Creating Business Plans (HBR 20-Minute Manager Series)

Harvard Business Review

• Publisher: Harvard Business Review Press
• Year: 2014
• Print ISBN: 9781625272225
• eBook ISBN: 9781625272270
• Topic: Business
• Subtopic: Business Skills
• Index: Business

A well-crafted business plan generates enthusiasm for your idea and boosts your odds of success--whether you're proposing a new initiative within your organization or starting an entirely new company. Creating Business Plans quickly walks you through the basics. You'll learn to:

• Present your idea clearly
• Develop sound financial plans
• Project risks--and rewards
• Anticipate and address your audience's concerns

Don't have much time? Get up to speed fast on the most essential business skills with HBR's 20-Minute Manager series. Whether you need a crash course or a brief refresher, each book in the series is a concise, practical primer that will help you brush up on a key management topic. Advice you can quickly read and apply, for ambitious professionals and aspiring executives--from the most trusted source in business. Also available as an ebook.

Describing the Opportunity

Describing the Opportunity

You know your idea inside and out, so it can be easy to lose sight of the details that will matter to investors when you draft your business plan. Ensure that your plan explains how your offering will help customers and places that offering within the larger business context, too.

Presenting your idea

Win readers over with a description of your idea that addresses a clear and specific business need and provides details about the larger context within which your offering will thrive.

To add customer focus to your plan, consider these questions as you define your product or service: What customer pain are you easing with your offering? What special technology, new perspective, or unique concept will you offer customers that is better than what’s available now? And what will compel them to buy your product rather than your competitors’?

Even if you’re not trying to raise a round of venture funding and are instead trying to build a persuasive case for a new product or initiative within your company, you must make sure the business need is clear. If your investors and managers don’t agree with your explanation of the problem, they’re not going to support your venture. Let’s say, for instance, that you’re trying to solve the problem of low customer usage of your company’s mobile retail shopping app. You have an idea to redesign the app that could increase customer engagement. But what if the technologists at your company don’t think there’s anything wrong with the app? What if, instead, they believe that low customer usage is the result of poor marketing? To gain buy-in for your idea, you’d have to build a case for the technology group and other decision makers with evidence that proves that the root cause of low engagement is a design flaw, not a problem of branding or awareness.

Of course, you can’t really describe your plan and its customer focus clearly without addressing the “context” in which your business will flourish. We’ll explore that part later, in “Analyzing the business environment.”

Executive summary

The executive summary is a concise description of what your company is, where you want it to go, and why it will be successful. In just one page, it gives readers an understanding of your proposal and captures their interest in your new venture. In some cases, this is the only section your time-pressed audience may read, so the key is to present your concept passionately and lay out why you believe the business will be a resounding success, even as you acknowledge the risks and costs involved. A well-crafted executive summary will inspire your reviewers to read on.

SAMPLE COVER PAGE

To give you a better sense of how a business plan might look, this book offers a primary case. Meet TechnoExercise Corporation (“TechEx”), an imaginary, hypothetical online diet and exercise service based in Cambridge, MA. Woven throughout this book, you’ll find examples of certain sections of TechEx’s business plan that will help you understand how it fits together. This is just one sample—there are many variations, since a good business plan is always tailored to its audience.

Here is the material that goes on the cover page:

TECHNOEXERCISE CORPORATION

TechEx

559 Treburke St.

Cambridge, MA 02115

[phone]

www.technoexercise.com

Ping Huang

Founder and Chief Executive Officer

email: [email protected]

cell: [phone]

Anjali Banerjee

Chief Financial Officer

email: [email protected]

cell: [phone]

Mercedes Meceda

Chief Technology Officer

email: [email protected]

cell: [phone]

Plan prepared July 2014 by Corporate Officers

Sketching out your executive summary can give you a rough idea of what you plan to say, but rewrite and polish it once you’ve finished drafting your entire business plan, paying attention to those areas that may have changed during the writing process.

An executive summary typically includes the following elements:

• A mission statement: one or two sentences that describe what your business is about, its philosophy, and your vision for its future.

• A succinct description of the industry and market environment in which your new venture will develop and flourish.

• An explanation of the unique business opportunity you’ll be taking advantage of.

• A brief mention of the competitive advantages that differentiate your product or service from rivals’ offerings.

• A rundown of the financial potential of your new venture, as well as the anticipated risks.

• A description of the management team and their respective roles.

• Information about the stage of the business (on the drawing board, in start-up mode, ready to expand), its financial status (whether you’ve raised any money or have taken out any loans for the business thus far), and its structure (partnership, corporation, affiliate). Online resources such as the website of the Small Business Administration will be very helpful here.

• Details on the capital requested so that readers understand what you hope to gain from them, such as money, contacts in the industry, or other resources.

SAMPLE EXECUTIVE SUMMARY

TechEx’s mission: The driving principle of Techno-Exercise Corporation (“TechEx”) is to change the way women lose weight and tone their bodies using four key elements: customized data-driven metrics, personal psychology, access to certified health professionals, and emotional support from a community.

How it works: Customers wear a stylish monitor (fitfast) that tracks their eating and exercise patterns online. They also receive one-on-one weekly video chat sessions with a registered dietician, behavior coach, and trainer, all of whom monitor their weight loss and muscle gain via a customer-supplied wireless scale. Through message boards, instant messaging software, and moderated chat rooms, customers also have access to a community of fellow dieters who provide them with emotional support and encouragement.

Structure: TechEx, which was incorporated under the laws of the State of California on August 30, 2013, is headquartered in Cambridge, MA, in the heart of the US entrepreneurial community. The company has filed a petition with the Internal Revenue Service seeking to qualify as an “S Corporation.”

Market: The service appeals to busy professional women who don’t have time for traditional fitness and weight loss programs. These women may be overweight and in search of diet plans, or they may already be at a healthy weight and looking to mix up their fitness routines. TechEx will promote its service through targeted advertisements in diet and fitness magazines. The company will expand its marketing activities through strategic alliances with employers and insurance plans as well as partnerships with healthcare groups and gyms.

Management team: The company’s founder, Ping Huang, is a former operations manager at an online nutrition start-up. She met her business partners, Anjali Banerjee, who worked at Morgan Goldman investment bank in Dublin, Ireland, and Mercedes Meceda, a former Dain consultant, at MIT’s Sloan School of Management. Together, this management team is responsible for TechEx’s daily operations and owns 100% of the company.

Competitors: The weight loss industry is crowded and the market environment is highly competitive. TechEx’s primary rival is E-Fitfab, a full-service program similar to TechEx. However, E-Fitfab does not have any element of community and social support, which research indicates is very important to female dieters. Other large, well-known weight loss companies, such as Calorie Counters and Jenny Haig, tend to focus more on healthy eating rather than exercise; furthermore, they are so big that they cannot offer customized services. Other competitors include free apps like My-ExerciseBuddy and Lose Weight!, which help users track food and exercise while also networking with friends. These products are aimed at customers who take a DIY approach to diet and exercise, while TechEx is targeted at customers who prefer a tailor-made full-service program. In short, TechEx is the only company that offers customizable and convenient diet and exercise solutions combined with the social support critical to effective weight loss. Nonetheless, one of the biggest risks the company faces comes from potential me-too competitors who might exploit parts of TechEx’s business model.

Pricing strategy: TechEx is priced below E-Fitfab, which will put it in square competition with that company, but TechEx’s pricing still positions it as a first-class service provider.

Financial status: TechEx seeks funding of $250,000 that will add to the $84,000 of initial financing that was raised among friends and family. At this point, the biggest challenge that TechEx faces is cash flow. The company requires immediate funding for system development and technology programming as well as advances for contracts with dieticians, behavior coaches, and trainers. These represent TechEx’s biggest costs.

What is TechEx’s future? The company estimates first-year sales of $11.74 million, gross margins over 60%, and net margins of approximately 42% before taxes. The company expects to be profitable after the first six months of operations. After that, TechEx plans to embark on an international expansion plan in Europe. Ultimately, the management team would like to take the company public.

Business description

The business description is another summary, but it differs from the executive summary because it provides a high-level, forward-looking overview of your proposed venture. This is the section of the plan where you go into greater detail about your business. Think of it as an extended elevator pitch that helps readers and potential investors quickly grasp the concept of your business and its value proposition. The business description must also demonstrate how an opportunity can g...

Table of contents

• Cover
• Title Page
• Copyright
• Contents
• Why Write a Business Plan?
• Describing the Opportunity
• Introducing Your Management Team
• Bringing Your Product to Market
• Projecting Financial Risk and Reward
• Attachments and Milestones
• Conclusion
• Test Yourself
• Learn More
• Sources
• Index
• Back Cover