ECONOMICS:
A World of Opportunity


ENTREPRENEURSHIP AND INNOVATION

PLANNING

i) The Planning Documents

To launch a new business or a major research and development project without a comprehensive, precise, detailed, documented plan is lunatic. Only through rigorous planning can the inevitable risks be minimized.

There are three kinds of plans and it is important to distinguish among them. They are:

  1. The Strategic Plan
  2. The Preliminary Business Plan
  3. The Business Plan (Action Plan)

The Strategic Plan

This plan is more general and less detailed than the business plans described below. The strategic plan takes a long-term perspective (usually at least a decade) and addresses the basic opportunities or dangers that a venture might face. It concerns itself with the outlook for an entire industry or broad product category or with the evolution of a particular technology. Changing lifestyles, social norms or political priorities would also be considered. A strategic plan therefore should provide a venture with a basic sense of direction for the future. For any major undertaking a strategic plan is essential.

The Preliminary Business Plan

The difference between the preliminary business plan and the business or action plan is that the preliminary business plan may NEVER be used to justify any major commitment of resources. A preliminary business plan is not the basis on which you launch a new business or large-scale research and development project. Rather, it is the basis on which you investigate the possibility of starting a new business or undertaking a major program of new product development. In particular, the preliminary plan helps you to decide whether you can justify the effort and expense of conducting a market survey and possibly a test-market. Of course, if you cannot justify a market survey, you cannot justify the launch of a business or a research and development program.

The preliminary plan follows the same basic format as the action business plan except that it does not contain market survey and test-market results. It does, of course include market research or analysis based on published information. However, the preliminary plan is less detailed and less documented than the action business plan.

The Business Plan

(The Action Plan or the Business Action Plan)

The business plan answers every question you need to ask to launch a new business or major research and development effort. And it answers them BEFORE you start. Moreover, each and every answer is documented with respect to where you obtained the information and why exactly you came to this particular conclusion. You never spend serious money without having a business plan in place and finished.

But note that a plan is an anticipation of the future; it is not a guarantee of the future. Therefore, your plan needs contingency pathways and some built-in flexibility. Nevertheless, you may well encounter some unexpected development that renders part of your plan inoperative. Do you then abandon the plan and proceed on an ad hoc basis? No. You abandon the existing plan, but not the art of planning. In other words, you stop and generate a new and complete business plan and set off again into the future.

The Basic Requirements of the Business Plan

The following elements are usually present in all business plans. However, particular situations or personal preference may alter the sequence or some of the content or involve additional information. Such amendments should support the fundamental logic of the plan which is to provide documented answers to all the significant questions involved. It is better to err on the side of more information rather than less.

The Product

The Market

*Note:
For the preliminary plan you report the results of your analysis of published sales figures of similar products. For the action business plan you must report on the basis of your market survey and test-market, if the test-market was feas ible. In all circumstances a market survey is necessary.

Research and Development

Note:
If this plan is being used to justify a major R&D project, this section will be greatly expanded. Otherwise, for a new business launch, this R&D should involve only minor and apparently easy details of elaboration. You do not start a business unless you have a product that basically works and can be delivered reliably.

The Production

The Marketing Strategy

The Organization

The Leadership of the Venture

The Evaluation of Risk

The Financial Analysis