| Updated, March 2006 |  |
File C5-68 |
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Writing a Value-Added Business Plan
Don Hofstrand, Co-Director, Ag Marketing Resource Center, 641-423-0844, dhof@iastate.edu
A business plan is critical for the creation or expansion of a value-added business. Essentially, the business plan tells how it will be created and why your business will be successful.
Although a comprehensive and well thought out business plan is important to the success of your business venture, many producer groups drag their feet when it comes to preparing one. They assert that the market changes too fast for a business plan to be useful. However, you cannot adjust your plan due to a changing market conditions if you don’t have a base plan to start with. Without a plan you will spend your time going from crisis to crisis without looking at the long-run future of your business
A business plan is only one step in creating a viable value-added business. Writing a great business plan is meaningless unless you properly implement the plan. Many value-added start-up business ventures fail because they do not focus their efforts on properly implementing the plan.
The business plan is not something you complete and then forget about. It is a living document that will undergo change as you move through the business development and implementation process.
Focus on the quality of your business plan, not its length. Does it address the relevant issues? The business plan should properly and succinctly tell your story. The length of the business plan should be the shortest version needed to adequately tell your story. Anything more is not a sign of depth or completeness. Rather, it will dissuade people from reading the plan because of its length. Remember, focus on content -- not length.
Ten Questions to Answer in Writing the Plan
There are certain elements that are critical for a business plan. Below are ten questions your business plan should answer. The quality of your business plan will depend on how well you can answer them. You can use these as a “checklist” of the completeness of your plan.
1) Who are we?
2) What do we do?
3) What do we have to offer?
4) Why will someone pay for our product/service?
5) What resources do we have?
6) Where are we going?
7) What do we need to get there?
8) Why will we be successful?
9) Why should someone participate/invest?
10) How will we measure performance?
How to Write the Plan
Your business plan should be written in plain, easy-to-read language. Use short simple sentences. Determine what you want to cover in you business plan and make headings for each of the items. Make sure your business plan covers all of the relevant topics. To help you organize your business plan use Create your Own Value-Added Business Plan and Information File Key Points in Writing a Business Plan.
Proofread your plan for the following:
- Poor organization
- Vague statements
- Errors in logic
- Gaps in the plan
- Repetitive statements
- Inconsistency
- Misspelled words
- Poor grammar
- Incomplete sentences
- Mathematical errors
It is usually a good idea to have someone who is not involved in the project proofread your business plan. They can help you aspects of your business plan that may need additional clarification and explanation.
Who Should Write the Plan
Although it is common and often preferable to have someone help you write the business plan, the founders or management team is ultimately responsible for creating the ideas and content of the business plan. Stated simply, if you are not intimately involved in writing the business plan, you will not know what it contains. If you don’t know what the business plan contains, how can you implement the plan. If you cannot implement the plan, how can you create a successful business.
So, the primary responsibility for writing the business plan is with you, the founders or the management team. Consultants or professional writers can be used to help you with creating the business plan, but their role is only to assist you in this important process.
However, it is often a wise investment to hire a consultant to review a draft of the plan. Having an outsider review the plan, especially someone who knows the industry and is familiar with writing business plans, can be invaluable in pointing out deficiencies and shortcomings of the plan. Finding and correcting these deficiencies can greatly improve your business plan.
How Long Should It Be
Focus on the quality of your business plan, not its length. The length of the business plan should be the shortest version needed to adequately tell your story. The business plan should properly and succinctly tell your story. Does it address the relevant issues? Anything more is not a sign of depth or completeness. Rather, it will dissuade people from reading the plan because of its length. Remember, focus on content -- not length.
Not All Business Plans are Alike
Value-added agriculture includes many types of businesses. Businesses range from a few producers marketing products directly to local consumers to large-scale integrated processing/manufacturing businesses. Likewise, who you are writing the business plan for can vary substantially.
Type of Value-Added Business
Just as all value-added businesses are not alike, all value-added business plans are not alike. The plan must fit the needs of the business. For example, the marketing needs of a commodity processing business like ethanol are much different than those of a niche food business. The financial needs of a processing business are much greater than those of a direct marketing business. So the focus on investors and lenders is much greater. In addition, the need for risk management strategies is much greater due to the capital intensive nature of the business and the volatility of commodity markets. Conversely, the management needs of both types of businesses are substantial, although of a different type.
Who are the Readers of Your Plan
In addition to the type of value-added business you are starting, your plan needs to be tailored to the reader of your plan. Most value-added businesses have several types of stakeholders. A stakeholder is someone who has a stake or interest in the outcome of the business. In addition to the business founders, stakeholders include equity investors, bankers, key employees, and others. Different stakeholders have different priorities. These priorities need to be balanced in the business plan.
Figure 1 lists the issues to emphasize or deemphasize depending on whom the plan is written for. For example, bankers are usually looking for cash-flow while investors may be looking for growth. This is not to say that the content and direction of the business plan should be altered. However, it does mean that the focus of the plan may shift.
This means that you may have more than one version of the business plan. This is alright as long as the same story is told - just with different emphasis.
Implementing the Business Plan
A business plan is only one step in creating a viable value-added business. Writing a great business plan is meaningless unless you properly implement the plan. Many value-added start-up business ventures fail because they do not focus their efforts on properly implementing the plan. Essentially this is a plan for implementing the plan. A portion of the business plan should focus on the steps required to implement the plan. This should include a timeline and milestones of accomplishments.
