what is scope in a business plan

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What Is Business Scope (Explained: All You Need To Know)

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What does scope mean in business?

What’s essential to know?

In this article, I will break down the meaning of Business Scope so you know all there is to know about it!

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Business Scope Meaning

You’re looking to write a business plan, apply for a business loan, or register a new business entity and you’re asked to provide the “scope” of your business…

What does business scope mean?

What should you indicate there?

Defining and properly understanding your business scope is very important for all businesses to ensure that all employees, managers, executives, and directors are all paddling in the same direction.

In the English language, the word scope is defined as “area” or “subject matter”.

In essence, “business scope” means the “area” in which your business operations (your business objective).

Depending on your business, you may have to define your business scope per department, per region, per product line, or for the entire business.

For example, a small boutique selling t-shirts will have a highly defined scope (the sale of consumer goods at retail).

On the other hand, a large conglomerate having subsidiaries operating in different lines of business will have to define its scope per subsidiary or line of business.

Business Scope Definition

How do you define business scope?

If you ask ten people to define business scope, you may potentially get ten different answers.

Business scope is a broad term that can be defined in many ways.

Scope in business tends to summarize in a few words what your company does.

Here is a definition of business scope that can be considered:

Business scope refers to the main strategic direction of your company Author

In other words, your business scope refers to the reason why company shareholders appoint the board of directors and the board’s overall objectives.

Your “business scope” should refer to every business activity performed by your company from sales, marketing, product development, contracting, and all other functions.

Why Is Business Scope Important

Defining the scope of your business is quite important.

For a new company starting out, defining your business scope allows you to better target your business plan, increase your chance of getting the business financing or loan that you need, and ensure that everyone in your company is working on the same objective.

Having a good understanding of your business scope will also allow you to properly define your business when you’re looking to form a new business entity.

In many states, you’ll be asked to provide the “business scope” when you’re looking to form a new business entity.

Having defined your business scope, especially for a new business, will help you immediately answer this question.

In other jurisdictions, the scope of your business is also mentioned in the company’s incorporation papers, charter, memorandum, articles of association, or similar documents.

Related article:

• Need of business

How To Write A Business Scope

The scope of your business should be clear enough allowing everyone to quickly understand what your business does.

To define your business scope, you’ll first need to understand the nature of your business.

There are three broad nature of business categories: service business , merchandising business , and manufacturing business.

For example, a consulting firm will be in the service business whereas a grocery store will be in the merchandising business.

Once you have defined your overall business nature, then you can start defining your scope.

For most small businesses, the business scope should cover what your company does as a whole.

However, large businesses may need to consider their scope per unit, region, industry, or other segments.

To narrow your scope, consider the strategic direction of your company.

What is your company looking to achieve?

What’s the overall purpose of your company?

Who are you trying to serve?

Your scope should cover the products and services you offer, all your physical locations, and the markets you serve.

For example, a shoe store will potentially have the following business scope: provide affordable sports shoes to sports amateurs and athletes.

• Nature of business meaning

Business Scope Example

Let’s look at a few examples of business scope to better understand the topic.

A family-owned catering business can define its scope as “providing catering services to individuals and companies in the city”.

A small boutique could define its scope to be “purchase consumer goods wholesale and sell to consumers at retail”.

A large company having different lines of business can define a scope for each line of business, such as:

• Provide professional services to companies for the implementation of network security products and equipment 
• Provide network security products and equipment to companies of all size 
• Types of businesses

Takeaways 

So there you have it folks!

What does business scope mean in simple terms?

Scope in business refers to a statement summing up all the activities performed by a company from sales, marketing, product, contracts, and more.

For most businesses (small businesses and SMEs), business scope covers all departments and all functions of the business.

For larger organizations, the scope may be defined per region, industry, or other qualifications.

Properly defining your business “ scope ” is crucial allowing you to quickly verbalize what your company does and the results it is looking to achieve.

Now that you know what “business scope” means, why it’s important, and how to define one, good luck with your business!

If you enjoyed this article on Business Scope , I recommend you look into the following terms and concepts. Enjoy!

You May Also Like Related to What Is Scope In Business

Product scope Project scope  Project scale Economies of scale  Economies of scope  What is scope  Scope creep  Scope management  What is a business Author

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What Is Scope?

Understanding scope, product scope vs. project scope, special considerations.

• Visualizing a Project's Scope

The Bottom Line

• Business Essentials

What Is Scope? Understanding Project Scope vs. Product Scope

Investopedia / Yurle Villegas

Scope refers to the combined objectives and requirements needed to complete a project. The term is often used in project management as well as in consulting. Properly defining the scope of a project allows managers to estimate costs and the time required to finish the project. That's what makes scope management such an important part of a business—it saves both time and money. There are generally two different types of scope in project management . These are project and product scope.

Key Takeaways

• Scope outlines the time and cost of a business project.
• The term is generally used in project management.
• Project scope encompasses all the work needed for the project, while product scope only focuses on the end result.
• Scope creep is when uncontrollable changes extend the project deadlines and require effective project management.

Properly defining the scope of a project allows managers to estimate costs and the time required to finish the project.

Scope is a term used in  project management . Project management involves the planning and organization of a company's resources to complete a specific task, event, or action and is usually a one-time event. Scope describes the required processes and resources to complete a project or produce a product. By identifying and recognizing different variables of a project through scope management, companies are able to save money.

As mentioned above, there are two types of scope—product scope and project scope. The product scope is a way to identify a product or service's functions, while the project scope highlights everything needed to deliver that product or service. In short, product scope represents the functional requirements while project scope is the how-to part of project management.

A  deliverable  can include any objective or milestone within a project such as the creation of products, services, or processes. Additionally, it can consist of incremental changes, staged across the project plan used to govern or assess the pace of the project’s progress.

Product Scope

Product scope identifies the characteristics and functions of a product or service. These characteristics include physical features such as size and materials, as well as functional specifications. Functional considerations include what the product is designed to do and its purpose or end-use.

Product scope focuses on the result or the actual offering. This is the final product or service. Product scope may also refer to a service or other item for customer use. Product scope often considers how to evaluate whether the object is on track for completion and whether it meets the expected outcome. 

Project Scope

Conversely, the project scope encompasses all the work needed to deliver a product or service. In short, the project scope describes how the mission will be accomplished. It includes identifying and documenting the project's goals, deliverables, tasks, project members, deadlines, and milestones. Documentation consists of the scope statement, statement of work, and a breakdown of the work structure. 

The project scope also outlines the project's limits by specifying what is not included within the scope of the plan. It can incorporate information about the project's budget or available resources. Information regarding the project schedule, as well as the assignment of tasks, may also be included in the project scope. Workgroups will often be assigned listing the internal or external personnel who will be involved with the project.

Uncontrollable changes that extend deadlines are known as scope creep. Extended deadlines may change the original requirements of the project's scope. As the project progresses, small changes to the original plan occur, expanding the scope from the initial limits regarding budget and time. Small changes can lead to additional changes, resulting in a cascading effect of further considerations and requirements.

Effective project management considers the possibility of scope creep and incorporates strategies to mitigate it. Understanding the vision or primary objective, proper initial planning, as well as devising and adopting approaches to avoid scope creep from the outset are ways to prevent scope creep.

According to the Project Management Institute, the combined project management costs for all phases of a project total somewhere between 7–11% of the project's true interest cost.

Visualizing a Project's Scope

Project managers use a variety of tools to plan and communicate a project's scope. Two popular tools to do this are the Gantt chart and the program evaluation review technique (PERT).

The Gantt chart is a graphical depiction of a project schedule. It is a bar chart that shows the start and finish dates of several elements of a project that include resources, milestones, tasks, and dependencies. Henry Gantt, an American mechanical engineer, designed the Gantt chart.

The program evaluation review technique (PERT) chart is a visual representation of a series of events that must occur within the scope of a project’s lifetime. A PERT chart allows managers to evaluate the time and resources necessary to manage a project. This evaluation includes the ability to track  required assets  during any stage of production in the course of the entire project.

What Does Scope Mean?

In the business world, scope refers to the combined objectives and requirements needed to complete a project. Scope is a term commonly used by project managers.

What Is an Example of the Economies of Scope?

Company ABC wants to increase its  product line  and remodels its manufacturing building to produce a variety of electronic devices, such as laptops, tablets, and phones. Since the cost of operating the manufacturing building is spread out across a variety of products, the average total cost of production decreases. The costs of producing each electronic device in another building would be greater than just using a single manufacturing building to produce multiple products.

What Is the Difference Between Scope and Scale?

Economies of scope focus on the average total cost of production of a variety of goods. In contrast, economies of scale focus on the cost advantage that arises when there is a higher level of production for a single good.

What Is the Scope of a Project?

The scope of a project is a detailed outline which encompasses all the work needed to deliver a product or service. This includes the project's goals, deliverables, tasks, project members, deadlines, and milestones.

How Do You Write a Project Scope Statement?

A proper project scope statement should include the following elements: an introduction stating the purpose of the project, the deliverables required to complete the project, a determination of the project's milestones, as well as any constraints or exclusions.

In order to properly execute the rollout of a new project or product, it is essential to have a firm grasp of the project's scope. With its comprehensive look at a business's operations and assets, scope is a concept of the utmost importance to project managers and businesses as a whole.

Project Management Institute. " Project Management: How Much Is Enough? " Accessed Aug. 6, 2021.

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What is a business plan?

1. write an executive summary, 2. describe your company, 3. state your business goals, 4. describe your products and services, 5. do your market research, 6. outline your marketing and sales plan, 7. perform a business financial analysis, 8. make financial projections, 9. summarize how your company operates, 10. add any additional information to an appendix, business plan tips and resources.

A business plan outlines your business’s financial goals and explains how you’ll achieve them over the next three to five years. Here’s a step-by-step guide to writing a business plan that will offer a strong, detailed road map for your business.

ZenBusiness

A business plan is a document that explains what your business does, how it makes money and who its customers are. Internally, writing a business plan should help you clarify your vision and organize your operations. Externally, you can share it with potential lenders and investors to show them you’re on the right track.

Business plans are living documents; it’s OK for them to change over time. Startups may update their business plans often as they figure out who their customers are and what products and services fit them best. Mature companies might only revisit their business plan every few years. Regardless of your business’s age, brush up this document before you apply for a business loan .

» Need help writing? Learn about the best business plan software .

This is your elevator pitch. It should include a mission statement, a brief description of the products or services your business offers and a broad summary of your financial growth plans.

Though the executive summary is the first thing your investors will read, it can be easier to write it last. That way, you can highlight information you’ve identified while writing other sections that go into more detail.

» MORE: How to write an executive summary in 6 steps

Next up is your company description. This should contain basic information like:

Your business’s registered name.

Address of your business location .

Names of key people in the business. Make sure to highlight unique skills or technical expertise among members of your team.

Your company description should also define your business structure — such as a sole proprietorship, partnership or corporation — and include the percent ownership that each owner has and the extent of each owner’s involvement in the company.

Lastly, write a little about the history of your company and the nature of your business now. This prepares the reader to learn about your goals in the next section.

» MORE: How to write a company overview for a business plan

The third part of a business plan is an objective statement. This section spells out what you’d like to accomplish, both in the near term and over the coming years.

If you’re looking for a business loan or outside investment, you can use this section to explain how the financing will help your business grow and how you plan to achieve those growth targets. The key is to provide a clear explanation of the opportunity your business presents to the lender.

For example, if your business is launching a second product line, you might explain how the loan will help your company launch that new product and how much you think sales will increase over the next three years as a result.

» MORE: How to write a successful business plan for a loan

In this section, go into detail about the products or services you offer or plan to offer.

You should include the following:

An explanation of how your product or service works.

The pricing model for your product or service.

The typical customers you serve.

Your supply chain and order fulfillment strategy.

You can also discuss current or pending trademarks and patents associated with your product or service.

Lenders and investors will want to know what sets your product apart from your competition. In your market analysis section , explain who your competitors are. Discuss what they do well, and point out what you can do better. If you’re serving a different or underserved market, explain that.

Here, you can address how you plan to persuade customers to buy your products or services, or how you will develop customer loyalty that will lead to repeat business.

Include details about your sales and distribution strategies, including the costs involved in selling each product .

» MORE: R e a d our complete guide to small business marketing

If you’re a startup, you may not have much information on your business financials yet. However, if you’re an existing business, you’ll want to include income or profit-and-loss statements, a balance sheet that lists your assets and debts, and a cash flow statement that shows how cash comes into and goes out of the company.

Accounting software may be able to generate these reports for you. It may also help you calculate metrics such as:

Net profit margin: the percentage of revenue you keep as net income.

Current ratio: the measurement of your liquidity and ability to repay debts.

Accounts receivable turnover ratio: a measurement of how frequently you collect on receivables per year.

This is a great place to include charts and graphs that make it easy for those reading your plan to understand the financial health of your business.

This is a critical part of your business plan if you’re seeking financing or investors. It outlines how your business will generate enough profit to repay the loan or how you will earn a decent return for investors.

Here, you’ll provide your business’s monthly or quarterly sales, expenses and profit estimates over at least a three-year period — with the future numbers assuming you’ve obtained a new loan.

Accuracy is key, so carefully analyze your past financial statements before giving projections. Your goals may be aggressive, but they should also be realistic.

NerdWallet’s picks for setting up your business finances:

The best business checking accounts .

The best business credit cards .

The best accounting software .

Before the end of your business plan, summarize how your business is structured and outline each team’s responsibilities. This will help your readers understand who performs each of the functions you’ve described above — making and selling your products or services — and how much each of those functions cost.

If any of your employees have exceptional skills, you may want to include their resumes to help explain the competitive advantage they give you.

Finally, attach any supporting information or additional materials that you couldn’t fit in elsewhere. That might include:

Licenses and permits.

Equipment leases.

Bank statements.

Details of your personal and business credit history, if you’re seeking financing.

If the appendix is long, you may want to consider adding a table of contents at the beginning of this section.

How much do you need?

with Fundera by NerdWallet

We’ll start with a brief questionnaire to better understand the unique needs of your business.

Once we uncover your personalized matches, our team will consult you on the process moving forward.

Here are some tips to write a detailed, convincing business plan:

Avoid over-optimism: If you’re applying for a business bank loan or professional investment, someone will be reading your business plan closely. Providing unreasonable sales estimates can hurt your chances of approval.

Proofread: Spelling, punctuation and grammatical errors can jump off the page and turn off lenders and prospective investors. If writing and editing aren't your strong suit, you may want to hire a professional business plan writer, copy editor or proofreader.

Use free resources: SCORE is a nonprofit association that offers a large network of volunteer business mentors and experts who can help you write or edit your business plan. The U.S. Small Business Administration’s Small Business Development Centers , which provide free business consulting and help with business plan development, can also be a resource.

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• Project scope management: Plan, templat ...

Project scope management: Plan, template, and guide

A scope management plan outlines the processes involved in executing your project and serves as a guideline to keep the project within specific limits. In this article, we’ll explain what a scope management plan is and how it can assist you in the planning phase. With effective scope management, you can set you and your team up for success.

Managing the scope of a project is like driving a car. If you don’t keep your eyes in front of you, the car veers off the road. Similarly, if you don’t control your project scope, the project gets off track. A scope management plan outlines the processes involved in executing your project and serves as a guideline to keep the project within specific limits. 

As a project manager, it’s your responsibility to guide your team through the project life cycle. In this article, we’ll explain what a scope management plan is and how it can assist you in the planning phase. Once you understand the scope management process, your plan will set you and your team up for success.

What is project scope management?

Project scope management refers to the process of defining and controlling what is included and what is not included in a project. It's about understanding the project goals, milestones, tasks, deadlines, outputs, and costs and ensuring everything is aligned to meet the objectives of the project. A well-defined scope management plan is essential for successful project execution, as it helps prevent scope creep, makes sure resources are used efficiently, and keeps the project on track.

Phases of project scope management

This plan is a roadmap for stakeholders to understand the boundaries of the project and helps keep everyone on the same page from start to finish.

The initiation phase sets the groundwork by identifying the part of the project that needs focus and the primary objectives. During this phase, you engage key stakeholders, assess project feasibility, and develop a clear statement of work or project charter. The initiation phase creates a solid foundation for all subsequent project activities.

During the planning stage, the project team collaborates to develop a comprehensive approach that outlines the project timeline , scope baseline , and project budget. This is where the scope definition becomes crucial; it's the process of breaking down the project into manageable tasks and subtasks, which makes it easier for the team to deliver on expectations.

In the defining stage, you create precise documentation of the project's exclusions, clarifying what is outside the project's scope to prevent misunderstandings and scope creep. This documentation provides a clear reference for what the project will deliver, so all project stakeholders and team members have a cohesive understanding of the project objectives.

Verification

Verification involves regular reviews with project stakeholders to confirm that the project remains aligned with the scope baseline and to make adjustments as necessary. Verification is vital for managing changes and avoiding scope creep, which can derail project success.

Controlling the project scope

Finally, controlling the project scope requires continuous monitoring and management of the project's progress against the original plan. This entails keeping tabs on the project team's performance, controlling the project budget, managing cost overruns, and making sure all stakeholders are aware of and agree upon any changes to the project timeline.

Importance of project scope management

Understanding the importance of scope management is pivotal for avoiding project pitfalls like delays, budget overruns, and stakeholder dissatisfaction. A well-crafted project scope management plan acts as a blueprint that guides every decision and action throughout each part of the project.

For example, consider a project to develop new customer service software. When a stakeholder suggests a feature not originally included in the scope, the project manager can refer to the project scope management plan to firmly explain why the new feature cannot be accommodated. This decisive stance ensures the project remains focused and on track.

What is the purpose of a scope management plan?

The purpose of a scope management plan is to create project structure by documenting the resources required to achieve the project objectives. Your scope management plan will also reduce the chance of scope creep. 

A scope management process helps you avoid common problems, including: 

Constantly changing requirements

Overspending

Wasted time

Failure to meet deadlines

What is project scope?

Your project scope sets the boundaries for your project and defines the project goals, deadlines, and deliverables. When you clarify your project scope, you’re structuring your project around what your team will and won’t do and providing goals and objectives for them to work toward.  

The entire team should be involved in defining the project scope. This means communicating with key stakeholders and writing up a project scope statement that outlines requirements of the project. For example, if you’re defining a scope for a new advertising campaign, you’ll want to ensure the design team, the content team, and the digital marketing team all agree on the details in the scope statement. 

What is scope creep?

Scope creep occurs when your project exceeds your initial scope statement. For example, scope creep may occur if a stakeholder adds an additional project deliverable after the project has begun. 

Unexpected project changes can lead to increased project risks like missed timelines, increased budgets, overwork , or a low-quality end product. There are various reasons why scope creep can occur. Some reasons include:

Unclear project scope

Unrealistic project objectives

Too many stakeholders

Poor scope management

Poor communication with stakeholders

To avoid scope creep, you need to plan against it, which is where a strong scope management plan comes into play.

How to create a project scope management plan

The Project Management Institute’s (PMI) Project Management Body of Knowledge (PMBOK® Guide) offers a standard, six step project scope management process. These six steps help you create a solid scope management plan to keep your project on track.

1. Create your scope plan

The first step in the planning process involves creating your scope plan document. This document should include your scope statement, a breakdown of project requirements, and any expected deliverables for the project. 

Your scope plan document may also include a change control process , which is a process for change requests that can prevent scope creep. This is a document you can refer to in later stages of project planning. You may need this document for complex projects, projects where you think stakeholders will want many deliverables, or when there’s a lot of flux in what your deliverables might be. 

Tips for creating a scope plan: 

Incorporate expert judgment : To create your scope planning document, you need to consider all parts of the organizational process. Check in with cross-functional and executive stakeholders to ensure you have all of the information you need.

Hold scope kickoff meetings: Before you lock your scope document, make sure you have buy-in from all stakeholders. Share your scope plan document asynchronously , or host a kickoff meeting so that other managers and team members involved in the project can contribute to the initial scope statement.

2. Collect project requirements

In this step of the process, you’ll identify stakeholders’ needs so you can meet project objectives. Your goal should be to gather an in-depth list of requirements from stakeholders so that you can prevent scope changes down the line. 

Tips for collecting project requirements: 

Create a project charter: Create a project charter , or an elevator pitch, so stakeholders can clearly understand the project and ensure their expectations match the project's objectives. 

Hold focus groups or workshops: Hold focus groups or workshops to give stakeholders a better understanding of your project. Communicating your project objectives to stakeholders is essential if you want them to buy into your project scope.

Develop prototypes: Develop a prototype of your project deliverable before presenting your project to stakeholders. This way, stakeholders can visualize the end product, voice their concerns, or list additional requirements early on.

3. Define scope

Once you’ve collected requirements from stakeholders, turn that information into a well-defined scope and a detailed product description. This document clarifies the expectations and deliverables for the project so that all team members know what they must accomplish.

Tips for defining scope:  

Try product analysis: Before you can define your scope and write a detailed product description, you need to do an in-depth product analysis. Analyze the product you plan to create from the eyes of the customer or client in order to determine whether it will meet their expectations. 

Generate alternatives: You’ll also want to generate alternatives in case your project encounters risks. For example, how will you meet stakeholder needs if you’re planning a new product launch and your launch date gets delayed?

Facilitate workshops: Host brainstorming workshops to clarify the scope of the project and to encourage collaboration among team members. 

4. Create a work breakdown structure

A work breakdown structure (WBS) is a way to divide your project into levels of tasks. When you create a WBS, your team can clearly visualize each component of the project and assess what needs to be done. 

A work breakdown structure creates a hierarchical structure of tasks. From there, you can schedule, monitor, and control your project.

Tips for creating a WBS: 

Decompose your project objective: A WBS decomposes, or breaks down, your project objective into dependencies and sub-dependencies. These smaller groups of tasks are often referred to as work packages. Once you break your tasks down, you have clear insight into everything your project needs, including the hours, equipment, tools, and expenses.

Automate workflows: Automating team member workflows can streamline coordination on projects and enhance project visibility. Using software to automate these workflows will also reduce manual information-gathering and duplicative work.

5. Validate scope

Validating your scope simply means getting sign-off from all stakeholders involved in the project. Make sure stakeholders clearly understand your project deliverables to avoid future scope creep. If possible, get feedback or advice on any changes and improvements. 

Tips to validate scope: 

Inspect your plan: Because validation is the final sign-off for your scope management plan, you’ll want to review and inspect it thoroughly. Team members can help you inspect the plan before sending it off to stakeholders, but stakeholders should also participate in a final inspection so that the plan gets as many eyes on it as possible.

6. Control scope

The last step in your scope management plan is scope control. As your project continues into the execution phase, monitor the status of the project and manage changes to the scope. The best way to streamline scope control is to use project management software. These tools can share feedback, files, and status updates on your project, so you’re aware of any scope changes in real time.

Tips to control scope: 

Analyze variance: In this part of the scope management plan, assess how much variance in scope occurs. Analyzing the actual performance of your scope versus the planned performance will give you insight for future projects.

Refer to change control document: You created a change control process earlier in the planning phase. Remember to refer to this document so you can track the flow of information when it comes to project changes.

Tips for effective project scope management

Effective project scope management is crucial for the success of any project. It combines strategic planning and work management techniques to ensure that objectives are met efficiently. 

Here are several tips to guide you in keeping your project on the right path from start to finish:

Clearly define the product and project scope. Begin with a precise definition of both the product scope—detailing the features and functions of the product or service being developed—and the project scope, which includes the work required to deliver the product. A clear distinction between these scopes helps prevent misunderstandings and scope creep.

Engage stakeholders early. Involve key project stakeholders early in the planning process. Their input can help refine the project scope and ensure it aligns with business objectives and stakeholder expectations.

Develop a detailed scope management plan. Create a comprehensive scope management plan that outlines how scope changes will be identified, evaluated, and implemented or rejected. This plan is your roadmap for navigating scope challenges.

Implement change control processes. Establish formal change control processes to manage requests for changes to the project scope efficiently. These processes help assess the impact of changes on the project timeline, budget, and resources.

Document everything. Keep detailed records of all project meetings, decisions, and changes related to the project scope. Documentation provides a clear reference point for all project participants and can be invaluable for resolving disputes and informing future projects.

Incorporating these tips into your project management practices can lead to more successful outcomes. Effective scope management is about balancing the detailed planning of product features and project work with the flexibility to adapt to changes.

Simplify your scope management with project management tools

A project scope management plan creates a clear structure for your team to follow during project execution. Scope management planning is easier if you use an online tool because you can share your plan with stakeholders, automate internal workflows, and easily break down project objectives into tasks. With project management software, you can streamline your processes and feel better prepared for what lies ahead.

Related resources

Understanding dependencies in project management

How Asana uses work management to optimize resource planning

Unmanaged business goals don’t work. Here’s what does.

How Asana uses work management to drive product development

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What Is a Business Plan? Definition and Planning Essentials Explained

Posted february 21, 2022 by kody wirth.

What is a business plan? It’s the roadmap for your business. The outline of your goals, objectives, and the steps you’ll take to get there. It describes the structure of your organization, how it operates, as well as the financial expectations and actual performance. 

A business plan can help you explore ideas, successfully start a business, manage operations, and pursue growth. In short, a business plan is a lot of different things. It’s more than just a stack of paper and can be one of your most effective tools as a business owner. 

Let’s explore the basics of business planning, the structure of a traditional plan, your planning options, and how you can use your plan to succeed. 

What is a business plan?

A business plan is a document that explains how your business operates. It summarizes your business structure, objectives, milestones, and financial performance. Again, it’s a guide that helps you, and anyone else, better understand how your business will succeed.  

Why do you need a business plan?

The primary purpose of a business plan is to help you understand the direction of your business and the steps it will take to get there. Having a solid business plan can help you grow up to 30% faster and according to our own 2021 Small Business research working on a business plan increases confidence regarding business health—even in the midst of a crisis. 

These benefits are directly connected to how writing a business plan makes you more informed and better prepares you for entrepreneurship. It helps you reduce risk and avoid pursuing potentially poor ideas. You’ll also be able to more easily uncover your business’s potential. By regularly returning to your plan you can understand what parts of your strategy are working and those that are not.

That just scratches the surface for why having a plan is valuable. Check out our full write-up for fifteen more reasons why you need a business plan .  

What can you do with your plan?

So what can you do with a business plan once you’ve created it? It can be all too easy to write a plan and just let it be. Here are just a few ways you can leverage your plan to benefit your business.

Test an idea

Writing a plan isn’t just for those that are ready to start a business. It’s just as valuable for those that have an idea and want to determine if it’s actually possible or not. By writing a plan to explore the validity of an idea, you are working through the process of understanding what it would take to be successful. 

The market and competitive research alone can tell you a lot about your idea. Is the marketplace too crowded? Is the solution you have in mind not really needed? Add in the exploration of milestones, potential expenses, and the sales needed to attain profitability and you can paint a pretty clear picture of the potential of your business.

Document your strategy and goals

For those starting or managing a business understanding where you’re going and how you’re going to get there are vital. Writing your plan helps you do that. It ensures that you are considering all aspects of your business, know what milestones you need to hit, and can effectively make adjustments if that doesn’t happen. 

With a plan in place, you’ll have an idea of where you want your business to go as well as how you’ve performed in the past. This alone better prepares you to take on challenges, review what you’ve done before, and make the right adjustments.

Pursue funding

Even if you do not intend to pursue funding right away, having a business plan will prepare you for it. It will ensure that you have all of the information necessary to submit a loan application and pitch to investors. So, rather than scrambling to gather documentation and write a cohesive plan once it’s relevant, you can instead keep your plan up-to-date and attempt to attain funding. Just add a use of funds report to your financial plan and you’ll be ready to go.

The benefits of having a plan don’t stop there. You can then use your business plan to help you manage the funding you receive. You’ll not only be able to easily track and forecast how you’ll use your funds but easily report on how it’s been used. 

Better manage your business

A solid business plan isn’t meant to be something you do once and forget about. Instead, it should be a useful tool that you can regularly use to analyze performance, make strategic decisions, and anticipate future scenarios. It’s a document that you should regularly update and adjust as you go to better fit the actual state of your business.

Doing so makes it easier to understand what’s working and what’s not. It helps you understand if you’re truly reaching your goals or if you need to make further adjustments. Having your plan in place makes that process quicker, more informative, and leaves you with far more time to actually spend running your business.

What should your business plan include?

The content and structure of your business plan should include anything that will help you use it effectively. That being said, there are some key elements that you should cover and that investors will expect to see. 

Executive summary

The executive summary is a simple overview of your business and your overall plan. It should serve as a standalone document that provides enough detail for anyone—including yourself, team members, or investors—to fully understand your business strategy. Make sure to cover the problem you’re solving, a description of your product or service, your target market, organizational structure, a financial summary, and any necessary funding requirements.

This will be the first part of your plan but it’s easiest to write it after you’ve created your full plan.

Products & Services

When describing your products or services, you need to start by outlining the problem you’re solving and why what you offer is valuable. This is where you’ll also address current competition in the market and any competitive advantages your products or services bring to the table. Lastly, be sure to outline the steps or milestones that you’ll need to hit to successfully launch your business. If you’ve already hit some initial milestones, like taking pre-orders or early funding, be sure to include it here to further prove the validity of your business. 

Market analysis

A market analysis is a qualitative and quantitative assessment of the current market you’re entering or competing in. It helps you understand the overall state and potential of the industry, who your ideal customers are, the positioning of your competition, and how you intend to position your own business. This helps you better explore the long-term trends of the market, what challenges to expect, and how you will need to initially introduce and even price your products or services.

Check out our full guide for how to conduct a market analysis in just four easy steps .  

Marketing & sales

Here you detail how you intend to reach your target market. This includes your sales activities, general pricing plan, and the beginnings of your marketing strategy. If you have any branding elements, sample marketing campaigns, or messaging available—this is the place to add it. 

Additionally, it may be wise to include a SWOT analysis that demonstrates your business or specific product/service position. This will showcase how you intend to leverage sales and marketing channels to deal with competitive threats and take advantage of any opportunities.

Check out our full write-up to learn how to create a cohesive marketing strategy for your business. 

Organization & management

This section addresses the legal structure of your business, your current team, and any gaps that need to be filled. Depending on your business type and longevity, you’ll also need to include your location, ownership information, and business history. Basically, add any information that helps explain your organizational structure and how you operate. This section is particularly important for pitching to investors but should be included even if attempted funding is not in your immediate future.

Financial projections

Possibly the most important piece of your plan, your financials section is vital for showcasing the viability of your business. It also helps you establish a baseline to measure against and makes it easier to make ongoing strategic decisions as your business grows. This may seem complex on the surface, but it can be far easier than you think. 

Focus on building solid forecasts, keep your categories simple, and lean on assumptions. You can always return to this section to add more details and refine your financial statements as you operate. 

Here are the statements you should include in your financial plan:

• Sales and revenue projections
• Profit and loss statement
• Cash flow statement
• Balance sheet

The appendix is where you add additional detail, documentation, or extended notes that support the other sections of your plan. Don’t worry about adding this section at first and only add documentation that you think will be beneficial for anyone reading your plan.

Types of business plans explained

While all business plans cover similar categories, the style and function fully depend on how you intend to use your plan. So, to get the most out of your plan, it’s best to find a format that suits your needs. Here are a few common business plan types worth considering. 

Traditional business plan

The tried-and-true traditional business plan is a formal document meant to be used for external purposes. Typically this is the type of plan you’ll need when applying for funding or pitching to investors. It can also be used when training or hiring employees, working with vendors, or any other situation where the full details of your business must be understood by another individual. 

This type of business plan follows the outline above and can be anywhere from 10-50 pages depending on the amount of detail included, the complexity of your business, and what you include in your appendix. We recommend only starting with this business plan format if you plan to immediately pursue funding and already have a solid handle on your business information. 

Business model canvas

The business model canvas is a one-page template designed to demystify the business planning process. It removes the need for a traditional, copy-heavy business plan, in favor of a single-page outline that can help you and outside parties better explore your business idea. 

The structure ditches a linear structure in favor of a cell-based template. It encourages you to build connections between every element of your business. It’s faster to write out and update, and much easier for you, your team, and anyone else to visualize your business operations. This is really best for those exploring their business idea for the first time, but keep in mind that it can be difficult to actually validate your idea this way as well as adapt it into a full plan.

One-page business plan

The true middle ground between the business model canvas and a traditional business plan is the one-page business plan. This format is a simplified version of the traditional plan that focuses on the core aspects of your business. It basically serves as a beefed-up pitch document and can be finished as quickly as the business model canvas.

By starting with a one-page plan, you give yourself a minimal document to build from. You’ll typically stick with bullet points and single sentences making it much easier to elaborate or expand sections into a longer-form business plan. This plan type is useful for those exploring ideas, needing to validate their business model, or who need an internal plan to help them run and manage their business.

Now, the option that we here at LivePlan recommend is the Lean Plan . This is less of a specific document type and more of a methodology. It takes the simplicity and styling of the one-page business plan and turns it into a process for you to continuously plan, test, review, refine, and take action based on performance.

It holds all of the benefits of the single-page plan, including the potential to complete it in as little as 27-minutes . However, it’s even easier to convert into a full plan thanks to how heavily it’s tied to your financials. The overall goal of Lean Planning isn’t to just produce documents that you use once and shelve. Instead, the Lean Planning process helps you build a healthier company that thrives in times of growth and stable through times of crisis.

It’s faster, keeps your plan concise, and ensures that your plan is always up-to-date.

Try the LivePlan Method for Lean Business Planning

Now that you know the basics of business planning, it’s time to get started. Again we recommend leveraging a Lean Plan for a faster, easier, and far more useful planning process. 

To get familiar with the Lean Plan format, you can download our free Lean Plan template . However, if you want to elevate your ability to create and use your lean plan even further, you may want to explore LivePlan. 

It features step-by-step guidance that ensures you cover everything necessary while reducing the time spent on formatting and presenting. You’ll also gain access to financial forecasting tools that propel you through the process. Finally, it will transform your plan into a management tool that will help you easily compare your forecasts to your actual results. 

Check out how LivePlan streamlines Lean Planning by downloading our Kickstart Your Business ebook .

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Project Scope: What scope really is (and how to define it)

• by Adrian Neumeyer

People like to use jargon in order to feel smart. The same is true in project management, where the word scope is one of the most frequently used terms.

Because I don’t want to let you standing in the rain, I’ll give you my explanation of what scope is.

What is meant by project scope

In a nutshell, project scope is the sum of things that a project has to take care of. It’s an abstract concept and it’s not something you can put in a case and ship off. Rather, think of it as a list of responsibilities, tasks and tangible items or deliverables a project must take over, conduct or create so that the project goal is achieved.

You define the scope while  planning your project, so both planning and scope definition go hand in hand and are carried out by the project manager.

Having a clear picture of the scope is critical for your project’ success. Scope determines all important parameters of the project, including the timeline, cost and risks. In other words: If you aren’t sure about your project’s exact scope, you cannot predict its duration, timeline and risks properly — and you will ultimately fail .

That was a lot of theory, right?

An analogy from everyday life:

You’re looking to get a new kitchen. So you talk to several furniture stores who offer custom made kitchens. In the end they’ll hand you an offer consisting of several pages, describing what they will do for you such as designing the kitchen, choosing surface materials, suggesting suitable appliances etc. Maybe you want them to get the old kitchen stuff removed and of course to have the new one installed by a handyman. So all the work and all the items are part of your kitchen project scope 🙂

In scope or out of scope? That’s the question!

In project management, you often hear people talking about something being ‘in scope’ or ‘not in scope’. If an activity is in scope, this means a project will take care of it. Not in scope means the project is not responsible for it.

How to define the scope of a project

How do you typically define the scope in a project? It all starts with a conversation between the customer and the contractor (the party running the project and doing the work). Customer side management will describe to the contractor their issue and what kind of solution they are looking for. They might say something like:

Customer: We have a lot of issues with managing our inventory. It takes our workers so much time to find the right item on the shelves, and very often goods get lost because we don’t properly track physical movements … we just use Excel.

and the contractor will say:

Contractor/vendor:   Ok, what you need is an IT based inventory management system. This is exactly what we are offering. We can roll out that system for you in 4 months only.

These kind of talks occur long in advance before an actual project is started, maybe even years in advance!

Then, over the following months client and vendor will have further meetings. The content of their discussions will change from high-level topics to very specific questions :

Sample Questions to clarify scope:

• Do you want a cloud-based inventory management system? Or do you prefer an installation on your own servers?
• Do you need hardware? like barcode scanners? terminals?
• Do you want us [vendor] to optimize your warehouse structure? We offer that service.
• Do you want onsite training for your workers? Or do you prefer video-based training which costs less?
• Do you want us to do an inventory stock count? We offer this service.

The vendor will gather all such details and decisions in a document. Using this information he will later create an offer to the customer as well as a formal scope statement , which lists all items the company will do for the customer.

PROVEN STEPS TO DEFINE PROJECT SCOPE

Before I go deeper into the scope definition process, please note this: defining the scope is not something you accomplish within one or two hours. Scope is also not something you “fix” in a few meetings alone.  Rather, it’s a longer process during which you attempt to get a better understanding of the project and your customer’s needs, clarify any ambiguous points and write down your findings.

So, here’s a general framework I’d use for scope:

Step 1 ― Define your project goal

You can’t really confirm scope if you don’t have a project goal in front of you. If you don’t have a project goal yet then define one first, and don’t make this serious mistake .

Step 2 ― List major project activities and deliverables

Put simply, scope is the sum of all project activities and deliverables. So, the most basic of scope definition would be a list of all planned project activities and deliverables. Just to clarify, deliverables are results or things created in the course of the project, for example a training plan or a software could be a deliverable.

I’m using the previous example about the rollout of an inventory management system.

In such a project we would list the following scope:

major project activities:

• project planning
• requirement specification

software installation

• adjust software to client’s needs
• training of warehouse staff

deliverables:

• project schedule
• requirement specification document
• ready-to-use system
• training plan
• training manual

This list is already our first scope definition!

Step 3 ― Clarify scope for each activity and deliverable

So you got your basic scope list from step 2. Your next step is to refine it further. Why is this necessary? The items you’ve listed may require further clarification before you can put down a valid cost and duration value. Also, the client may have additional wishes or requirements that need to be considered for the scope definition ( click to learn how to gather requirements ).

Valid question to ask:

Will the client perform the software installation himself or should it be done by the vendor?

Does the client prefer a cloud-based solution instead of a dedicated installation?

The answers have an impact on project scope.

For example, if the customer prefers a cloud-based platform, then a software rollout on the client’s servers is out of scope .

Maybe the software has different modules, and the client only needs 3 out of 5 modules. Then those three modules are in scope and the other two are not in scope. As a consequence the software installation and configuration will require less effort (and as a result cost will be lower).

As you can see, you have to be quite specific to get a good and complete understanding of the scope. Often it requires you to dig down deep with super-specific questions — almost like going through a checklist and checking each scope-related question carefully.

Documenting scope in a scope statement

The scope statement is a formal document that explains the scope of a project, including the activities, responsibilities and deliverables of the project. Purpose of the statement is to make sure both customer and contractor have the same understanding of what the project is going to deliver. The document is normally signed by both parties.

I recommend using a proper template that already has the right structure and includes the relevant chapters.

My scope statement template

I’ve included the template I used for my projects. You can download the Word file (DOC) here. The template contains all sections you need for proper scope definition with your customer.

To help you getting started I’ve included sample data from an IT project. Note that scope statements are usually a lot more comprehensive than this sample — meaning they contain much more text. So, make the document as comprehensive as needed for your project.

DOWNLOAD THE PROJECT SCOPE STATEMENT (DOCX)

Read this if you struggle with defining scope

Sure enough, you want to make your project a success. But you also need a clear definition of what your project should do and how to accomplish its mission.

You need a FEASIBLE plan:  When you define scope for the first time, you may feel overwhelmed sheer amount of options and activities that possibly have to be done. Don’t make it too complicated. Just ask yourself ‘How can we get from A to B?’ and then write down the steps that YOU think need to be taken. The key thing that matters is that your plan is feasible. And the steps are the basis for your project’s scope.

Go from high level to detailed level:  People love to discuss details, even though the overall project strategy and approach may not be clear yet. This does not make sense. I recommend you always at the high level, looking at the major activities and deliverables and then breaking those down into smaller tasks and work packages.

Dealing with different options: Your sponsor or your stakeholders may have their own ideas on how to tackle the project. The problem is that their ideas may not be feasible, or they may not be optimal from an overall project perspective. What you could in this case to convince the other parties of your approach is to put each option side by side in a spreadsheet and list all the pros and cons for each alternative. Then, have the team decide on which way to go.

Was this article helpful?

I’d love to hear if this article has given you a better understanding of what project scope is. Also I hope you feel more confident defining scope in your project. If you have any questions, just post a comment below and I’ll give you my answer.

Hi! I'm Adrian, former Senior IT Project Manager and founder of Tactical Project Manager. I created the site to help you become an excellent project leader and manage intense projects with success!

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What’s a project scope, and how do you write one?

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What’s a project’s scope? Scope statement and project scope definitions

6 benefits of defining project scope in the early stages

How to define the scope of a project

Project scope planning and management

Project scope examples, don’t skip the scope.

As you gear up for your next project, it's crucial to set off on the right foot by crafting a roadmap for your success. Whether you're gunning for that well-deserved promotion or aiming to foster better collaboration with your boss or coworkers, this is a key moment to flex your leadership skills and unite everyone under a common goal.

However, it's easy to get caught up in the excitement and rush ahead, inadvertently overlooking crucial details during the planning phase. Sometimes, that eagerness to make progress can undermine the importance of thorough preparation.

Amidst this hustle, a pivotal aspect of project planning can keep you grounded: your project scope. Defining scope encourages you to visualize the entire lifecycle of your project and narrow your team’s focus to what’s strictly necessary. Let’s explore how to use this project management step to assess the feasibility of your goals and make sure you give all the details their due diligence.

What’s a project’s scope? Scope statement and project scope definitions 

Project scope is used in project planning to define the main deliverables, goals , costs, and deadlines you need to complete a project. Defining these details helps you create a clear action plan according to your timeline and budgeting constraints.

These individual details collectively form the scope statement, which acts as a valuable reference for team members and project managers , offering them a clear understanding of their responsibilities and the anticipated outcomes.

Depending on the complexity of your project, you may need to distribute this document across departments to ensure everyone is on the same page. For example, if you’re working on a sneaker launch promotion, you want to align with the photography, product, and marketing teams to confirm all objectives can be met by the launch date.

No matter your project’s size and how many stakeholders are involved, proper planning is crucial to ensure everything goes according to your vision.

Although it’s exciting to start a new project and dive in as soon as possible, what saves you time in the beginning often comes back around. Here are seven benefits of defining your project’s scope in the early stages of project planning:

• Outlines the project’s objectives and the metrics for success
• Defines a reasonable timeframe for achieving the project’s objectives
• Ensures all tasks are within the designated budget
• Reduces the risk of scope creep (when project deliverables balloon throughout the project)
• Ensures all teams have an understanding of the project’s requirements
• Manages and sets expectations for the boundaries of the project
• Clarifies the delegation and ownership process down the line

How to define the scope of a project 

According to the Project Management Institute, “ambiguous or unrefined scope definition” is the number one cause of scope creep . In other words, without a clear scope, you risk wasting time and money on work that doesn’t benefit your end goal. 

Outlining your project scope lays the groundwork for your project’s success by flagging the necessary milestones and making the right exclusions. Here are eight steps to follow when creating a project scope statement:

1. Outline project objectives

Your project’s objectives are the outcomes you want to achieve by its completion date. Outlining these objectives gives purpose and direction to the entire initiative — and your team. Without clear, realistic goals , your project is more susceptible to scope creep and can branch off to include deliverables or details that aren’t necessary.

2. Create a resource management plan

In scope project management, resources can refer to budgets, inventory, and human bandwidth. A resource management plan outlines the available resources and how you intend to use them throughout the project. Knowing what resources are available from the beginning empowers you to create a reasonable timeline, define project boundaries , and gauge the feasibility of the project’s final outcome.

3. Collect additional project requirements

Before drafting your statement, you should collect and define any additional requirements that may influence your project’s scope. This could include external factors such as client deadlines or company policy. For example, if you’re a software engineer working on a sensitive company project, your work may require additional security requirements, such as encryption.

4. Draft your project scope statement

Once you’ve noted your goals and objectives and collected additional project requirements, it’s time to draft your project scope statement. Your statement should outline your project’s intended outcomes and the work your team will cover within the defined timeline.

5. Acquire approval from key stakeholders

Before running with your project scope statement and introducing it to the rest of your team, make sure to receive a sign-off from key stakeholders. This allows you to gain an outsider’s opinion on your project’s deliverables and make any necessary changes to ensure the client or C-suite is happy. This is especially important when answering to a higher-up within your organization who approves your budget and resources.

6. Create a change control process

When working on large projects, deliverables, resources, and timelines often need to be adjusted as your team makes progress. Maybe funding fell through for the project budget and the scope of the project needs to be changed, or perhaps a product’s design didn’t meet expectations and needs to be redeveloped.

If you’re managing a complex project with multiple stakeholders, creating a change control process can help you reduce the risk of scope creep while promoting adaptability . A change control process is a predetermined procedure team leaders must go through before making changes to the project scope.

This process requires the project team to submit change requests to important stakeholders for approval each time they’d like to alter the content of their work.

7. Share the project scope statement with the team

Once your key stakeholders have reviewed the project scope statement and you’ve developed a proper change control process, it’s time to share the statement with your team. During this phase, team members can ask questions and discuss any concerns about the project’s progression or deliverables.

Often, individual contributors have the best insight into what is and isn’t achievable given their resources and skills.

8. Review the project scope statement during the project

Your project scope statement is more than a starting point for your project — it’s a great reference to review while conducting your work. Looking over the statement during each stage ensures you follow the correct order of operations while working on the initiative.

And as a manager , it can help you assess whether each team member is performing and actively contributing to the project’s success.

Although project scope statements lay the foundation for staying on track, unexpected changes and updates are part of the management process. It’s the project manager’s responsibility to evaluate possible modifications and document any changes made to the project’s scope.

When new information and opportunities arise, you must decide whether they contribute to the project's scope or deviate from achieving your intended objectives.

These change management processes grant the flexibility to make beneficial tweaks to workflow and resource management while remaining true to your project’s goals. Remember to stay open-minded when receiving ideas from your stakeholders and team members, as they may share valuable insight on how to improve your processes and the overall outcome of your project.

Knowing which components to include in your project scope statement and seeing an example in action are two very different things. Here are two templates for inspiration when creating your own statement:

Example 1: project scope statement for a product launch

If you’re a small designer launching a new sneaker, your project scope statement may look like this:

Project objective: to create a stylish, on-trend platform sneaker to launch in the spring/summer collection that caters to Gen Z and boosts overall brand recognition.

• Footwear design team (10 people) available for 30 hours of work per week per person
• Shoemakers (40 people) available for 30 hours of work per week per person
• Photography team (8 people) available for 30 hours of work per week per person for two weeks
• Marketing team (5 people) available for 30 hours of work per week per person
• Graphic designers (5 people) available for 25 hours of work per week per person for two weeks

Additional requirements

• The new sneaker needs to be designed and tested by January to go to market in the spring/summer collection

Project roadmap and timeline

• August 15: Give brief to the footwear design team and begin brainstorming new sneaker design
• August 22: Present the first round of ideas to the footwear design team
• August 25: Choose the top three designs to develop further
• September 8: Present new renditions of the top three designs to the footwear design team
• September 13: Determine the final design with the footwear design team
• September 15: Make minor design adjustments before passing them along to the shoemaking team
• September 20: Begin the manufacturing process with the shoemaking team
• September 29: Present the first draft of the final shoe design
• October 3: Order supplies necessary to refine the shoe design
• October 17: Make a second draft of the final shoe design
• October 20: Test the sneaker prototype
• October 31: Make necessary changes to the final design
• November 10: Re-test the sneaker design
• November 24: Begin manufacturing a small batch of the final sneaker design
• December 12: Take product and content photos of the new design
• December 13: Begin retouching product photos
• December 20: Finalize marketing materials with new product photos
• January 2: Launch new sneaker design on the company website and social media platforms

Example 2: project scope statement for redesigning a company website

If you’re in charge of organizing a new website launch, your project scope statement could look like this:

Project objective: to redesign the company website to fit the new branding material and improve customer experience.

• Web developer available for 25 hours of work per week
• Art director available for 30 hours of work per week
• Photography team (4 people) available for 10 hours of work per week
• Content writers (2 people) available for 30 hours of work per week
• Marketing team (3 people) available for 6 hours of ad hoc work per week
• The website needs to be launched by October 3, before the product launch on October 10
• August 18: Begin creating a website template for Art Director’s approval
• August 21: Have the photography team take content photos for the website
• August 22: Give content writers outlines for new website copy
• August 29: Review and upload new images onto the website template
• September 5: Have the marketing team review the writer’s written copy
• September 8: Approve and upload written content
• September 13: Have art direction review the website and offer recommendations
• September 15: Begin implementing recommendations
• September 20: Perform quality control on website design and new content
• September 29: Launch new website

Defining the project scope is an important step in project management that points you and your team in the right direction. Before embarking on your next venture, create objectives, compile resources, and note project requirements to better understand how your initiative will run.

By laying this groundwork before kicking off work, you can account for any barriers and gauge your project’s potential for success more accurately.

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What is a Business Plan? Definition, Tips, and Templates

Published: June 07, 2023

In an era where more than 20% of small enterprises fail in their first year, having a clear, defined, and well-thought-out business plan is a crucial first step for setting up a business for long-term success.

Business plans are a required tool for all entrepreneurs, business owners, business acquirers, and even business school students. But … what exactly is a business plan?

In this post, we'll explain what a business plan is, the reasons why you'd need one, identify different types of business plans, and what you should include in yours.

What is a business plan?

A business plan is a documented strategy for a business that highlights its goals and its plans for achieving them. It outlines a company's go-to-market plan, financial projections, market research, business purpose, and mission statement. Key staff who are responsible for achieving the goals may also be included in the business plan along with a timeline.

The business plan is an undeniably critical component to getting any company off the ground. It's key to securing financing, documenting your business model, outlining your financial projections, and turning that nugget of a business idea into a reality.

What is a business plan used for?

The purpose of a business plan is three-fold: It summarizes the organization’s strategy in order to execute it long term, secures financing from investors, and helps forecast future business demands.

Business Plan Template [ Download Now ]

Working on your business plan? Try using our Business Plan Template . Pre-filled with the sections a great business plan needs, the template will give aspiring entrepreneurs a feel for what a business plan is, what should be in it, and how it can be used to establish and grow a business from the ground up.

Purposes of a Business Plan

Chances are, someone drafting a business plan will be doing so for one or more of the following reasons:

1. Securing financing from investors.

Since its contents revolve around how businesses succeed, break even, and turn a profit, a business plan is used as a tool for sourcing capital. This document is an entrepreneur's way of showing potential investors or lenders how their capital will be put to work and how it will help the business thrive.

All banks, investors, and venture capital firms will want to see a business plan before handing over their money, and investors typically expect a 10% ROI or more from the capital they invest in a business.

Therefore, these investors need to know if — and when — they'll be making their money back (and then some). Additionally, they'll want to read about the process and strategy for how the business will reach those financial goals, which is where the context provided by sales, marketing, and operations plans come into play.

2. Documenting a company's strategy and goals.

A business plan should leave no stone unturned.

Business plans can span dozens or even hundreds of pages, affording their drafters the opportunity to explain what a business' goals are and how the business will achieve them.

To show potential investors that they've addressed every question and thought through every possible scenario, entrepreneurs should thoroughly explain their marketing, sales, and operations strategies — from acquiring a physical location for the business to explaining a tactical approach for marketing penetration.

These explanations should ultimately lead to a business' break-even point supported by a sales forecast and financial projections, with the business plan writer being able to speak to the why behind anything outlined in the plan.

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Free Business Plan [Template]

Fill out the form to access your free business plan., 3. legitimizing a business idea..

Everyone's got a great idea for a company — until they put pen to paper and realize that it's not exactly feasible.

A business plan is an aspiring entrepreneur's way to prove that a business idea is actually worth pursuing.

As entrepreneurs document their go-to-market process, capital needs, and expected return on investment, entrepreneurs likely come across a few hiccups that will make them second guess their strategies and metrics — and that's exactly what the business plan is for.

It ensures an entrepreneur's ducks are in a row before bringing their business idea to the world and reassures the readers that whoever wrote the plan is serious about the idea, having put hours into thinking of the business idea, fleshing out growth tactics, and calculating financial projections.

4. Getting an A in your business class.

Speaking from personal experience, there's a chance you're here to get business plan ideas for your Business 101 class project.

If that's the case, might we suggest checking out this post on How to Write a Business Plan — providing a section-by-section guide on creating your plan?

What does a business plan need to include?

• Business Plan Subtitle
• Executive Summary
• Company Description
• The Business Opportunity
• Competitive Analysis
• Target Market
• Marketing Plan
• Financial Summary
• Funding Requirements

1. Business Plan Subtitle

Every great business plan starts with a captivating title and subtitle. You’ll want to make it clear that the document is, in fact, a business plan, but the subtitle can help tell the story of your business in just a short sentence.

2. Executive Summary

Although this is the last part of the business plan that you’ll write, it’s the first section (and maybe the only section) that stakeholders will read. The executive summary of a business plan sets the stage for the rest of the document. It includes your company’s mission or vision statement, value proposition, and long-term goals.

3. Company Description

This brief part of your business plan will detail your business name, years in operation, key offerings, and positioning statement. You might even add core values or a short history of the company. The company description’s role in a business plan is to introduce your business to the reader in a compelling and concise way.

4. The Business Opportunity

The business opportunity should convince investors that your organization meets the needs of the market in a way that no other company can. This section explains the specific problem your business solves within the marketplace and how it solves them. It will include your value proposition as well as some high-level information about your target market.

5. Competitive Analysis

Just about every industry has more than one player in the market. Even if your business owns the majority of the market share in your industry or your business concept is the first of its kind, you still have competition. In the competitive analysis section, you’ll take an objective look at the industry landscape to determine where your business fits. A SWOT analysis is an organized way to format this section.

6. Target Market

Who are the core customers of your business and why? The target market portion of your business plan outlines this in detail. The target market should explain the demographics, psychographics, behavioristics, and geographics of the ideal customer.

7. Marketing Plan

Marketing is expansive, and it’ll be tempting to cover every type of marketing possible, but a brief overview of how you’ll market your unique value proposition to your target audience, followed by a tactical plan will suffice.

Think broadly and narrow down from there: Will you focus on a slow-and-steady play where you make an upfront investment in organic customer acquisition? Or will you generate lots of quick customers using a pay-to-play advertising strategy? This kind of information should guide the marketing plan section of your business plan.

8. Financial Summary

Money doesn’t grow on trees and even the most digital, sustainable businesses have expenses. Outlining a financial summary of where your business is currently and where you’d like it to be in the future will substantiate this section. Consider including any monetary information that will give potential investors a glimpse into the financial health of your business. Assets, liabilities, expenses, debt, investments, revenue, and more are all useful adds here.

So, you’ve outlined some great goals, the business opportunity is valid, and the industry is ready for what you have to offer. Who’s responsible for turning all this high-level talk into results? The "team" section of your business plan answers that question by providing an overview of the roles responsible for each goal. Don’t worry if you don’t have every team member on board yet, knowing what roles to hire for is helpful as you seek funding from investors.

10. Funding Requirements

Remember that one of the goals of a business plan is to secure funding from investors, so you’ll need to include funding requirements you’d like them to fulfill. The amount your business needs, for what reasons, and for how long will meet the requirement for this section.

Types of Business Plans

• Startup Business Plan
• Feasibility Business Plan
• Internal Business Plan
• Strategic Business Plan
• Business Acquisition Plan
• Business Repositioning Plan
• Expansion or Growth Business Plan

There’s no one size fits all business plan as there are several types of businesses in the market today. From startups with just one founder to historic household names that need to stay competitive, every type of business needs a business plan that’s tailored to its needs. Below are a few of the most common types of business plans.

For even more examples, check out these sample business plans to help you write your own .

1. Startup Business Plan

As one of the most common types of business plans, a startup business plan is for new business ideas. This plan lays the foundation for the eventual success of a business.

The biggest challenge with the startup business plan is that it’s written completely from scratch. Startup business plans often reference existing industry data. They also explain unique business strategies and go-to-market plans.

Because startup business plans expand on an original idea, the contents will vary by the top priority goals.

For example, say a startup is looking for funding. If capital is a priority, this business plan might focus more on financial projections than marketing or company culture.

2. Feasibility Business Plan

This type of business plan focuses on a single essential aspect of the business — the product or service. It may be part of a startup business plan or a standalone plan for an existing organization. This comprehensive plan may include:

• A detailed product description
• Market analysis
• Technology needs
• Production needs
• Financial sources
• Production operations

According to CBInsights research, 35% of startups fail because of a lack of market need. Another 10% fail because of mistimed products.

Some businesses will complete a feasibility study to explore ideas and narrow product plans to the best choice. They conduct these studies before completing the feasibility business plan. Then the feasibility plan centers on that one product or service.

3. Internal Business Plan

Internal business plans help leaders communicate company goals, strategy, and performance. This helps the business align and work toward objectives more effectively.

Besides the typical elements in a startup business plan, an internal business plan may also include:

• Department-specific budgets
• Target demographic analysis
• Market size and share of voice analysis
• Action plans
• Sustainability plans

Most external-facing business plans focus on raising capital and support for a business. But an internal business plan helps keep the business mission consistent in the face of change.

4. Strategic Business Plan

Strategic business plans focus on long-term objectives for your business. They usually cover the first three to five years of operations. This is different from the typical startup business plan which focuses on the first one to three years. The audience for this plan is also primarily internal stakeholders.

These types of business plans may include:

• Relevant data and analysis
• Assessments of company resources
• Vision and mission statements

It's important to remember that, while many businesses create a strategic plan before launching, some business owners just jump in. So, this business plan can add value by outlining how your business plans to reach specific goals. This type of planning can also help a business anticipate future challenges.

5. Business Acquisition Plan

Investors use business plans to acquire existing businesses, too — not just new businesses.

A business acquisition plan may include costs, schedules, or management requirements. This data will come from an acquisition strategy.

A business plan for an existing company will explain:

• How an acquisition will change its operating model
• What will stay the same under new ownership
• Why things will change or stay the same
• Acquisition planning documentation
• Timelines for acquisition

Additionally, the business plan should speak to the current state of the business and why it's up for sale.

For example, if someone is purchasing a failing business, the business plan should explain why the business is being purchased. It should also include:

• What the new owner will do to turn the business around
• Historic business metrics
• Sales projections after the acquisition
• Justification for those projections

6. Business Repositioning Plan

When a business wants to avoid acquisition, reposition its brand, or try something new, CEOs or owners will develop a business repositioning plan.

This plan will:

• Acknowledge the current state of the company.
• State a vision for the future of the company.
• Explain why the business needs to reposition itself.
• Outline a process for how the company will adjust.

Companies planning for a business reposition often do so — proactively or retroactively — due to a shift in market trends and customer needs.

For example, shoe brand AllBirds plans to refocus its brand on core customers and shift its go-to-market strategy. These decisions are a reaction to lackluster sales following product changes and other missteps.

7. Expansion or Growth Business Plan

When your business is ready to expand, a growth business plan creates a useful structure for reaching specific targets.

For example, a successful business expanding into another location can use a growth business plan. This is because it may also mean the business needs to focus on a new target market or generate more capital.

This type of plan usually covers the next year or two of growth. It often references current sales, revenue, and successes. It may also include:

• SWOT analysis
• Growth opportunity studies
• Financial goals and plans
• Marketing plans
• Capability planning

These types of business plans will vary by business, but they can help businesses quickly rally around new priorities to drive growth.

Getting Started With Your Business Plan

At the end of the day, a business plan is simply an explanation of a business idea and why it will be successful. The more detail and thought you put into it, the more successful your plan — and the business it outlines — will be.

When writing your business plan, you’ll benefit from extensive research, feedback from your team or board of directors, and a solid template to organize your thoughts. If you need one of these, download HubSpot's Free Business Plan Template below to get started.

Editor's note: This post was originally published in August 2020 and has been updated for comprehensiveness.

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Project scope — definition, best practices, examples, and more

Project management can be challenging. Budget issues, low stakeholder engagement, and poorly defined goals are just a few problems that can impede progress. If you find yourself running into these problems frequently, the real problem may involve project scope .

Scoping a project accurately can be tricky, but with a good understanding of how it works and a list of best practices, it gets much easier. This post will cover the concept of project scope with actionable strategies to help you successfully execute your next project.

What is project scope?

The importance of defining project scope, what is a project scope statement, what is scope creep, how to define project scope, project scope example.

Project scope is a component of project implementation that helps determine goals, constraints, workflow management strategies, tasks, and deliverables. By defining project scope, individual contributors will be able to manage their workloads more easily.

A project scope is never set in stone and you may run into unanticipated issues. But the more clearly a scope statement is designed, the easier it’ll be to pivot and address obstacles.

Defining and documenting project scope is crucial for keeping contributors aligned. Outline important limitations and constraints that may derail timelines, budgets, and deliverables. Defining these parameters of a project helps alleviate unforeseen issues.

It’s important to determine what results you want to measure when defining project scope, like costs or conversion rate. Then discuss the team’s vision and allow project managers (PMs) to create compromise by diagnosing areas of concern or disagreement. This helps you to understand the goals of the project and how each team can contribute.

A clear project scope:

• Provides a roadmap. Any team member can refer back to the project scope at any point during the project for alignment and a clear view of project goals.
• Manages stakeholder expectations. Stakeholders may have different priorities for the project. The project scope sets the parameters, ensuring everyone is aware of the specific intentions and goals.
• Makes budgeting and scheduling easier. Clearly defining deadlines and constraints in the project scope before beginning helps you plan resources.
• Prevents scope creep. Setting the boundaries of your project in the project scope helps alleviate issues that may shift the focus of your project away from the plan.

The project scope statement is a detailed written outline of the project, including timeline, budget, assigned tasks, project stakeholders, and workflow strategies.

With a well defined project plan and project scope statement, it’s easier for project managers to oversee each step in the delivery of a project. The scope statement keeps contributors on task, within budget, and on track to meet deadlines.

Team leaders should also map out a procedure for project changes within the scope statement. If a change is needed, stakeholders should inform the team and follow the guidance in the project scope statement to make sure the impact is minimal.

Scope statements may vary depending on the project’s needs, but it’s important to always include a breakdown of all project tasks, deliverables, constraints, and exclusions.

Scope creep occurs when unforeseen changes in scope alter the project plan without a formal request. It’s common for stakeholders to add or alter project goals after the project has been defined, increasing the likelihood of scope creep. Budget issues, missed deadlines, and increased stress are commonly associated with scope creep.

There are a few simple strategies that can help prevent and manage scope creep.

• Include all stakeholders in project planning.
• Detail possible roadblocks in the project scope statement.
• Communicate potential project setbacks to stakeholders and devise strategies to help avoid them.

There are seven main steps to accurately and confidently define project scope. Project managers will develop some of their own best practices over time — according to what their teams uniquely need — but the broad strategy is a good place for any PM to start.

1. Establish goals and objectives

Determining measurable goals and objectives is an important first step in project planning and defining project scope. If you know where you’re going, it’s much easier to determine how to get there.

Note that goals and objectives are not interchangeable — they describe separate considerations. Goals are high-level achievements that are larger in scale, while objectives are lower-level assets in every phase of the project that help you meet goals.

2. Collect project requirements

Every project has variables like budget limitations, anticipated level of quality, client contribution expectations, and timeline. Knowing the boundaries of the project allows you to set and manage expectations. These project requirements help finalize what to include in the project scope.

3. Identify and allocate resources

In order to oversee a successful project life cycle , it’s important to understand what resources are available. Resources are any asset, from finances to contributors, that are available to help a project through to completion. Accurate planning helps make sure teams have the resources needed and keeps the project on track.

4. Create exclusions and constraints

Identify exclusions that are outside the project scope — tasks and goals that won’t be accomplished during the project life cycle. You should also clarify and define relevant constraints to the project.

Knowing what’s outside of a project’s scope is just as important as knowing what’s within it. Listing each exclusion and constraint will help prevent scope creep because it prevents work from being added outside the capabilities of your team.

5. Define deliverables

Perhaps the most important step in determining project scope is defining deliverables. Outline what needs to be accomplished and when it needs to be done.

Relevant stakeholders should create a work breakdown structure (WBS) , allowing the project to be arranged into smaller, individual tasks. Project managers should include workflow methods and areas of efficiency in the WBS. This will help visualize the scope of the project and what is needed to complete it.

6. Get buy-in from stakeholders

Before work begins, all components of the project should be reviewed and approved by stakeholders. This is an opportunity for revisions to be made to the project scope, goals, and objectives before work begins. Keeping all stakeholders included in the planning phase helps everyone stay aligned on project goals and deliverables.

Getting stakeholder buy-in will also help alleviate scope creep and ensure everyone understands the overall vision of a project.

7. Establish a change control process

No project scope is perfect, and it’s likely changes will need to be made. Creating a change control process allows project managers to submit change requests to stakeholders, who will approve or deny the requests. What’s acceptable and what isn’t should be well defined.

Every project scope statement should follow a consistent outline. Below is a basic outline and an example of what each section might look like.

I. Introduction

The introduction should define the purpose, goal, and stakeholders. An introductory statement might start with, “This marketing project is being undertaken to create an article to post on the blog to create brand awareness.”

II. Requirements and goals (project scope)

The project scope is the main piece of the project scope statement. It should define specific requirements like budget, timeline, or contributing teams. You can also offer a vision of the deliverables.

Include a statement like, “This project will include research, content strategy, content creation, and content publication on the company blog. It will also include sharing the article on social media. All activities will be conducted by the marketing team.”

III. Deliverables

Define the actual item that needs to be completed, whom it’s going to, and any deadlines. This could be a short write-up like, “Project deliverables include one researched, written article of up to 1,000 words to be delivered by email.”

IV. Project acceptance criteria

Use acceptance criteria to set target thresholds for your project requirements. Be sure to state who will be responsible for the final analysis and how the metrics will be measured. In the project outline, you might begin with something like, “The company will review and approve the final article before publishing.”

V. Exclusions

List the components that will not be a part of the project. Identify these in writing, prior to beginning the work. For example, your statement might include, “This project will not include payment to external vendors for research or outsourced services.”

VI. Constraints

Document project constraints like budget limits or timeframes. To clearly state the potential sources of scope creep, your statement could say something like, “Constraints may include communication delays, changes in scope, or technical difficulties. The budget for this project is $21,000 and it must be completed by the end of Q3.”

VII. Change control process

Clearly define the steps required to alter the project scope, and who should be involved in any changes. The change control process in your project scope statement may read, “Any modifications to the project should be submitted to the project manager, who will assess the request and approve or deny it. Necessary stakeholders should also be included in the initial request.”

Project scope management

Once your project scope is defined, project scope management is the ongoing process of tracking and monitoring each phase of the project.

To properly manage project scope, be on the lookout for potential changes. If needed, refer to the change control process within the project scope statement. If revision is required, determine the impact to the project and include stakeholders in the decision. Most importantly, try to minimize any impact on budget and timeline.

https://main--bacom-blog--adobecom.hlx.page/blog/fragments/project-management

Getting started with project scope

Clearly stating goals, tasks, deliverables, and more creates a project scope that keeps projects efficient and on track. The project scope statement helps you manage expectations and ensure teams know what’s expected of them.

To start defining your project’s scope, determine your goals and how you’ll measure them. It’s also important to ensure you’ve allocated the necessary resources and that you understand any exclusions and constraints.

A world-class workflow software is key to successfully managing project scope, and Adobe Workfront will help you manage everything from deliverables, to stakeholders, to target metrics. Take a product tour today to learn how Workfront can help you make your next project a success.

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What is a scope management plan with examples & tips on creating one.

What is a scope management plan?

Why is a scope management plan important, what are the key elements of a scope management plan, how do i create a scope management plan.

• Example of a scope management plan.

How can Workamajig help you with your scope management plan?

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Once a project has started, there are many factors that can cause a change in the project scope . Armed with a scope management plan, scope changes can be absorbed into a project seamlessly without causing damage. Without one, however, scope creep is likely to derail your project faster than you can say “I thought we could manage without one!”

In this blog, we’re going to discuss what exactly a scope management plan is, how to create one, and give some examples.

Let’s begin! 

Well, how about we start with what it’s not ? A scope management plan is not a physical document, but rather a series of implementations that help manage project scope. It’s a plan for how the project scope will be documented, rolled out, and approved by stakeholders .

But wait, what exactly is project scope?

Project scope is the agreed-upon deliverables for a project. Going beyond what was originally intended for the project means going beyond the project scope.

Scope creep is the term used for the unfortunate reality of projects going beyond the scope.

A project scope management plan ensures that everything required of the project gets done in the right way by defining how, what, and by when tasks should be done. 

Having a concrete scope management plan also helps you avoid project enemies, such as scope creep, budget overrun , an accumulation of non-billable hours, and missed deadlines. When you have a plan to refer to, you’re much more likely to notice if things start to veer off course and catch it before it’s too late.

Having said that, some sort of scope change is almost inevitable in any project. The way to handle scope change so as not to let it derail your project  is by having a change request process. Types of change request processes vary from project to project, but it generally involves having a plan for when change is requested, such as a document for the change request to be detailed on, with a place for stakeholder signatures. This document also makes it clear that if the change request is approved, there may be a condition, such as an increased budget, or a pushed-off deadline.

Having a change request process should be part of how you plan scope management.

• Define who the project stakeholders are and what they want out of the project
• Detail the project requirements in a SOW ( Scope of Work )
• Further, break down project tasks with a WBS ( Work Breakdown Structure) .
• Decide and document how the WBS will be controlled and kept up to par.
• Determine how deliverables will be handed to stakeholders.
• Prepare a change control process to effectively handle change requests .

Now, let’s get more nitty gritty and define what exactly is involved in all of the aforementioned steps.

What is the first step in developing the project scope management plan?

1. Define project stakeholders & expectations

Once you know which stakeholders you’re dealing with, it’s time to gain clarity on what they would like you to do. A good way to do this is by holding a meeting for the purpose of laying out project requirements and making sure everyone is on the same page. It’s highly recommended to show stakeholders visuals of what you see as being the end deliverables , as visuals are a great way to ensure that there are no misunderstandings. 

2. Detail the project requirements in a SOW (Scope of Work)

Now that you know what exactly your stakeholders want to be done, you can send them a SoW (Statement of Work) and ask for a signature. This will give you the security that you’re on the same page and you have correctly understood what is wanted out of the project.

3. Further break down project tasks with a WBS (Work Breakdown Structure)

With a WBS, you can visually show team members the breakdown of tasks expected of them. You can also use a WBS  to track progress throughout the project by checking development against the WBS.

4. Document how the WBS will be implemented

It’s important to put someone in charge of ensuring that whatever is on the WBS is carried out in real life. Without this in place, there isn’t much point in spending time creating a WBS.

5. Determine how deliverables will be handed to stakeholders

Imagine you had a deliverable all ready to be sent off, but instead of being sent off to the right people, it remains with your project team…until the annoyed phone call comes, asking why the deliverable is late. There needs to be a procedure in place for who is going to hand over the deliverable and to whom.

6. Prepare a change control process to effectively handle change requests

As mentioned above, a change control process is an important part of a scope management plan. When a change request is made, you can handle it cooly and calmly by getting the stakeholder requesting the change to fill out the change request form. You can then discuss what actions will be necessary for your team to handle the scope change, such as an increased budget or timeline, or additional personnel. And don’t forget, if the change request is not something feasible, you have the right to say no!

What is a scope management plan example?

Let’s put things into context with a real-life example:

A creative agency has taken on a website project. Their client has asked them to build a website for their company that sells gourmet chocolate arrangements.

How will they create their scope management plan?

Let’s go through the steps that this company would go through to create its scope management plan, as listed above.

•  Write a list of stakeholders-Mr Willy Wonker, Charlie Bucket's grandparents, and Veruca Salt’s parents. Document what they would like out of the project-a flashy, five-page website with a brown color scheme.
• Write an SOW document with all the project requirements and terms, and get it signed by stakeholders.
• Create a WBS to make things simpler for the project team. E.g. Jack to gather company details, Sally to build a website wireframe, Taylor to design the perfect golden chocolate bar to use as the company icon on the website, and Jason to write hilarious, lip-smacking copy to match the company's tone of voice.
• Put PM, Venessa, in charge of ensuring that the WBS is carried out.
• Set a date for sending Willy Wonker the finished website and put Tim in charge of sending it.
• Decide on a change control process in case Veruca Salt begs her parents to make real chocolate bars pop off the website, or Charlie Bucket really can’t wait and his grandparents ask for the website to be ready tomorrow.

In this sample scope management plan, you can see what a good head start the scope management plan will give the project. Without it, the company would be unsure about who’s meant to be doing what, vague of project requirements, and unprepared for scope change requests.

So you have your scope management plan, and you’re all raring to go that’s great! But just before you jump in, how are you going to make sure that all your careful planning gets put into practice? And how will you know whether resources are being put to use according to your plan, or whether you are safely within your budget and project timeline ?

As our Workamajig users will attest: Workamajig gives you the confidence to dive head first into a project, knowing that your scope management plan is not just a plan, but will be put into practice through Workamajig’s all-in-one project management software . How? In all sorts of ingenious ways, like:

• Giving you real-time updates on project status, including how much time is being spent on what.

• Showing you exactly where your finances are holding and if you’re within budget.

• Showing you exactly how close your project is to completion, and what still needs to be done.

Sit back, relax, and enjoy your project-put Workamajig is in charge behind the scenes

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Value and Scope of Business Plan: All You Need to Know

Introduction

In the realm of entrepreneurship and business management, a business plan is a foundational tool that plays a pivotal role in the launch and growth of enterprises. Whether one is venturing into a new business or seeking to expand an existing one, the formulation of a business plan provides clarity, direction, and a roadmap for success.

A well-structured plan encompasses various elements, from an executive summary to detailed market analyses and financial projections, ensuring every facet of the business is addressed and strategized.

What is a Business Plan?

A business plan is a comprehensive document that outlines the objectives, strategies, and operations of a business. It serves as a blueprint, detailing every aspect of a new business or the growth strategy of an existing one.

This plan encompasses various sections, including an executive summary, which offers a snapshot of the business; a detailed description of the product or service, highlighting its value proposition; and a marketing plan that outlines how the business intends to reach and engage its target audience.

By providing a structured overview, the business plan becomes an invaluable guide for entrepreneurs and stakeholders.

Definition of a Business Plan

By definition, a business plan is a formal written document that articulates a company’s direction, objectives, and strategies for achieving those objectives. It’s a roadmap that outlines the business’s operational and financial details, its unique selling points, and its market position.

The plan typically begins with an executive summary, providing a quick overview of the business’s essence and its primary goals. Subsequent sections delve into the specifics of products or services, target market analysis, operational strategies, and financial projections.

Essentially, it encapsulates the vision and action plan for the business.

Importance of Having a Business Plan

Having a business plan is crucial for multiple reasons. Firstly, it provides a clear outline of the company’s goals and the strategies to achieve them, ensuring alignment and direction. For new businesses, it helps in assessing viability, foreseeing challenges, and devising solutions.

Moreover, a well-crafted business plan is often a prerequisite for securing investments, as it demonstrates to potential investors the business’s potential and profitability. It also serves as a benchmark, allowing businesses to track progress, make informed decisions, and adapt to changing market conditions.

In essence, a business plan is not just a document; it’s a strategic tool for success.

Why Write a Business Plan?

for startups entering a competitive market. At its core, a business plan serves as a roadmap, delineating the path the business intends to take to achieve its objectives. It offers clarity, helping entrepreneurs understand their business better, from its products and services to its market positioning.

Furthermore, a business plan is instrumental in conducting feasibility studies, helping determine whether the business idea is viable and how it will fare against competitors. Through market research and SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis, the plan provides insights into the external environment and internal capabilities, ensuring that the business is prepared for both challenges and opportunities.

Benefits of Writing a Business Plan

The benefits of crafting a comprehensive business plan are manifold. For startups, it offers a clear structure, guiding them through the initial stages and ensuring that crucial aspects like market research and product feasibility are addressed.

A well-formulated plan can also be pivotal in securing investments, as it presents potential investors with a clear picture of the business’s potential, backed by data and projections. The balance sheet, cash flow, and other financial components provide transparency, showcasing the business’s financial health and growth potential.

Moreover, the process of writing the plan itself fosters introspection, helping entrepreneurs refine their strategies, anticipate challenges, and position themselves effectively in the market.

Steps to Write a Business Plan

Creating a business plan involves a systematic approach. The initial step is to define the business’s mission and vision, setting the tone for the entire plan. Next, conduct thorough market research, understanding the target audience, their preferences, and the competitive landscape.

This is followed by a SWOT analysis, which identifies the business’s strengths, weaknesses, opportunities, and threats. The product and services section details what the business offers, its unique selling points, and its relevance to the market. Financial projections, including income statements, balance sheets, and cash flow analyses, give a holistic view of the business’s economic prospects.

The marketing and sales strategy outlines how the business intends to reach and engage its customers. Finally, an executive summary at the beginning encapsulates the key points, providing a snapshot for potential investors or stakeholders. Each step requires meticulous research and planning, ensuring that the final plan is both actionable and aligned with the business’s goals.

Photo by airfocus on Unsplash

Elements of a Business Plan

Executive summary.

The executive summary is often the first section in a business plan and sets the stage for what’s to follow. It provides a concise overview of the entire plan, capturing the essence of the business and its goals. For anyone looking to write a business plan, the executive summary is crucial as it gives potential investors or stakeholders a snapshot of the business’s scope and value.

While it’s positioned at the beginning, many business owners choose to write this section last, ensuring it encapsulates all the key points from the detailed sections. A well-crafted executive summary can pique interest, prompting readers to delve deeper into the strategic plan outlined in subsequent sections.

Company Description

This section provides a detailed look into the company, its origins, mission, and objectives. When you start a business, this section will outline the problem your business aims to solve, the target market, and the unique value proposition that differentiates it from competitors.

As part of the process to create a business plan, the company description offers insights into the company’s core, helping stakeholders understand its purpose, structure, and positioning in the market.

Market Analysis

An effective business plan is rooted in thorough market analysis. This section delves deep into the industry landscape, identifying key trends, market size, and growth potential. It’s where business owners detail their understanding of the target audience, their preferences, behaviors, and pain points.

Additionally, a competitive analysis within this section sheds light on competitors, their strengths, and weaknesses, offering insights into potential opportunities and threats. For anyone looking to write a business plan, this section demonstrates due diligence, showcasing the depth of research and understanding of the market dynamics.

Organization and Management

Understanding how a business operates and is structured is pivotal for potential investors or partners. This section of the business plan offers a clear view of the company’s organizational structure, detailing the roles and responsibilities of key team members.

It provides insights into the leadership and management team, their experience, and their contributions to the business’s success. By detailing the expertise and capabilities of the team, this section reassures stakeholders of the company’s ability to execute the strategic plan effectively and achieve its goals.

Product or Service Line

One of the fundamental elements of a business plan is the product or service line section. This segment delves into the details of what the business offers to its customers. Whether you’re introducing a tangible product or a unique service, you’ll need to include specifics such as the product lifecycle, benefits, production costs, and any associated intellectual property rights.

This section justifies the business idea’s viability and value, showing how it addresses a particular market need or problem. For businesses with multiple offerings, each product or service should be detailed, emphasizing its significance to the company’s overall mission statement and operational strategy.

Marketing and Sales

After defining the product or service, the next step in a comprehensive business plan is the marketing and sales strategy. This segment, built upon the foundation of the market analysis, outlines how the business plans to attract, retain, and grow its customer base.

The best business plan will detail the entire customer journey, from awareness to purchase, including strategies for advertising, promotion, and sales. This plan allows stakeholders to understand how the business will achieve its revenue targets and gain a competitive advantage in the market.

Funding Request

For businesses seeking external financing, the funding request is a pivotal section. Here, you’ll need to create a clear and compelling case for the amount of funding required, its intended use, and the return on investment for potential financiers.

Whether it’s for starting a new venture, expanding current business operations, or entering a new market, this section should align with the financial plan and projections, offering a holistic view of the company’s financial health and growth potential.

Financial Projections

A crucial aspect of any business plan, financial projections provide stakeholders with a glimpse into the company’s expected financial performance. Drawing from the operations plan and market analysis, this section will typically include projections for income statements, balance sheets, cash flow statements, and break-even analyses.

For a business plan writer, ensuring these projections are both optimistic and realistic is crucial. They demonstrate the viability of the business idea and provide benchmarks for future performance evaluations.

The appendix is where business plan writers include additional information that supports the main content but might be too detailed for the primary sections. This could range from resumes of key team members, detailed market research data, product specifications, or legal documents.

Essentially, the appendix complements the core aspects of the business plan, providing depth where necessary, ensuring stakeholders have a comprehensive understanding of the business without overwhelming them in the main sections.

Types of Business Plans

Startup business plan.

A start-up plan is specifically tailored for new businesses, laying the groundwork for their initial operations and market entry. This plan typically includes a detailed business description, outlining the company’s mission, vision, and objectives. It delves into the products or services being offered, emphasizing their unique selling points.

Financial projections, vital for attracting potential investors, provide a forecast of revenue, expenses, and profitability. A comprehensive market analysis identifies the target audience, competition, and potential market share. Without a business plan, many startups would struggle to navigate the challenges of the initial phases.

The start-up plan serves as a roadmap, guiding the business at the best possible path towards growth and success.

Growth Business Plan

As businesses evolve, so do their goals and challenges. A growth business plan focuses on expansion, whether it’s branching into new markets, introducing new products, or scaling operations. This plan leverages past performance data, utilizing financial statements to make informed projections.

Effective business planning during the life of a company ensures that the business is prepared to seize new opportunities while mitigating potential risks. The growth plan provides a framework, helping businesses transition from one business phase to the next seamlessly.

Strategic Business Plan

The strategic business plan is a high-level document that sets out the company’s long-term goals and the strategies to achieve them. It often incorporates a SWOT analysis, identifying strengths, weaknesses, opportunities, and threats.

This plan gives a holistic view of the company’s direction, ensuring alignment across different departments and teams. An effective strategic plan should help in decision-making, resource allocation, and setting performance benchmarks.

It’s a tool that ensures the company remains focused on its core objectives, driving growth, and maintaining a competitive edge.

Internal Business Plan

While many business plans are designed for external stakeholders, an internal business plan focuses on the company’s internal goals and strategies. This plan might not delve into details of a business description or marketing tactics but instead emphasizes operations, team management, and process optimization.

It might include financial details, but these would be more geared towards budgeting and resource allocation than attracting investors. This plan is a tool for effective business planning and alignment within the company, ensuring every department and individual understands their role and contribution.

Feasibility Study

Before diving into full-fledged business operations, it’s often wise to conduct a feasibility study. This type of business plan determines the viability of a business idea or concept. It examines various aspects, from market demand, competition, and operational challenges to potential returns on investment.

A feasibility plan is crucial for startups and companies looking to diversify or branch into new markets. It helps entrepreneurs and decision-makers evaluate whether an idea is worth pursuing, ensuring time and resources are invested in the best business opportunities.

The Scope and Value of a Business Plan

A business plan is a document describing the nature, objectives, strategies, and operational mechanisms of a business. It is a vital tool, providing both a high-level overview of your business and detailed insights into its various facets. Whether you’re an entrepreneur starting a new venture or an established business looking to expand, the scope and value of a business plan cannot be understated.

The plan is one that delves into every aspect of business activities, from market analysis and financial projections to marketing strategies and organizational structure. It adapts to changing business environments, ensuring that the company remains agile and focused on its core objectives.

Provides Direction and Focus

At the heart of every business plan is its ability to provide direction and focus. By outlining the key points and strategies, the plan ensures that all business activities align with the company’s objectives.

Whether it’s launching a new product or entering a new market, the plan offers a structured approach, guiding the business towards its goals. It helps the business prioritize tasks, allocate resources efficiently, and maintain a clear vision amidst the complexities of daily operations.

Attracts Investors and Funding

For many startups and businesses looking to scale, attracting investors and securing funding is paramount. A viable business plan is one of the most crucial tools in this endeavor. It not only presents a clear picture of the company’s financial health and growth potential but also convinces potential investors, from venture capitalists to banks, of the business’s viability.

The plan is a document that showcases the company’s value proposition, market positioning, and strategies to maximize profits, making it an indispensable tool in fundraising efforts.

Identifies Potential Obstacles and Solutions

No business venture is without challenges. However, a well-thought-out business plan can help identify potential obstacles before they become critical issues. By conducting thorough market research, SWOT analysis, and risk assessment, the plan outlines potential pitfalls and offers solutions.

This proactive approach minimizes the risk of business failure, ensuring that the company is prepared to navigate challenges and seize opportunities.

Helps in Making Informed Decisions

In the dynamic world of business, making informed decisions is key to success. A business plan is also an analytical tool, providing insights into market dynamics, customer preferences, and competitive landscapes. Whether it’s choosing a marketing strategy, setting pricing models, or determining the best distribution channels, the insights from the plan guide decision-making, ensuring that every business choice is data-driven and aligned with the company’s goals.

Serves as a Roadmap for Success

Ultimately, a business plan serves as a roadmap, guiding the business from its inception to its growth phases. For every business, from startups to established enterprises, having a plan is critical. It not only outlines the company’s vision and objectives but also provides a step-by-step guide on how to achieve them.

With clear milestones, performance benchmarks, and actionable strategies, the plan ensures that the business stays on track, maximizing its potential and achieving long-term success.

How to Create the Best Business Plan

Research and preparation.

Before embarking on the journey of crafting a business plan, thorough research and preparation are paramount. Understand your business inside out, from its value proposition to the market dynamics it operates within. A well-thought-out business plan stems from a deep understanding of the industry, competitors, customer preferences, and emerging trends.

The plan should outline the company’s objectives and the strategies to achieve them, all rooted in factual data and insights. Whether you’re creating a formal business plan to obtain financing or a high-level overview for internal purposes, preparation ensures that the foundation of your plan is solid and reflective of the entire business landscape.

Structure and Format

The kind of plan you’re drafting determines its structure. However, a typical business plan offers a clear format, starting with an executive summary, followed by sections detailing the company description, market analysis, organization and management, products or services, marketing and sales strategies, and financial projections.

Ensuring a consistent format with clear headings and sub-sections makes the plan easy to navigate, providing stakeholders with a comprehensive yet organized view of the entire business.

Write Concisely and Clearly

When writing your plan, clarity and conciseness are key. Avoid jargon or overly complex language. Your plan should be accessible to a range of readers, from potential investors unfamiliar with your industry to team members involved in day-to-day operations.

Each section of your plan should clearly differentiate your business, emphasize its strengths, and provide actionable strategies. Remember, the primary goal is to communicate your vision, so clarity ensures readers fully understand your business’s value and potential.

Use Realistic Financial Projections

While optimism is essential in business, it’s crucial to ground your financial projections in reality. This part of the plan provides insights into the company’s expected revenue, costs, profitability, and growth trajectory. By basing these projections on past performance, market research, and realistic assumptions, you showcase a viable and sustainable business model. Whether you aim to attract investors or plan day-to-day operations, realistic financials underscore the credibility and potential of the business.

Seek Feedback and Revise

No business plan is perfect in its first draft. Once you’ve written your plan, it’s a good idea to seek feedback from mentors, industry experts, or potential stakeholders. Their insights can offer a fresh perspective, identifying gaps or areas of improvement.

Additionally, as your company makes progress or the business environment changes, it’s essential to revisit and revise your plan, ensuring it remains relevant and aligned with your evolving goals and challenges. This iterative process ensures your business plan remains a dynamic and invaluable tool for your enterprise’s growth and success.

In the dynamic world of business, a robust and well-structured business plan serves as an invaluable compass, guiding enterprises through the complexities of market dynamics, financial challenges, and operational intricacies. From startups taking their first steps to established entities navigating growth phases, the importance of a comprehensive plan cannot be overstated.

It offers clarity, direction, and a roadmap, ensuring that every decision aligns with the company’s core objectives. Moreover, a business plan isn’t a one-time document but a living guide that evolves with the business, reflecting changing environments and emerging opportunities.

Through meticulous research, clear writing, realistic projections, and continuous revisions, businesses can craft a plan that not only attracts investors but also steers the company towards long-term success. In essence, in the intricate dance of business strategy and operations, a well-crafted business plan is the choreographer, orchestrating every move towards excellence and growth.

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How to Write a Scope of Work (Examples & Templates Included)

What Is a Scope of Work?

A scope of work document is an agreement on the work you’re going to perform on the project. The scope of work in project management  includes deliverables, a timeline, milestones and reports. Let’s look closer at each of these elements below.

What Should Be Included in a Scope of Work Document?

Here’s an overview of the main components of a scope of work. You can add or remove some of these elements to better adjust to your project stakeholders’ requirements.

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Scope Of Work Template

Use this free Scope Of Work Template for Word to manage your projects better.

Project Deliverables

This is what your project delivers. Whether it’s a product or a service, it’s the reason you’re executing the project for your customer, stakeholder or sponsor. Whatever that deliverable is, and it can be some sort of document or report, software, product, build (or all of the above), you need to clearly identify each item here. Creating a work breakdown structure can help with this step. Also, make sure there’s an acceptance criterion for the project deliverables, such as quality standards or functional requirements.

Project Timeline

Think of a timeline as a road leading from the start of a project to its end. It’s a section of the document that delineates the major phases across the schedule of the project’s duration. It should also mark the points in the project when your deliverables are ready. As you can guess, it’s essential to scope out the overall plan of any project. This is best presented visually, like a rolled-up Gantt chart plan, so the stakeholders can see the high-level timeline.

Project Milestones

Projects can be long and complex, which is why they’re laid out over a timeline and broken down into more manageable parts called tasks. Larger phases of the project are marked by what’s called a milestone . It’s a way to help you monitor the progress of the project to ensure it’s adhering to your planned schedule. Define your key milestones on a timeline in the scope of work document, including project kickoffs, meetings, hand-offs, etc.

Project Reports

You’ll be generating reports throughout the project, delivered to either your team or customer, stakeholder or sponsor. These can include status reports , progress reports, variance reports and more. They’re a formal record of the progress of your project, but they’re also a means of communication beyond whether the project’s on schedule or not.

Depending on how you customize reports , there’s a wealth of data that can serve a number of different audiences. Define how you’ll be reporting on the project and when the stakeholders can be expecting them and from whom.

How to Write a Scope of Work

Now that we’ve listed the elements of a scope of work document, let’s go through the step-by-step process of writing one. These steps can help you create a scope of work for different industries such as construction or manufacturing.

• Define the project goals: Before writing a scope of work, you should define what project goals will be accomplished through the execution of the project tasks that’ll be included in your scope of work.
• Use a work breakdown structure to identify project tasks: The first step when writing a scope of work is to identify all your project tasks. This is done by using a work breakdown structure (WBS), a project management tool that lets you break down projects and work packages into individual tasks, so you can better plan and schedule them.
• Determine your project deliverables: A project deliverable is a tangible or intangible output from tasks. They’re an important part of a scope of work as they’re the outcomes of the project.
• Establish acceptance criteria for your project deliverables: Project deliverables must meet the acceptance criteria established by the project client, such as quality standards or functionality requirements.
• Use the CPM method to create a project timeline: The critical path method is a project scheduling technique that allows project managers to create a project timeline and estimate project duration by identifying the longest sequence of tasks. It’s important that you use this or other project scheduling techniques to create a realistic schedule for your scope of work.
• Establish payment terms for the project: You may include payment terms as a section of your scope of work.
• Establish project reporting procedures: Communication between the project team and project stakeholders is very important, so your scope of work document should include a section that explains how reporting will take place.

Scope of Work Template

Now that you know how to write a scope of work, as well as what’s included in this all important document, download our free scope of work template for Word . It has everything you need to make a scope of work document for your own project, so your stakeholders know exactly what to expect in terms of schedule, deliverables and effort.

Scope of Work Example

To understand the purpose and importance of a scope of work in project management, let’s start with a simple scope of work example, planning a wedding. A wedding is a project, and depending on the bridezilla (or groomzilla), it could be bigger and more complicated than building a highway or an airport.

Let’s take one aspect of that larger project, the wedding invitations, and break this down into a scope of work. We’ll outline the deliverables, timeline, milestones and reports in this scope of work example.

Deliverables

• Invite list
• Addresses of attendees
• Addressed envelopes
• Jan. 1: Decide on the invite list
• Feb. 1: Have addresses collected of attendees
• March 1: Pick invitation style and have printed
• April 1: Address and mail invites
• May 1: Get the final count of guests
• June 1: Wedding
• Selection of guests and collection of addresses
• Mailing of invitations
• The final count of attendees
• Check on the status of address collection
• Stay in touch with the printer for progress on invitations
• Check RSVPs against the invitation list

With ProjectManager , you can build a project timeline in seconds with our online Gantt chart maker. Map your scope of work, create a budget, assign tasks, add dependencies and more. Then present to your team and stakeholders to get the project moving on the right foot. Try it free today.

Construction Scope of Work Example

Now, let’s create a scope of work for a small construction project , building a house. This project involves many steps, but for practical purposes, this construction scope of work example will only focus on some of the main deliverables, timelines, milestones and reports.

Project deliverables: These project deliverables are individual, tangible outputs from different construction activities.

• Land clearing
• Ground leveling
• Sewer Lines
• Wood Framing
• Sheathing Installation
• HVAC system installation
• Electrical panels and wiring installation
• Roof installation
• Insulation installation
• Drywall installation
• Interior painting, appliances, cabinets and other final details

Project Timeline: The scope of work timeline depends on the complexity of the construction design and the agreement that the project owner reaches with the general contractor, who will hire subcontractors to accomplish different types of construction work.

Project Milestones: The scope of work milestones marks important achievements during the project as tasks are executed . Instead of referring to individual project deliverables, they describe project phases that have been completed successfully. As a project manager, you might choose the milestones that are significant for your project.

• The building envelope has been completed
• Foundation, framing, plumbing and electrical inspections have been passed
• Exterior work has been completed
• Interior work has been completed
• Project has been delivered successfully

Project Reports: The reports that you use to track the scope of work might vary, but these are essential construction project reports.

• Project status reports
• Daily construction logs
• Construction punch list

Why Is It Important to Write a Scope of Work?

Here are some of the reasons why writing a scope of work is beneficial for projects.

Defines the Project Scope

The main purpose of a scope of work is to define the scope of a project . This means defining the work that’ll be done as well as project exclusions, activities or deliverables which aren’t part of a project.

Prevents Scope Creep

Scope creep is a risk that can affect any project. It occurs when additional project tasks are added to the initial project scope during the execution of a project. These unplanned additions of work cause extra costs and derail the project schedule. Scope creep can be avoided by having a clear scope of work that establishes what will and what won’t be executed. However, changes might be made to the project scope by using a change request, another important project management document.

Sets Clear Expectations for Project Stakeholders

Without a scope of work document, project stakeholders might have unrealistic expectations about a project , such as assuming certain tasks and deliverables will be done. Therefore, it’s important for project managers and project teams to make sure there’s a scope of work that lets stakeholders know what to expect.

Scope of Work Tips

But before you get to writing, you need to make sure you follow these tips.

• Be specific : explain the terms used clearly
• Use visuals : a picture is worth a thousand words
• Get sign-offs : make sure everyone who needs to okay the work, does

It’s not that difficult, but it needs to be thorough because you don’t want to have to play catch-up with paperwork when you’re in the heat of the project.

Pro tip: The SOW is essential to the project plan and is often included as part of the overall project plan, but it can be time-consuming to write. We’ve created dozens of project management templates to help you create all your project documents. 

How to Manage Your Scope of Work With Project Management Software

It can feel overwhelming with so many tasks to keep track of, but project management software can simplify the process. In ProjectManager , you can import your spreadsheet or use one of our industry-specific templates to get you started.

A list of tasks is only a start. To bring order to that chaos, you’ll want to estimate duration by adding start and finish dates. We then automatically put your tasks on a timeline in our Gantt chart project view , so you can see the whole project in one place. Further reign in the tasks by prioritizing them, linking dependencies to prevent bottlenecks later in the project and setting milestones to break up the larger project into more manageable phases.

Collaborate at the Task Level

Tasks need people to execute them and move your project forward. You have your schedule, so onboard your team and start assigning them tasks. You can do this from any of our multiple project views. We offer collaborative tools that make teams more productive and help them work together. You can direct them with task descriptions and by attaching files to the task. Then, they can work together, commenting at the task level with other team members, who are notified by email. This is great for remote teams and even those working in the same room.

Track Progress to Stay On Time and Under Budget

Speaking of distributed teams, how can you keep track of their progress if you can’t check in on them? We solve that problem with great monitoring features, such as a real-time dashboard that shows you task progress, costs and other high-level views of the project. Our software takes status updates and automatically displays them in easy-to-read charts and graphs. You can even share them at stakeholder meetings to keep them in the loop.

For more in-depth data, we feature one-click reports that can be filtered to show just the data you’re looking for. Reports track project variance, workload and more. You’ll catch issues and resolve them quickly before they become problems that threaten to derail your project.

If you want that scope of work to be the beginning of a beautiful project, then try ProjectManager for free with our 30-day trial offer.

Video: Scope of Work Best Practices

In this video, Jennifer Bridges, PMP, shows you how to write a scope of work for project management . Follow her steps to get started or use our project plan and scope document template!

Here’s a shot of the whiteboard for your reference!

If you need a tool that can help you manage and track your scope of work document, then sign up for our software now at ProjectManager .

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Read BBA, BMS, B.Com Syllabus wise Notes

Scope and value of Business plan

Scope of business plan.

The setting of objectives is a decision-making process that reflects the aims of the entire organization. Generally, it begins at the top with a clear statement of the organization’s purpose. If well communicated and clearly defined down through the hierarchy, this statement becomes the basis for short-range objectives in the annual budget.

Management articulates the overall goals to and throughout the organization in order to coordinate all business activities efficiently and effectively. It does this by:

• Formulating and distributing a clear, concise statement of the central purpose of the business
• Leading in the formulating of long-range organizational goals
• Coordinating the activities of each department and division in developing derivative objectives
• Ensuring that each subdivision participates in the budget process
• Directing the establishment of short-term objectives through constructing the annual budget
• Evaluating actual results on the basis of the plans

The organization must know why it exists and how its current business can be profitable in the future. Successful businesses define themselves according to customer needs and satisfaction with products and services.

Management identifies the customers, their buying preferences, product sophistication, geographical locations, and market level. Analyzing this data in relation to the expected business environment, management determines the future market potential, the economic variables affecting this market, potential changes in buying habits, and unmet needs existing now and those to groom in the future.

In order to synchronize interdepartmental planning with overall plans, management reviews each department’s objectives to ensure that they are subordinate to the objectives of the next higher level.

Management quantifies objectives by establishing goals that are: specific and concrete, measurable, time-specific, realistic and attainable, open to modification, and flexible in their adaptation.

Because goals are objective-oriented, management generally lists them together. For example:

• Profit objectives state performance in terms of profits, earnings, return on investments, etc. A goal might call for an annual increase in profits of 15 percent for each of the next five years.
• Human resources. This broad topic includes training, deployment, benefits, work issues, and qualifications. In an architectural consulting firm, management might have a goal of in-house CAD training for a specified number of hours in order to reach a certain level of competence.
• Customer service. Management can look at improvements in customer service by stating the number of hours or the percentage of complaints it seeks to reduce. The cost or cost savings are stated in dollar terms. If the business sells service contracts for its products, sales goals can be calculated in percentage and dollar increases by type and level of contract.
• Social responsibility. Management may desire to increase volunteerism or contributions to community efforts. It would calculate the number of hours or dollars within a given time frame.

Evaluating proposed plans

Management undertakes a complete review and evaluation of the proposed strategies to determine their feasibility and desirability. Some evaluations call for the application of good judgment—the use of common sense. Others use sophisticated and complex mathematical models.

Prior to directing the development of a profit budget for the upcoming annual period, management resolves issues related to the internal workings of the organization from a behavioral point of view. For example:

• Ensuring managerial sophistication in the application of the plans
• Developing a realistic profit plan, and assigning adequate responsibility and control
• Establishing appropriate standards and objectives
• Communicating the attitudes, policies, and guidelines to operational and administrative personnel
• Attaining managerial flexibility in the execution of the plans
• Evaluating and updating the system to harmonize with the changing operational and business environments

Stating actions and resources required

With the objectives and forecasts in place, management decides what actions and resources are necessary in order to bring the forecast in line with the objectives. The basic steps management plans to take in order to reach an objective are its strategies.

Strategies exist at different levels in an organization and are classified according to the level at which they allocate resources. The overall strategy, often referred to as the grand strategy, outlines how to pursue objectives in light of the expected business environment and the business’s own capabilities. From the overall strategy, managers develop a number of more specific strategies.

• Corporate strategies address what business(es) an organization will conduct and how it will allocate its aggregate resources, such as finances, personnel, and capital assets. These are long-term in nature.
• Growth strategies describe how management plans to expand sales, product line, employees, capacity, and so forth. Especially necessary for dynamic markets where product life cycles are short, growth strategies can be (a) in the expansion of the current business line, (b) in vertical integration of suppliers and end-users, and (c) in diversifying into a different line of business.
• Stability strategies reflect a management satisfied with the present course of action and determined to maintain the status quo. Successful in environments changing very slowly, this strategy does not preclude working toward operational efficiencies and productivity increases.
• Defensive strategies, or retrenchment, are necessary to reduce overall exposure and activity. Defensive strategies are used: to reverse negative trends in profitability by decreasing costs and turning around the business operations; to divest part or all of a business to raise cash; and to liquidate an entire company for an acceptable profit.
• Business strategies focus on sales and production schemes designed to enhance competition and increase profits.
• Functional strategies deal with finance, marketing, personnel, organization, etc. These are expressed in the annual budget and address day-to-day operations.

Value of Business plan

A business plan is critical to the success of any business. And, if the plan is frequently reviewed and updated, it becomes increasingly valuable over time. It provides valuable historical information to help a business owner make decisions on the future direction of the company. Effective business planning will enable the owner to both maximize profits and maximize the value of the company.  If the exit strategy of the owner is to sell the business, effective business planning during the life of the business will contribute to successfully selling the business at the best possible price.

What Information is Included in a Business Plan?

The information included in a business plan is also of great interest to a prospective buyer who is evaluating the business as a possible acquisition. Some of the major business areas that should be included in a business plan that would also be of interest to a buyer include the following:

–        Mission Statement and Company Philosophy

–        Company History

–        Short term and long term revenue and profit goals

–        Organizational structure

• Current Organization
• Organizational growth plan
• Employee development

–         Marketing

• Target market
• Major accounts and/or markets
• Sales and marketing strategies
• Competition

–        Operations

• Current processes
• Planned and proposed changes to operations

–         Product and\or service lines

–        Documented history of key successes and failures during the life of the business

Complete and accurate books and records are essential for the successful sale of any business. Typically, a buyer’s first exposure to the confidential details of a business comes in the form of a comprehensive document covering the financial and operational aspects of the business. Presenting buyers with the details contained in a good business plan will make a great first impression and can shorten the time it takes to close the sale. Providing buyers with extensive details upfront can shorten the buyer’s evaluation and due diligence process.

The growth potential of a business is usually a huge factor in a buyer’s decision to acquire that business. Potential can be difficult to prove, but a well-documented business plan can give a buyer a comfortable level of understanding about the potential opportunities and challenges for the business in the future.

A business owner’s claims about potential are sometimes discounted by buyers, unless those claims are supported by the type of in-depth historical and current data that is included in a good business plan. A business plan not only helps to prove potential; it also provides the buyer with several ideas on a possible road map on how to achieve that potential.

The first time business owner will sometimes experience anxiety over their ability to successfully manage a business, even though they may be highly qualified. A business plan should help to relieve that anxiety.  The plan not only provides valuable information on how to manage a business, but also enables the buyer to benefit from the years of experience of the previous owner. The new owner can see a history of both successes and failures in the business, and they will benefit from the lessons learned by the previous owner.

Operations and Management

The operations and management component of your plan is designed to describe how the business functions on a continuing basis. The operations plan highlights the logistics of the organization, such as the responsibilities of the management team, the tasks assigned to each division within the company, and capital and expense requirements related to the operations of the business.

Financial Components of Your Business Plan

After defining the product, market and operations, the next area to turn your attention to are the three financial statements that form the backbone of your business plan: the income statement, cash flow statement, and balance sheet .

The income statement is a simple and straightforward report on the business’ cash-generating ability. It is a scorecard on the financial performance of your business that reflects when sales are made and when expenses are incurred. It draws information from the various financial models developed earlier such as revenue, expenses, capital (in the form of depreciation), and cost of goods. By combining these elements, the income statement illustrates just how much your company makes or loses during the year by subtracting cost of goods and expenses from revenue to arrive at a net result, which is either a profit or loss. In addition to the income statements, include a note analyzing the results. The analysis should be very short, emphasizing the key points of the income statement. Your CPA can help you craft this.

The cash flow statement is one of the most critical information tools for your business, since it shows how much cash you’ll need to meet obligations, when you’ll require it and where it will come from. The result is the profit or loss at the end of each month and year. The cash flow statement carries both profits and losses over to the next month to also show the cumulative amount. Running a loss on your cash flow statement is a major red flag that indicates not having enough cash to meet expenses-something that demands immediate attention and action.

The cash flow statement should be prepared on a monthly basis during the first year, on a quarterly basis for the second year, and annually for the third year. The following 17 items are listed in the order they need to appear on your cash flow statement. As with the income statement, you’ll need to analyze the cash flow statement in a short summary in the business plan. Once again, the analysis doesn’t have to be long and should cover highlights only. Ask your CPA for help.

The last financial statement you’ll need is a balance sheet. Unlike the previous financial statements, the balance sheet is generated annually for the business plan and is, more or less, a summary of all the preceding financial information broken down into three areas: assets, liabilities and equity.

Balance sheets are used to calculate the net worth of a business or individual by measuring assets against liabilities. If your business plan is for an existing business, the balance sheet from your last reporting period should be included. If the business plan is for a new business, try to project what your assets and liabilities will be over the course of the business plan to determine what equity you may accumulate in the business. To obtain financing for a new business, you’ll need to include a personal financial statement or balance sheet.

In the business plan, you’ll need to create an analysis for the balance sheet just as you need to do for the income and cash flow statements. The analysis of the balance sheet should be kept short and cover key points.

Supporting Documents

In this section, include any other documents that are of interest to your reader, such as your resume; contracts with suppliers, customers, or clients, letters of reference, letters of intent, copy of your lease and any other legal documents, tax returns for the previous three years, and anything else relevant to your business plan.

Some people think you don’t need a business plan unless you’re trying to borrow money. Of course, it’s true that you do need a good plan if you intend to approach a lender–whether a banker, a venture capitalist or any number of other sources–for startup capital. But a business plan is more than a pitch for financing; it’s a guide to help you define and meet your business goals.

Just as you wouldn’t start off on a cross-country drive without a road map, you should not embark on your new business without a business plan to guide you. A business plan won’t automatically make you a success, but it will help you avoid some common causes of business failure, such as under-capitalization or lack of an adequate market.

As you research and prepare your business plan, you’ll find weak spots in your business idea that you’ll be able to repair. You’ll also discover areas with potential you may not have thought about before–and ways to profit from them. Only by putting together a business plan can you decide whether your great idea is really worth your time and investment.

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