5. e-Business Plan: Business Description

Writing your e-business plan begins now!

Previous lessons in this tutorial have provided background information and emphasized preparation to write the e-business plan. The business description section of your e-business plan represents the first substantial section you have to write. This lesson gives you an overview of the business description section with links to additional lessons that assist you in writing your mission statement, goals, and objectives.

The lesson outline is:
What is the Business Description?
Business Concept
--Industry analysis
--Mission statement
--Business goals
--Project objectives
--Value proposition
Products and Services

What is the Business Description?

The business description describes the nature and purpose of the business and includes the firm's mission statement, goals, value proposition, and description of products and services. The business description delivers this content in a straightforward and informative manner, but with an upbeat and inspiration tone. The purpose of the business description is to objectively explain and justify your business idea in a positive and enthusiastic manner.

The business description includes two sections with both required and optional content. The business concept section includes an industry analysis, the mission statement, business goals, value proposition, and, optionally, the objectives and business model. The products and services section is a concise description of what the business will sell or deliver to the customer.

Business Concept

The business concept section gives the reader the big picture about what the business will do and how it will succeed.

Industry analysis: A good way to open this section is with a brief industry analysis. An industry is a group of businesses that manufacture, distribute, or sell similar projects or services. An industry analysis defines the industry in which the business will operate (e.g., retail, information distribution, financial services) and uses reliable and objective data to show the future prospects of the industry and, by implication, the business.

Sources of information for the industry analysis include research companies such as Dun & Bradstreet, Standard & Poor's Investor Services, and the Risk Management Association who publish business directories and industry surveys. Trade and industry journals publish articles that include quantitative data, trend analysis, and influential environmental factors that are affecting their respective industry sectors. These resources will be available in most university libraries.

In the United States the FedStats Web site provides access to statistical data from over 100 Federal agencies including (of interest to business plan writers) the International Trade Administration (e.g., U.S. Industry and Trade Outlook), the Small Business Administration, Bureau of Economic Analysis, Bureau of the Census (e.g., Statistical Abstract of the United States), and the Bureau of Labor Statistics.

Few, if any, countries do a better job at collecting and publishing industrial data than the United States. However, similar agencies and publications exist in most developed countries (e.g., in Australia, the Australian Bureau of Statistics).

Don't expect to find perfect information in the time you have to complete this analysis. Why? Sometimes what is available isn't very applicable to your business idea (e.g., projected US on-line retail sales is only a start if, like Purma Top Gifts, you are selling to the world). Highly aggregated data (e.g., worldwide retail sales) may not say much about your business (e.g., country-based gift sales) and even less about your niche market (e.g., country-based expensive gift sales). Finally, the data you really need may be unavailable because it is held by private companies or is very expensive to acquire from consulting companies such as McKinsey and the Gartner Group.

In analyzing your company's industry, be honest and don't exaggerate. Nothing will turn a potential investor away faster than opening claims that are not credible or an industry analysis that is off target. Also cite or footnote all major data sources so the reader will be able to judge how dependable the data are.

For some businesses in some industries, an extensive industry analysis may be required. For example, if the industry is new and unfamiliar to the reader, if the business intends to be a major player in the industry, and perhaps in a business case (see Business Case Box 2).

However, in most e-business plans, the industry analysis does not have to be very extensive. Generally, one page should be enough, perhaps two pages if graphs or tables are included. Remember, this is a business plan, not an industry plan, so briefly analyze the industry and then move the reader's attention from the big industry picture to the smaller business picture.

Business Case Box 2 A traditional industry analysis is less critical in a business case because, obviously, the senior management and board of directors will know as much, or more, than you about the industry in which the company operates. However, there would be no harm in highlighting some important industry-based data, especially as it applies to the proposed e-commerce venture. For example, recently we critiqued a business plan for expansion of a grocery store chain into a nearby city. That plan included historical and projected data on the chain's performance in its current locations, an extensive description of the grocery market in the new city, location analysis data, assessment of internal and external environmental factors (e.g., the impact of on-line grocery stores), and a list of assumptions upon which all the projections were based. Alternatively, this is an opportunity to write a "company analysis" that has the same purpose as an industry analysis, but with the focus on the company. Again, the reader will be extremely well-informed so everything has to be relatively new and applicable to the proposed venture. Topics that would likely be of interest to business case readers in the company analysis include: --consistency of the electronic commerce opportunity with the company's history and current initiatives --an analysis of why the company should adopt this particular initiative instead of other opportunities --environmental factors in the industry and the company that may positively and negatively impact on this initiative

Assignment 2: Identify the industry within which your e-business will operate and write an industry analysis. Follow the guidance provided by your instructor to submit, present, or save this analysis.

Mission statement: With the big industry picture in the reader's mind, narrow the focus to your business. After a few words of introduction, state the mission of your business and provide a brief justification and explanation about the importance of this mission, perhaps in light of the industry analysis just presented. Or, in the business case, explain how the e-business initiative will contribute to the fulfillment of the company's mission (see Business Case Box 3).

Business Case Box 3 When is a mission statement not a requirement in a business plan? When the business plan is a business case. The reason why is obvious -- the initiative being proposed is being developed in an organization that (hopefully) already has a mission statement. Instead include the company's mission statement in the business case and explain how the e-business project will support that mission. Alternatively, the business case may present a "project purpose statement" that contains all the characteristics of a mission statement (e.g., visionary, broad, short) and is consistent with the company's mission. Being consistent with and supportive of the company's mission statement is critical for political acceptance of the e-business initiative.

A mission statement is a declaration of what a business aspires to be. This can be an intimidating exercise, especially if your business idea is still being formed in your own mind. It is also an important exercise because the mission statement appears early in the plan and is a starting part for defining the business and writing the plan.

The Mission Statement lesson provides explicit instructions to write the mission statement and illustrates the process with sample mission statements. When you are ready to write your mission statement, complete that lesson and return here to complete assignment 3.

Assignment 3: Draft a mission statement for your e-business. Include a paragraph or two that explains or justifies the mission statement. This mission statement may change slightly as you continue to develop your business idea, but it should also be complete and accurate enough to guide the formation of goals and the value proposition below. Follow the guidance provided by your instructor to submit, present, or save this mission statement.

Business goals: Stating what you intend to do in your mission statement is insufficient for most business plan readers, and certainly so for all investors. In addition to stating what you are going to do, you must also indicate how you are going to do it. To do that you need to set some business goals.

A goal is a statement that clearly describes actions to be taken or tasks to be accomplished by a company. The Business Goals lesson provides explicit instructions and sample goals. When you are ready to write your business goals, complete that lesson and return here to complete assignment 4.

Assignment 4: Write at least six goals for your business. Each goal should include both a clear statement of purpose and a brief explanation. Follow the guidance provided by your instructor to submit, present, or save these goals.

Project objectives: If a mission statement expresses what is to be done and goals state how the promise of the mission statement is to be fulfilled, then project objectives answer the when, where, who, and by how much questions.

Achieving goals doesn't just happen. Usually one or more projects are initiated in order to accomplish the action or task stated in the goal. The nature and scope of the project is expressed through its objectives. So, there should be a clear link between a goal, its subordinate project(s), and the project's objectives. Be aware that whereas a goal is a general statement about what needs to be accomplished, an objective states a specific, short-term, measurable, and verifiable condition that must exist to fulfill the affiliated goal.

Most business plans don't include project objectives. Why? First, each goal has a number of objectives, so this adds significant detail and length to the plan. Second, many plan writers see objectives as being too operational to include in something as strategic as a business plan. Third, from a practical viewpoint, the specificity required to write project objectives is difficult to achieve in what is, in most cases, a prospective business. Objectives are best written in consultation with the individuals who will be responsible for carrying them out, and those people simply aren't hired yet.

However, there may be some instances when project objectives are preferred or required, the most prominent one being the business case (see Business Case Box 4). A small business plan, with minimum scope and only a few goals would also benefit from the inclusion of objectives. Finally, writing some "indicative objectives", at least, shows investors and other plan readers that the business idea is feasible and the business owners know what they are doing. This adds significant credibility to the business plan.

Business Case Box 4 The major exception to the don't-include-objectives-in-a-business-plan rule is the business case. In the business case much of the uncertainty that is inherent in start-up e-business plans does not exist. Also, the mission and goals of the initiative should be no surprise to the senior management and board of directors because it is likely they authorized the development of the business case. Instead, these business case readers are most interested in what resources will have to be reallocated or acquired to carry out the initiative, and what benefits will be received in return. Requirements such as these inevitably lead to the setting of objectives as part of the business case. Finally, this is easier to do because many of the staff who will be responsible for achieving the objectives are in place. So, unlike most business plans, a business case is likely to include a set of specific, measurable, action-oriented, realistic, and time-bound objectives necessary to carry out the proposed e-commerce initiative.

You should seek guidance from your instructor to determine whether writing project objectives is a required or optional part of your business plan. If you do need to write some objectives, then the Project Objectives lesson will assist you. When you are ready to write your project objectives, complete that lesson and return here to complete assignment 5.

Assignment 5: Write at least three SMART objectives for each of the business goals you developed in assignment 4. The best way to present these objectives in your plan is to make them part of the goal they relate to. That is, following each goal statement, list three or more objectives that contribute to the achievement of the goal. Follow the guidance provided by your instructor to submit, present, or save these objectives.

Value proposition: So far you have told the business plan reader the answers to the what (mission statement), how (goals), and when, where, who, and by how much questions (objectives). What's missing? The answer to the why question.

The value proposition describes the benefits that a company's products or services provide to customers and/or the consumer's need that is being fulfilled. In other words, why should a customer buy your product or service?

Since the focus of the value proposition is on the customer, the proposition should be stated from the customer's perspective. Value propositions (with examples) may be based on lowest cost (buy.com), superior customer service (amazon.com), reduction in product search (autobytel.com) or price discovery (deal-time.com) costs, product customization (dell.com), or provision of niche products (anything left-handed).

This is also the "first-best" opportunity to tell the reader who are your customers. Complete information about your target markets will be covered in the market analysis section, but here you should identify your primary, secondary, and, if necessary, tertiary target markets.

Assignment 6: Formulate and write the value proposition of your e-business. This should be a paragraph or two that clearly states the benefits your business will offer to customers and justifies why this is an important proposition for customers and in the marketplace. Follow the guidance provided by your instructor to submit, present, or save this value proposition.

Business model: An optional part of the business description is the business model your proposed business follows, such as virtual merchant, community portal, transaction broker, or trust intermediary. Investors tend to be impressed when business owners can classify their proposed business activities into one or more business models that succinctly label those activities.

As defined in your e-commerce textbook, a business model is a method of doing business by which a company can generate revenue to sustain itself. The two principal components of the business model are the value proposition, discussed above, and the revenue model -- how a business or EC project intends to generate income.

Frequently it is difficult to include all of your business activities in just one business model. For example, Purma Top Gifts' principal business model is a virtual merchant, but it also provides customer benefits and revenue from its affiliate business model. Generally, businesses will begin with one or two business models. Over time these models may change, or a third one may be added, but too many models tend to indicate that a business doesn't know what it is about and is focusing on too many activities, perhaps not doing any one of them well.

In addition to the overview of business models in your textbook, other valuable resources for learning about e-commerce business models are:

• Perhaps the most comprehensive taxonomy of e-commerce business models is Business Models on the Web by Professor Michael Rappa. This taxonomy includes 30+ models organized into nine major categories. One of the advantages of this list being on-line is that Professor Rappa keeps it up to date, making changes as new models emerge and current models change.
• In Chapter 3 of Information Technology and the Future Enterprise: New Models for Managers Professor Lynda Applegate proposes a taxonomy of business models that is more extensively described than Business Models on the Web. This taxonomy lists model differentiators, likely revenues, likely costs, examples, and, for each category, trends that will influence the development of these models.
• In Place to Space: Migrating to E-Business Models Peter Weill and Michael Vitale take a different approach by offering eight "atomic business models". Instead of trying to specify a comprehensive list, as Michael Rappa and Lynda Applegate have done, these authors define eight models that can be combined in multiple ways (like atoms combine to form molecules) to represent virtually any kind of business model.
• In Chapter 4 of Net Ready: Strategies for Success in the E-conomy Cisco managers Armir Hartman and John Sifonis identify five extended business models: e-business storefront, infomediary, trust intermediary, e-business enabler, and infrastructure providers/communities of commerce.

Follow the guidance provided by your instructor to determine if a business model description is a required or optional part of your business plan. If you need or want to include a business model description in your business plan then complete assignment 7.

Assignment 7: Select one or two (rarely three or more) business model(s) that accurately describe your proposed business activities. For each model, identify it and briefly describe the model as it applies to your business idea. Include the value proposition (from assignment 6) and the revenue model in your description. Follow the guidance provided by your instructor to submit, present, or save this business model description.

Finally, in your business concept, include any other important information about the business that you feel is important for an investor or other business plan reader to know. For example:

• Any unique or special features about the business that will appeal to customers or encourage the success of the business.
• The legal form of the business: sole proprietorship, partnership, or corporation (optionally, this can be included in the operations section).
• If the business is small, then the management plans (i.e., who will manage the business and their background) can be included here. If the business is a large one, then management plans are best included in the operations section (more information about this is included in the Operations lesson).
• If known and/or important, where the business will be physically located.
• If the business is an existing business, then a brief history and it's current position in the marketplace can be reviewed.

Products and Services

This section of the business description offers the reader a thorough and straightforward description of the products or services the business will provide to customers. For example, include product characteristics such as functionality, design, styles, and colors.

The product/service description should be complete enough to give the reader a clear idea of your products/services, but not overly detailed or technical so the reader is confused or loses interest and attention. If the product is unusual or not easily described, include a picture or a drawing. If a range of products or services are being offered, highlight the principal one or two and list the rest of the range here and/or put the full product/service range in an appendix. As much as possible, describe the product or service from the customer's perspective.

The description should tell the reader what makes your company's product or service different or unique in the marketplace. More detail on this will be provided in the competitor analysis section, but a brief highlighting of product distinctions and key selling attributes here will help the reader understand the product or service better.

After describing the product or service, tell the reader what benefits the customer will receive from purchasing the product or service (e.g., what problem is being solved). This will most likely further explain the value proposition statement defined earlier.

Assignment 8: Write a products and services section for your e-business. Follow the guidance provided by your instructor to submit, present, or save this product/service description.