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How to write effective business plans

Updated on September 20, 2009
business plan
business plan


Your business can benefit from your sell written, and carefully produced business plan.

As the famous saying goes, "if you don't know where your going how will you get there?"

Planning to write

You should write the plan in present tense, as if you have achieved all the things you are planning to try. This way you can start to imagine what is realistic, and picture in your mind if what you are proposing is possible.

If you can consider all your important variables that the business needs, as well as the ones that might seem minor just now, but could easily become a major part of your business. An example of this could be borrowing interest rates increasing.

You can easily speak to people in the same industry and with similar business to find out what they wish they had considered when they started up. If your business plan includes things that might not be obvious, then this will impress anyone who is reading it. It will show you have done your homework, and considered professionally how to create a successful business.

I have outlined the types of variables that are importantly specific to each sector of business.

Purpose of the business plan

The purpose of the business plan is to:

1. Help you think though your finished  venture and ensure you have considered all your options and anticipated any potential difficulties.

2. Convince lenders and investors that you are in control of the project and that their money will be safe with you.

3. Serve as an operating guide as you turn your idea into a viable business.

4. Create a measurement against which to judge your  forthcoming decisions and results.

If your going into the Retail sector

  1. Your Company image, and branding.
  2. Pricing strategies, including Explain markup policies.  
  3. Prices should be profitable, competitive and in accord with the company image.
  4. Calculate your annual inventory turnover rate. Compare this to industry average for your type store. You can find this information easily on the Internet
  5. Customer service policies: should be competitive and in accord with company values.
  6. Location:  Does it provide the exposure you need?  Is it convenient for customers?  Is it consistent with company image and brand?
  7. Promotion:  methods used, cost.   Does it project a consistent company image?
  8. Credit:  Do you extend credit to customers?  If yes, do you really need to, and do you include the cost into prices?

If your going into the service sector

Service businesses sell intangible products. They are usually more flexible than another types of business, but they also have higher labor costs and generally very little in fixed assets.

  1.   Prices
  2.   Methods used to set prices         
  3.   System of production management
  4.   Quality control procedures
  5.   Standard or accepted industry quality standards
  6.   How is labor productivity measured?
  7.   What percent of total available hours are actually billed to customers?
  8.   Breakeven billable hours
  9.   Percent of work subcontracted to another firms            
  10.   Profit on subcontracting?           
  11.   Credit, payment, and collections policies and procedures
  12.   Strategy for keeping client base    
  13.   Strategy for attracting new clients

If your going into the Manufacturing sector

  1.   Present production levels
  2.   Present levels of direct production costs and indirect (overhead) costs
  3.   Gross profit margin, overall and for each creation line
  4.   Possible production efficiency increases
  5.   Production/ Capacity limits of existing fleshly plant
  6.   Of expanded plant (if expansion is planned)
  7.   Production/ Capacity limits of existing equipment
  8.   Of new equipment (if new equipment is planned)
  9.   Prices per creation line
  10.   Purchasing and inventory management procedures
  11.   Anticipated modifications or improvements to existing products
  12.   New products under development or anticipated


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