Entrepreneur Startup Model > Step 4: The Business Plan

A.- Planning Your Work

A business plan precisely defines your business, identifies your goals, and serves as your firm's resume. The basic components include a current and pro forma balance sheet, an income statement, and a cash flow analysis. It helps you allocate resources properly, handle unforeseen complications, and make good business decisions. Because it provides specific and organized information about your company and how you will repay borrowed money, a good business plan is a crucial part of any loan application. Additionally, it informs sales personnel, suppliers, and others about your operations and goals.

The importance of a comprehensive, thoughtful business plan cannot be overemphasized. Much hinges on it: outside funding, credit from suppliers, management of your operation and finances, promotion and marketing of your business, and achievement of your goals and objectives.

"The business plan is a necessity. If the person who wants to start a small business can't put a business plan together, he or she is in trouble," says Robert Krummer, Jr., chairman of First Business Bank in Los Angeles.

Despite the critical importance of a business plan, many entrepreneurs drag their feet when it comes to preparing a written document. They argue that their marketplace changes too fast for a business plan to be useful or that they just don't have enough time. But just as a builder won't begin construction without a blueprint, eager business owners shouldn't rush into new ventures without a business plan.

Before you begin writing your business plan, consider four core questions:

• What service or product does your business provide and what needs does it fill?

• Who are the potential customers for your product or service and why will they purchase it from you?

• How will you reach your potential customers?

• Where will you get the financial resources to start your business?

The previous steps in this Start-up Model will help you develop your plan.

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B.- Writing the Plan

What goes in a business plan? The body can be divided into four distinct sections:

1. Description of the business

2. Marketing

3. Finances

4. Management

Addenda should include an executive summary, supporting documents, and financial projections.
Although there is no single formula for developing a business plan, some elements are common to all business plans. They are summarized in the following outline:

Elements of a Business Plan

1. Cover sheet

2. Statement of purpose

3. Table of contents

   1. The Business

      1. Description of business

      2. Marketing

      3. Competition

      4. Operating procedures

      5. Personnel

      6. Business insurance

   2. Financial Data

      1. Loan applications

      2. Capital equipment and supply list

      3. Balance sheet

      4. Breakeven analysis

      5. Pro-forma income projections (profit & loss statements)

         • Three-year summary

         • Detail by month, first year

         • Detail by quarters, second and third years

         • Assumptions upon which projections were based

      6. Pro-forma cash flow

   3. Supporting Documents

      1. Tax returns of principals for last three years Personal financial statement (all banks have these forms)

      2. For franchised businesses, a copy of franchise contract and all supporting documents provided by the franchisor

      3. Copy of proposed lease or purchase agreement for building space

      4. Copy of licenses and other legal documents

      5. Copy of resumes of all principals

      6. Copies of letters of intent from suppliers, etc.

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C.- Business Plan Checklist

The following outline and checklists can guide you in writing your business plan:

The Business Plan

Goal is to provide:

1. A market exists for your product and/or service that will allow you to achieve a profit,

2. You are well positioned to make a profit from this market, and

3. Your financial projections are reasonable and in-line with your assumptions from numbers 1 & 2.

Resources:

Layout & Functions

BPlan.com http://www.bplan.com


Executive Summary

Goal is to provide:

1. A focused summary of the plan, and

2. Specific identification of the goals of the new venture at this point (including financing).

Notes:

* Write the executive summary last.

Checklist:

_____ Identify the market opportunity, marketing strategy, and the company's unique features.
_____ Identify the management team's experience and accomplishments.
_____ Describe the business.
_____ Specify the financial goals of the business.
_____ Specify how much money the company needs, how the money will be used, and how funds will be obtained.
_____ Specify what the owners are contributing and the value of any collateral.


New Venture Concept Statement (Business Description)

Goal is to provide:

1. A general overview of the new organization, and

2. Basic information relevant to understanding the business.

Notes:

* If the information is longer than a page, summarize it and put the rest in the appendix.

Checklist:

_____ Describe when and why the company was formed.
_____ Describes the marketing history of the product and service (if applicable).
_____ Outline the company's annual sales, profits, and performance to date. (if applicable)
_____ Identify key goals and allow sufficient time to accomplish them.
_____ Address legal liability issues.
_____ Address legal structure.
_____ Address insurance requirements & coverage.
_____ Address security issues.
_____ Describe billing & collections systems.

Resources:

Business Structure, Name, & Registration

Registration of your fictitious name or entity with the state of Florida does not reserve or protect a name against use by another party, nor does it provide rights to the use of a trade name, trademark, service mark or corporate name. If name protection is your goal, you may want to pursue registering a trademark or service mark.

SBA Business Legal Structure Wizard: http://app1.sba.gov/exsysweb/client/bizform/bizformmenu.html
Florida Small Business Legal Structure: http://www.floridasmallbusiness.com/startup/02law.asp
Florida Fictitious Name Inquiry: http://www.sunbiz.org/corpweb/inquiry/ficinam.html
Florida Corporation/Limited Partnership/LLC/Trademark Name Inquiry: http://www.sunbiz.org/corpweb/inquiry/corinam.html
Register your Florida Fictitious Name, Corporation, LLC, Trademark, etc.: http://www.sunbiz.org
Register your Federal Trademark Registration: http://www.uspto.gov
Register for your Employer ID Number (EIN): http://www.irs.gov/businesses/small/article/0,,id=98350,00.html
Register for your county occupational license: http://www.myflorida.com/includes/counties.html
Register for your city occupational license: http://www.myflorida.com/includes/cities.html
Register for all of your state tax concerns: http://www.myflorida.com/dor/businesses

Business Location

The United States Postal Service allows you to locate the ZIP Code +4 of any location. Then, use mapquest.com to print a street map and aerial photo of your proposed business location. Finally, locate zip codes within a certain radius of your location using melissadata.com

United States Postal Service: http://www.usps.com/zip4/
MapQuest.com: http://www.mapquest.com
Melissadata.com: http://www.melissadata.com/Lookups/zipradius.asp

NAICS/SIC Codes

The North American Industry Classification System (NAICS) 2002 Codes have replaced the U.S. Standard Industrial Classification (SIC) system. The NAICS was developed jointly by the U.S., Canada, and Mexico to provide new comparability in statistics about business activity across North America.

NAICS Search: http://www.naics.com
SIC/NAICS Search/Conversion: http://www.loglink.com/sic.asp

Florida State Professional Licensing/Permits/Legal Requirements

The North American Industry Classification System (NAICS) 2002 Codes have replaced the U.S. Standard Industrial Classification (SIC) system. The NAICS was developed jointly by the U.S., Canada, and Mexico to provide new comparability in statistics about business activity across North America.

Florida Business Licenses, Permits, and Regulation Homepage: http://www.myflorida.com/portal/Business
Florida Department of Business & Professional Regulation: http://www.state.fl.us/dbpr/
Florida Department of Health's Medical Quality Assurance Division: http://www.doh.state.fl.us/mqa/


Product & Service Description

Goal is to provide:

1. A reason why your product/service will stand out in the market, and

2. Information pertinent to understanding your product/service.

Checklist:

_____ Describe the products and/or services.
_____ Identify the unique features.
_____ Identify the special benefits to the user.
_____ List the requirements from regulatory agencies. (if applicable)
_____ List critical and backup suppliers plus subcontractors.
_____ Address the raw material needs.
_____ Describe equipment needs.
_____ Address the research and development requirements. (if applicable)


Management Team

Goal is to provide:

1. Who will lead the organization, and in what capacity, and

2. Establish complete credibility and ability of these leaders.

Checklist:

_____ List key management positions, salaries, and benefits.
_____ List the members of the professional team and their contact information (including accountant, attorney, advisors, etc.).
_____ List personnel requirements, salaries, and costs.
_____ Outline primary job duties and responsibilities assigned to each position.
_____ Identify the individuals who are expected to fill each position.
_____ Summarize each person's experience and accomplishments.
_____ Provide explanation of how deficiencies will be overcome.


Organization & Operating Procedures

Goal is to provide:

1. Organizational, personnel, and operating goals and measures, and

2. An understanding of the flow of cash in, through, and out of the organization.

Marketing Plan

Goal is to provide:

1. The proposed target market(s) of the venture,

2. An overview of the competitive environment,

3. The pricing strategy of the organization,

4. The promotional and advertising plans, and

5. How sales will be managed.

Checklist:

_____ Identify target markets for industry.
_____ Address market size.
_____ Address geographic locations.
_____ Address industry trends.
_____ Addresses seasonal factors.
_____ Address existing distribution networks.
_____ Include a customer profile.
_____ Identify target markets of company and size of each.
_____ Address advertising, promotion, and packaging.
_____ Address warranties and guarantees.
_____ Address trade shows.
_____ Discuss future markets.
_____ Describe competitive advantages and disadvantages of company.
_____ Summarize the nature of competition.
_____ Address the market opportunities.
_____ Address the threats that exist in the market place.
_____ Identify major competitors and addresses their strengths and weaknesses.
_____ Include pricing policies.
_____ Address pricing procedures for industry.
_____ Address gross profit margin potential.
_____ Address the terms of sales.

Target Market Research Resources:

Consumer Market

EASIDemographics.com http://www.easidemographics.com         * Registration Required.
Melissadata.com http://www.melissadata.com/Lookups/zipradius.asp
U.S. Census Bureau http://factfinder.census.gov
Google http://www.google.com
Department of Labor - Bureau of Labor Statistics - Consumer Expenditures Survey http://www.bls.gov/cex/

Business Market

Verizon SuperPages http://www.superpages.com
AnyWho - Find a Toll-Free Number http://www.anywho.com/tf.html
InfoSpace - Company Websites http://www.infospace.com/info/bizweb.htm
Google http://www.google.com

Pricing Analysis Research Resources:

General Pricing Information

The Pricing Advisor is a resource for anyone who needs to set prices.

The Pricing Advisor http://www.pricing-advisor.com


Financial Plan & Projections

Goal is to provide:

1. Financial goals and needs of the organization,

2. Contingency plans for unexpected/unmet factors, and

3. Reasonable financial projections.

Checklist:

_____ Specify the financial goals of the business.
_____ Specify how much money the company needs, how the money will be used, and how funds will be obtained.
_____ Describes the financial risks and the strategies for their mitigation.
_____ Address industry trends.
_____ Addresses seasonal factors.
_____ Address existing distribution networks.
_____ Addresses contingency plan if sales forecasts go unmet.
_____ Identify target markets of company and size of each.
_____ Address advertising, promotion, and packaging.
_____ Addresses the repayment of loans.
_____ Addresses the investment opportunity.
_____ Discuss future markets.
_____ Describe competitive advantages and disadvantages of company.
_____ Summarize the nature of competition.
_____ Addresses the return on investment.
_____ Addresses the exit strategy for investors.

Resources:

Bank Comparisons

Bankrate.com http://www.bankrate.com

Benchmarking

BizStats.com http://www.bizstats.com

Breakeven

BreakEven Calculator http://www.dinkytown.net/java/BreakEven.html

Credit Scoring

ConsumerInfo.com ($34.95 for Scores from the three major bureaus) http://www.consumerinfo.com

Terminology

InvestorWords.com http://www.investorwords.com

Appendix

Goal is to provide:

1. Additional relevant information not located within the parameters of the plan, and

2. Support documents referred to within the plan.

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D.- Using the Plan

A business plan is a tool with three basic purposes: communication, management, and planning.
 
As a communication tool, it is used to attract investment capital, secure loans, convince workers to hire on, and assist in attracting strategic business partners. The development of a comprehensive business plan shows whether or not a business has the potential to make a profit. It requires a realistic look at almost every phase of business and allows you to show that you have worked out all the problems and decided on potential alternatives before actually launching your business.

As a management tool, the business plan helps you track, monitor and evaluate your progress. The business plan is a living document that you will modify as you gain knowledge and experience. By using your business plan to establish timelines and milestones, you can gauge your progress and compare your projections to actual accomplishments.

As a planning tool, the business plan guides you through the various phases of your business. A thoughtful plan will help identify roadblocks and obstacles so that you can avoid them and establish alternatives. Many business owners share their business plans with their employees to foster a broader understanding of where the business is going.

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