Business environment
Your business environment section covers all the major aspects of your company’s situation that are beyond your immediate control, including the nature of your industry, the direction of the marketplace, and the intensity of your competition. Look at each of these areas in detail to come up with lists of both the opportunities that your business environment offers and the threats that your company faces. Based on your observations, you can describe what it takes to be a successful company.
For more information on how to explore your business circumstances and the overall environment that your company competes in, check out Part 2.
Company description
This section should go into much more detail about what your company has to offer. The description includes information about your management, the organization, new technology, your products and services, company operations, your marketing potential — in short, anything special that you bring to your industry.
In particular, look carefully and objectively at the long list of your company’s capabilities and resources. Sort out the capabilities that represent strengths from the ones that show weaknesses. In the process, try to point out where you have real advantages over your competitors.
Examining your company through your customers’ eyes helps. Today many interested observers of business organizations want to know your plans for dealing with issues of environmental sustainability, social responsibility, and creating staff inclusiveness policies. Be sure you address these. With a consumer viewpoint, you can sometimes discover customer value that you didn’t know you provide, and as a result, you can come up with additional long-term ways to compete in the market.
To start to put together all the things that your company brings to the table, flip to Chapters 9 and 10.
Company strategy
Company strategy brings together everything that you know about your business environment and your company to come up with future projections.
Everybody knows that the future is uncertain, so you need to talk about the ways your business world may be different in the future. List alternative possibilities for action, and in each case, describe what your company is doing to anticipate the changes and take advantage of new opportunities. Explain how your current resources might be rapidly transformed to meet new possibilities and what critical signals you will monitor to determine if and when such a pivot is necessary.
To prepare for change in your business world and to get info on how to think strategically about your company’s future, turn to Part 4.
Financial review
Your financial review covers both where you stand today and where you expect to be in the future.
Describe your current financial situation by using several standard financial statements. True, these statements don’t make for the liveliest reading, but the people who are interested in the financial part of your business plan expect to see them, and some of these folks will have a magnifying glass in their hands. For everyone else, make certain that your financial statements are referenced and support the assumptions and arguments that you make in the other sections of the business plan. The basic financial statements include the following:
Income statement: A list of numbers that adds up all the revenue that your company brings in over a month, a quarter, or a year and then subtracts the total costs involved in running your business. The total is your bottom line — the net profit that you make during the period.
Balance sheet: A snapshot of your financial condition at a particular moment, showing exactly what assets your company owns, liabilities that exist including money it owes, and its net worth.
Cash-flow statement: A record that traces the flow of cash in and out of your company over a given period, tracking where the money comes from and where it ends up. The cash-flow statement only tracks money when you actually receive it or spend it. Potential investors are particularly interested in when you plan to achieve “positive cash flow” status — that is, cash inflows become greater than outflow and you are not reliant on outside injections of cash to pay bills and stay solvent.
Your projections about your future financial situation use exactly the same kind of financial statements. But for projections, you estimate all the numbers in the statements based on your understanding of what may happen. These are called pro forma statements. Make sure to include all the assumptions you made to come up with your estimates in the first place.
To get a head start on your financial planning, flip to Chapters 11 and 12.
Action plan
Your action plan lays out how you intend to carry out your business plan. It points out proposed changes in management or the organization, for example, as well as new policies or procedures that you expect to put in place. Also include any additional skills that you, your managers, and your employees may need to make the plan work. Finally, you want to talk about how you will generate excitement for your business plan inside your company, creating a culture that supports what you want to accomplish. Only then can you have real confidence that your business plan is going to succeed.
