Unit 3: Business Plan

Concepts

What is a Business Plan?

The business plan is a roadmap that allows addressing the expected opportunities and obstacles and
unexpected events that the future holds and to successfully navigate through the competitive
environment particular to that business, whether it is a new company, an expansion of an existing firm, a
spin-off from a parent corporation, or even a project within the established organization.

A business plan is a tool for reflection and work that serves as a starting point for business development.
It is done in writing by an enterprising person and in it he expresses his ideas, the way to carry them out
and indicates the objectives what to achieve and the strategies to use. It consists of writing, with method
and order, the thoughts that you have in your head. The business plan evaluates the quality of the business
itself. In the process of preparing this document, the environment of the business activity is interpreted
and the results that will be obtained by influencing it in a certain way are evaluated, the variables involved
in the project are defined and the optimal allocation of resources for start it up.

The business plan is a formal document prepared in writing that follows a logical, progressive, realistic,
coherent and action-oriented process, which includes in detail the future actions to be carried out by both
the owner and the collaborators of the company. company to, using the resources available to the
organization, seek the achievement of certain results (objectives and goals) and that, at the same time,
establish the mechanisms that will make it possible to control said achievement.

Origins

This planning tool had its origins in the United States in the 60s (of the 20th century) as a response to the
need of corporations to invest their surplus capital, but it was from the late 70's, as a result of the
development boom business around technology, in Silicon Valley, when it became popular. The following
graph shows the phenomenon:

Benefits of developing a business plan

A business plan helps you make the future of your company as close to what you want it to be and not
what "destiny" will give you.

• Determine which are the business opportunities most promising for the company.

• It allows to determine with greater precision the markets of interest to the company.
 • Point out how to participate more actively in those markets.

• Provides the basis for deciding the type of products or services to be offered to customers.

• Set goals, programs, strategies and plans to follow, which allow better control of the future
development of the company.

• It establishes a firm foundation to plan all the activities of the company.

• It encourages a more rational use of resources.

• It allows assigning specific responsibilities and establishing coordinated work programs.

• Facilitates control and measurement of results.

• Raise awareness of obstacles that must be overcome.

• Provides a valuable source of information for current and future reference.

• Facilitates progressive progress towards the most important goals of the company.

• Keeps all members of the organization oriented towards cost effectiveness.

• It allows to evaluate alternative strategies.

• Facilitates practical and effective reviews.

• It allows you to develop more effective sales strategies based on the true sales potential of the
company.

• Create the general financial framework of the company.

• Determine which the most important areas to control are.

• It allows to analyze the situation of the company with respect to its most important competitors.

• It makes it easier to determine the things that should be done better and in a different way than
how competitors do.

Steps to formulate a successful business plan

• Define your business activities.

• Then define the current state of your business

• It must define the external market, competition what he faces and his positioning market.

• Define your goals for the period covered by the plan.

• Formulate a strategy to achieve the objectives.

• Identify the risks and opportunities.

• Map out a strategy to limit risks and exploit the

 • Refine strategies to work plans.

• Project costs and revenues, and develop a plan

• Document it concisely.

• Get the plan approved.

• Apply it.

Essential features of the business plan

The main characteristics of a good business plan are:

• Prioritize key success factors of the business.

• Answer potential investor questions.

• It's sharp, leaves no ideas in the air, and uses precise terms.

• It is also short, usually not longer than 30 pages.

• It is structured to allow easy reading.

• Your presentation must be flawless.

General structure of the business plan

The general structure of a business plan could be the following:

• Executive Summary: it offers a general impression of the project, contains the key data and
highlights them, it must provide the reader with all the relevant elements, maximum 3 pages.

• Description of the product or service: the business plan must begin by identifying the need to be
covered and the solution proposal that is nothing more than what is planned to be developed.

• Management teamInvestors believe more in people with experience or who know the business
very well, and they are also interested in the commitment of each member who works in the
development of the project.

• Market analysis: it must identify the market, size it, segment it, put it in a geographical dimension,
analyze the competition and possible new entrants, not only direct competitors but substitutes
and complementary ones.

• Marketing plan: define the strategies on the four P's, always seeking to meet the needs of
customers and even better to be above them.

• Business system: describes the steps, the process, necessary to manufacture the product or offer
the service, their interactions and elements. It includes personnel planning, elements of
management, development and organizational culture.
 • Schedule: shows a realistic planning of the project, defines the critical path and milestones of the
project.

• SWOT analysis: identify Weaknesses, Opportunities, Strengths and Threats, how to enhance the
positive aspects and how to develop strategies to counteract the negative ones.

• Financing: It is a key point, it must be a detailed analysis of the financial situation of the business,
including the financing needs, the expected results, the possible sources of financing and the
financial statements and ratios generally used. It can include an initial valuation of the business
through discounted cash flows. If what you are looking for isrisk capital should be propose "exit"
alternatives to investors.

• Conclusions: Highlight realistic key factors including risks.

How to create a Business Plan

8 steps to creating a business plan

Now, then we explain what are the steps that every business plan document should include so that
entrepreneurs work in the same direction, capable of leading their startup to achieve success more easily.

1. Executive Summary

At this point you should review the most important aspects that you will include in the business plan (later
explained in more detail). Think that with this first point you will have to be able to capture the attention
and interest of future investors, so… go for it!

2. Product description

This is where you will have to perfectly explain the product: its concept, origin of the idea and main
characteristics. Once the interested parties already know what we offer, you must specify what target it
is aimed at, why and the needs that it satisfies them.

3. Market and Competition Analysis

This point is key to our business plan. In this we will analyze, on the one hand, the market in which the
product will be introduced, its size, the success factors that characterize it, what entry and exit barriers
we can find, what is its evolution and natural growth, its consequent current pace and trends.

4. Business Model

Here we will define the business model and the financial plan, which will detail the financial agreements,
the central portfolio of products or services that the organization offers and will offer based on the actions
necessary to achieve the strategic goals and objectives, among other relevant aspects.

5. Description of the Team

It is essential to describe the human team that makes up the startup. Investors attach great importance
to this point to see if these entrepreneurs are able to carry out the business correctly.

6. Business Development Status

It is important to specify here in which phase the product is, if a test has been carried out (application of
the Lean Startup methodology) or if it exists a developed prototype, etc.

7. Marketing Strategies

At this point we will start detailing the decisions about actions and resources to be used both in the online
and offline media, which will allow us to achieve the final objectives of the company or organization, as
well as specify if we are going to work with a communication, advertising or online marketing consulting.

8. Contingency Plan

As in any new project that is launched, risks have a place and must be counted on. Therefore, it is
important that we take them into account and put them on the table in this document, in this way
investors, partners ... They will be able to know from us what the risks they would face could be.

Canvas model

The canvas -or canvas- for business models is a tool that helps the entrepreneur to organize his ideas
and achieve a complete vision of his business project.

Between a business idea and the reality of the market there can be a huge difference. In fact, three out
of 10 companies die in their first year of life due to not selling enough, according to official figures.of
INEGI.

And the longer the business lasts, the greater your chances of going out of business. On average, the life
expectancy of Mexican companies is 7.8 years.

The main reasons for failure are, in addition to insufficient income, the lack of indicators to measure how
the results are going, the absence of analysis of business numbers and poor planning.

In this stage, a good plan or business model makes all the difference, because this document requires the
entrepreneur to analyze his idea in detail before spending a peso. In addition, it includes the most
important indicators to know the viability of the business.

There are multiple tools and even templates to develop a business plan. But the canvas or canvas model
stands out because it combines simplicity and functionality, in a visual and schematic way that for many
is fun.

What does it consist of?

• Canvas is a tool that arises from the entrepreneurship methodology described in the book
“Generation of business models”, by Alex Osterwalder and Yves Pigneur.
 • It consists of a canvas that encompasses business planning in 9 aspects. It is printed to work with
post-its and colored markers.

• When filling it out, entrepreneurs have a starting point, in which they can visualize their entire
company and verify if there is congruence between their ideas.

How is it filled?

It is recommended to start with the modules on the right side of the canvas and progress little by little:

1. Customer segments. It is the market niche or specific population that your product needs.

2. Value proposal. It is the problem with which you help your clients.

3. Channels.It is the means by which you will deliver that solution to your clients. It can be online,
through physical stores, through distributors ...

4. Relations with clients. It consists of detailing the means of contact you will have with your clients.

5. Sources of income. Describe the activities that should generate income for you.

6. Key resources. It is the breakdown of all the monetary, human, material and time resources that
you will need.
 7. Key activities. These are the tasks that you will have to carry out in your company, that is, those
that you will not be able to subcontract. Usually it refers to the main productive activity.

8. Key associations. List the people or companies you will need to work with, such as suppliers and
partners.

9. Cost structure. Once all the activities have been contemplated, here the administration costs,
operating, payroll and everything that represents a liability.

It is a starting point ... and it is modified

The idea that the canvas is printed and filled with post-its is that, precisely, it can be easily modified. In
the vision of Alex Osterwalder and Yves Pigneur, the business model is not fixed, but can be adjusted to
respond to reality.

Another important assumption of the canvas is that you should work on team. It is a technique designed
to be developed by several people, who contribute their own points of view on the key aspects of the
business and workflows.

The truth is that, according to the specialists who recommend it, this canvas never replaces the business
model that investors usually ask for. But it is a support technique to make the writing of the long document
easier.

Examples

Basic
As a first example, the structure of the Canvas Model is offered without any modification. This means that
the following image explains the specific order of the model with the characteristic corresponding to each
block.
Uber

This example speaks of Uber, it is a reliable, efficient and quality transportation system that, when it first
appeared, provided great news in relation to this type of service.
Practice

Create the Canvas Model of your own company.

Use previous information and content.