Three Strongest Components in Each Business Plan - Term Paper Example

Business Plan Analysis Student Name: Institutional Affiliation: Date: Table of Contents Business Plan Analysis 1 Student Name: 1 Institutional Affiliation: 1 Date: 1 Introduction 3 1 Brief summary of the subject business plans. 3 1.1 Eye surgery equipment maker business plan 3 1.2 Brewery Business Plan 4 2 Three strongest components in each business plan 5 2.1 Eye surgery equipment maker business plan 5 2.2 Brewery Business Plan 7 3 Three weakest components in each business plan along with recommendations 8 3.1 Eye surgery equipment maker business plan 8 3.2 Brewery Business Plan 9 4 Challenges and lessons 10 4.1 Challenges 10 4.2 Lessons learnt 10 5 Demonstrated competencies 11 6 Conclusion 12 References 13 Introduction A business plan is a professional document used to outline the goals of existing or non-existing business and the appropriate strategy that will help the business achieve the goals. Most importantly, a business plan provides information relating to the financing of the business, market dynamics, product differentiation and operational issues (Cuervo, 2007; Derammelaere, 2008). The process of preparing a business plan is quite involving. It requires careful analysis of different sets of data to come up with a final document that should lead a business to profitability and success (Blackwell, 2011). The purpose of this report is to analyse two different business plans by comparing and contrasting the strengths and weaknesses in both. Additionally, the paper will discuss the challenges involved in business plan preparation and how they can be overcome. Finally the paper will identify the lessons learnt and the competencies the author of the report demonstrated from the analysis of the two business plans. This will be achieved through appropriate subheadings in the report. 1 Brief summary of the subject business plans. 1.1 Eye surgery equipment maker business plan Source: www.bplans.com NovOculi Inc. business plan is intended to attract investors to finance its research and development in ophthalmology. The start-up company plans to launch a new refractive correction technique in the market and the surgical equipments required to do so. The technology and the technique have all been patented by the company and the next agenda is to take the product into the market. According to company’s research, the available techniques in the market such as LASIK result in destruction of the epithelial layer of the Eye’s cornea. The damage may take time to heal and mostly results in some complications in the eye. NovOculi is offering a solution to this problem by introducing a non-invasive corneal sculpting (NICS) technique which does not require an incision of the epithelium thus causing no destruction. The principals at NovOculi assert that more than 90 million Americans require a refractive correction surgery. This is the target market for the product which is currently being served by a few competitors including LASIK. (NICS) is better placed as it offers minimal disturbance to the cornea and thus most patients are likely to prefer it. This knowledge informs the marketing strategy of the company which targets eye surgery centers in the first phase to push demand for the technology. In the second phase, the marketing strategy targets patients to accelerate demand for equipment required to do the surgery. The business plan projects profitability for the enterprise only after four years of operation. In the fourth year, the company is expected to post a net profit of $30 million. 1.2 Brewery Business Plan Source: www.bplans.com Sedibeng breweries business plan intends to lay out a strategic plan the company intends to adopt to achieve its objectives. The objectives include; provision of high quality traditional beer to customers, acquisition of 6% market share of the entire beer market in Botswana, creating employment and opportunities for the local communities and success of the enterprise. The company directors believe there is a substantial market amongst the working class population of Botswana mainly in the mining industry. This market will be very appreciative of good traditional beer offered at considerable affordable price. To attract this market, the marketing strategy will focus on informing the prospective buyers particularly what need the product will be satisfying. Essentially then, the company seeks to be driven by the market needs and dynamics to adjust its production methods, product features and marketing strategy. The business plan appreciates that there is stiff competition in the beer market and therefore highlights Sedibeng’s keys to success which include a commitment to producing uncompromised quality of beer for the market. To do so, the company will need committed employees and emerging brewing technology. An effective distribution channel will complement the marketing efforts so as to deal effectively with the competition. The plan acknowledges that stringent financial control is crucial in sustaining the activities of the organization. The business plan projects profits for the company within the first year of operation. In the first year, the company is expected to post a net profit of $100,000. This should increase gradually to $180,000 in the third year 2 Three strongest components in each business plan 2.1 Eye surgery equipment maker business plan Citing of research information This business plan has adequately cited data from research carried out by the drafters of the business plan as well as from independent sources such as print media. This is very effective in convincing the audience of the business plan that the drafters have done adequate research to back the plan. For a business to succeed in the medical field, it products must be supported by knowledge gained from professional research mainly by experienced individuals in the industry. The business plan has succeeded in portraying this by continuously acknowledging the input of the experienced principals at NovOculi. Most importantly, the business plan cites at onset the main competitive advantage of the company which is a revolutionary technology owned and patented by the company. Adequate explanation in the market analysis and competition sections The business plan has adequately and sufficiently furnished the audience with clear market information mainly from primary research and secondary research materials. The information provided by the plan supports the conviction of the drafters of the plan that indeed there is a vast unsatisfied market for the product being offered by NovOculi. The presentation of simplified research data is crucial in adding weight to the argument being fronted by the document regarding the target market for the product. The competition section profiles LASIK technology as the main competitor in the industry and identifies the huge investment made by institutions in buying equipment required to conduct LASIK. By identifying the strengths of the competitors, the document presents the drafters as people with clear knowledge of the market thus in a position to identify the strength of their own brand against the competition. Clear flow The document has been arranged in a clear flow from one section to the other. This has enabled the drafters to communicate the key information crucial to the reader in an easy-to-understand manner. From the onset, one is able to identify and understand the product being offered by the company, its competitive advantage, the goal of the company and the strategy to be employed. Keeping a business plan simple and easy to understand is all that matters in as far as business plan writing is concerned (Debelak, 2005). 2.2 Brewery Business Plan SWOT analysis SWOT is an analysis tool which is very popular with business scholars and the business community at large (Reading, 2004). It audits a company’s external and internal environments to bring out the strengths, weaknesses, opportunities and threats facing a company. By using this tool in the document, the drafter is able to explain the company’s position in a way that most will understand instantly. The tool also helps the drafters of the business plan to arrange the collected information in an orderly and clear manner to avoid confusion. The business plan continuously reiterates the company’s commitment to quality and customer focus throughout the document. This is very important as it keeps the audience in touch with the main competitive edge of the company which is customer focus. The company seeks to understand the needs of its consumers by offering the right mix of price, quality and convenience to them. The business plan contains additional information in form of control measures and contingency planning. These sections provide for an opportunity for the drafter of the business plan to communicate any other pertinent issues that may affect the business which may have lacked legitimacy to be mentioned pin the main sections of the business plan. It is important to note that, despite the fact that the issues were not featured in the main sections, it does not necessarily mean they are of less meaning to the audience of the business plan. 3 Three weakest components in each business plan along with recommendations 3.1 Eye surgery equipment maker business plan The financial projections show that the company will make losses for the first four years of operation. In the fifth year the company will make a hefty $30 million in net profits. This phenomenon is not explained convincingly by the document. There is no credible explanation as to how the sales will rise to almost $60 million from less than $10 million in the fourth year. The business plan clearly comes out as grossly exaggerated in terms of the success it can achieve within such short time considering the market entry hurdles. Realistic financial projections are critical in convincing the readers of a business plan that the drafters have done their paper work well and understand the finance aspects of the business candidly (Bygrave, Lange, Mollov, Pearlmutter, & Singh, 2007). According to the plan, the sales force will have attracted at least forty-four member by year five. These leaves room for curiosity from the any expert analyzing the document. It might put the presenters of the business plan in a difficult position explaining the factors that inform the level of certainty in future human resource needs, yet the business is not operational. As noted by Barringer (2009), long-term plans should be left open-ended if the drafter of a business plan is not entirely sure with them. The document contains several technical terms which are not clearly explained such as the use of a ‘440 nm wavelength laser’ and a process known as ‘iontophoresis’. These and several other terms throughout the business plan may hinder effective communication to individuals who are not familiar with the ophthalmology field as a profession. Business plans should try as much to simplify information for effective communication (Debelak, 2005). 3.2 Brewery Business Plan The business plan does not have a clear flow of ideas and communication from one section to the other. This most certainly presents a difficulty for the reader to find his/her way through the document trying to piece the information together to make meaning out of it. It is not clear to understand the purpose of the business plan from the beginning as there is no indication in the document. The executive summary is too long and unstructured thus presenting difficulty for executive readers such as prospective financiers. Readers’ attention is captured by the first few sentences of a business plan so it is important to keep it short and as captivating as possible (Mason, & Stark, 2004). The business plan does not clearly identify its main competitors but rather refers to the competitor as ‘brewer XX’. This may give an impression of casualness in research and compilation of data. As argued by Shane & Delmar (2004), a serious investor will be very apprehensive of a document that lacks sufficient details to back arguments. Clear identification of competition sources shows the preparation of the business plan involved extensive market research. The business plan does not help in outlining the unique competitive advantage that the business is set to enjoy once it enters the market. The document vastly mentions quality and reaching out to remote markets as key competitive advantage. It fails to identify a clear advantage the business has over the rest of the competition. The long paragraphs appear to be repeating ideas a lot which may be a little irritating for readers. In business plans, short but informative paragraphs communicate more effectively than long, vague paragraphs (Derammelaere, 2008). 4 Challenges and lessons 4.1 Challenges Preparing a business plan can be very involving considering the amount of information to be included in each section of the document. This information may not be readily involved in books or from online sources. To get industry specific information, one has to pay physical visits to the premises of the people in the industry which may be difficult at times due to some respondents being economical with information. The process is also time-consuming (Brinckmann, Grichnik, & Kapsa, 2010). To overcome this, Brinckmann et al (2010) recommend collecting of information from consulting firms as a viable option since it saves time and resources in sourcing for accurate information. Financial projections section is usually a tricky area of a business plan. This is the section that most readers look at especially in business plans intended to be used as financing tools. Understanding the financial statements and projections is a difficult task in itself and it requires one to have some background financial accounting knowledge to interpret the figures. One can refer to accounting books to understand the financial projections. 4.2 Lessons learnt There are several lessons I have learnt about business planning as explained below; 1. Business planning involves identifying a primary goal that a business intends to achieve. The goal will then inform the strategy to be adopted by the management to reach the goal. This is the basis of any business plan. 2. The simpler a business plan gets, the better it is for your readers. When a business plan communicates the ideas of the drafter in a clear concise manner, it is likely to have greater impact than when the drafter has to explain in person most of what is contained in the plan. 3. having conservative financial projections and sales forecasts shows that the drafter is in terms with the reality on the ground based on the research knowledge at he/she has acquired in the preparation process. 4. A competitive edge is the main item that the marketing analysis and marketing strategy should expound on to convince the audience of a business plan. The audience will always be eager to see how the business is prepared to fight competition. 5. The first few sentences of a business plan are an opportunity to capture the attention of your audience in a business plan. One should therefore introduce the business, its product, the competitive edge and expected success in the market at this stage. 5 Demonstrated competencies I demonstrated competence such as understanding of the planning aspect in relation to strategy formulation in businesses. This knowledge helped in analyzing the positioning of the company in the market as well as the marketing strategy proposed in the business plans. Financial accounting knowledge also helped me identify the casualness employed in the sales forecasts and financial projections in the documents. Knowledge in business plan writing was particularly helpful in understanding the small mistakes such as in idea presentation and in data analysis in the two business plans. 6 Conclusion A business plan is an important document which can be used to guide a new business, source for funding for a business and refocus an existing business to a desired goal. Skills such as ability to research and use of research data are vital in writing a business plan. Presentation of ideas and arguments is also an important consideration in preparation of a business plan. It is the simple, well explained and realistic business plans that achieve the goals of the drafters, as such one should consider these factors when embarking on business plan writing. The NovOculi business plan has succeeded in offering adequate information and communicating the strategy of the businesses while the Sedibeng brewery business plan didn’t quite achieve this. References Barringer, B. R. (2009). Preparing effective business plans: an entrepreneurial approach. Upper Saddle River. Blackwell, E. (2011). How to Prepare a Business Plan: Create Your Strategy; Forecast Your Finances; Produce That Persuasive Plan. Kogan Page Publishers. Brinckmann, J., Grichnik, D., & Kapsa, D. (2010). Should entrepreneurs plan or just storm the castle? A meta-analysis on contextual factors impacting the business planning–performance relationship in small firms. Journal of Business Venturing, 25(1), 24-40. Bygrave, W. D., Lange, J., Mollov, A., Pearlmutter, M., & Singh, S. (2007). Pre-startup formal business plans and post-startup performance: a study of 116 new ventures. Venture Capital Journal, 9(4), 1-20. Cuervo, A. (2007). Entrepreneurship: Concepts, Theory and Perspective. Springer. Debelak, D. (2005). Perfect Phrases for Business Proposals and Business Plans. McGraw Hill Professional. Derammelaere, S. (2008). Writing a Convincing Business Plan. Barron's Educational Series. Mason, C., & Stark, M. (2004). What do investors look for in a business plan? A comparison of the investment criteria of bankers, venture capitalists and business angels. International Small Business Journal, 22(3), 227-248. Reading, C. (2004). Strategic Business Planning: A Dynamic system for Improving Performance & Competitive Advanatge. Kogan Page Publishers. Shane, S., & Delmar, F. (2004). Planning for the market: business planning before marketing and the continuation of organizing efforts. Journal of Business Venturing, 19(6), 767-785. Read More