unattainable which can discourage employees or create unrealistic expectations

• often broad, making it challenging to track specific achievements

examples of a vision statement

• Tesla – “To create the most compelling car company of the 21st century by driving the world’s transition to electric vehicles.”

• LinkedIn – “Create economic opportunity for every member of the global workforce.”

• Google – “To provide access to the world’s information in one click.”

• IKEA – “To create a better everyday life for the many people.”

• A potential vision statement for a local café – “To build a community of coffee lovers, by serving the best coffee at the most competitive prices.”

business concept

• describes how the business was set up or the amount of capital required to set up

• main activity of the business is given in detail and the good/service to be sold is outlined

• outlines competitive advantage that product gives and how it meets the needs of customers

• essential for clearly communicating the main idea and unique selling point of the business

• offers potential investors an understanding of what the business does and why it stand out in the market

• should provide:

  • a description of the product

  • market summary and customer description

  • analysis of potential income and profits

  • potential risks assessment

• situations it may apply:

  • pitching a new business idea to potential investors, partners or stakeholders

  • existing business that is launching a new product line or expanding into a new market

  • during the development of a business plan to clarify the company's activities and goals

  • helps communicate shifts in business strategy or the introduction of innovative approaches to the market

pros and cons of a business concept

pros:

• clearly defines the product or service and the value it brings to customers

• highlights unique features or benefits that differentiate the business from competitors

• helps in setting objectives, aligning operations, and identifying target markets

• can be persuasive in securing financial support from investors

cons:

• may oversimplify the business model, operational challenges or market dynamics

• if the competitive advantage is overstated or unrealistic, it can lead to unmet

  expectations and credibility issues

• while it defines the idea, it may not provide enough information on how the business will achieve its goals

examples of a business concept

• Airbnb

  • "A platform connecting travellers seeking aHordable accommodations with hosts who have rooms, apartments, or homes for rent."

  • highlights a unique approach to accommodation, targeting a market that seeks flexibility and affordability.

• Uber

  • "An app-based ride-hailing service that connects passengers with drivers who use their own vehicles."

  • emphasises convenience and cost- effectiveness in urban transportation.

• Warby Parker

  • "An online eyewear retailer oHering stylish glasses at a fraction of the cost of traditional retail, with a focus on social impact."

  • combines affordability, style, and a social mission to attract customers.

marketing plan

• outlines all the activities that must be undergone in order to meet the requirements of product, price, place and promotion

• essential for understanding the market environment, identify customer needs and developing strategies to meet those needs effectively

• helps businesses allocate marketing resources efficiently, target the right customers and adapt to competitive pressures

• includes a SWOT analysis which allows the business to evaluate its internal capabilities and external conditions, making it easier to create strategies that leverage strengths and opportunities and mitigate weaknesses and threat

• can include:

  • current position in market

  • market research, barriers to entry and competitor analysis

  • the product

  • target market analysis

  • marketing goals

  • marketing strategy

  • marketing mix

  • costing

• situations it may apply:

  • helps launch a new product or service by outlining how to introduce the product to the market and gain customer interest

  • when expanding into new regions or customer segments, the plan ensures strategies are tailored to local market conditions

  • provides direction for updating marketing strategies and tactics when rebranding or revamping marketing efforts

  • helps businesses set and achieve specific marketing objectives

  • allows the company to adapt its strategies based on evolving customer preferences or competitor actions

pros and cons of a marketing plan

pros:

• clarifies the business's market position

• identifies opportunities and risks through market research and SWOT analysis

• guides marketing activities, making it easier to allocate resources effectively

• provides insights that help management make informed decisions about marketing

  initiatives and priorities

cons:

• if the SWOT analysis is not detailed, it can lack actionable insights and lead to vague strategies

• conducting thorough market research and preparing a comprehensive plan can be time-consuming

• the market environment is dynamic, so the plan must be adjusted regularly to remain relevant

• external factors like economic shifts or sudden market disruptions may not be fully accounted for

examples of a marketing plan

• Coca-Cola’s SWOT Analysis:

  • Strengths - strong brand recognition and a global distribution network allow Coca-Cola to reach customers worldwide

  • Weaknesses–dependence on sugary drinks, which may limit appeal to health conscious consumers

  • Opportunities–expanding into healthier beverage categories, such as water and low sugar drinks

  • Threats–changing health regulations and taxes on sugary drinks could impact sales

• Tesla's marketing strategy focuses on premium electric vehicles and emphasises sustainability. SWOT analysis might identify strengths in innovation, but weaknesses in high production costs.

operations strategy

• a summary of how the business will undergo the production process

• includes details about production processes, location, pricing strategies, inventory management, internal controls, risk management, and supplier relationships

• ensures that the business runs smoothly by optimising resources and managing workflow to meet customer needs and achieve business goals

• ensures that the business can operate efficiently and meet customer demands consistently

• provides a structured approach to managing resources, workflows, and processes while reducing costs and risks

• helps businesses adapt to growth, market changes, and new technologies, ensuring that they remain competitive in the long term

• may include specific subsections depending on industry:

  • Trading/merchandising - focus on inventory management, including supplier details, storage, stock turnover, and reordering strategies

  • Manufacturing - require more detailed information on production processes, equipment, raw materials, finished goods inventory, and facility size and capacity

• situations it may apply:

  • Essential for setting up efficient operations and planning production or service delivery processes in a new business launch

  • Helps businesses that are growing rapidly to maintain operational efficiency and manage increasing demands

  • For established companies seeking to streamline operations, reduce costs, or improve delivery times

  • Necessary for businesses with complex logistics or multiple suppliers to ensure smooth coordination and risk management

  • Mitigates operational risks by outlining internal controls and contingency plans

pros and cons of an operations strategy

pros:

• Ensures smooth functioning of day-to-day activities

• Improves efficiency and cost-effectiveness as it optimises resources and reduces operational costs by streamlining processes

• Helps maintain consistency in product or service quality through standardised

  procedures

• Continuous monitoring of operations can identify areas for improvement

• Efficient operations can improve delivery times and service quality, enhancing customer satisfaction

cons:

• Establishing efficient operations, particularly for complex or large-scale businesses, can involve high initial costs

• As the business grows, the operations strategy may need frequent updates, which can be resource intensive

• Changes to established procedures or supply chains may cause temporary issues if not managed carefully

• Overly rigid processes can hinder flexibility and the ability to adapt to sudden market changes

examples of an operations strategy

• Amazon – Amazon’s operations strategy focuses on eHicient logistics, fast delivery systems, and automated warehouses. By streamlining processes, Amazon ensures quick order fulfillment and customer satisfaction

• McDonald's – the fast-food chain employs a standardised production process across all locations, ensuring consistency in product quality and fast service

• Toyota – Toyota’s operations strategy emphasises lean manufacturing and just-in-time inventory, allowing it to reduce waste and optimise production efficiency

human resource management

• the strategic approach to managing employees to help the business achieve its goals

• addresses the full range of employee management, including hiring, training, performance management, employee relations, and employee separation

• ensures that the business has the right staff with the necessary skills and motivation to perform their roles effectively

• essential for effectively managing the workforce and ensuring that the business can attract, retain, and develop staff

• helps align employee goals with the business's strategic objectives and fosters a productive and positive work environment

• should address:

  • staffing requirements

  • recruitment and selection

  • training, development and induction

  • performance management

  • staff relations

  • separation

• situations it may apply:

  • When the company is undergoing expansion, there is a need to hire new staff, train them, and manage increasing HR responsibilities

  • crucial during organisational changes such as mergers, downsizing, or shifts in strategic direction to manage employee transitions

  • For businesses focusing on improving their culture or employee satisfaction, a strategic HRM approach can support these goals

  • Ensures that the business adheres to labour laws and regulations regarding hiring, training, compensation, and employee rights

pros and cons of an HRM plan

pros:

• Helps recruit and retain employees with the right skills and cultural fit, contributing to business success

• Training and development opportunities enhance employee skills, motivation, and career progression, leading to higher retention rates

• Through performance management and clear expectations, employees are more likely to meet and exceed business goals

• Managing staff relations and fostering a strong organisational culture can enhance employee morale and engagement

cons:

• Developing and maintaining an eHective HRM plan requires significant time, eHort, and financial resources

• As the business grows, HRM processes may need frequent updates and adjustments to meet changing needs, which can be complex

• If HR policies and practices are not regularly updated to reflect changes in labour laws, the business could face legal issues

• Unexpected employee departures can disrupt HRM plans

examples of an HRM strategy

• Google's HRM Strategy – Google places a strong emphasis on employee satisfaction, career development, and fostering a culture of innovation. Their HRM plan includes comprehensive training programs, flexible work arrangements, and strong employee engagement initiatives.

• Retail Chain HRM Plan – for a retail business, an HRM plan may focus on hiring seasonal workers, ongoing training in customer service skills, and performance management programs to ensure staH can handle peak shopping periods

financial plan

• details anticipated earnings, costs, and financial strategies

• provides projections and forecasts to estimate future income, expenses, and financial position, ensuring the business is financially viable

• focuses on two main financial goals: profitability (ability to generate earnings) and liquidity (ability to pay debts as they fall due).

• includes several elements:

  • Sales and purchases forecasts – estimates of future sales and purchases based on market research, historical data, trends, seasonal fluctuations and industry change

  • Projected income statement (Profit and Loss Statement) – forecasts future income (revenue) and expenses, predicting profitability over a certain period.

  • Monthly cash flow – a statement that shows the timing of cash inflows and outflows, helping the business manage liquidity. It is crucial for ensuring that the company can meet its financial obligations as they arise.

  • Balance sheet – a financial snapshot that outlines the company’s assets, liabilities, and equity, reflecting the overall financial position.

  • Breakeven analysis – calculates the sales volume needed to cover all costs, helping set pricing strategies. This analysis determines the point where total revenue equals total expenses, resulting in no profit or loss.

• Situations it may apply

  • assessing the feasibility and financial requirements of a new business

  • Potential investors or lenders will want to see financial forecasts and projections to assess risk and returns

  • Helps determine the financial resources needed for scaling the business when planning for growth

  • Periodic financial planning allows a business to measure performance against projections and make necessary adjustments

pros and cons of a financial plan

pros:

• Outlines expected income, expenses, and cash flow, helping the business prepare for future financial needs

• Increases credibility with investors and lenders by showing realistic financial projections and demonstrating the business's potential for growth

• Offers insights for budgeting, setting financial goals, and evaluating performance

• Breakeven analysis and forecasting help determine optimal pricing and sales targets

cons:

• If based on unrealistic assumptions or insuHicient data, forecasts may not reflect actual performance

• Developing detailed financial projections requires significant time and eHort, especially for businesses with complex operations

• External factors such as economic downturns or sudden changes in consumer behaviour can make the projections inaccurate

• Those without a financial background may find it challenging to create accurate forecasts

examples of a financial strategy

• A new coffee shop projects monthly cash flow to estimate revenue, expenses, and when it will achieve breakeven. It also forecasts sales based on seasonal factors, such as higher sales in winter due to increased demand for hot drinks.

• Manufacturing Business: A factory projects future sales of ecofriendly products based on trends in environmental awareness. The financial plan includes detailed inventory needs for raw materials, cost of production, and expected income.