WHY BUSINESS PLANS FAIL?

Generally a poorly prepared business plan can be blamed on one or more of the following factors:

• Goals set by the entrepreneur are unreasonable.
• Goals are not measurable.
• The entrepreneur has not made a total commitment to the business or to the family.
• The entrepreneur has no experience in the planned business.
• The entrepreneur has no sense of potential threats or weaknesses to the business.
• No customer need was established for the proposed product or service.

Setting goals requires the entrepreneur to be well informed about the type of business and the competitive environment. Goals should be specific and not so mundane as to lack any basis of control. For example, the entrepreneur may target a specific market share, units sold, or revenue. These goals are measurable and be monitored overtime.

In addition, the entrepreneur and his or her family must make a total commitment to the business in order to be able to meet the demands of a new venture. For example, it is difficult to operate a new venture on a part- time basis while still holding on to a full- time position. And it is difficult to operate a business without an understanding from family members as to the time and resources that will be needed. Lenders or investors will not be favorably inclined toward a venture that does not have full- time commitment. Moreover, lenders or investors will expect the entrepreneur to make a significant financial commitment to the business even if it means a second mortgage or a depletion of savings.

Generally, a lack of experience will result in failure unless the entrepreneur can either attain the necessary knowledge or team up with someone who already has it. For example, an entrepreneur trying to start a new restaurant without any experience or knowledge of the restaurant business would be disastrous.

The entrepreneur should also document customer needs before preparing the plan. Customer needs can be identified from direct experience, letters from customers, or from marketing research. A clear understanding of these needs and how the entrepreneur’s business will effectively meet them is vital to the success of the new venture.

HOWTO WRITE A BUSINESS PLAN

The business plan can take more than 200 hours to prepare, depending on the experience and knowledge of the entrepreneur as well as the purpose it is intended to serve. It should be comprehensive enough to give any potential investor a complete picture and understanding of the new venture and will help the entrepreneur clarify his or her thinking about the business. Many entrepreneurs incorrectly estimate the length of time that an effective plan will take to prepare. Once the process has begun, however, the entrepreneur will realize that it is invaluable in sorting out the business functions of a new venture. Each of the items in the contents of the business plan is explained in detail as follows.

INTRODUCTORY PAGE:

This is the title page or cover that provides a brief summary of the venture and should include the following things:

• Name and address of the company.
• Name of the entrepreneur(s) and telephone number.
• Description about the company and also stating nature of business.
• Stating their financial requirements.
• A statement of the confidentiality of the report.

EXECUTIVE SUMMARY:

This is prepared after total plan is written. This about 3 to 4pages in length, this summary should stimulate the interest of the potential investor. This highlight concise and convincing manner the key point in the business plan stating the nature of the venture, financing needed, market potential, and supports to why it will succeed.

INDUSTRIAL ANALYSIS:

This reviews industry trends and competitive strategies. The industry outlook, including future trends and historical achievements, insight of new product developments in this industry. Competitor should be identified, with appropriate strengths and weakness described and how will it affect the new ventures potential success in the market.

DESCRIPTION OF VENTURE:

It states the product produced by venture which includes patent, copyright, or trademark status. It also gives a brief idea where the business will be located including the construction of building, leased or owned. In description of venture the type of office equipment will be required whether it will be purchased or leased. He (entrepreneur) should also look at the management experience, stating their education, age, special abilities and interest.

PRODUCTION PLAN:

This includes details of manufacturing process a product, which is very necessary. If the manufacturing is to be carried out in whole or in part by the entrepreneur, he or she will need to describe to physical plan layout: the machinery and equipment needed to perform the manufacturing operations: raw material and suppliers names, addresses, and the terms; costs of manufacturing and any future capital equipment needs. It should also include state subcontractors name and addresses; costs of subcontracted manufacturing; raw material required for manufacturing.

MARKETING PLAN:

The marketing plan represents a significant element in the business plan for a new venture. Marketing planning should be an annual activity that focuses on implementing decisions related to the marketing mix variables (product, price, distribution, and promotion). Like the annual budgeting cycle, market planning has also become an annual activity and should be incorporated by all the entrepreneurs, regardless of the size or type of the business. These marketing plans must be monitored frequently, especially in the early stages of start up.

ORGANIZATIONAL PLAN:

The organizational plan describes the venture form of ownership i.e. whether it is proprietorship, partnership or a corporation. If the venture is a partnership, the term of partnership should be included, name of partners, term of agreement, specimen signatures of the partners etc. If it is a corporation venture than it is important to detail the shares of the stock authorized, share options, names and address, resumes of the directors and officers of the corporation. If it is an incorporation venture than it should state the principal shareholders and shares owned by them; type and number of shares stating voting or non-voting stocks have been issued, members of board of directors, check signing authority or control. The plan also states how many members are there in management team and their background, their roles and responsibilities stating their salaries, bonuses or other forms of payment for each members of the management team. This is also helpful to provide an organization chart indicating the line of authority and responsibilities of the members of the organization. This information provides the potential investor with a clear understanding of who controls the organization and how other members will interact in performing their management functions.

ASSESSMENT OF RISK:

All ventures face some potential hazards, given the particular industry and competitive environment. An entrepreneur should make assessment of risk and prepare an effective strategy to deal with them. Even if these factors present no risks to the new venture, the business plan should discuss why that is the case. Contingency plans and strategies illustrate to the potential investor that the entrepreneur is sensitive to important risks and is prepared should any occur.

FINANCIAL PLAN:

The financial plan should include proforma income statements, break –even analysis, proforma cash flow, proforma balance sheet, and proforma sources and uses of funds.

APPENDIX:

It generally contains business plan generally back up material that is not necessary in the text of the document. Reference to any of the documents in the appendix should be made in the plan itself. Letters from customers, distributors or sub- contractors are examples of information that should be included in the appendix. Any documentation of information that is secondary data or primary research data used to support plan decisions should also be included. Leases, contracts or any others types of agreement that have been initiated may also are included in the appendix. It should also include price lists from suppliers and competitors may be added.

CONCLUSION

A business plan is a crucial component for an entrepreneur. A business plan is presented to a bank to obtain funds in the initial stage of a project. It is a monetary rule that a business plan has to be presented to a bank before the release of funds by the financial institutions. Hence, business plan is a stepping- stone for an entrepreneur in the commencement of a project.

CONTENTS OF A BUSINESS PLAN

I. INTRODUCTORY PAGE

• Name and address of business.
• Name(s) and address (es) of principals.
• Nature of business.
• Statement of financing method.
• Statement of confidentiality of report.

II. EXECUTIVE SUMMARY

Three to four pages summarizing the complete business Plan.

III. INDUSTRY ANALYSIS

• Future outlook and trends.
• Analysis of competitors.
• Market Segmentation.
• Industry forecasts.

IV. DESCRIPTION OF VENTURE

• Product(s)
• Service(s)
• Size of business.
• Office equipment and personnel.
• Background of entrepreneurs.

V. PRODUCTION PLAN

• Manufacturing process (amount subcontracted)
• Physical Plant.
• Machinery and Equipment.
• Names of Suppliers of raw materials.

VI. MARKETING PLAN

• Pricing.
• Distribution.
• Promotion.
• Product forecasts.
• Controls.

VII. ORGANIZATIONAL PLAN

• Form of ownership.
• Identification of partners or principal shareholders.
• Authority of principals.
• Management- team background.
• Roles and responsibilities of members of organization.

VIII. ASSESSMENT OF RISK

• Evaluate weakness of business.
• New technologies.
• Contingency Plans.

IX. FINANCIAL PLAN

• Proforma income statement.
• Cash Flow Projections.
• Proforma balance sheet
• Break-Even analysis.
• Sources and application of funds.

X. APPENDIX (contains backup material)

• Letters.
• Market Research Data.
• Leases or contracts. 
• Price lists from suppliers

Measuring Advertising Effectiveness

All advertising efforts are directed mainly towards the achievement of business, marketing and advertising objectives i.e., to increase the sales turnover and thus to market the maximum profit. The advertiser spends lakhs of rupees in to this advertising activity. In the background of all these efforts, is an attempt to attract the customer towards the product through advertising. As soon as the advertising campaign is over, a need is generally arisen to measure the effectiveness of the campaign. Whether, it has achieved the desired results i.e. desired sales profitability or results in terms the change in customer’ behaviour in favour of the company’s product which will naturally, affect the future sale of the product.

In order to measure the effectiveness of advertising copy, two types of tests pretests and post tests- can be undertaken. Pretests are generally conducted in the beginning of the creation process or at the end of creation process or production stage. There are several pre and post tests techniques to measure the effectiveness of the advertising copy.

The effectiveness of advertising in a particular media may also be measured in any of the following ways – (a) by giving different addresses to different media, (b) different newspapers may be selected for advertisements of different departments, (c) coupon blank etc. May be provided with the advertisement or (d) enquiry from consumers should mention the name of the source of information. The technique is known as keying the advertising.

Thus in measuring the effectiveness of advertising we include measuring of the effectiveness of advertising campaign, advertising copy and the effectiveness of individual media. This chapter deals these three problems.

Importance of measuring the Effectiveness of Advertising

(1) It acts as a Safety measure

Testing effectiveness of advertising helps in finding out ineffective advertisement and advertising campaigns. It facilitates timely adjustments in advertising to make advertising consumer oriented and result oriented. Thus waste of money in faulty advertising can be avoided.

(2) Provides feed back for remedial measures

Testing effectiveness of advertising provides useful information to the advertisers to take remedial steps against ineffective advertisements.

(3) Avoids possible failure

Advertisers are not sure of results of advertising from a particular advertising campaign. Evaluating advertising effective helps in estimating the results in order to avoid complete loss.

(4) To justify the Investment in Advertising

The expenditure on advertisement is considered to be an investment. The investment in advertising is a marketing investment and its objectives should be spelt out clearly indicating the results expected from the campaign. The rate and size of return should be determined in advance. If the expected rate of return is achieved in terms of additional profits, the advertisement can be considered as effective one.

(5) To know the communication Effect

The effectiveness of the advertisement can be measured in terms of their communication effects on the target consumers or audience. The main purpose of advertising is communicated the general public, and existing and prospective consumers, various information about the product and the company. It is therefore desirable to seek post measurements of advertising in order to determine whether advertisement have been seen or heard or in other words whether they have communicated the theme, message or appeal of the advertising.

(6) Compare two markets

Under this procedure, advertising is published in test markets and results are contrasted with other. Markets – so called control markets – which have had the regular advertising programme. The measurements made to determine results may be measurements of change in sales, change in consumer attitudes, changes in dealer display. and so on depending upon the objectives sought by the advertiser.

CLASSIFICATION OF ADVERTISEMENT COPY

It is true that copy writing is an art and the copywriter has a very important role to play in advertising creativity. Copy writing does not admit any stereotyped rules and classification. There are various styles in which a copy can be prepared and presented. The following types of copy may be studied-

1. Descriptive Copy – This type of copy describes the pertinent and relevant characteristics features of the product. It is very simple and of non-technical nature. It does not have any specialty which can attract the attention of the target consumers or may compel them to read it. It is very much similar to a press account or news item simply giving relevant information to the public without any stylish touch

2. Scientific Copy – Such types of copies are technical in nature and generally used by drugs and pharmaceutical firms elaborating the propositions of properties and constituents of the product. It provides full information about the product and the producer. This type of copy is usually meant for professional or for those who are really interested in such types of information.

3. Institutional Copy – Institutional advertisement copy aims at selling the name of the advertiser or the institution that is producing or selling the products or services. The main objective of such type of advertisements is to create, maintain or increase the goodwill of the product or of brand or of the department or of the selling house as a whole, Institutional copy invites the target consumers to the selling outlet. Such a copy seeks to build goodwill through publicizing the policies, customer services, Conveniences and general features of superiority of the store over the rivals.

4. Topical Copy – Herein and attempts is made to appeal to the general public by linking the theme of the copy with some current event but it should not look absurd. It commands a good deal of interest because of that sensational event which lives in the minds of the public.

5. Reason why Copy – This type of advertisement copy offers the readers reasons why they should buy the advertised goods. It narrates the positive points of difference from other brands of the same product category in an endeavour to convince the reader from product’s qualitative aspect. It directs its appeal to the intellect or judgment rather than to emotions or senses. It substantiates the superiority of the merchandise with the tests performance. Records testimonials, guarantees or construction data.

6. Human Interest Copy – It makes its appeal to the emotions and the senses rather than to the intellect and judgment. Sympathy fear, bonus, curosity and other emotional appeals like appeals to the senses of sight hearing touch taste, and smell are used in such type of copy. Human interest copy presents the product in relation to people instead of confirming to facts about product. As emotions are many and always new it may be made more exciting an artful than reason why copy. It affords a refreshing change. Human interest copy can take various forms:-

• Humorous Copy - It exploits the sense of humor of the people. It turns the reader laughter. All examples and statements in such copy are fully to make the reader smile.
• Fear Copy - It appeals to the sense of fear and arouses the interest of people to save their lives, properties and other belongings. Such copy of advertisement should be drawn carefully so that it may not carry an unpleasant association of readers’ minds with the advertiser’s product of business Lifer Insurance Corporation General Insurance Companies and Bank generally use this type of copy.
• Story Copy - In such a copy a story is narrated me a very interesting manner to create manner to create an impression in the minds of the people about the product. Its ability to create interest depends upon dramatic impact it produces. Experience of customers can also be narrated in the story.
• Predicament Copy – It is often used to advantage when it shows an article of merchandise in a case that provides a dramatic explanation of its advantages. Predicament copy usually overlaps the other three kinds of human interest copies

7. Colloquial copy or Conversational Copy – The colloquial copy presents the message in the way of conversation. It uses an informal language and conversation takes place in terms of ‘I’ and ‘You’ with personal reference to reader and the advertiser. In such copy the style is one of a personal talk or one of an eyewitness account.

8. Personality Copy - This copy attempts to encase the opinion of personality – real or imaginary – about the product. Usually the personality is real. The photograph of the personality (a person specialized to concerned field) is given with the text of the copy with a view to convince the readers through the moral influence of his name. Invariably, such copy shows a certificate or a testimonial of such influential person.

9. Prestige Copy - This pattern is usually for in institutional advertising which aims at creating an atmosphere about the product or the firm and may not directly advise the product for sale. Such a copy is occasionally used and is very much similar to the personality copy in impression which also strives to enhance the prestige of the advertising firm indirectly by visualizing the name of the eminent personality.

10. Educational Copy – The copy is designed to educate the general public about the attributes of the product. Usually introductory appeal is made in this style when the product is introduced in the market for the first time; it is the duty of every producer or advertiser to tell everything relevant about the product to the public in such a manner that it may get a warm welcome among customers. Such an advertisement copy depicts the specialties to the product category. The advertiser may insist only one or two attributes of the product which is more sensational such as introduction of a low priced item without the loss of quality or a product developed from a new technology indigenous or imported etc.

11. Suggestive Copy - A suggestive copy tries to suggest or convey the message to the readers directly or indirectly to pursue them to purchase the product. It is useful where the reader is confused about the quality of a product brand and is not in a position to take a decision about the purchase of the product.

12. Expository Copy – Just opposite of suggestive copy it expository copy. It does not conceal anything about the product but exposes. The message is quite clear and it needs no inference, no taxing on mind, no thinking, Even a cursory glance rakes it quite easy to remembers or to pick – up.

13. Questioning copy – Questioning copy as the term suggests. In Corporate a series of questions expected to be answered by them readers. The advertiser puts no narration, statement or reason of its own in order to pursue the readers to buy the product. The question arouses the curiosity in the minds of the readers and makes them think of it. Thus there are various types of copies of advertisement on the basis of their style of presentation.