Full Description

The first business plan is often the most difficult to write. A company may have little or no history, and often may not know lender requirements, what to stress and what to avoid. Your First Business Plan simplifies the process by outlining the different parts of a business plan and, in an uncomplicated question-and-answer style, helps the business owner create a winning plan for their business.

The easy-to-follow chapters show entrepreneurs how to:
--Think through strategies and balance enthusiasm with facts
--Capture and hold the interest of potential lenders and investors
--Understand and develop their financial statements
--Recognize the unique selling advantage of their products or services
--Avoid potentially disastrous errors like undercapitalization and negative cash flow

Also included in this book:
--A glossary of planning and financial terms
--A complete sample business plan

Table of Contents

Overview
Introduction

Chapter 1: Powerful Guidelines to Writing Your First Business Plan
- A few facts about business planning
- Consider a start-up’s impact on your life
- The nuts and bolts of a business plan
- Focus on your Unique Selling Proposition (USP)

Chapter 2: The First Pages
- Cover sheet
- Table of contents
- Executive summary

Chapter 3: General Company Description
- Context of your business
- Profile of your business
- Profile of your specific market
- Anticipated challenges and planned responses

Chapter 4: Present Situation
- Give a snapshot of your situation
- Calculate your Current Ratio
- Calculate your Quick Ratio

Chapter 5: Objectives Section
- Understand what you want and need to accomplish
- Record your objectives

Chapter 6: Product/Service Section
- Description of your product or service
- Added value
- Tests and approvals
- Product or service life cycle
- Trademarks and copyrights

Chapter 7: Market Analysis
- Do you homework
- Market strengths and weaknesses
- Customer profile
- Competition

Chapter 8: Marketing and Sales Strategies
- Build a great marketing plan
- Selling tactics
- Flaunt your Unique Selling Proposition
- Establish market objectives
- Establish advertising and promotion concepts

Chapter 9: Management Section
- Chart your formal organization
- Incorporate your management team
- People and talent requirements
- Compensation
- Directors

Chapter 10: Financial Projections
- More than just dollars and cents
- Your financial management tool
- Determining your numbers
- Financial projections
- Implementation schedule
- Statement of resource needs

Chapter 11: Executive Summary
- First comes last
- Give an overview
- Your statement of purpose
- Your mission statement
- The market, your customers, and your product or service

Chapter 12: Appendix Section
- Substantiate your claims
- Keep it all organized

Chapter 13: Practical Tips

Chapter 14: Sample Business Plan: Home Improvements, Inc.

Appendix 1: 101-Plus Questions to Success

Appendix 2: Sample Business Plan: CC Day Care Center

Appendix 3: Sample Business Plan: Micro Service and Sales

Glossary -

Excerpt

A Few Facts about Business Planning

Excerpted from Your First Business Plan by Joseph A. Covello and Brian J. Hazelgren © 2005


About one million new businesses are started each year in America; of those, approximately two hundred thousand will survive five years. This translates into one in five businesses making it to their fifth anniversary. This is an alarming statistic! Why in the world would only one in five businesses in the “Land of Opportunity” survive for so short a period of time? There are several reasons, but the most common also happens to be the most controllable. There is no magic equation for success, but one basic rule holds true: A business owner who fails to plan also plans to fail.


Be Unique

When it comes to writing a business plan, most people think it’s about as much fun as taking a trip to the dentist. They usually focus on the pain rather than the results. Let’s face it, writing a good business plan takes a lot of time, patience, and thought, and many hours of research, writing, and editing. But think of the results! You will know your business (and yourself) better and be better assured that it will flourish. In addition, you will have a better chance of getting financing. Most importantly, you will know how to conduct business and compete at a more sophisticated level. The time invested in developing a business plan can make the difference. Also consider the edge you will have over your competition. Countless businesses do not have a business plan. They are simply reacting to the conditions that exist, much like a sailboat haplessly setting out on a windless day—or, in other cases, a stormy day. The point is that when you take the time to fully develop a sound business plan, you will have a greater advantage in maneuvering and changing your course when the climate is not to your benefit.

Think Outside the Box: Advice about starting a business and developing a plan to help oversee it can come from any of a number of sources. Consider going to trade shows and other networking opportunities in your field and make it a goal to meet as many people as you can. You never know what might come of it.

A business plan helps entrepreneurs and business managers think through their strategies, balance their enthusiasm with facts, and recognize their limitations. It also helps avoid potentially disastrous errors like undercapitalizing, creating negative cash flow, hiring the wrong people, selecting the wrong location, and pursuing the wrong market. See Figure 1.1 below for a list of questions to ask yourself (and your partner, if you have one) when choosing your market.

A winning business plan requires time: fifty to one hundred hours to write an effective business plan, which would include research, documentation, analysis, and review. Keep this in mind, and remember that entrepreneurs should start planning at least six months before they initiate a new business. This takes into consideration the time you need to devote to startup while working another job. Six months gives you time to sharpen and focus your business ideas, test your assumptions, and improve your management skills. So dig in and begin your journey. This chapter gives you an overview of the essential elements that must be part of your task.

YOUR NEW ENTERPRISE—BEFORE START-UP
The type of business you pursue depends on a few important factors:

• How much money do you have to invest?
• Can you attract other investors?
• What return do you expect?
• Where is your expertise?
• What do you like to do most?
• Are you willing to work hard and long hours?
• What are prominent consumer trends in your industry today?

Consider a Start-Up’s Impact on Your Life
Before venturing full-force into your start-up business, consider these possibilities. Your income may suffer, your work hours will multiply, and your family relationships may be strained. You will have expended your personal cash and possibly assumed a fair amount of debt. Most of the time, you may feel like you’re running behind, and you may become more irritable or critical with people around you. You will see less of your friends and family; you may get more headaches, backaches, or stomachaches. You may feel guilty at times when you take time off from work. Your life, for a time, may truly be all work and no play.

Don’t despair! These feelings and circumstances are a normal part of starting a business or embarking on a new project. Just don’t give up. Developing a business plan is going to be very hard work, but if you do it right, wonderful things may result. So begin your research earnestly and objectively. Figure 1.2 on the next page alerts you to some good starting points.

The Nuts and Bolts of a Business Plan—Think about a Mission Statement
Once you have completed a good amount of research, you can begin to define your business, and writing a mission statement is an important step in further cementing your idea. A mission statement should be fifty words or less and outline what you will sell and to whom, and what will make your business different. (This is called your “Unique Selling Proposition,” or USP, which we describe in detail at the end of this chapter.) Here is an example of a mission statement:

Mission Statement
To provide useful, applicable solutions to business owners and managers in the areas of marketing, business planning, finance, accounting, and promotion, and to fully use our management team’s experience and knowledge to increase the revenues of each of our clients’ enterprises and companies.

Name Your Business
A compelling component of your business idea is the name you put to it. You may already have an idea for your business’s name, but also be sure to think and rethink that name once you have conducted market research. Our advice is to keep the name straightforward and descriptive, and make it as distinctive as possible. Avoid grandiose, overworked adjectives. Your business name should be like a headline to an article. It should describe who you are and what you do. A dangerous marketing mistake is to make your prospects and potential customers guess what it is that you do. For example, Bob’s Hardware Store says so much more than Bob’s Enterprises. Ambassador Pizza works much more effectively than Ambassador Foods. You end up spending much more time and precious capital marketing your product or service when the customer has to guess what you do. Most businesses do not have that luxury, so have some type of descriptive word in your company name that will benefit you. Let the companies with deep pockets promote ambiguous names to create their own identity.

Consider All Uses of a Business Plan
Your business plan is the heart and soul of your operation and the most important document you provide to any lending institution or potential investor. It explains all the financing you need and, most importantly, it will give your financial sources persuasive information about your venture.
QUICK Tip
Also remember that your business plan is a multipurpose document. A comprehensive and realistic business plan will help you accomplish many essential objectives. It will help you:

1. Take charge of your entrepreneurial life. A business plan is evidence of your initiative. It shows that you have discipline to focus your energy on an important project. It also shows that you understand how to achieve progress and growth, solve problems along the way, and realize your ultimate goals. The business plan is the foundation that provides pillars for your vision and allows you to structure your ideas into reality.

2. Lay out a master blueprint. A business plan is to an entrepreneur what a set of detailed architectural drawings is to a builder. It shows you the logical progression of steps needed to reach your established goal. It may also help you consider an alternate and possibly better route. A business plan is a powerful management tool.

3. Communicate your master plan to members of your team. A business plan allows you to communicate to your colleagues a step-by-step agenda for reaching your goals. Some portions of a business plan can also be used in training and coordinating meetings, as well as teaching staff what their role and accountability will be in making your business function successfully.

4. Attract money to your project. Potential suppliers of capital and other needed resources (such as bankers, brokers, investors, future partners, and the like) will place great value on your business plan as they determine whether or not to participate in your venture.

Your ability to create trust and respect can be greatly enhanced through interpersonal contact with these potential suppliers of capital. However, you may not even get a chance to get to know these people on a personal basis; therefore, you must have a professional document to present in written form. Your business plan will be your initial selling tool—your business résumé— when attracting lenders to participate with you in your venture.

Management Team
Your management team is very important. Potential investment sources place a tremendous amount of importance on the team of managers who will be making crucial day-to-day decisions. The success or failure of your enterprise depends on the experience, maturity, and common sense of you, your partners, your board of directors, and your management staff.

Balance within a management team, as a whole, includes the behavioral, technical, and conceptual skills applicable to the development, production, and delivery of both current and future products and services. At a minimum, the management team must have or develop skills in management, marketing, finance, and operations.

The strength of your management team must be diligently articulated in your business plan. A company with a formal structure will greatly enhance its ability to raise capital and achieve its goals in less time, and with far less expense.

Use honesty in your judgment of yourself and each member of the management team. Don’t allow yourself to sway from truth or reality. If your management team is weak in any of the above areas, consider bringing in top-notch, experienced professionals to help you and bring in overall inspiration. Outside professionals can offer your enterprise tremendous leverage— without carrying them on your payroll. Advisors you may need throughout your planning efforts are a competent attorney, management consultant, accountant, insurance agent, and banker. A marketing consultant could also be helpful—he or she may save you time, money, and misspent effort. These experts will help you, your management team, and your business develop and grow.

Your Current and Projected Financial Statements
When it comes to thinking about your business’s finances, you need to consider your current and projected future situation. Determine your cash needs, project your expenses, and review your sales and profit objectives. You should also prepare a preliminary balance sheet. List your assets and liabilities to create a snapshot of what your company looks like at a given moment. Your balance sheet is a necessary tool for your banker and your accountant.

The financial projections that you document in your business plan should be well thought out. Plan on devoting a fair amount of time to developing these. If you have to tell the investor to ask your accountant about something regarding your financial position, you project a less-than-solid business to the investor. To avoid this, include financial projections on:

1. Your profit-and-loss statement
2. Your balance sheet
3. Your cash-flow statement

When calculating your projections for the future, at a minimum, illustrate monthly figures for the first two years and annual projections for years three through five.

Your Products and Services
Your products or services are obviously very important when attracting potential sources of capital. In your business plan, be sure to discuss the unique and specific characteristics of your products and services: • How do they differ from similar products and services? • What customer reactions may be anticipated due to these characteristics? • How will you satisfy customer needs and wants? Describe any unique value-added characteristics your products and services

Hooking up with the Right People:
Scout out a university-run business plan competition or class to help you fine-tune your pitch for capital. The professionals involved in a program such as this usually consist of a few venture capitalists who will be able to give you excellent guidance on the financial details of your plan. provide to the customer and how these will give your company a competitive edge. If your product or service has evolved over the past few years, explain how and why. Describe how the product works or how the service is used. Will your product save your customers time or money? Will your product or service generate more profits for your customers? If so, how? Have any tests or case studies been performed that will help you back up your claims? Obtain that vital information and document it in your plan. What is the product or service’s life cycle? Explain it to the investor. You may even want to create a simple chart covering the life cycles of your products and services. Also include the time factors influencing your ability to make money and the effects of economic cycles.

Typical stages are:

1. Introduction stage: An intense marketing campaign introduces a new or unique product or service.

2. Growth stage: Sales begin and growth occurs.

3. Maturity stage: The market begins to be saturated with the unique product or service. Competition increases as awareness of product becomes common.

4. Decline stage: Newer, more unique, and more advanced products enter the market. Loyal customers continue to buy your product or service. Not-so-loyals begin to look at alternatives, and eventually may shift their business to the newer items. Discuss your plans for the next generation of products and services that will be introduced in the near future.

Be prepared to contact several different investment sources and groups to discover which capital sources will be most interested in your particular venture. For example, some suppliers of finances only look at real estate transactions. Others may only consider franchise concepts, while others may wish to invest in a manufacturing enterprise.

Your Marketing Plan
Your marketing plan is next on the list of importance. This area requires a fair amount of study and analysis on your part. Although it may seem a lengthy task at the onset, you can still have a lot of fun with it. This is when you find out who is out there, what the competition offers and what they don’t offer, whether or not your product or service will outsell the competition, and what Unique Selling Proposition (USP) you have over your competitors.

You may even discover that the timing is not right for your enterprise and it would be beneficial not to go ahead with your plans. This would not be a negative bit of information to find. The time and money you would save by waiting for a better time or pursuing another market would be invaluable. Your future enterprise may depend on what the market dictates after a carefully designed marketing analysis. So have fun with this section and enjoy seeing what is out there!

A market analysis describes the existing marketplace in which you plan to operate your business. When doing a marketing analysis, you are hoping to define what specific segment of the market will purchase your product or service. Key points for defining the market segment for your products and services are:

1. Product features
2. Lifestyle of your targeted customers
3. Geographical location
4. Cyclical factors

How many competitors share your market? How is the share of the market distributed among the major participants? Is the market growing at a rapid rate? What are the major trends toward the development of the shared marketplace? Summarize your view of the trends and the implied opportunities from your market analysis.

In this section, you will want to list the strengths and weaknesses of your product and service. When covering your strengths, you need to be sure to place at least as much emphasis on marketing your product as on your product itself, if not more. List several distinct advantages over the competition in the following areas:

1. Actual performance
2. Quality and reliability
3. Production efficiencies
4. Distribution
5. Pricing
6. Promotion
7. Public image or reputation
8. Business relationships or references

If you know of any weaknesses in your product or service, list those also and show what steps you are taking to alleviate the problem(s). Developing a marketing strategy is the art and science of planning for and implementing a promotional campaign that will generate sales for your enterprise. Such strategies are designed to enhance, promote, and support the advantages, features, and benefits of your products and services. Your marketing section should be designed with one word in mind: strategy. When thinking about a strategy, you must take into consideration your business activities, strengths, and direction. What type of strategy would you put together if your very existence depended on it? A good strategy could save you. See Figure 1.4 on the next page for a list of questions to ask while developing your marketing plan.

Figure 1.4: MARKETING QUESTIONS TO BRAINSTORM BY
There are several questions you should pay attention to when developing a marketing plan.
• What can be said about your competitors’ products or services that will change your customer’s minds?
• What is your Unique Selling Proposition?
• What strategies will you use to promote your products and services?
• Will you use television and radio?
• Would it benefit you to conduct seminars or participate in trade shows?
• Will you use telemarketing and/or outside sales representatives?
• Do you need to hire a public relations agency?
• Have you considered direct mail?
• Will you use brochures and flyers?
• Will you sell your products and services locally, nationally, or internationally?
• What other creative ideas will you come up with to generate leads?
• Are your strategies consistent with your evaluation of the marketplace and your capabilities?
• Have you defined your targeted market into a narrow window, or does your product appeal to a large market?
• Are your strategies based on facts or assumptions?
• Is your appraisal of the competition open-minded and honest?
• Is the expected return on investment sufficient to justify the risks?
• Have you thoroughly examined strategies your competitors are using? Could some of their strategies be adapted to your environment?
• Is your strategy legal?

Your strategy should be defined in such terms as to capture your share of the market in as little time as possible. With this in mind, how will your customers perceive your company and products relative to the competition? This is critical and worth repeating. How will your customers perceive your company and products relative to the competition? A good way to find out is to ask them. Conduct a market survey. This is an easy and inexpensive way to find out the answer to this important question.

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