6 Steps In Making A Business Plan

You can never be too careful in setting up a business. Whether it is a small carinderia, a medium-scale drug store, or a large manufacturing company, a lot of things can go wrong, even the simple ones. This is even truer during your initial setting up of your business. This is why a business plan is essential in starting your own business. No matter how big the company you plan to run will be, having an organized business plan will help you a lot through the process. Here are six steps to making your own business plan:

1. Executive Summary. The Executive Summary is the summation of the entire business plan. It illustrates what kind of business it will be. It explains all your findings regarding the business — how it will be implemented, how much buyers it will have, how it would be marketed, how much it will generate for the following years to come, and how much it will grow. It must be concise and easily understandable

2. Research. The next part of your business plan should contain your re-searches — such as Porter’s analysis (level of competition in the existing companies in the same industry, how much the consumers in the industry can dictate the pricing, how much the suppliers of raw materials in the industry can affect the pricing, if there are substitute products or services that can be availed of instead of yours, and if it is easy to enter the same industry), PESTEL analysis (Political – government policies; Economic – economic status of the country and industry; Social – how the market behaves, buying patterns, etc.; Technological – available technology in the industry; Environmental – implications of the industry in the environment; and Legal – laws that affect the businesses in the industry), and your feasibility studies.

3. Product/Service. After the thorough discussion of your researches regarding the business you want to put up and the industry it belongs to, now is the time to define what exactly your business will be producing. What kind of product will you make? What are its innovations as compared to the ordinary products offered in the market? How big is it? How different is it from competing products?

How will your products evolve? No matter how new and innovative your products or services are, they are still governed by the concept of product life cycle — that is, it will experience growth in sales, but it will eventually slump and be no longer marketable in the near future. How will you regain the customers? Will you reinvent the product? Or will you be introducing an upgraded version of it? In planning your business, you should plan how the business will grow.

4. Operations and Logistics. In this part of your business plan, you should be able to answer questions like: What is the right layout and size of the production area? How much raw materials should you buy in one production schedule? Where will you store these raw materials? Where will you store your unsold finished product? How fast will the raw materials spoil? When do you have to re-order your material so you never run out of them?

5. Human Resource. In order to produce quality output, quality input and quality process must be used. For you to have a quality process entails getting the right people and assigning them the right tasks. Your business plan should not only contain what the business will be and how the products or services will look like, but also contain the jobs necessary in producing them. This is the part where you plan the human resource aspect of your business plan. In this chapter of the business plan, indicate the necessary roles and positions that the company needs, and the qualifications/requirements needed from the person who will be handling the position.

6. Finance. Last and truly not the least is the finance aspect of your business. This part of the plan contains everything that will be needing money — from the business registration fees, purchasing of raw materials, overhead costs, to the rent expenses, electricity, and water expenses.

The most important detail that you have to include in the finance chapter of your business plan is the expected five-year growth of the company. You should at least make an estimate of how much the company can grow in its first five years of operation. Check if your cash flow will be sufficient or if you have to source a loan.

There are cynics who claim that planning in business is a sham because reality rarely turns out as planned. But this is a myopic view of the process. In making a business plan, you get to consider factors that were not apparent initially and this allows you to make needed changes before incurring losses. Among many other benefits, you get to see what resources will be needed and potential problems that may be encountered. While it is not possible to plan for every possibility, having a business plan will vastly improve your chances of success.

*Originally published by the Manila Bulletin. Manila Bulletin, C-6, Sunday, February 14, 2016. Written by Ruben Anlacan, Jr. (President, BusinessCoach, Inc.) All rights reserved. May not be reproduced or copied without express written permission of the copyright holders.