SWOT analysis

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SWOT analysis, with its four elements in a 2x2 matrix. SWOT analysis (alternatively SWOT Matrix) is a structured planning method used to evaluate the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture. A SWOT analysis can be carried out for a product, place, industry or person. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective. The technique is credited to Albert Humphrey, who led a convention at the Stanford Research Institute (now SRI International) in the 1960s and 1970s using data from Fortune 500 companies.[1][2] The degree to which the internal environment of the firm matches with the external environment is expressed by the concept of strategic fit. Setting the objective should be done after the SWOT analysis has been performed. This would allow achievable goals or objectives to be set for the organization.

Strengths: characteristics of the business or project that give it an advantage over others Weaknesses: are characteristics that place the team at a disadvantage relative to others Opportunities: elements that the project could exploit to its advantage Threats: elements in the environment that could cause trouble for the business or project

Identification of SWOTs is important because they can inform later steps in planning to achieve the objective.

First, the decision makers should consider whether the objective is attainable, given the SWOTs. If the objective is not attainable a different objective must be selected and the process repeated. Users of SWOT analysis need to ask and answer questions that generate meaningful information for each category (strengths, weaknesses, opportunities, and threats) to make the analysis useful and find their competitive advantage.[3]

Contents

1 Matching and converting 2 Internal and external factors 3 Use 4 Criticism 5 SWOT - landscape analysis 6 Corporate planning o 6.1 Marketing 7 See also 8 References 9 External links

Matching and converting

One way of utilizing SWOT is matching and converting. Matching is used to find competitive advantage by matching the strengths to opportunities. Converting is to apply conversion strategies to convert weaknesses or threats into strengths or opportunities. An example of conversion strategy is to find new markets. If the threats or weaknesses cannot be converted a company should try to minimize or avoid them.[4]

Internal and external factors

SWOT analysis aims to identify the key internal and external factors seen as important to achieving an objective. The factors come from within a company's unique value chain.[citation needed] SWOT analysis groups key pieces of information into two main categories: 1. internal factors the strengths and weaknesses internal to the organization 2. external factors the opportunities and threats presented by the environment external to the organization Analysis may view the internal factors as strengths or as weaknesses depending upon their effect on the organization's objectives. What may represent strengths with respect to one objective may be weaknesses (distractions, competition) for another objective. The factors may include all of the 4Ps; as well as personnel, finance, manufacturing capabilities, and so on.

The external factors may include macroeconomic matters, technological change, legislation, and socio-cultural changes, as well as changes in the marketplace or in competitive position. The results are often presented in the form of a matrix. SWOT analysis is just one method of categorization and has its own weaknesses. For example, it may tend to persuade its users to compile lists rather than to think about actual important factors in achieving objectives. It also presents the resulting lists uncritically and without clear prioritization so that, for example, weak opportunities may appear to balance strong threats. It is prudent not to eliminate any candidate SWOT entry too quickly. The importance of individual SWOTs will be revealed by the value of the strategies they generate. A SWOT item that produces valuable strategies is important. A SWOT item that generates no strategies is not important.

Use
The usefulness of SWOT analysis is not limited to profit-seeking organizations. SWOT analysis may be used in any decision-making situation when a desired end-state (objective) has been defined. Examples include: non-profit organizations, governmental units, and individuals. SWOT analysis may also be used in pre-crisis planning and preventive crisis management. SWOT analysis may also be used in creating a recommendation during a viability study/survey.

Criticism
Some findings from Menon et al. (1999) [5] and Hill and Westbrook (1997) [6] have shown that SWOT may harm performance. Other complementary analyses have been proposed, such as the Growth-share matrix.

SWOT - landscape analysis

The SWOT-landscape systematically deploys the relationships between overall objective and underlying SWOT-factors and provides an interactive, query-able 3D landscape.

The SWOT-landscape grabs different managerial situations by visualizing and foreseeing the dynamic performance of comparable objects according to findings by Brendan Kitts, Leif Edvinsson and Tord Beding (2000).[7] Changes in relative performance are continually identified. Projects (or other units of measurements) that could be potential risk or opportunity objects are highlighted. SWOT-landscape also indicates which underlying strength/weakness factors that have had or likely will have highest influence in the context of value in use (for ex. capital value fluctuations).

Corporate planning
As part of the development of strategies and plans to enable the organization to achieve its objectives, that organization will use a systematic/rigorous process known as corporate planning. SWOT alongside PEST/PESTLE can be used as a basis for the analysis of business and environmental factors.[8]

Set objectives defining what the organization is going to do Environmental scanning o Internal appraisals of the organization's SWOT, this needs to include an assessment of the present situation as well as a portfolio of products/services and an analysis of the product/service life cycle Analysis of existing strategies, this should determine relevance from the results of an internal/external appraisal. This may include gap analysis which will look at environmental factors Strategic Issues defined key factors in the development of a corporate plan which needs to be addressed by the organization Develop new/revised strategies revised analysis of strategic issues may mean the objectives need to change Establish critical success factors the achievement of objectives and strategy implementation Preparation of operational, resource, projects plans for strategy implementation Monitoring results mapping against plans, taking corrective action which may mean amending objectives/strategies.[9]

Marketing
Main article: Marketing management In many competitor analyses, marketers build detailed profiles of each competitor in the market, focusing especially on their relative competitive strengths and weaknesses using SWOT analysis. Marketing managers will examine each competitor's cost structure, sources of profits, resources and competencies, competitive positioning and product differentiation, degree of vertical integration, historical responses to industry developments, and other factors.

Marketing management often finds it necessary to invest in research to collect the data required to perform accurate marketing analysis. Accordingly, management often conducts market research (alternately marketing research) to obtain this information. Marketers employ a variety of techniques to conduct market research, but some of the more common include:

Qualitative marketing research, such as focus groups Quantitative marketing research, such as statistical surveys Experimental techniques such as test markets Observational techniques such as ethnographic (on-site) observation Marketing managers may also design and oversee various environmental scanning and competitive intelligence processes to help identify trends and inform the company's marketing analysis.

Below is an example SWOT analysis of a market position of a small management consultancy with specialism in HRM.[9] Strengths Reputation in marketplace Expertise at partner level in HRM consultancy Weaknesses Shortage of consultants at operating level rather than partner level Unable to deal with multi-disciplinary assignments because of size or lack of ability Opportunities Well established position with a well defined market niche Identified market for consultancy in areas other than HRM Threats Large consultancies operating at a minor level Other small consultancies looking to invade the marketplace

business plan
Definition
Set of documents prepared by a firm's management to summarize its operational and financial objectives for the near future (usually one to three years) and to show how they will be achieved. It serves as a blueprint to guide the firm's policies and strategies, and is continually modified as conditions change and new opportunities and/or threats emerge. When prepared for external audience (lenders, prospective investors) it details the past, present, and forecasted performance of the firm. And usually also contains pro-forma balance sheet, income statement, and cash flow statement, to illustrate how the financing being sought will affect the firm's financial position.

Definition of 'Business Plan'

A written document that describes in detail how a new business is going to achieve its goals. A business plan will lay out a written plan from a marketing, financial and operational viewpoint. Sometimes a business plan is prepared for an established business that is moving in a new direction.

Investopedia explains 'Business Plan'

A business plan includes a description of a company or small business, its services and/or products and how the business will achieve its goals. The plan includes the overall budget, current and projected financing, a market analysis and its marketing strategy approach. In a business plan, a business owner projects revenues and expenses for a certain period of time and describes operational activity and costs related to the business. The idea behind putting together a business plan is to enable owners to have a more defined picture of potential costs and drawbacks to certain business decisions and to help them modify accordingly before implementing these ideas.

The big principles of business planning

This article presents the BIG principles of business planning the following principles will help you focus on the most important areas when writing your business plan.

Focus and alignment you cant be all things to all people!

Its easy to fall into the trap of being constantly busy but never really moving your business forward. There are many sayings that describe this trap busy fool, working in rather than on the business, fire fighting ......... etc. Being caught in this trap is often a result of three things: 1. Not planning for growth resulting in the owner manager doing everything. There personal capacity therefore becomes a major barrier to growth. 2. Trying to do too much spreading intellectual and physical resources to thinly so they dont have a significant impact in any area. 3. Not having the courage or conviction - To get the best out of finite resources means making difficult decisions. Getting old ideas out of your head can be one of the biggest barriers to creativity stop hanging on and focus on the vital few opportunities. Its much better to focus on doing fewer things really well. Focus gets the best out of the collective energy and resources available throughout your business. Energy levels rise as people recognise that progress is being made and directly make the connection between the actions they complete on a day-to-day basis and the achievement of goals and vision.

The strategic pyramid is a great way of making sure that the resources identified in your business plan are directly aligned to the achievement of a focused set of goals and vision. It helps you to interrogate every task, every action, every meeting, everything against the key question is this helping me achieve the goals? If the answer is no dont do it1

Dig deep for that elusive proposition

Why should I buy from you rather than your competitors? This is a critical question and one that any funder will want to know; this is what makes you competitive. Dont fall into the trap of listing all the things that you expect people want to hear, such as we deliver a quality product or we offer a personal service. Customer expectations have risen dramatically and these are now basic expectations. You need to dig deep and develop a Value Proposition that is truly different and better than the competition. Get this right and you are on the road to success.

Accessing Finance? Then make the Executive Summary exciting

Although an executive summary doesnt sound that exciting, it must be! If you are developing a business plan to access funding, assume that the reader will not look beyond the executive summary. If it doesnt grab their attention then youve lost the opportunity. Think about the rest of the plan as an annex the reader will refer to in search of evidence to substantiate the claims made in the executive summary.

Speak the language of the receiver

It may sound obvious but understanding the audience for your plan is critical, if its an internal plan then it needs to be simple and action focused, if its to access funding its got to excite and grab the attention of the reader whilst proving that the plan can be delivered. For the purpose of accessing finance your plan must:

Present the opportunity Present the killer facts Provide prove that it can be delivered

Demonstrate that you can pull it off

This is about demonstrating that you are business savvy, you understand business models, have a creative and innovative strategy and have the necessary action mechanisms in place (e.g. a project or operational plan, effective leadership etc). Essentially you need three things to deliver the plan: 1. Skills 2. Resources 3. Cash Demonstrate to the reader that you understand how you will acquire and manage all three elements. Its not essential that you start will all the building blocks in place, you must however clearly demonstrate when and how you plan to acquire skills and resources, against a managed cash-flow and project planning system.

Get the numbers right youve got to win minds as well as hearts!
So youve written a great plan, done your research, developed a compelling and superior value proposition, a fantastic product and got the funders full attention how many times have we seen this scenario on Dragons Den, the pitchers passion has won the dragons hearts, only for them to get torn to shreds because they dont have a full appreciation for their numbers. A business plan must capture minds, so get your numbers right or the plan will be discredited.

Its ALIVE
And finally, youve put lots of work into the development of your plan so dont let it gather dust. Success is attributed to 5% planning and 95% effort; hence use your plan as a mechanism for action. Bring it to life, build it into a project plan, assign responsibility and ownership across

your business, make it timed and track progress against goals and vision. Implemented correctly a well-formulated plan will raise the energy levels and motivation across your business and engender a culture of creativity and innovation.

5 Fundamental Principles of Good Business Planning

by Tim Berry, Guest Blogger

Created: May 21, 2013, 11:00 am

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Ive just finished a two-month period in which Ive read more than 50 business plans as part of my role as judge of several major national business plan competitions and as managing investor of my local angel investment group. And I like reading business plans, so it wasnt a sacrifice. But it did remind me that every so often, its good to go back to the five important fundamental principles of good business planning. 1. Form follows function Youd think it would be obvious, but the business plan is supposed to be whatever it needs to be to solve the business purpose. For example, only very few business plans ever have to be documents well formatted and carefully presented to back up an investment pitch or loan application. While those uses exist, the vast majority of business plans need to be not pretty documents, but rather specific collections of lists, such as objectives, focus, tactics, specific activities, specific responsibilities, deadlines, performance expectations and so forth. They can exist in different formats and live on a computer, or a network, where multiple people can access, use and contribute to them. The plan itself is whats supposed to happen, and why, and how much of this and that and when things are supposed to happen. The document, the pitch, the elevator speech, and the summary memo arent the plan; they are outputs, or summaries, of the plan. So why do we write it down? So we can review it every month, see what went right and what went wrong, and make course corrections. You cant review the results of your plan if you didnt write it somewhere. But dont waste time making it pretty. Business plans are perishable, like food. Their shelf life is just a few weeks. 2. The beauty is in the results, not the plan

What makes a good plan? Not the writing, editing or formatting. Not even the ideas, the details, the strategy, the analysis or research. What distinguishes a good plan from a bad plan are the results. Im quoting some of my books here, but the quotes apply:

A plan is worth the decisions it causes. A good plan is nine parts execution for every one part strategy.

3. Accountability = metrics + management In a business landscape changing rapidly because of new technology, the business planning is more needed than ever before because the traditional means of management and accountability are crumbling. It wasnt that long ago that we could measure productivity by how warm the chair was, meaning how many hours so-and-so spent in the office. Now, with the world splintering and physical presence not so important, we measure with metrics, numbers actual performance. And for that, we need planning to establish the expected measurement numbers and then to review the results and see what comes next. Planning is the key to accountability. 4. Planning thrives on change Why should I plan, people ask? Things are just going to change, they say, theres no point in planning because things move too rapidly. The people who say that are missing the point. Planning is a process that manages change. The plan establishes expectations and the plan review analyzes results and creates revised expectations, in a step-by-step process that is something like steering, lots of small course corrections. 5. Planning is not accounting The basic numbers included in a business plan projections of sales, costs, expenses, profits, salaries, assets, liabilities, capital and cash flow look like the reports we see in bookkeeping and accounting, but they are very different. Accounting starts today and goes backward in time in ever increasing detail. Planning, on the other hand, starts today and goes forward in time in ever increasing aggregation. We cant project the future in detail; its a waste of time because the level of uncertainty is too deep. So we project a year in months and then the next two years on an annual basis, and thats enough. The good news is that this makes planning easier than a lot of people think. Just make sure, if you work with an accountant on planning, that he or she understands that 1) this is educated guessing; and 2) nobody is going to blame the accountant if its wrong. Conclusion: All five of these basic principles are essential. And each of them makes planning easier, more practical, more important, and better managed.

Top-down and bottom-up design

Top-down and bottom-up are both strategies of information processing and knowledge ordering, used in a variety of fields including software, humanistic and scientific theories (see systemics), and management and organization. In practice, they can be seen as a style of thinking and teaching. A top-down approach (also known as stepwise design or deductive reasoning,[1] and in many cases used as a synonym of analysis or decomposition) is essentially the breaking down of a system to gain insight into its compositional sub-systems. In a top-down approach an overview of the system is formulated, specifying but not detailing any first-level subsystems. Each subsystem is then refined in yet greater detail, sometimes in many additional subsystem levels, until the entire specification is reduced to base elements. A top-down model is often specified with the assistance of "black boxes", these make it easier to manipulate. However, black boxes may fail to elucidate elementary mechanisms or be detailed enough to realistically validate the model. Top down approach starts with the big picture. It breaks down from there into smaller segments.[2] A bottom-up approach (also known as inductive reasoning,[1] and in many cases used as a synonym of synthesis) is the piecing together of systems to give rise to grander systems, thus making the original systems sub-systems of the emergent system. Bottom-up processing is a type of information processing based on incoming data from the environment to form a perception. Information enters the eyes in one direction (input), and is then turned into an image by the brain that can be interpreted and recognized as a perception (output). In a bottom-up approach the individual base elements of the system are first specified in great detail. These elements are then linked together to form larger subsystems, which then in turn are linked, sometimes in many levels, until a complete top-level system is formed. This strategy often resembles a "seed" model, whereby the beginnings are small but eventually grow in complexity and completeness. However, "organic strategies" may result in a tangle of elements and subsystems, developed in isolation and subject to local optimization as opposed to meeting a global purpose. bottom-up (b t m- p ) adj. Progressing from small or subordinate units to a larger or more important unit, as in an organization.
bottom-up - of an approach to a problem that begins with details and works up to the highest conceptual level; "bottom-up parser"; "a bottom-up model of the reading process" top-down - of an approach to a problem that begins at the highest conceptual level and works down to the details; "a top-down analysis might begin by looking at macro-economic trends"; "top-down programming"

top down: You formulate the problem and solve it inroducing simple operations, for instance, you need to add 2 numbers. This is your problem which you have to solve.

You devide it in simpler problems. Remember in computer memoty first additive, then second. And then add it to each other and show result or save in another variable and show the result.Top down approach is the most popular method in programming. bottom up: This method is more complicated because it's not easy to formulate simple problems and end up with a global problem. In most cases bottom up is reversed to top down approach.

Top-Down vs. Bottom-Up Planning

written by: Marlene Gundlach edited by: Michele McDonough updated: 7/2/2011

There are debates in project management regarding whether "top-down" or "bottom-up" planning is most effective. Is one option better than the other, or is a combination of the two processes the best approach?

Top-Down Planning
Top-down planning is referred to as strategy. Top-down project planning is focused on keeping the decision making process at the senior level. Goals and quotas are established at the highest level, and those at the top are not often willing to take advice or any guidance from lower level employees. Senior-level managers need to be as specific as possible when laying out expectations since those following the plan are not involved in the planning process. Because employees are not included in any of the decision making process and are often only motivated through either fear or incentives, moral can become an issue. With top-down planning, management must choose techniques to align projects and goals. Management holds the sole responsibility for the plans set forth and for the end result. This way of thinking assumes that management knows best how to plan and carry out a project, thus not taking advantage of talented employees who may have more experience with certain aspects of the project. Some see the top-down planning process as a way to make a plan, and not about who develops the plan. It allows management to divide a project into steps, and then into still smaller steps. This continues until the steps can be studied, due-dates can be accurately assigned, and then parts of the project can be assigned to an employee. However, the focus is on long-term goals, and the here-and-now goals can get lost. Often, this approach is applied best to very small projects.

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Bottom-Up Planning
Bottom-up planning is referred to as tactics. With bottom-up planning, you give your project deeper focus because you have a larger number of employees involved, each with their own area of expertise. Team members work side-by-side and have input during each stage of the process. Plans are developed at the lowest levels and are then passed on to each next higher level. It then reaches senior management for approval. Lower-level employees are more likely to take personal stock in a plan that they are involved in planning. Employees are more motivated and morale improves. While project managers are ultimately responsible for the completion of the project, no matter the steps taken it is management that ultimately must be the final step in the system of checks and balances.

Comparing Top-Down and Bottom-Up

Which Approach to Choose?

Ultimately, a blend of these two project management techniques is most effective. Using the strength of each, you can align each step so that the needs of the project are met. You can determine the needs of the project at the top, and allow accountability to fall with the lower levels. With this combination, you are merging the vision of senior management with the skills of lower level employees. This allows the project to be completed more efficiently, and lets a company utilize the best of what its employees have to offer.

http://www.brighthubpm.com/project-planning/8542-top-down-vs-bottom-up-planning/

Advantages and disadvantages of the top-down and bottom-up implementation approaches

The top-down and bottom-up approaches to deploying your identity management solution are provided to help you decide the best way to integrate identity management capabilities into your environment. Each approach has distinct advantages and disadvantages, as shown in Table 11.
Table 11. Pros and cons of the top-down and bottom-up implementation approaches Bottom-up approach Summary

Top-down approach

High deployment coverage in early phases Earlier return on investment High visibility of organizational changes Higher impact to organization

Tactical, limited coverage Delayed return on investment Lower impact to overall organization Higher deployment costs

Advantages

User and business awareness of the product. Benefits are realized in the early phases. You can replace many manual processes with early automation. You can implement password management for a large number of users. You do not have to develop custom adapters in the early phases. Your organization broadens identity management skills and understanding during the first phase. Tivoli Identity Manager is introduced to your business with less intrusion to your operations.

Your organization realizes a focused use of resources from the individual managed application. The first implementation becomes a showcase for the identity management solution. When the phases are completed for the managed application, you have implemented a deeper, more mature implementation of the identity management solution. Operation and maintenance resources are not initially impacted as severely as with the bottom-up approach.

Disadvantages

The organizational structure you establish might have to be changed in a later rollout phase.

The solution provides limited coverage in the first phases. A minimal percentage of user accounts are

Table 11. Pros and cons of the top-down and bottom-up implementation approaches Bottom-up approach

Top-down approach managed in the first phases. You might have to develop custom adapters at an early stage. The support and overall business will not realize the benefit of the solution as rapidly. The implementation cost is likely to be higher.

Because of the immediate changes to repository owners and the user population, the roll-out will have a higher impact earlier and require greater cooperation. This strategy is driven by the existing infrastructure instead of the business processes.

http://publib.boulder.ibm.com/tividd/td/ITIM/SC32-1708-00/en_US/HTML/im460_plan76.htm

Business Plan Components

Once youve refined and validated your business concept, its a good idea to gain an understanding of the various components that go into a business plan.

For now, well ignore obvious components such as the cover page and table of contents, though needless to say, your cover page should be simple yet attractive, and your table of contents should be easy to navigate. Of course, you should definitely have a legal page up front in the plan too, and have all copies in circulation signed by readers. This protects you from at least the possibility of someone running away with your business concept and plan! But we wont spend much time here on legalities, which is better left to the legal experts. A typical business plan should cover between 3 5 years. Its not recommended to create a plan beyond that, since so many factors in the future are hard to predict and the entire environment surrounding your business will change considerably. Instead, create a long-term vision, and build successive business plans towards that vision every 3 5 years. Now, lets move on to the components that make up a business plan There are seven business plan components you absolutely must include in your plan. Rather than getting into deep detail about each of these (which would probably take you a week to read), well focus on the their essence, and what they mean to your business plan. Now lets get down to business!

Below is a list of the key business plan components, with explanations of each further below:

Executive Summary the core of your business plan Company Summary Products/Services Market Analysis Marketing and Sales Plan Management Plan Financial Plan Appendix to stick in the detailed financials

The Executive Summary: The Core of Your Business Plan

Its important to keep in mind that most people just dont like to read.
The first and definitely most important of all business plan components is the Executive Summary. In fact, the executive summary will most likely make or break your plan. Most potential investors and lenders, like most people in general, would rather get a clear picture within the first few minutes than have to read all 50 pages of your plan. But the paradox of the executive summary is that while youd ideally want to let your audience know as much as you can about your business proposal, in reality, this doesnt make sense. The whole idea of the executive summary is to give the reader a snapshot of your business concept, and to win their interest to read on. The executive summary, while being the most important business plan component, is also the most difficult to write. To learn how to write an executive summary in more depth than what well cover here, you can read writing an executive summary. But for now, lets just take a look at what goes into the executive summary:

Highlights: 3 to 5 year projections for sales, gross margin and profit. These projections give the reader a summary view of key figures from the financial section of your plan. Objectives: State your business (not personal) objectives in specific, measurable, actionable, realistic and time limited (SMART) terms. If you cant measure your goals, then how do you know youre achieving them? Your objectives should state a timeline for when they will be achieved, and as such, should be written with a future focus. Mission: Your mission should define your business and its fundamental goals. Think of your mission as a description of your business in the now, rather than in the future, and write it in the present tense. Keys to Success: Be sure to stress the keys that will make the difference between your business success and failure. These are things you must accomplish in order for your business to succeed according to your business plan. An example of a key to success could be a volume sales target.

Its best to leave writing the executive summary until youve written all other parts of your plan, since the executive summary captures the key elements of all of those business plan components.

Company Summary
This section of the plan describes the nature of your business. It explains the ownership and legal establishment of the company, detailing whether your organization is a corporation, partnership, sole proprietorship, or limited liability partnership, for example. Here youll also discuss who are the owners of the company and the proportion of their ownership. Youll want to state what type of corporation your company is, and whether it is privately or publicly held. For startups If your business is a startup, its very important you provide details about your startup costs, assets, investments and loans. This lets investors and lenders see the true extent of your position before you start your business.

Products or Services
This section is simply summarizes the products or services your business offers, how they are offered or distributed to your customers, and your plans to develop or expand upon your current offering of products and services. 1 3 paragraphs is a good size for this component of your business plan. Keep in mind that while your product or service offering is an important part of your business, its not the be-all and end-all of your business from an investors or lenders perspective. The business plan components that follow carry much more weight.

Market Analysis
Market Analysis is one of the most sections of your plan, because its here that you will prove that an open-to-buy market exists for your product or service. This section involves extensive research about your industry, your consumer, and the current economic trends your business faces. Depending on several factors, you will need to either hire a research agency or purchase existing market or industry reports. The findings from your research efforts will form this section of your plan, ultimately describing who your target consumers are. Your target market may be just one segment, or multiple segments of the larger market. Either way, you will explain why they fall within your target market, and elaborate on their attitudes, perceptions, past buying patterns and future buying intentions. You might even go as

far as asking your potential target markets if they would buy your product or service given various circumstances, and what price they would be willing to pay for it. You will also need to provide demographics of your target market segments, and the trends surrounding each segment. For example, are these segments growing or shrinking demographically? Is their buying power increasing or decreasing? Is the demand for your product or service growing or shrinking among these groups? Depending on your product or service and your research, your segments could be any combination of various age groups, gender, income levels, occupation, employment status, marital status or interest groups. You will need to be the judge, and the whole purpose of research is to help you, your partners and shareholders make clear, objective decisions about your market. Its also good due diligence, letting potential investors and lenders know that your business plan is based on sound evidence of a market, as evidenced in your research findings. Its a very good idea to include a pie chart showing the proportion each of your target segments represent to your business. Its also important to include a table showing what percentage of these target markets your business will penetrate in each year included in your business plan. Many entrepreneurs fail to recognize the importance of this component of the business plan. Dont be one of them!

Marketing and Sales Plan

Your marketing and sales plan is is critical in the eyes of potential investors and lenders, because your marketing and sales efforts are the money-making machine of your business. There are actually four components to the marketing and sales plan: Competitive Edge Firstly, you must show in this section how your business is different or unique from its competitors, and what advantage or edge you have over them. You should also clarify how you plan to sustain or grow this competitive edge. Marketing Strategy Secondly, you need to detail your marketing strategy for your business and its products or services. In other words, how are your target consumers going to become aware and interested in your products or services? What messages, images, perceptions do you want your target consumers to associate with your business, products and services?

Sales Strategy Thirdly, your plan should include details of your sales strategy. While your marketing efforts bring potential customers to your doorstep, your sales efforts will be solely aimed at closing the deal and creating repeat, loyal business. Its one thing to have a line at your door; its quite another to have capable sales staff and systems to persuade consumers to buy. But the two go together like hand and glove. Your sales strategy clearly shows how your business will close potential buyers, how it will compensate sales staff, and take and process orders. It will also clarify how you will deliver the final product or service as well as the conditions surrounding your business sales. You should include a monthly sales forecast for the first year of your business plan, and yearly sales forecasts for each year in the plan. Youll also need to justify your sales forecasts by linking your marketing and sales efforts together, and basing both on your market analysis. Milestones Finally, your marketing and sales plan should include a set of milestones. These are the key accomplishments within your marketing and sales strategy. Your milestones will consist of launches and achievements. For example, if you will be launching a significant marketing campaign on a certain date, it should be present among other milestones. Achieving a certain volume or monetary value of sales by a certain date is another example of a milestone to list. for each milestone, be sure to state the start and end dates, budget, and the manager and department responsible. Do you need a complete marketing plan as a separate document? Depending on the purpose of your business plan and your audience, your marketing and sales plan may span from a few to several pages. If necessary, your business planning efforts may even warrant a separate, detailed marketing plan.

Management Plan
Your market analysis may be thorough and your marketing and sales strategy may be very effective. But few stakeholders in your business are going to be convinced that your business can develop, sustain and grow without a strong and experienced management team, supported by capable staff. Your management plan details who will manage your business, and how they will manage it. Here you give the credentials and achievements of your management team and the principles that will guide it.

Equally important to your management team is your entire personnel. Youll need to provide information such as the various positions within your organization and how they relate to each other. In this section, you should also list these positions and the costs associated with each. For example, you can include a table listing each position and the associated salary. Be sure to break down labor costs by month for the first year, and annually for each year in the plan.

Financial Plan
The financial plan is going to be one of the first business plan components investors and lenders will glance through. Now, its important to note before we go further that many inexperienced entrepreneurs will overestimate the financial results of their business. This runs contrary to what investors and lenders look for. In fact, your financials should be based on the worst-case scenario. This not only benefits you as a business person, since you will use the business plan as a blueprint for your business success. But it also pleases investors and lenders to know that you can profit and maintain a positive cash balance under the worst conditions. Of course, if after careful review of your worst-case scenario, your business is not going to generate a profit, or is going to face cash flow challenges, youll then need to reconsider your entire business strategy, or whether its wise to move forward with the business at all. Whatever the case be honest with yourself and others in planning your business plan financials. While we wont go into great detail here, the following make up the core of your financial plan:

Startup Funding (if your business is a startup, show your funding sources and values) Key Assumptions (youll need to make consistent financial assumptions throughout your business plan, and state each of your assumptions in the plan) Break-even Analysis (calculate at what point sales and profits cross, showing how much sales your business will need to generate to cover your monthly costs) Profit and Loss/Income Statement (you will need to project monthly profit statements for the first year of your plan, and yearly profit statements for each year of the plan. You will also need to show your monthly and yearly gross margins if your business sells products rather than services) Cash Flow (you will need to project the cash inflows and outflows in your business. This will be based on both cash and credit sales, and will depend on your accounts receivable and accounts payable turnover. Ultimately, your business must consistently create a positive cash flow and always maintain a positive cash balance in order to survive. Again, monthly for the first year, and annually for each year of the plan) Balance Sheet (you will need to project the assets, liabilities and equity of your business. Project monthly for the first year of the plan and annually for each year of the plan)

Financial Ratios (this is a list of key financial ratios resulting from your financial projections. Key ratios include current, acid-test and debt to asset ratios. These ratios indicate the strength and liquidity of your business, and help investors and lenders make careful decisions about the risks or rewards involved in funding your business. They also help you determine whether your business concept is feasible and if your business will be solvent and profitable)

Adding details The Appendix

The Appendix, as you know, shows up in the back of your business plan, and is also an important business plan component. Rather than boring your audience with details, the key business plan components should emphasize the big picture, showing how your business, and its product or service will succeed with your target consumer. Instead, stick the detailed tables and charts in the appendix, so readers can check for details, particularly detailed financials, after they have grasped the big picture of your business plan. Heres what youll likely find in the appendix:

Detailed Sales Forecast Detailed Projected Personnel Payroll Costs Detailed Projected Income Statements Detailed Projected Cash Flow Statements Detailed Projected Balance Sheets

Of course, if youve been in business for a while, you might also want to show your past performance as justification for your projections. In that case, you can include previous years statements for the above.

Wrapping up your business plan

As you can see, these key business plan components are basically smaller plans within the big plan. Therefore, focus on each of the business plan components as small plans and build them carefully and thoroughly. Dont forget though while its important to write a business plan to persuade potential investors and lenders to buy-in to your business, its more important to actually create a business plan that clearly maps out the strategy you will implement over the next 3 5 years. Write each of the business plan components with this in mind. Also, remember that while your business plan is a blueprint to your business looking ahead, its an equally important measurement tool looking back. Follow your business plan, make adjustments as necessary, and evaluate your business performance with a regular review of your plan. http://the-business-plan.com/business-plan-components/