BUSINESS PLAN BASICS

BUSINESS PLAN BASICS

Business plans are the preferred mode of communication between entrepreneurs and potential investors. Experienced owners and managers of closely held businesses know that business plans can also be an indispensable management tool. Many entrepreneurs/business owners have found that just completing the steps required to develop a business plan forces them to introduce discipline and a logical thought process into all of their planning activities. They have found that a properly prepared business plan can greatly improve their company’s ability to consistently establish and meet goals and objectives in a way that best serves the companies owners, employees, and investors.

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A business plan should be a simply written representation of where a company is going, how it will get there and what it will look like once it arrives.

Not only should entrepreneurs write business plans but so should all companies. Most companies who value business plans are used at a minimum to:

  1. Set goals and objectives for the company’s performance
  2. Provide a basis for evaluating and controlling the company’s performance.
  3. Communicate a company’s message to middle managers, outside directors, lenders and potential investors.

 

    COVER SHEET:   Serves as the title page of your business plan.
  ·         Name, address, and phone number of the company.

·         Name, title, address, phone number of owners/corporate officers.

·         Month and year your plan was prepared.

·         Name of preparer.

·         Copy number of the plan.

    TABLE OF CONTENTS   (Quick reference to major topics covered in your plan)
 

 

 

  ·         You want the business plan to be as easy to read as possible. An orderly table of contents will allow the reader to turn to the desired section as needed.

 

I.   EXECUTIVE SUMMARY (or Statement of Purpose)
  This is the thesis statement and states business plan objectives. Should be 4 paragraphs 1 to 2 pages). Use thekey word approach (who, what, where, when, why, how, how much) to summarize the following:
  ·         Your Company (who, what, where, when).

·         Who your management is and What their strengths are.

·         What your objectives are and Why you will be successful.

·         If you need a financing, why you need it, how much you need and how you intend to repay the loan or benefit the investor.

 

  Note: Do not write the executive summary (statement of purpose) until you have completed your business plan! It is a summary and reflects the contents of the finished plan.

 

 

I1.    THE COMPANY INFORMATION
  What is included? This section should include a “summary description of your business” statement followed by information on the “administrative” end of your company.
  A.  SUMMARY DESCRIPTION OF THE BUSINESS
  In a paragraph or two give a broad overview of the nature of your business, telling when and
why the company was formed. Then complete the summary by briefly addressing:
  ·         mission (projecting short- and long-term goals)

·         business model (describe your company’s model and why it is unique to your industry)

·         strategy (give an overview of the strategy, focusing on short- and long-term objectives)

·         strategic relationships (tell about any existing strategic relationships)

·         SWOT Analysis (strengths, weaknesses, opportunities, and threats that your company will face, both internal and external)

 

 

  B.  INTELLECTUAL PROPERTY
  ·         Address Copyrights, Trademarks, and Patents

·         Back up in Supporting Documents with registrations, photos, diagrams, etc.

 

  C.  LOCATION
  ·         Describe your projected or current location.

·         Project costs associated with the location.

·         Include legal agreements, utilities forecasts, etc. in Supporting Documents.

 

  D.  LEGAL STRUCTURE
  ·         Describe your legal structure and why it is advantageous for your company.

·         List owners and/or corporate officers describing strengths (include resumes).

 

 

  E.  ACCOUNTING & LEGAL
  ·         Accounting: What system will you set up for daily accounting? Who will you use for a tax accountant? Who will be responsible for periodic financial statement analysis?

·         Legal: Who will you retain for an attorney? (Keep ‘Murphy’s Law’ in mind.)

 

  F.  INSURANCE
  ·         What kinds of insurance will you carry? (Property & Liability, Life & Health)

·         What will it cost and who will you use for a carrier?

 

  G.  SECURITY
  ·         Address security in terms of inventory control and theft of information (online and off).

·         Project related costs.

III.    ENVIRONMENTAL AND INDUSTRY ANALYSIS
  What is included? This section should include how your business fits into larger contexts.
  A.  ENVIRONMENTAL
  ·         Identify trends and changes happening at the national and international level that may influence the future.   Describe any trends that are going on in your industry.

·         Describe the opportunities that you have for your business.   Describe how your business can take advantage of opportunities.

 

 

  B.  INDUSTRY ANALYSIS
  ·         Target Market (identify with demographics, psychographics, and niche market specifics).

·         Industry demand

·         Competition –identify major competitors (including their locations) assessing their strengths and weaknesses or include a SWOT analysis.

·         Market Trends (identify industry trends and customer trends).

 

 

 

IV.  PRODUCTS OR SERVICES

 

What is included? This section should include a “summary description of your business describing your product or service.

 

  ·         If you are the manufacturer and/or wholesale distributor of a product: Describe your products. Tell briefly about your manufacturing process. Include information on suppliers and availability of materials.

·         If you are a retailer and/or an e-tailer: Describe the products you sell. Include information about your sources and handling of inventory and fulfillment.

·         If you provide a service: Describe your services List future products or services you plan to provide.

 

V.  MARKETING RESEARCH AND EVALUATION

 

  What is research and evaluation? This section presents evidence that a market exists for your business.
  A.  TARGET MARKETS & MARKET SEGMENTATION

 

 

  ·         Target Market (identify with demographics, psychographics, and niche market specifics).

 

  B.  MARKET TRENDS

 

   

·         Market Trends (identify industry trends and customer trends).

 

1. C.  COMPETITION

 

·         Competition –identify major competitors (including their locations) assessing their strengths and weaknesses or include a SWOT analysis

 

  D.  MARKET SHARE
  ·         Target Market (identify with demographics, psychographics, and niche market specifics).

·         Competition (describe major competitors assessing their strengths and weaknesses.

·         Market Trends (identify industry trends and customer trends).

·         Market Research (describe methods of research, database analysis, and results summary).

 

  E.  MARKETING PLAN
  ·         General Description (budget % allocations on- and off-line with expected ROIs).

·         Method of Sales and Distribution (stores, offices, kiosks, catalogs, d/mail, website).

·         Packaging (quality considerations and packaging).

·         Pricing (price strategy and competitive position.

·         Branding.

·         Database Marketing (Personalization).

·         Sales Strategies (direct sales, direct mail, email, affiliate, reciprocal, and viral marketing).

·         Sales Incentives/Promotions (samples, coupons, online promo, add-ons, rebates, etc.).

·         Advertising Strategies (traditional, web/new media, long-term sponsorships).

·         Public Relations (online presence, events, press releases, interviews).

·         Networking (memberships and leadership positions).

 

  ·         Description of Customer Service Activities.

·         Expected Outcomes of Achieving Excellence.

 

   
  1.  MANUFACTORING AND OPERATIONAL PLAN

 

  What is included? This section should include detailed information regarding operational plan including geographic location, facilitates, control systems and labor force. .
VII.   MANAGEMENT TEAM
  What is included? This section should state key individuals that will help transform your vision into a successful business.  An organizational chart can be included.

 

  A.  MANAGEMENT
  ·         List the people who are (or will be) running the business.

·         Describe their responsibilities and abilities.

·         Project their salaries.

·         (Include resumes in Supporting Documents)

 

 

  B.  PERSONNEL
  ·         How many employees will you have in what positions?

·         What are the necessary qualifications?

·         How many hours will they work and at what wage?

·         Project future needs for adding employees.

VIII.   TIMELINE
  What is included? This section should outline the interrelationships and timing of the major events planned for your business.

 

IX.   CRITICAL RISKS & ASSUMPTIONS
  What is included? This section should include implicit assumptions.

 

 

X.     BENEFITS TO COMMUNITY
  What is included?This section should include (if any) the economic impact, human development, and community development.
XI.   EXIT STRATEGY
  What is included?This section should include your succession plan..

 

XII.   FINANCIAL DOCUMENTS
  The quantitative part of your plan. This section of the business plan is the quantitative interpretation of everything you stated in the organizational and marketing plans. Do not do this part of your plan until you have finished those two sections.

Financial documents are the records used to show past, current, and projected finances. The following are the major documents you will want to include in your Business Plan. The work is much easier if they are done in the order presented because they build on each other, utilizing information from the ones previously developed.

  A.  SUMMARY OF FINANCIAL NEEDS (needed only if you are seeking financing)
  This is an outline of the following information:
  (1) Why you are applying for financing.
(2) How Much capital you need.
  B.  LOAN FUND DISPERSAL STATEMENT (needed only if you are seeking financing)
  You should:
  (1) Tell How you intend to disperse the loan funds.
(2) Back Up your statement with supporting data.

 

  C.  PROJECTED BALANCE SHEET -THREEYEAR INCOME PROJECTION
  Projection of Assets, Liabilities, and Net Worth of your company at end of next fiscal year.
  Shows the condition of the business as of a fixed date. It is a picture of your firm’s financial condition at a particular moment and will show you whether your financial position is strong or weak. It is usually done at the close of an accounting period. Contains: (1) Assets, (2) Liabilities and (3) Net Worth.
   

 

  D.  PROFIT AND LOSS STATEMENT (INCOME STATEMENT)- THREE-YEAR INCOME PROJECTION
  Shows your business financial activity over a period of time (monthly, annually). It is a moving picture showing what has happened in your business and is an excellent tool for assessing your business. Your ledger is closed and balanced and the revenue and expense totals transferred to this statement.
  E.  CASH FLOW STATEMENT- THREE-YEAR  PROJECTION
  Shows the amount of cash generated and used by a company in a given period.
   

 

 

XIII.

 

  APPENDIX (SUPPORTING DOCUMENTS)-this section isn’t included in the grading criteria. Not crucial to the business plan but can be of interest to potential investors and creditors.
  This section of your plan will contain all of the records that back up the statements and decisions made in the three main parts of your business plan. The most common supporting documents are:
  A.  PERSONAL RESUMES
  Include resumes for owners and management. A resume should be a one-page document. Include: work history, educational background, professional affiliations and honors, and a focus on special skills relating to the company position.
  B.  OWNERS’ FINANCIAL STATEMENTS
  A statement of personal assets and liabilities. For a new business owner, this will be part of your financial section.
  C.  CREDIT REPORTS
  Business and personal from suppliers or wholesalers, credit bureaus, and banks.
  D.  COPIES OF LEASES, MORTGAGES, PURCHASE AGREEMENTS, ETC.
  All agreements currently in force between your company and a leasing agency, mortgage company or other agency.
  E.  LETTERS OF REFERENCE
  Letters recommending you as being a reputable and reliable business person worthy of being considered a good risk. (both business and personal references)
  F.  CONTRACTS
  Include all business contracts, both completed and currently in force.
  G.  OTHER LEGAL DOCUMENTS

 

  All legal papers pertaining to your legal structure, proprietary rights, insurance, etc. Limited partnership agreements, shipping contracts, etc.
  H.  MISCELLANEOUS DOCUMENTS
  All other documents which have been referred to, but not included in the main body of the plan. (For example, location plans, demographics, competition analysis, advertising rate sheets, cost analysis, etc.).

 

 

PUTTING YOUR PLAN TOGETHER
  When You Are Finished: Your Business Plan should look professional, but the potential lender or investor needs to know that it was done by you. A business plan will be the best indicator that can be used to judge your potential for success. It should be no more than 30 to 40 pages in length, excluding supporting documents. If you are seeking a lender or investor: Include only the supporting documents that will be of immediate interest to the person examining your plan. Keep the others with your own copy where they will be available on short notice. Have your plan neatly bound at your local print shop or in blue, black or brown covers purchased from the stationery store. Make copies for each lender or investor you wish to approach. Do not give out too many copies at once, and keep track of each copy. If you are turned down for financing, be sure to retrieve your business plan.
KEEP YOUR BUSINESS PLAN UP-TO-DATE
  Your plan will be beneficial only if you update it frequently to reflect what is happening within your business. Measure your projections against what actually happens in your company. Use the results to analyze the effectiveness of your operation. You can then implement changes that will give you a competitive edge and make your business more profitable.

 

 

 

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