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Business Plan as a Model

Rationale

 

 

Learning Objectives and Outcomes

This is a non-taught unit designed for self-directed study by those intending to enhance their professional or managerial competence, knowledge, understanding, and skills in business modelling.

Knowledge

After completing the course, student will:

• Understand the main concepts and principles of both, business planning and modelling.

 

Skills

After completing the course, student will be able to

• Select and apply appropriate business models and planning principles own business.

 

 

Business Planning

A Business Plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals.

 

 

The business goals being attempted may be for-profit or non-profit. For-profit business plans typically focus on financial goals. Non-profit and government agency business plans tend to focus on service goals. Business plans may also target changes in perception and branding by the customer, client, tax-payer, or larger community. A business plan that has changes in perception and branding as its primary goals is called a marketing plan.

Business plans may be internally or externally focused. Externally focused plans target goals that are important to external stakeholders, particularly financial stakeholders. They typically have detailed information about the organization or team attempting to reach the goals. With for-profit entities, external stakeholders include investors and customers.^[1] External stake-holders of non-profits include donors and the clients of the non-profit's services.^[2] For government agencies, external stakeholders include tax-payers, higher-level government agencies, and international lending bodies such as the IMF, the World Bank, various economic agencies of the UN, and development banks.

Internally focused business plans target intermediate goals required to reach the external goals. They may cover the development of a new product, a new service, a new IT system, a restructuring of finance, the refurbishing of a factory or a restructuring of the organization. An internal business is often developed in conjunction with a balanced scorecard or a list of critical success factors. This allows success of the plan to be measured using non-financial measures. Business plans that identify and target internal goals, but provide only general guidance on how they will be met are called strategic plans.

Operational plans describe the goals of an internal organization, working group or department.^[3] Project plans, sometimes known as project frameworks, describe the goals of a particular project. They may also address the project's place within the organization's larger strategic goals.^[4][5]

 

Business Plan Content Business Plan Preparation Support services Resources for researching facts and figures Internal corporate records Free information Fee-based services Strategic Analysis Forecasts: Modeling Techniques Presentation Formats Revisiting the Business Plan Cost overruns and revenue shortfalls Legal and Liability Issues Disclosure requirements Limitations on content and audience How Business Plans are Used Venture Capital Within Corporations Fund raising Total Quality Management Management by Objective Strategic Planning Education K-12 Higher Education Satires of Business Plans References   See also Corporate Finance Cost overrun Cost-benefit analysis Marketing plan Strategic plan

Corporate finance Working capital management Cash conversion cycle Return on capital Economic value added Just In Time (business) Economic order quantity Discounts and allowances Factoring (finance) Capital budgeting Capital investment decisions The investment decision The financing decision Capital investment decisions Sections Managerial finance Financial accounting Management accounting Mergers and acquisitions Balance sheet analysis Business plan Corporate action Finance series Financial market Financial market participants Corporate finance Personal finance Public finance Banks and Banking Financial regulation

 

 

 

 

Business Modelling

The term Business Model describes a broad range of informal and formal models that are used by enterprises to represent various aspects of business, such as operational processes, organisational structures, and financial forecasts. Although the term can be traced to the 1950s, it achieved mainstream usage only in the 1990s. Many informal definitions of the term can be found in popular business literature, such as the following:

“	A business model is a conceptual tool that contains a big set of elements and their relationships and allows expressing the business logic of a specific firm. It is a description of the value a company offers to one or several segments of customers and of the architecture of the firm and its network of partners for creating, marketing, and delivering this value and relationship capital, to generate profitable and sustainable revenue streams.	”
	— Osterwalder, Pigneur and Tucci (2005)

 

More recently, researchers build definitions based on economic and organisational theories and show that the definitions are econometrically sound. For example, Malone, et al. (2006) at MIT propose an operational definition of business model, based on theories such as those from transaction cost economics. Zott and Amit (2002) from INSEAD and Wharton based their definition on boundary-spanning transactions.

 

 

Simply put: What problem does this business solve and how does it do so profitably?

• Components of a business model
• Evolution
  • Example business models over the years
    • The subscription business model
    • The razor and blades business model (bait and hook)
    • The pyramid scheme business model
    • The multi- level marketing business model
    • The network effects business model
    • The monopolistic business model
    • The cutting out the middleman model
    • The auction business model
    • The online auction business model
    • The bricks and clicks business model
    • The loyalty business models
    • The Collective business models
    • The industrialization of services business model
    • The servitization of products business model
    • The low-cost carrier business model
    • The online content business model
    • The freemium business model
    • The premium business model
    • The direct sales model
    • The professional open-source model
    • Various distribution business models
• Do Business Models Matter?
• Related Concepts

 

See also

• Business model design
• Business process modeling
• Business plan
• Growth Platforms
• Market forms
• Marketing
• Marketing plan
• Monopoly
• Strategic management
• Strategic planning
• Value migration
• Business rule

 

External links

• Business Modeling Forum
• Business Model: A Bridge between Technology and Business
• TKO Business Modelling Software
• Business Strategy Blog

 

 

Today's Videos

• Connect with us on http://www.youtube.com/finntrack
• Google's Play lists

 

 

Teaching and Learning Resources

• Learning Environment
• Learning Contents
• Teaching Strategies

 

Click on the titles below

 

Strategic Business Planning

Tutorials

• Strategic Business Planning

 

Readings

Anyone starting up a new business must assess every aspect of the proposal and think through how it might fail or (hopefully) be successful. To raise capital, your ideas and plans must be explained to others (the bank, potential partners/investors, advisers) - even yourself. The business plan should do this. Producing the plan checks out the feasibility of your ideas and anticipates the risks. The plan is an architect's plan/model for the business start-up. The architect's plan needs a bill of materials, a schedule, planning permissions, a budget etc. It guides the constructors.

 

 

Who are you and what do you want?

Do you really have what it takes - the drive and energy, the constancy to carry it through? Be honest about your skills and abilities. Are you tough enough, organised enough, willing to work long hours, endure incredible sacrifices and risk losing everything - home, savings, perhaps even family?

 

These may not come to pass but have you really contemplated the hardships of the journey?
 

What kind of business and why this type?

Will you be a Sole trader? You carry all the risks. The Inland revenue and Social Security must be informed that you will be working for yourself and the date you start trading. You are totally responsible for starting up and raising all the capital. You have unlimited liability for the debts of the business.

Partnership - You carry the risks and now must work with others who can let you down. They may even want to pull out or block your decisions! Although not compulsory, approach a solicitor and set up a partnership agreement. This even applies between family partners. Each partner has unlimited liability for the business's debts. Hence in a dispute between partners, the rights of each party will be clear from the partnership agreement? If there is disagreement
 

• How will decisions be reached? Is a partner sleeping and perhaps with limited liability?
• How much £ does each partner put in, what % of the profit does each get
• What happens if a partner wants to withdraw?

Limited company? A legal entity separate from its owners. Owners of the business equity have limited liability (for the value of their share holding). Profits are subject to corporation tax. PAYE and national insurance contributions must be administered for employees.

Trading name and Logo

The business's name should project its identity and image. Clients need to like and understand it e.g. Trotter's International Traders, C. Rimer Security, Yoakam Yoghurt, Bakersfield Pies. Try answering the telephone using the company's name e.g. "Firth, Ackroyd Reno Billericay Boiler and Steam Generation Design Associates - can I help you?" Is it easy to say? Does it roll off the tongue or abbreviate well? Try the acronym? Will it be remembered? Do others warm to the name?

You will need letter-headed paper, business cards, invoices, order forms etc. A sign on your van or factory unit will be useful. You may wish to present your trading name with a nicely selected font or design a graphic logo (iconic representation). Make sure your logo communicates the company well. Evaluate its eye-catchiness. Will the name and logo work? Could the name and logo be misinterpreted e.g. if you trade in an overseas market? Will it match the test of time?

 

 

See also

• Planning for a Business Start-up

 

 

Recommended Texts

 

Strategic Modelling and Business Dynamics: A Feedback Systems Approach John Morecroft, London Business School ISBN: 978-0-470-01286-4 ©2007 464 pages Check the availability and buy your books from our Bookshop.

 

 

Resources

 

 

 

 

 

 

• The Five Keys to Building a Successful Company
• Presentations

   

• To download PowerPoint slides of John’s recent presentations, simply click on the name
  of the program you wish to view and the slides will automatically begin downloading

  SHRM Strategic HR
  A presentation on how HR can get a seat at the CEO strategy table

  Fulton County Schools: Leadership and Excellence
  Leadership and career development for school administrators

  Excellence By Design - College
  John’s presentation on how to succeed in college and life

 

 

 

 

 

 

 

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