TO ACHIEVE SUCCESS in any business,

Transcription

1 Preparing a Business Plan TO ACHIEVE SUCCESS in any business, it is important to regularly develop a business plan. Although a business plan can be developed on a monthly or yearly basis, it should list important business goals, past achievements, and areas of financial need. The business plan should be well-communicated to all employees and stakeholders in the business. Objective: Explain the importance of establishing goals and creating a business plan. Key Terms: appendix business plan business plan introduction business regulations company description financial plan goal immediate goals legal plan location analysis long-term goals management plan marketing plan mission statement operating plan short-term goals venture capital Developing a Business Plan For a business to function successfully, it must first set realistic goals. A goal is the end result of effort toward a specific achievement. The goals and the methods by which people set out to accomplish them can be found in a mission statement a brief summary of the business goals and objectives. ESTABLISHING BUSINESS GOALS Goals can be used to set policy and to provide decision-making guidelines. Consistency is important in establishing policies in businesses of all sizes. Policies regarding hiring, training, retention, and promotion should be reflected in the business goals. Page 1

2 Similar to personal goals that you may establish for your own success as a student, business goals should be reviewed periodically. A review must be conducted to accurately evaluate the success or improvement needed to achieve the goals. Other factors outside of the business (e.g., economic, political, and social changes within the business sector) may directly or indirectly affect the ability to accomplish business goals. For goals to be effective, establish objectives to help meet the goals. Objectives should be stated in terms that are identifiable by periods of time, such as quarterly or yearly. At that time, the business performance should be compared to the stated objectives. Based on the given performance, management should determine if the goals have been met and, if not, decide what changes need to be made to meet the goals. Before a mission statement can be written and objectives can be determined, a business has to set goals, according to the following three categories: immediate, short-term, and long-term. Understanding these categories and how to go about accomplishing the goals within each category is what makes a business successful. Immediate, Short-Term, and Long-Term Goals Three major categories of goals should be established by a business: immediate, short-term, and long-term. Immediate goals are what you would like to accomplish in the near or immediate future (e.g., within a day, week, or month). A business should have immediate goals to have a successful start to the operation. Short-term goals are what the business would like to accomplish within one to two years; they help a business work toward its long-term goals. Although long-term goals take a number of years to accomplish, a business can use long-term goals to determine its overall performance after so many years. DEVELOPING SMART GOALS For a business to accomplish its goals, the goals must first be prioritized. SMART is an acronym that is often used to identify and prioritize important goals for business or personal reasons. SMART goals are specific, measurable, attainable, realistic, and timely. SMART goals should follow certain guidelines and criteria. For example, goals should be very specific because a specific goal provides details that an individual or business can strive to achieve. In addition, measurable goals enable a business to constantly evaluate its progress. Goals must be attainable within a specific time period, which should be based on complexity. Goals can be lofty, but they should be realistic and within the budget. Also, the goals should be evaluated weekly, monthly, and annually. FIGURE 1. All agribusinesses should set SMART goals. (Courtesy, Natural Resources Conservation Service, USDA) Page 2

3 PURPOSE AND IMPORTANCE OF A BUSINESS PLAN A business plan serves many important purposes for the potential success of the business operation. It is also important for the business development, growth, and advancement. A business plan should specify future projects and establish objectives to help achieve the projects. Goals for future projects can be defined as immediate, short-term, and long-term. The future projects outlined in the business plan should define where the owner would like for the business to be and how he or she plans to achieve the goals or projects. A business plan should evaluate the past progress of the business based on achievements of previously established goals. These goals should be reviewed and discussed to establish the effectiveness and progress of the business in achieving its goals. One of the most important functions and purposes of a financial plan is to generate interest and to raise money from prospective investors to build financial stability for the business. Without financial backing for future projects, it is challenging for any business to realize growth, progress, and prosperity. PARTS OF A BUSINESS PLAN FIGURE 2. Agribusinesses should develop business plans to assist in growth and development and to improve its products. (Courtesy, Agricultural Research Service, USDA) A business plan is the written description of all aspects of an agribusiness. The business plan, like the mission statement and goals, is essential in starting a successful agribusiness. Business plans are unique for each business they represent. However, a business plan should include components that will help in the goal-setting process. The components include the introduction, business description, products or services offered, management plan, marketing plan, legal plan, location analysis, business regulations, capital required, financial plan, financing arrangements, competition, operating plan, and an appendix. One of the first parts of a business plan should be the introduction. The business plan introduction is an overview of the agribusiness. The introduction should describe the agribusiness and list its goals and objectives. If the proposed agribusiness is a franchisee of a current company, a company description should be included. A company description is a statement that describes the company as it currently exists, the company history, and the type of services or products offered. The products and services should be detailed as much as possible. Page 3

4 Types of Business Plans Five specific types of plans should be included within the business plan: management, marketing, legal, financial, and operating. A management plan is a document that identifies the individuals who will oversee the proposed agribusiness. It should include an organizational chart of employees and their job descriptions. Another type of business plan deals with marketing. The marketing plan is a document that describes the type of competition a business will face and the types of customers the business hopes to attract. In identifying its competition, an agribusiness should also determine how well it will be able to compete within the market. A marketing strategy could also be included within the marketing plan. The third most commonly used business plan deals with legally categorizing the business. A legal plan is a document that identifies the legal organization of the agribusiness. Potential legal organizations include sole proprietorship, partnership, corporation, cooperative, or franchise. Another important type of business plan involves the financial aspect of the business. A financial plan is a document that projects the income, expenses, and profits of a business over a multi-year period. Finally, an operating plan is a document that describes how an agribusiness will run on a daily basis. Facilities, personnel, materials, and processing requirements should be included within the operating plan. Other Business Plan Items FIGURE 3. The development of a business plan may require the work of several people. There are a variety of key aspects that may be in a business plan. For example, a location analysis is a study that evaluates specific areas of the agribusiness, including possible consumers, traffic patterns, accessibility, and visibility. Another important item that should be included discusses business regulations, which are local, state, and federal restrictions and insurance requirements. The amount of start-up capital required should also be well-detailed, along with the financial arrangements (e.g., loans, personal investments, and venture capital). Venture capital is the money invested in an agribusiness by an investor. Finally, for organizational purposes and ease of reading, it is recommended that an appendix be included. The appendix is a document that should include all of the marketing research and serve as a reference of the materials used in compiling the business plan. Page 4

5 Summary: A successful agribusiness should establish business goals and classify those goals as immediate, short-term, and long-term. These goals should be established and evaluated on a monthly or yearly basis. Business goals should also follow the SMART format: specific, measurable, attainable, realistic, and timely. A business plan is important for specifying future projects, evaluating past progress, generating interest, and raising money from prospective investors. A well-written business plan should include the following components: business plan introduction, business description, products or services offered, management plan, marketing plan, legal plan, location analysis, business regulations, capital required, financial plan, financing arrangements, competition, operating plan, and an appendix. Checking Your Knowledge: 1. List and define the three major types of business goals. 2. Define the acronym SMART as it refers to goal-setting. 3. Explain the purpose and importance of a business plan. 4. List and describe the parts of a business plan. Expanding Your Knowledge: Create a small agribusiness in your class, and develop a business plan that corresponds with the agribusiness. When developing your business plan, be sure to include all of the parts of the business plan while taking into consideration the overall purpose of your business. Web Links: The Purpose of a Business Plan My Own Business Business Plan Page 5