Business planning begins with information. As noted above, one important part of the strategic value of the business planning process, and the formal written business plan that emerges from that process, is the knowledge that the founders and the other senior managers acquire while they are collecting the information needed to prepare the plan. Moreover, timely and complete information on all relevant aspects of the company’s projected market and products and services is required in order to obtain the support of investors, banks and other prospective business partners. If the business plan fails to convey an understanding of the data that is most relevant is assessing the viability of the business concept then it is likely that the venture will fail due to its inability to attract the necessary resources from its environment. In addition, the steps taken to identify the best sources of information for the initial business plan should also serve as a foundation for creating a permanent system for collecting additional information in the future that can be used to measure the progress of the business and to make refinements to the strategic business plan as the company moves forward and environmental conditions change.
The outline of the contents of the business plan presented below should provide a guide as to the scope and amount of information that will be needed in order to prepare the plan. In general, the process should begin with an examination of the industry sector(s) where the company hopes to compete with its products and services and, in particular, the specific markets within those industries that the company intends to target initially and in the future. Sector analysis should include a review of the overall performance of the sector in relation to the general economy and the collection of current and reliable information on forecasts, growth trends, and environmental factors. Market analysis focuses on the specific stakeholders that the company will need to include within organizational domain and should include customers, suppliers, distributors and competitors. Customer information is obviously critical and the company must be able to collect the data necessary to answer several basic questions—who are the customers, where are they located, what are they currently doing to solve the problem addressed by the company’s products or services, and how might they use the company’s products and services as an alternative solution. Information should also be collected on the current and projected spending habits of the customer base. With regard to competitors the goal is to collect enough information to understand their strengths and weaknesses and how they operate within the target market. In order to do this the company must gain access, legally, to information regarding competitors’ product lines, customer base, manufacturing and distribution strategies, and financial condition.
Presumably, the founders and senior managers will have sufficient experience in the industry to allow them to get a good reading on the initial risks and costs associated with the proposed venture. However, there are a wide variety of other sources of planning information that might be useful in certain instances. For example, national governmental agencies (e.g., U.S. Small Business Administration and the Department of Commerce) spend large sums of money on research and a number of government publications can provide statistics on the size of relevant markets and expenditures for research and development, manufacturing, marketing, and human resources. Government publications can be particularly useful when the business is planning on a significant volume of foreign sales activity. Local agencies, as well as nonprofit organizations, also provide assistance to persons interested in starting up a new business and can guide the founders and senior managers to information specific to the geographic area where the business will be organized. Trade associations may be able to provide a substantial amount of current information on business resources that are very industry and niche specific and can also provide an overview of relevant laws, regulations and competitive conditions. Finally, financial information released by listed companies involved in the same line of business may also be useful in putting together long-term projections and analyzing the ratios between income and expense items that might be set as goals for the new business. While information is abundant, there may be situations where the specific kind of information necessary for a particular part of the business plan is not available or is not sufficiently updated to provide readers with a current picture of all the relevant issues. This does not, however, mean that an issue should be ignored; it simply means that the founders and senior managers should make note of the shortcomings in the information base and how they might impact the decisions that need to be made during the strategic planning process.
While collection and assessment of information for use in the business plan is often a heavily quantitative process that involves a substantial amount of sophisticated statistical analysis, the founders and senior managers should not ignore the value of “business intelligence” that can be obtained through old-fashioned personal surveys. Before finalizing the business plan and circulating it to prospective business partners the founders should make direct contact with key parties within their developing organizational domain to gather further information and test some of the assumptions that may be guiding their thinking regarding the strategic planning process. For example, the founders and senior managers should visit sales outlets operated by potential competitors and also talk informally with prospective customers to find out directly what there concerns and requirements might be with respect to the proposed products and services to be offered by the company. Input from these personal survey techniques may be used as part of the formal business plan and, perhaps even more importantly, can be referred to as a sign of credibility in one-on-one meetings with potential investors and business partners who should appreciate the fact that the founders and senior managers are not relying solely on the library to define the vision for the company.