Business Plan Template

by Cynthia Benjamin

Final Project for BA 297.6: Impact of the Internet and Multimedia, Prof. Howard Besser

Walter A. Haas School of Business, U.C. Berkeley


This paper will present the issues involved in writing a business plan for a new Internet-based business on the World Wide Web. Beginning with a generic outline for any new business, special attention will be paid to sections that are significantly different for a business specific to the Internet. There are certain advantages to any Web-based business in that it is a relatively new media for commerce. First mover advantages and few rivals, ease of use, unlimited geographic access, and low capital requirements provide opportunities for entrepreneurs with good ideas and some Internet expertise. Low barriers to entry, rapidly changing technologies and standards, uncertain revenue models, and the presence of a few overwhelmingly large players, however, are disadvantages specific to business on the Internet. As well, currently unresolved issues regarding security, intellectual property, and government regulation will have a major impact on electronic commerce over time.

By proceeding with a particular concept through the outline presented, an entrepreneur should be able to answer most of the major questions regarding a new Internet-based business. The specifics of Financial Analysis of the opportunity are left to the entrepreneur and potential investors. Formation of a Web Site focused on teen-age girls will be used throughout this paper to exemplify the various sections and stages that a business plan author must attend to.

I. Executive Summary

II. Market Analysis

III. Company Description

IV. Marketing and Sales

V. Products and Services

VI. Operations

VII. Management and Ownership

VIII. Funds Required

IX. Financial Data

X. Exhibits


I. Executive Summary

The initial section of a business plan should summarize the plan as a whole, and present a convincing argument for the existence and potential success of this particular concept. The Business Plan functions as an operating plan for management, and an explanation of the business to potential investors. If the Executive Summary is not concise and convincing, an investor may not read further. The Executive Summary for an Internet-based business should explain to the reader both the opportunities in the particular market and the specific potential of this business on the World Wide Web.


II. Market Analysis

This section will describe the target market and industry in a fair amount of detail, and give the reader a sense for the potential opportunity. Most firms will see the Internet as a means of doing business, rather than a target market in and of itself. The Internet is, however, so new and unfamiliar to most potential investors that an overview of the Web, its history, and potential will be an integral part of the market analysis necessary to understand the prospective growth of a web-based company.

Industry Description and Outlook

It will be critical in the Industry Description section to demonstrate an understanding of the market as a whole, as well as the implications of this market as it transitions to the Internet. Assuming the nature of the business in question is primarily devoted to being a Web-based firm, growth projections should be broken out into numbers that are new to this industry due to Internet availability and normal market growth that would occur without the introduction of this new media.

1. Description of primary industry e.g., Information and entertainment for teens ages 12 to 16

2. Size of the industry

3. Industry Characteristics and Trends: life cycle to date and projections

4. Major Customer Groups

Target Markets

An Internet-based business may have one of several business models; the end-users may be subscribing to or purchasing access to the site, or may expect access for free. Revenues may be generated through advertising, sale of end-user data, or sale of actual product or services. It will be important in this section to recognize and describe which business model will be incorporated, who will be using the site, and who will be targeted for revenue generation. The Teen Web Site, for example, will focus on mainstream teen-age girls, ages 12 to 16, who have access to the Internet. The business will generate e revenue from providing advertising space and extensive data analysis and lists of the siteÕs users.

1. Distinguishing Characteristics of the primary target market and segment

2. Primary target market size

3. Market penetration - estimates and justification

4. Pricing/Gross Margin targets

5. Target Market Access

6. Key trends and anticipated changes

7. Secondary Markets - parents of young women - pre-teen girls

Competition

1. Identification - by product type/service

2. Strengths/ Competitive Advantages

3. Weaknesses/Competitive Disadvantages

4. Importance of target market to competition

5. Barriers to Entry to competitive or substitute products or services

6. Competitive Strategy

Regulatory Restrictions

1. Web-based commerce - no regulations currently, but continuing discussions regarding government intervention and potential censorship must be followed closely - several controversial Òself-regulatingÓ activities must be examined for a site meant to serve young teen girls:

2. Specific market - youth media - no legal or binding regulations


III. Company Description

Most of the operating and marketing details will be provided in other parts of the Business Plan, so this section is a description of how it will all work together. After reading the previous section on the market potential, the reader should at this point recognize the opportunity for a new business. The entrepreneur can now describe her particular vision of the company that can fill the market need and take advantage the opportunity. A clear description of the key concepts here should accurately describe the essence of the business.

Nature of the Business

1. Customers

2. Market needs to be satisfied

3. Product or Service

Distinctive Competencies

1. Market-based:

2. Internet-based:


IV. Marketing and Sales

A complete marketing and sales strategy is important in the growth of any business. As an Internet-based firm, it might be tempting (especially if the founders are technically oriented) to remain tied to this technology for all communication needs, but this could prove fatal to the business. Strategic use of other media and alliances could be useful, as the firm should attempt to draw both current Web users, and Internet novices to the site. If relying on advertising revenues, an effective and experienced sales force will be key; if subscription or transaction focused, marketing expertise to the target audience will be crucial.

Overall Marketing Strategy

1. Market penetration strategy - target mainstream youth first, and add niches and ÒpagesÓ over time - target current large advertisers who have not yet tried the Internet

2. Growth strategy - internal, acquisition, horizontal or vertical

3. Distribution channel: the Internet, and any others

4. Communication - regarding the Site, to both Web users and current non-users

5. Communication - to advertisers

Sales Strategies

1. Sales Force

2. Sales Activities


V. Products and Services

The emphasis in this section should be on the unique nature of this business and how it will meet the needs of the targeted market. Several issues arise here as to the nature of an Internet-based business; not only is the entrepreneur proposing a new business but a new media for it. Competitive advantages and disadvantages should be examined in the market and on the Web, and some specific issues such as intellectual property and industry life cycle should be addressed.

Product/Service Description

1. Specific benefits

2. Ability to meet needs

3. Competitive advantages

4. Present stage - idea, prototype, etc.

Product Life Cycle

1. ProductÕs current position within its life cycle

2. InternetÕs current position within its life cycle

3. Factors that may affect life cycle

Copyrights, Patents, and Trade Secrets

1. Existing copyrights or patents

2. Intellectual Property issues regarding Internet commerce

3. Key aspects of the business that are not protectable - i.e., graphics, content, and access (if free)

Research and Development Activities

1. Market: continuous development of the site will be important to maintain end-user base - surveys, trend forecasting, and continually bringing in new experts as either guest contributors or ongoing pages will bring people back over time - monthly ÒmagazineÕ format may prove useful to bring back users regularly

2. Web: continuing site development will allow for increasingly in-depth coverage of topics of interest, addition of niche ÒpagesÓ, and immediate survey response. - political issues, for example, could start with expert and opposing opinions on a topic regarding its implications for teens, and expand to include history, anecdotal information, comparison to girls in other countries, etc.


VI. Operations

Operations for an Internet-based business are minimal compared to many other opportunities. All needed services such as design and server access can be outsourced, though total outsourcing would be an unusually risky strategy. With such low barriers to entry, however, the low cost of operations may attract competition once your business has proven success in the market.

Production and Service Delivery Procedures

1. Internal

2. External

3. Anticipated increases in capacity

Operating Competitive Advantages

1. Internet versus competitive media

2. Firm versus others on the Internet

Suppliers

1. Critical elements of production

2. Risks from suppliers

3. Contractual relationships


VII. Management and Ownership

A business based on the Internet should, early on, have senior management on board that has experience in this media. Historically in emerging technologies, the first movers are the technologists, marketing to and for themselves. As the Internet matures, however, the level of sophistication required to build viable firms (utilizing but no longer focused on the technology) will require management with expertise in the target market. Our example would indicate that managers with experience in appealing to young teens as well as selling advertising space will be crucial team members.

The particulars of the Management section will vary dramatically from start-up to start-up. Few significant differences exist from a non-internet business, so only a rough outline is provided here:

1. Management Staff Structure - description and organization chart

2. Key Mangers - positions, responsibilities, and experience

3. Planned Additions to the Current Management Team

4. Legal Structure - S- or C-Corporation, Partnership, or Proprietorship

5. Owners - names, percent, form of ownership, common stock

6. Board of Directors names, background, contributions


VIII. Funds Required

Funding reflected in the financial statements should be discussed here, as well as alternate sources of funds. A typical Web-based business is not likely to require extensive financing as its capital expanses are low and working capital needs reflect primarily staffing expenses and server time.

1. Current Funding Requirements

2. Funding Requirements Over the Next Five Years

3. Use of Funds

4. Long-Range Financial Strategies


IX. Financial Data

This section will include Income Statement, Balance Sheets, and Cash Flow statements.

1. Historical Financial Data

2. Prospective Financial Data - Best Case, Worst Case, and Most Likely Scenarios are useful in examining alternate outcomes. Include significant assumptions.

3. Analysis - ratio and trend analysis can be graphically displayed to gain an understanding of the firmÕs potential


X. Exhibits

1. Resumes of key participants

2. Examples of Product or Site

3. References

4. Pertinent Published Information or Sources

* * * * * *

The writing of a business plan for any business takes an understanding of the potential market, the product or service, and production and funding issues. The start-up of an Internet-based business requires an additional understanding of the benefits, limitations, and continuing changing nature of this emerging technology as it applies to commerce. The outline presented here spells out both the content of a new business plan and the specifics of a generic Web-based entrepreneurial venture. The teen-focused web site used throughout demonstrated some of the strategic alternatives and wide range of issues facing potential company founders. If the entrepreneur has clear and convincing answers to each of the items outlined above, she can use her business plan as both an operating guide and a tool to attract investors to her venture.

* * * * * *

Sources:

Hoffman, Kalsbeek, and Novak, ÒProject 2000: Internet Use in the United States, 1995 Baseline Estimates and Preliminary Market SegmentsÓ at http://www2000.ogsm.vanderbilt.edu/baseline/1995.Internet

ÒOutline for a Business Plan,Ó Ernst & Young.

ÒNo Limits For Women - Girls & Young WomenÓ at www.rc.org/present_tense/liberation/women/no_limits/girls.html

ÒGirl GamesÓ, part of WomenÕs Wire at www.women.com/wwire/otw/girls.html

ÒExpect the Best from a Girl, ThatÕs What YouÕll GetÓ at www.academic.org

FeMiNa: www.femina.com/femina/femina/femina/femina/femina/femina/girls

GEEKGRRLS in Australia: www.youth.nsw.gov.au/rob.upload/friendly/index.html

ÒResearch Topic For Introduction to On-Line Research Pilot ProgramÓ, Jefferson County School District, By Sasha Bedin With help from my Mom: Sheryl Bedin, at jeffco.k12.co.us/dist_ed/onlinea/sabedin/

gURL at : http://www.itp.tsoa.nyu.edu/~gURL

NrrdGrrl! at : http://www.winternet.com/~ameliaw/

ÒThe Red Herring,Ó October and November, 1996 issues.

ÒHits!Ó, Fall, 1996.