Live and 2MBA Business Plans Analysis and Recommendations Report

Introduction

A business plan refers to a document prepared by a firm illustrating the projected course of business operations in the future. Usually, a business plan summaries both the operational and the financial objectives of a firm in the next one to three years. Additionally, it seeks to persuade investors to finance the new venture (Sellars, 2009). A business plan is prone to modifications later on to reflect changes in the operating environment.

The major changes in the environment that may require modification of the business plan include the emergence of new opportunities or threats. A business plan tends to convince investors to invest in the company, and thus the disclosure of material facts regarding the operations is inevitable.

A business plan should illustrate how the firm intends to use the funds raised from the financier and demonstrate its ability to manage resources effectively. This paper compares and contrasts the structure of two business plans. The paper identifies the major strengths and weaknesses of each plan before making recommendations for improvement of each document.

A Brief Description of the Business Plans

Manufacturing and Marketing Beverage Appliances, Inc. (2MBA, Inc.) is a manufacturing firm specialising in the production of beverage equipment, which it sells to food manufacturers. The firm’s business plan is premised on the need to raise $1.5 million from potential investors to boost its operations. 2MBA plan starts with an executive summary meant to brief investors on the intended operations of the business.

The plan is not comprehensive enough to exploit all the material facts. However, the entire business plan is structured to explore crucial information on the nature of the intended venture, which is useful to investors.

The 2MBA plan emphasises on information regarding the company’s products, and it seeks to paint a picture of the superiority of the company’s products over compliments produced by the competitors. The plan also includes information on competitors, which is assessed through the SWOT (Strength, Weaknesses, Opportunities and Threats) analysis.

In the case of the Live Plan Template, the business plan is structured to capture crucial information for investors. The plan opens with an executive summary section structured to highlight information regarding the amount of funds needed together with how the business intends to raise and use the money.

Another section of the plan analyses the projected cash flows arising from the intended investment by highlighting both the revenues and the costs. The plan is structured to capture the information in a more summarised manner than in the case of 2MBA. For instance, it uses tables to present the projected cash flows.

All the revenues and costs associated with the initial operations of the firm are captured in the plan through tables provided in the relevant sections. The plan integrates tables with theoretical explanations to make sure that the investor understands every aspect covered in the plan. However, the plan does not provide SWOT analysis as in the case of 2MBA.

Identification of the Three Strongest Components of Each Plan (and Why)

Live Plan

The Integration of Written Text with Tables

Tables help with the analysis of information contained in written texts for easy interpretation by the intended audience (Sellars, 2009). Business plans are intended to convince financiers to invest in a company. Therefore, the ability of a firm to repay the borrowed money must be demonstrated.

The presentation of financial statement in tabular form as in the case of the Live Plan Template helps investors in interpreting information with ease given that such data is simplified and easier to understand than when presented in words. The 2MBA plan does not feature tables, and only words are used to describe the financial requirements of the firm.

Additionally, the main financiers are banks and other formal financial lenders who require the adherence to accounting principles stipulated by the accounting bodies. The tables in the Live Plan Template are designed to present the financial statements of the business formally in line with the requirements of the accounting bodies.

Sales Forecast

An effective business plan requires a comprehensive statement of the projected sales and an honest disclosure of the entire costs associated with the sales to avoid overstatement of the net gains (DeThomas & Derammelaere, 2008).Both the projected income and expenses should be presented clearly, and the budgeted net gains worked out.

A clear presentation of sales projection and the accompanying costs may compel investors to invest in the company. The Live Plan business plan template seeks not only information regarding sales projections but also an analysis of the target customers. The sections seeking to explore information regarding sales projections coupled with detailed customers’ analysis are the major strengths evident in the business plan.

Financial Analysis

Another strength notable in the Live Plan Template is the exceptional design to capture data regarding the projected financial flow in the company. The structure of the template is in such a way that the basic financial statements including the profit and loss account are captured. The template presents unique tables for the user to fill in the projected financial information for easy analysis.

2MBA

SWOT Analysis

The 2MBA business plan provides the (SWOT) analysis of the company’s business environment to understand the nature of competition (Brown, 2006). SWOT analysis helps in capturing information regarding the company’s ability to repay the money given by investors. It outlines the company’s competitive advantage in the market in the backdrop of the stiffening competition among firms.

The information is crucial to investors since it helps to paint a picture for the audience about the major strengths and weaknesses of the company. From such information, investors can assess the viability of the venture that the company intends to make.

Product Description

The 2MBA business plan is designed to capture information regarding the company’s products clearly and concisely. Information regarding a company’s product is critical since it informs investors on what to expect after making an investment in the firm.

The unique structure of the 2MBA business plan ensures that information regarding the products that the company is currently producing is covered comprehensively. Besides, the structure attracts information about the new product or service to be implemented through the investors’ funds. This aspect is a major distinguishing factor between the two business plans.

Analysis of the Management Team

Investors need to access information about the management of a firm before accepting an investment offer from the company (DeThomas & Derammelaere, 2008). Knowledge regarding the management team is important since it helps investors in assessing the legality and objectives of the firm.

Information regarding the managers and directors’ shareholding and other interests in the firm is captured in this section. Based on such information, investors are in a position to assess the legality of the business since there is a ceiling on the number of shares that a director may own in a company. The 2MBA business plan is structured to capture information regarding the management’s shareholding.

Identification of the Three Weakest Components of Each Plan (and Why)

Live Plan

Failure to Include SWOT analysis

SWOT analysis revolves around assessing a business’ competitive advantage over its competitors. Information concerning a company’s competitive advantage is important to financiers since it helps them assess the major market strengths of the company.

A company with a great competitive advantage is likely to attract investors to the business since the return on investment will probably be high due to customer loyalty (Sellars, 2009). As opposed to the 2MBA business plan, which recommends the use of SWOT analysis tool to appraise the competitor, the Live Plan Template does not provide this analysis, which is a major shortcoming.

Brevity of Financial Analysis

Even though the Live Plan Template is designed to capture information regarding the projects’ returns, it fails to analyse major financial components. The template does not provide analysis of the financial statements through ratio analysis. Financial ratios are important tools since they assess the profitability of the project that the company intends to undertake.

Identification of Target Customers

An effective business plan should contain information regarding the target customers, which include their location and distribution (Brown, 2006). Other information that would be listed under this section includes the reason for choosing that group of customers.

Additionally, the marketing strategies to be adopted to ensure that the customers learn about the existence of the product or service would be included. Guided by the Live Plan template, a business may not be in a position to give comprehensive information regarding the customers, which is useful to investors.

2MBA

Brevity of Financial Analysis

The 2MBA business plan design limits the comprehensive analysis of the projected financial flows. The plan only captures the initial investments needed by the company to implement the project. However, it fails to offer a detailed analysis of the financial statements as in the case of the Live Plan template. Comprehensive coverage of the financial projections is important since it helps investors to assess the viability and profitability of the venture to determine whether it is a worth undertaking.

Failure to explore the legal entity

Lenders and other investors require information regarding the legal existence of the organisation seeking funds (Lasher, 2010). Information regarding the form of the business is essential to investors since it helps them determine the owners’ liability.

Additionally, the mentioned part gives investors first-hand information on the overall nature of the business. This section can influence the investors’ decisions regarding entering a financial contract with the company. Therefore, failure by 2MBA to include the summary is a major weakness.

Little Coverage of Long-term and Short-term Goals

Short-term goals refer to the objectives that the business intends to accomplish within a period not exceeding three years (Brown, 2006). On the other hand, long-term goals refer to the goals that a firm plans to accomplish within a period of more than three years. The 2MBA company does not distinguish between the two aspects of its business plan. Besides, the plan structure does not seek information on the length of time required to implement the project.

Suggestions on How the Business Plans could have been improved

Financial Analysis

Both business plans ought to have provided for ratio analysis to evaluate the projected financial statements exhaustively and convince investors that the project is viable.

Ratio analysis ensures that the profitability of a project or an undertaking is assessed, and it eliminates chances of making erroneous decisions. Some of the ratios that would require to be analysed in this case include return on investment, earnings before interest and tax ratios, gross profit margin, and return on equity among others (Sellars, 2009).

Mission Statement

In both business plans, weaknesses in disclosure of the mission statement have been identified. To remedy the shortfalls, the business plans ought to have explored the specific mission of the business managers regarding the new venture.

Mission statement offers information regarding the short-term and the long-term goals of the business. In this case, the business plans would provide the mission statement section. This information would get to potential investors to woo them into investing in the company.

A Statement of Five Lessons I Have learnt about Business Planning

Strategic Planning

An exploration of the two business plans reveals that strategic planning is an important tool for short-term planning since it helps identify the major strengths and weaknesses of a firm. Strategic planning involves the exploration of the business environment to gain insight into the competitive advantage of the firm.

Statement of Legal Existence

The other important lesson gained from this review is that business plans require an extensive description of the form of the enterprise. This information helps investors determine the owners’ liability since such liability varies from one business form to another. For example, in a company, the owners’ liability is limited while in sole proprietorships and partnerships it is unlimited.

Cash flow projections

The other lesson that I learnt from exploring the two business plans is that a business plan needs to offer financial projections arising from the venture. The business plan should include as 3-5 year analysis of the financial flows resulting from the investment made as well as the various financial ratios such as return on investment and risk ratios (Lasher, 2010). The Live Plan Template underscores the importance of analysing the projected financial gains from a venture through the presentation of such information in a formal financial statements format.

Customers and Competitor Analysis

Another lesson learnt is that the target customers need to be identified, and the decision to choose the group substantiated (DeThomas & Derammelaere, 2008). In addition to customer identification, the competitors need to be analysed to assess the ability of the business to penetrate the market.

Specification of the Needed Funds

Finally, I have learnt that the specific amount of funds needed for a venture must be identified in the business plan. A description of the expenditure plan and the projected returns should also be included in the business plan to provide assurance to lenders that their money will be used appropriately.

The Competencies that I believe I may have Demonstrated and the Extent

Analysis Based on the Porter’s Five Forces Model

The Porter’s Five Forces model centres on the assessment of the competitive factors in the environmental setting on which an organisation operates to determine chances of its success in the market (Brown, 2006). The concept is based on the following five key components:

1. Knowledgeable customers can force down prices by pitting rivals against each other
2. Influential suppliers can drive down profits by charging higher prices for supplies
3. Competition can steal customers
4. New market entrants can steal potential investment capital
5. Substitute products can steal customers

If I were involved in writing a business plan, I would be guided by the Porter’s Five Forces model to assess the competitor and the target customers.

SWOT Analysis

SWOT analysis aims at assessing the company’s major strengths that keep it ahead of the competitors. The analysis also sheds light on the ability of a business to acquire a considerably enough market share in the marketplace. If I were involved in writing the business plan, I would assess the venture using SWOT analysis to convince investors to invest in the company.

Challenges and counter strategies

In analysing the duo business plans, I encountered several setbacks that revolved around shortfalls in my overall analysis skills. Firstly, I found it quite difficult to compare and contrast the various marketing and management strategies outlined in each plan.

Secondly, I faced challenges in identifying the strengths and weaknesses of each business plan since I was not well versed with business plan formulation. To overcome the challenges, I employed the skills that I had acquired throughout the course regarding the components of a good business plan. Additionally, I reviewed the literature available in peer-reviewed articles to gain insight into the essentials of an effective business plan.

Conclusion

Strategic planning is a key component of business planning. It involves analysing the internal and external market forces likely to affect the operations of the business during the covered period. The analysis of the market and competitors are at the heart of strategic planning involving short-term business planning.

The SWOT and PESTEL analysis are the two major tools employed in making analysis regarding the strengths and weaknesses of a firm in connection with short-term goals. Effective analysis of the business environment helps investors assess the firm’s ability to repay the borrowed money. This aspect persuades the investors to invest in the company. Therefore, strategic planning is an effective tool for business planning since it helps identify the opportunities and threats inherent in the course of business operations.

References

Brown, B. (2006). Writing a business plan and making it work. Mason, OH: Rowmark.

DeThomas, A., & Derammelaere, S. (2008). Writing a convincing business plan. New York, NY: Barron’s Educational Series.

Lasher, W. (2010). The Perfect Business Plan Made Simple: The best guide to writing a plan that will secure financial backing for your business. New York, NY: Broadway Books.

Sellars, D. (2009). Business plan project: A step-by-step guide to writing a business plan. New York, NY: Business Expert Press.