Key Components to a Business Continuity Plan

What is a Continuity Plan?

The business continuity plan (BCP) encompasses disaster recovery planning and business resumption planning. The BCP outlines how the company will continue operations in the event of disasters and unforeseeable events that shutdown facilities or operations.

Recognize Critical Factors

Critical factors are factors carried out within the firm that are essential to operations. Without these critical factors operating properly the product/service cannot be offered or manufactured. Often critical factors create competitive advantage for your firm and will be absolutely necessary to continue operations following some kind of disaster. You can use your business plan and developing operations to recognize these key factors. Highlight points in production that create value and are irreplaceable in operations; these will be your critical factors.

Create Contingency Plans

There are a number of events that can require BCP implementation. Examples include earthquakes, storms, power outages, cyber-attacks, fires, and other disasters. For each event a recovery plan should be created. The recovery plan should outline the requirements to getting critical factors up and running again in order to continue business operations in times when perhaps employees are unable to meet at the office, etc.

Keep BCP Up-to-Date

As the organization grows and evolves so should the BCP. Over time new needs will arise and new threats, each needing to be addressed formally by a BCP. Frequently, BCP procedures should be reviewed and confirmed to verify that needs are met. This includes testing of recovery procedures and functions. This is normally done semi-annually or annually.

Communicate Procedures

As with any organizational plans and procedures, they need to be communicated and taught to all players within the organization. Management should frequently review and train employees on continuity plans. Make all information easy to access and visible to all employees. Take the time to gather all information and put it in one place where all employees know to find it. Once this information is gathered make a step by step guide for each employee defining their role in the contingency plan. This will help everything go smoothly if a situation ever arises.
Having a continuity plan will save you lots of time, money, and headaches if a situation were ever to arise. In times of disaster the last thing you want as a manager is to be unable to get your business going again while your employees run around unsure of what to do. A good continuity plan will outline critical factors and define each employees role in getting those critical functions up and running again as quickly as possible.

Who Should Write Your Business Plan?

Write Your Own Business Plan

The answer to who should write the business plan may seem obvious but here are three reasons why you the entrepreneur and founder of the business should write the business plan. This can be done from scratch or done with business plan software/templates which facilitate the process.

You Are the Expert

When it comes to your business nobody knows it better than you. You understand the direction and goals of the company which are vital to articulate well to important lenders and investors. Ultimately, you will be the one presenting these details and complexities to such men and women meaning that you need to be confident in all the aspects of your business plan. By taking the time to write this plan yourself you become more familiar and comfortable with the information presented.

You Will Learn More about Your Company

While you are the expert of your company there are always opportunities to learn more each day. Businesses, markets, and industries are complex and always changing. Financial and market analysis will prove extremely beneficial to you as you seek to start your business. In fact, while doing these analyses you may find details that will lead you to adjust your plan and business model which will lead to great financial success. By doing these analysis you make yourself even more of an expert in your business and market providing greater information for sound decision making in the future.

Writing the Plan Yourself Provides Flexibility

As your business plan develops and your business unfolds most likely necessary changes will be discovered. Having control of your business plan provides the flexibility to not only discover necessary changes but to make them quickly and in the manner you would like. This will occur as the goals of the firm change over time with business development. Flexibility is a powerful asset in the start-up as variables will be changing every day.
Writing your own business plan, whether it be from scratch or using software, has many benefits that add to your ability to manage your business. Success begins with the planning process. By writing your own business plan, achieving success is in your hands from start to finish.

Business Plan to Be Different

Business Planning for Market Share

A tendency when creating a new business plan is to simply mimic a previously successful plan created by someone else. While sometimes this can lead to financial success, more often than not this will not lead to high profit margins that others are enjoying within whatever industry it may be.
Within industries where firms enjoy high profit margins, profits are often maintained because it is very difficult to enter those markets or in economic terms, barriers to entry exist. Incumbent firms experience large profits because they have been very successful at keeping other companies from entering and taking market share. Your business plan should address this very issue of market share and how you plan to obtain it.

Copying is Easy to Counteract

The reason that new firms cannot enter the market so easily using previous business plans is simple: The incumbent firms have already done it and know exactly how to counteract it. Their scale, lead time, and price capabilities simply outmatch new, up and coming firms making entry through similar strategies very difficult.

Find a Niche

The key for a new entrepreneur with a business plan is to find a niche. This niche can come in various facets of the business whether it is access to resources, new technologies which cut costs, an exclusive or specialized customer base, or product features that other firms do not produce. Look for a target market that does not necessarily appeal to the mainstream customer base but has potential to grow.

Find Creative Solutions

At the end of the day an entrepreneur looking to crack into an industry must be creative. Try marketing a product to a different customer base or applying a business plan that has been successful in another industry to your industry, etc. Success comes in being different because different is difficult to react to and protect against.
Business is a competitive, never-ending process full of success and failures, new faces and old, and changes. Just because something has worked before cannot promise that it will work again. As you sit down to write out your next business plan, be creative, analyze the edges, and look for your niche that can lead to long-term success.

What to Include When Writing a Business Plan

Starting a Business Plan

Those who have written a business plan know that writing your first one can be daunting. It is difficult to know exactly what to include, where to get your information, and how to create solid financial statements. For those who are writing a business plan for the first time here are six necessary inclusions to a great business plan.
Executive Summary: The executive summary is essentially a summation of what your business does and you intend to run your business. This will be the very first section included in your business plan and is the “hook” to the rest of your business plan. It has even been termed the “resume” of your business which will get you the interview with investors, lenders, and other professionals. Take time to write a clear, concise Executive Summary which represents the key competitive advantages of your business.
Organizational Goals: Somewhere in your business plan your plans, goals, and intentions need to be clearly stated. Ask yourself where you see the business in three, five, then 10 years and include this in your business plan. Have a vision and share that vision.
Company Overview: Within this section of your business plan take the time to describe the organizational structure, the product/service, the management team, the company location, and any other relevant information regarding the company and its key differentiators. This will give readers a sense of “who” the business is.
Industry and Market Analysis: The importance of market analysis cannot be emphasized enough. In order to be successful firm management must understand who their customers, competitors, and stakeholders are. Taking the time to analyze this data will teach management invaluable information and will show investors the opportunities that exist within that market segment.
Marketing/Sales Strategy: After a careful market and industry analysis the firm must choose its Target Market. Answer questions such as,
• Who are we going to sell our product to?
• How are we going to sell our product?
• How will we create or gain market share over time?
• What is our pricing strategy?
• How can we connect best with interested buyers?
These are only a few examples of good questions to ask which will help you create a strong marketing plan going forward.
Pro-forma Financial Statements: One of the most important parts of the business plan and probably the part that will be most scrutinized by readers is the financial statements section. These statements such as the Balance Sheet, Income Statement, and Statement of Cash Flows are projections. Be sure to be realistic but optimistic in your projections as lenders and investors want to see potential profits quickly. Analyze current members of your industry, industry forecasts, and possibly perform your own demand surveys before making your statements. Robust financial data will play a huge role in gaining support for your business venture.

Consider the Audience

These six sections are not necessarily all that needs to be included in your business plan. Just like when writing an essay, you need to tailor your plan to the audience. Some audiences require more items than this while others may require less. These six sections are included in nearly all business plans with their size and detail being dictated by audience but having them will increase the strength of your business plan.

Writing a Business Plan: Keep it Simple

Keep Your Business Plan Simple

Business plans are fundamental in order to obtain funding and to get your business off the ground. Today, more and more people are writing business plans and see the value in doing so. On that note there are tons of materials, articles, and help guides to writing these documents. The business plan serves as an opportunity to present your business on paper in an objective manner to business professionals, lenders, and other sources of financing. Keeping all of this in mind, it is very important to remember to keep your business plan simple.

Use Simple Language and Sentence Structure

A business plan is not a thesis or dissertation paper. Often thesis type papers are filled with technical language
and jargon. Be careful not to assume that the reader knows the meaning of specific industry-related wording or acronyms. Business plans should be filled with clear, concise writing with straightforward verbs that depict the same meaning as other, more complicated, verbs. This makes it easier for a reader with limited time to read through the document and get the central idea.
Sentences should be short and to the point. It is hard for readers to continue reading a single sentence for multiple lines and retain all the information. The shorter and more simple the sentence structure the better. In short, don’t use eight words when five will do.

Simplify the Product Pitch

A large portion of the business plan can be describing your product or service, your business model, and everything about how your business works. While it is very important to convey this information in an effective manner, it is more important to prioritize this information. Focus on your competitive advantages; the things that separate you from the competition, that explain why people will care, and what difference your business will make once in existence. This is often done by selling a mission or core values when starting a business in an established industry. Always try to separate yourself from competitors. Doing so will simplify your pitch and allow readers of your business to focus on your key competitive advantages.

Use Clear and Simple Formatting

Amazingly enough, document formatting plays a huge role in readability of a document such as a business plan. Make sure you pay attention to font size, heading structure, page breaks, chart usage, and the amount of white space on your business plan. Here a few suggestions regarding these topics.
• Limit the amount of font sizes in the document. Two to three font sizes max.
• Create an agenda with headings and subheadings. Be consistent in how headings are formatted both in font type and size. Headings and subheadings should be clearly different than one another and from body text.
• Use page breaks when headings are at the bottom of a page.
• Keep charts simple and straightforward while providing explanations within body text. Avoid 3D charts unless applicable in some way.
• A lot of text crammed into little space is difficult to read. Use an adequate amount of white space to increase readability. Pay attention to margin size and paragraph spacing.
These are just a few pieces of advice regarding formatting. Materials found online provide a more in-depth look at improving document formatting.

Structure Enhances Content

Content is obviously the most important thing when writing a business plan. Your plan must be sound, well thought out, and intelligent. One trap that people often fall into is disregarding things such as structure when writing. Simplifying your business plan in the ways described above will visually impress and enhance the reader’s ability to focus on content. The benefits of these simple structural and writing techniques will separate your business plan from the rest.

Financing Start-ups: What Are Your Options?

Start-up Financing

Most start-up businesses struggle to acquire necessary capital in the early days of operation. This struggle often leads to early failure. Facts are that funding is absolutely essential early on to boost growth and help the newly found business rise to a state where it is profitable. What are potential sources of funding for these new small businesses? Essentially, there are two types of financing: Debt and Equity.

Debt Financing

Debt financing is money borrowed to be repaid in the future with some kind of interest payment. This can be done in the form of a loan from banks, private institutions, family/friends, or in the form a lease for capital such as equipment and property. With debt financing you do not give up any of your stake in the company but maintain all ownership.
If choosing to finance your start-up through debt financing, you are assuming all the risk involved with your company. If your business fails you are still obligated to repay all borrowed money with interest. However, if your company is successful, as stated before, you maintain all ownership in the company and therefore retain all earnings. Beyond retaining all earnings you also retain all the decision making involved with the future growth of the company. This is an important difference between debt and equity financing.

Equity Financing

Equity financing entails selling ownership stake in your company in exchange for money. Equity financing typically comes from private investors such as angel investors and venture capitalists. Venture capitalists generally invest into high growth, high opportunity businesses with generally millions of dollars at stake. Angel investors tend to work with smaller propositions but still seek out high profit opportunities.
These investors take on all risk associated with the business. If your business fails they lose their investment and you are not obligated to repay them anything. This is a benefit as it reduces risk for you as the business owner. But by choosing equity financing you are agreeing to allow investor input in business decisions as they are now part owners in the company. This can be conflicting if they are looking for a quick exit and return and you are more focused on the long-term growth of the business. Be cautious not to give up too much ownership in the company.
Often venture capitalist or angel investors are very savvy businessmen who can provide excellent business insights and networking to help you grow. Ultimately you must make a decision about how much risk you want to take on and how much ownership you are willing to give up.

Deciding Which to Use

Both types of financing have their pros and cons. The decision about which type of financing is up to you as you consider what type of company you want to be, what your short and long-term goals are, the amount of risk you wish to take on, and how much control you want of your company. Consider all these matters, ask for advice from friends and professionals, and choose what you feel most comfortable with. Both options can lead to a successful venture after you have created a solid business plan and made the decision that is best for you which may include a mixture of both financing options.

Three Reasons Why You Need a Business Plan

Are Business Plans Necessary?

Often we ask ourselves if it is necessary for new business owners to write a business plan. Today, the business plan still plays an important part in starting a new business. It helps new business owners build a framework for consistent decision making, create a financial plan, and understand their own firm and their market.

Consistent Decision-Making Framework

The business plan is crucial for organizing firm strategy, direction, and operations. It provides a road map into the future about the company plans to grow and expand. As new situations and opportunities arise the business plan allows management to make consistent decisions which are harmonious with the established strategy and operations. This consistency will enable the company to constantly grow going forward.

Create a Future Financial Plan & Goals

A company usually starts in the hole and takes several months or even years to begin to turn a profit. Under these types of circumstances financial prudence and discipline are necessary. A business plan will help you establish realistic financial goals. Having these goals will provide a framework from which decisions can be made about where to focus company efforts and where to allocate resources. Over time this plan will lead your firm to financial success. As well strong financials within a business plan will help you gain needed capital from investors. One of the top reasons new businesses fail is that they run out of money. Creating a business plan with a strong financial plan will help gain capital then allocate it wisely. Remember small businesses must spend money to make money.

Better Understand Your Firm and Market

A business plan will ultimately lead you through and analysis and inspection of your own organization as you consider things like management structure, budgeting, and sales strategy. As well as analyzing your own firm you will need to analyze your competitors. Look at how they do business, what kind of customers they get, how they retain those customers, and analyze if there is any unclaimed customer base. After this analysis you will have a better idea of where to focus your sales, how to innovate your product or service, and what your potential for growth is.
A business plan provides a healthy introspection of your own firm. As well it provides opportunity to present your business to investors and others showing your legitimacy. It will guide to business success as you better understand your firm and market, as you create a financial plan, and have a foundation for consistent decision making.

Developing a Business Model

Business-model Innovation

The Business Plan vs. the Business Model

The distinction between a business plan and a business model often causes confusion among people. A business plan defines the why and what of your business while a business model defines how your company does business. If someone asks for an explanation of a company’s business model they are typically wondering how your company makes money or creates and captures value.
The business plan outlines company vision and goals and is important to any start-up in order to get off the ground
and running. Creating a business plan requires research, forecasting, brainstorming, and analysis. A business plan generally is made before the business begins to hit the market. A business model is not necessarily developed in this manner or time frame.
The business model is generally included in the business plan but is not concrete. Developing a business model is a process of learning and understanding your organization, your target market, and your product. This takes time, and often trial and error. In fact, in a Harvard Business Review article Ramon Casadesus-Masanell and Joan E. Ricart state that “seven out of 10 companies are trying to create innovative business models, and 98% are modifying existing ones…” The optimization of a business model is something that occurs over time as the company matures.

The Goal of a Business Model

So, what is the goal of a business model? First and foremost a business model should accomplish the organization’s short and long-term goals. These are decided by the company’s management and are often expressed within the business plan. Vital functions of the business model are to create competitive advantage and to increase profit margins. These are accomplished as consistent decisions are made that create a constant loop of improvement for the organization.

Create Competitive Advantage

There are two types of competitive advantage: 1) Comparative advantage, which is the firm’s ability to produce the same or similar goods for a lower cost. 2) Differential advantage, where the firm offers different products or services than competitors. Both create ability for the organization to capture profits and market share that its competitors cannot. One can be accomplished by strategic decisions concerning operations and management and the other through product development. Both of these improvement activities should be an on-going process through time as the company matures.
As your organization strives to develop a business model it should focus on activities and decision that will differentiate the organization through product development or operational efficiency which drives down costs. The development process requires analysis, creativity, and time but with hard work and persistence a firm can indeed begin to see greater profit margins and company growth through business-model innovation.