Better Business Basics - The Plan

If you are planning on asking a financial institution to lend you money to fund your new business enterprise, you will need a business plan.  I would suggest to you that a well thought out business plan would help you to convince your old Uncle Ernie or your friends or even your Mom as well.  Most importantly, a well thought out business plan may even convince yourself that you are ready and know where the new businesses strengths and weaknesses are. This could help you succeed where others have failed.  I am sure by now you have heard the old statistics that 80% of all new businesses fail within the first two years.  The reason for these failures is due to a lack of commitment (either financial or time) or a lack of planning (you know the business plan).
Every business plan is different.  The outline and table of contents for one business is not necessarily the correct outline or TOC for your business.  What that means is that you need to take any advice that you receive and then bend or mold it to your needs. If you do not know where to start I recommend that you visit your local library and check out three different books on business planning.  Feel free to pick and choose ideas from each book to create a business plan that works for you.

The Parts

Now if you are convinced that you need a business plan you need to understand the parts before you begin.  Before putting ink on the paper (or electrons on the screen) you need to create an outline of your plan.  This will help you keep your thoughts organized as you proceed through the process. The outline should include the following:

1. Cover Page

2. Table of Contents

3. Executive Summary

4. Company Analysis

5. Product or Service Review

6. Industry analysis

7. Market Analysis

8. Management Team

9. Ownership

10. Growth Plan

11. Financial Analysis

12. Implementation Plan

13. Appendices & Attachments

The Table of Contents and the Executive Summary are written last.  The other parts should be written and re-written as one part causes changes in another part.

The Cover Page

The Cover of your plan is like the cover of any best selling book.  It needs to grab your attention and make you want to read it.  The only difference is that the business plan needs to sell in a more subtle way.  No glitzy photos or catchy slogans.  Just a clean professional look that tells the potential reader that this is a well thought out, professional document worth the reader’s time.

The Table of Contents

The TOC also needs to be a clean, one page guide that points the reader to the information he wants.

The Executive Summary

Like I said before, the Executive Summary should be written last.  This will be a one-page summary of the entire business plan.  This is the resume of the plan.  You should include the key points of the business plan.  Include what your business idea is, how you succeed over your competition and what your complete financial need is.  This is your one page pitch to the decision makers.  Keep the tone positive and authoritative so the reader can see your confidence in the success of your venture.

The Company Analysis

This is an analysis of the company yesterday, today, and tomorrow.  You need to include a brief history and you need to write about your company’s strengths and weaknesses.  Include your capabilities and goals to take advantage of these assets.  Obviously if you are a new company you will be starting with a fresh slate and focused on the future.

Product or Service Review

In order to convince someone to lend you money for your venture you need to demonstrate that you have clearly identified, researched and thoroughly thought out your product or service.   In this section of the business plan you need to explain all of the important information about your product in a concise manner.  You need to describe the life cycle of your product or service.  Sell the value that your product/service adds to your consumers needs/wants.  Explain the benefits and the quality of your product/service over that of your competitors.  You need to list out government and consumer ratings of your product, as well as, any patents, copyrights, trademarks, and licenses used or owned by you.  The bottom line is that this section must sell the reader that this is the right venture to back and that you understand how to support it. 

Industry Analysis

In this section you need to outline your competition.  The industry that you are entering already has existing businesses that are competing in this market.  Who are they?  If you are starting up a Pizza Parlor, you will need to look at the other pizza businesses in your target market.  However you also need to look at indirect competitors as well.  Pizzas also compete against sub sandwiches, tacos, and fast food restaurants for your consumers’ money.  You will need to look at these alternatives as well.  You also have to consider what is the possibility of additional competitors entering into your market area?  Identifying all of your competitors will be difficult; you will need to focus on who you consider to be in the top ten. I recommend that you create a competition spreadsheet to analyze the situation.  Create a list of criteria for success in your new industry.  Compare your business with the competition against the criteria that you have chosen as significant.  One approach is to use a SWOT analysis.  In a SWOT analysis you look at the Strengths, Weaknesses, Opportunities, and Threats. However you decide to approach it, remember that the goal for this section is to demonstrate your solid knowledge of the industry. 

Market Analysis

Do your homework!  Research and define your target market.  Do you have or can you get data that supports your belief that this target market exists, has interest in your product/service, has disposable income to spend on your product/service, and that you will be able to deliver it efficiently? What are your marketing strengths?  Do you have sources of advertising or promotional materials? This is another good place to utilize SWOT (Strengths, Weaknesses, Opportunities, and Threats).   You need to convey to the reader that you know your market, your customer needs, and how to reach them.

Management Team

In this section you need to demonstrate that the people that you have chosen to run your business are qualified to do so.  You need to include a mini resume of the team with a synopsis of their knowledge, work experience and what they bring to the company that will make your business a success. If this “team” consists of people other than yourself, you will need to show the relationships between the different roles and functions that each member has.  If it is appropriate you may wish to include an organizational chart to meet this need.

Ownership

Whether you are the sole owner or one of many owners you will need to address the same details as outlined for your management team.  Additionally, if you are seaking financial support, you will want to demonstrate your financial track record.  Are you a good financial risk?  Do you pay your bills?  On time?  Have you been reliable?  Do you have any financial or character references?  This section of the plan needs to go further than the management team section.  This is where you sell yourself, not just your ideas.

Growth Plan

Once the business is up and running, what now?  That is what potential investors will want to know.  How do you plan to grow the business and continue to earn a profit day after day, month after month, year after year?  As the market changes how are you going to adapt?  How does the business expand?  Are their new products or services that can be released at a later date?  Are their other markets to exploit?  The future plan is as important as the present day plan.

Financial Analysis

This is a section that most business owners fear.  If you are afraid of this section you should seek the help of a financial advisor.  It is important to have Profit and Loss Statements, Balance Sheets, and Cash Flow Statements prepared on a monthly basis.  If you cannot afford to pay for this help, you will need to study the topic in depth.  This is the section that will tell potential investors how the businesses money will be spent and earned throughout its life.

Implementation Plan

Once you have financing you will need to know how you are going to spend it.  How is your business ideas going to be put into practice?  A good implementation plan will explain to investors (and yourself) how you will start and run your business.  How do you get your product produced?  How do you introduce your new service?  You need to outline all the critical details of related to your new business and have a plan for each detail and a back up plan as well. Many businesses fail due to lack of planning.  Don’t let this be you.  Remember commitment and planning is your winning strategy.