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How to prepare a business plan that guarantees big
HOW TO PREPARE A BUSINESS PLAN THAT GUARANTEES BIG PROFITS...
Success in business comes as a result of planning. You have to have
a detailed, written plan that shows you what the ultimate goal is,
the reason for the goal, and each milestone that must be passed in
order to reach your goal.
A business plan is a written definition of, and an operational plan
for achieving your goal. You need a complete business tool in order
to define your basic product, income objectives and specific
operating procedures. YOU HAVE TO HAVE A BUSINESS PLAN to attract
investors, obtain financing and hold onto the confidence of your
creditors, particularly in times of cash flow shortages - in this
instance, the amount of money you have on hand compared with the
expenses that must be met...
Aside from an overall directional policy for the production, sales
efforts and profit goals of your product - your basic "travel guide"
to business success - the most important purpose your business plan
will serve, will be the basis or foundation of any financial
proposals you submit. Many entrepreneurs are under the mistaken
impression that a business plan is the same as a financial proposal,
or that a financial proposal constitutes a business plan. This is
just a misunderstanding of the uses of these two separate and
different business success aids.
The business plan is a long range "map" to guide your business to
the goal you've set for it. This plan details the what, why, where,
how and when, of your business - the success planning of your
company.
Your financial proposal is a request for money based upon your
business plan - your business history and objectives.
Understand the differences. They are closely related, but they are
not interchangeable.
Writing and putting together a "winning" business plan takes study,
research and time, so don't try to do it all in just one or two
days.
The easiest way is to start with a loose leaf notebook, plenty of
paper, pencils, pencil sharpener, and several erasers. Once you get
you mind "in gear" and begin thinking about your business plan,
"10,000 thoughts and ideas per minute" will begin racing through
your mind... So, it's a good idea when you aren't actually working
on your business plan, to carry a pocket notebook and jot down those
business ideas as they come to you - ideas for sales promotion,
recruiting distributors, and any other thoughts on how to operate
and/or build your business.
Later, when you're actually working on your business plan, you can
take out this "idea notebook" - evaluate your ideas, rework them,
refine them, and integrate them into the overall "big picture" of
your business plan.
The best business plans for even the smallest businesses run 25 to
30 pages or more, so you'll need to "title" each page and arrange
the different aspects of your business plan into "chapters." The
format should pretty much run as follows:
Title Page
Statement of Purpose
Table of Contents
Business Description
Market Analysis
Competition
Business Location
Management
Current Financial Records
Explanation of Plans For Growth
Projected Profit & Loss/Operating Figures
Explanation of Financing for Growth Documentation
Summary of Business & Outlook for The Future
Listing of Business & Personal References
This is a logical organization of the information every business
plan should cover. I'll explain each of these chapter titles in
greater detail, but first, let me elaborate upon the reasons for
proper organization of your business plan.
Having a set of "questions to answer" about your business forces you
to take an objective and critical look at your ideas. Putting it all
down on paper allows you to change, erase and refine everything to
function in the manner of a smoothly oiled machine. You'll be able
to spot weaknesses and strengthen them before they develop into
major problems. Overall, you'll be developing an operating manual
for your business - a valuable tool which will keep your business on
track, and guide you in the profitable management of your business.
Because it's your idea, and your business, it's very important that
YOU do the planning. This is YOUR business plan, so YOU develop it,
and put it all down on paper just the way YOU want it to read. Seek
out the advice of other people; talk with, listen to, and observe,
other people running similar businesses; enlist the advice of your
accountant and attorney - but at the bottom line, don't ever forget
that it has to be YOUR BUSINESS PLAN!
Remember too, that statistics show the greatest causes of business
failure to be poor management and lack of planning - without a plan
by which to operate, no one can manage; and without a direction in
which to aim its efforts, no business can attain any real success.
WHEN YOU FAIL TO PLAN, YOU PLAN TO FAIL!
On the very first page, which is the title page, put down the name
of your business - ABC ACTION - with your business address
underneath. Now, slip a couple of lines, and write in all capital
letters: PRINCIPAL OWNER - followed by your name if you're the
principal owner. On your finished report, you would want to center
this information on the page, with the words "principal owner"
offset to the left about five spaces.
Example: ABC ACTION
1234 SW 5th Ave. Anywhere, USA 00000
PRINCIPAL OWNER: Your Name
That's all you'll have on that page, except the page number -1-...
Following your title page is the page for your statement of purpose.
This should be a simple statement of your primary business function,
such as: We are a service business engaged in the business of
selling business success manuals and other information by mail.
The title of the page should be in all capital letters across the
top of the page, centered on your final draft - skip a few lines and
write the statement of purpose. This should be direct, clear and
short - never more than two (2) sentences in length.
Then you should skip a few lines, and from the left hand margin of
the paper, write out a subheading in all capital letters, such as:
EXPLANATION OF PURPOSE.
From, and within this subheading, you can briefly explain your
statement of purpose, such as: Our surveys have found most
entrepreneurs to be "sadly" lacking in basic information that will
enable them to achieve success. This market is estimated at more
than 100 million persons, with at least half of these people
actively "searching" for sources that provide the kind of
information they want, and need.
With our business, advertising and publishing experience, it is our
goal to capture at least half of this market of information seekers,
with our publication, MONEY MAKING MAGIC! Our market research
indicates we can achieve this goal, and realize a profit of
$1,000,000 per year within the next 5 years...
The above example is generally the way you should write your
"explanation of purpose," and in subtle definition, why you need
such an explanation. Point to remember: Keep it short. Very few
business purpose explanations are justifiably more than a half page
long.
Next comes your table of contents page. Don't really worry about
this one until you've got the entire plan completed and ready for
final typing. It's a good idea though, to list the subjects
(chapter titles) as I have, and then check off each one as you
complete that part of your plan. By having a list of the points you
want to cover, you'll also be able to skip around and work on each
phase of your business plan as the idea or the interest in
organizing that particular phase, stimulates you. In other words,
you won't have to make your thinking or your planning conform to the
chronological order of the "chapters" of your business plan -
another reason for the loose leaf notebook...
In describing your business, it's best to begin where your statement
of purpose leaves off. Describe your product, the production
process, who has responsibility for what, and most importantly, what
makes you product or service unique - what gives it an edge in your
market. You can briefly summarize your business beginnings, present
position and potential for future success, as well.
Next, describe the buyers you're trying to reach - why they need and
want (or will buy) your product - and the results of any tests or
surveys you may have conducted. Once you've defined your market, go
on to explain how you intend to reach that market - how you'll alert
these prospects to your product or service and induce them to buy.
You might want to break this chapter down into sections such as...
publicity and promotions, advertising plans, direct sales force, and
dealer/distributor programs. Each section would then be an outline
of your plans and policies.
Moving into the chapter on competition, identify who your
competitors are, their weaknesses and strong points - explain how
you intend to capitalize on those weaknesses and match or better the
strong points. Talk to as many of your "indirect" competitors as
possible - those operating in different cities and states.
One of the easiest ways of gathering a lot of useful information
about your competitors is by developing a series of survey questions
and sending these questionnaires out to each of them. Later on, you
might want to compile the answers to these questionnaires into some
form of directory or report on this type of business.
It's also advisable to contact the trade associations and
publications serving your proposed type of, business. For
information on trade associations and specific trade publications,
visit your public library, and after explaining what you want, ask
for the librarian's help.
The chapter on management should be an elaboration on the people
operating the business. Those people that actually run the business
- their job titles, duties, responsibilities and backfilled
resume's. It's important that you "paint" a strong picture of your
top management people because the people coming to work for you or
investing in your business, will be "investing in these people" as
much as your product ideas. Individual tenacity, mature judgement
under fire, and innovative problem-solving have "won over" more
people than all the AAA Credit Ratings and astronomical sales
figures put together.
People becoming involved with any new venture want to know that the
person in charge - the guy running the business knows what he's
doing, will not lose his cool when problems arise, and has what it
takes to make money for all of them. After showing the "muscle" of
this person, go on to outline the other key positions within your
business; who the persons are you've selected to handle those jobs
and the sources as well as availability of any other help you might
need.
If you've been in business on any kind of scale, the next chapter is
a picture of your financial status - a review of your operating
costs and income from the business to date. Generally, this is a
listing of your profit & loss statements for the past six months,
plus copies of your business income tax: records for each of the
previous three years the business has been an entity.
The chapter on the explanation of your plans for the future growth
of your business is just that - an explanation of how you plan to
keep your business growing - a detailed guide of what you're going
to do, and how you're going to increase your profits. These plans
should show your goals for the coming year, two years, and three
years. By breaking your objectives down into annual milestones,
your plans will be accepted as more realistic and, be more
understandable as a part of your ultimate success.
Following this explanation, you'll need to itemize the projected
cost and income figures of your three year plan. It'll take a lot
of research, and undoubtedly a good deal of erasing, but it's very
important that you list these figures based upon thorough
investigation. You may have to adjust some of your plans downward,
but once you've got these two chapters on paper, your whole business
plan will fall into line and begin to make sense. You'll have a
precise "map" of where you're headed, how much it's going to cost,
when you can expect to start making money, and how much.
Now that you know where you're going, how much it's going to cost
and how long it's going to be before you begin to recoup your
investment, you're ready to talk about how and where you're going to
get the money to finance your journey. Unless you're independently
wealthy, you'll want to use this chapter to list the possibilities
and alternatives.
Make a list of friends you can approach, and perhaps induce to put
up some money as silent partners. Make a list of those people you
might be able to sell as stockholders in your company - in many
cases you can sell up to $300,000 worth of stock on a "private
issue" basis without filing papers with the Securities and Exchange
Commission. Check with a corporate or tax attorney in your area for
more details. Make a list of relatives and friends that might help
you with an outright loan to furnish money for the development of
your business.
Then search out and make a list of venture capital organizations.
Visit the Small Business Administration office in your area - pick
up the loan application papers they have - read them, study them,
and even fill them out on a preliminary basis -and finally, check
the costs, determine which business publications would be best to
advertise in, if you were to advertise for a partner or investor,
and write an ad you'd want to use if you did decide to advertise for
monetary help.
With a listing of all the options available to your needs, all
that's left is the arranging of these options in the order you would
want to use them when the time comes to ask for money. When you're
researching these money sources, you'll save time by noting the
"contact" to deal with when you want money, and whenever possible,
by developing a working relationship with these people.
In your documentation section, you should have a credit report on
yourself. Use the yellow pages or check at the credit department in
your bank for the nearest credit reporting office. When, you get
your credit report, look it over and take whatever steps are
necessary to eliminate any negative comments. Once these have been
taken care of, ask for a revised copy of your report and include a
copy of that in your business plan.
If you own any patents or copyrights, include copies of these. Any
licenses to use someone else's patent or copyright should also be
included. If you own the distribution, wholesale or exclusive sales
rights to a product, include copies of this documentation. You
should also include copies of any leases, special agreements or
other legal papers that might be pertinent to your business.
In conclusion, write out a brief, overall summary of your business -
when the business was started, the purpose of the business, what
makes your business different, how you're going to gain a profitable
share of the market, and your expected success during the coming
5-years...
The last page of your business plan is a "courtesy page" listing the
names, addresses and phone numbers of personal and business
references - persons who have known you closely for the past five
years or longer - and companies or firms you've had business or
credit dealings with during the past five years.
And, that's it - your complete business plan. Before you send it
out for formal typing, read it over once a day for a week or ten
days. Take care of any changes or corrections, and then have it
reviewed by an attorney and then, an accountant. It would also be a
good idea to have it reviewed by a business consultant serving the
business community to which your business will be related. After
these reviews, and any last-minute changes you want to make, it'll
be ready for formal typing.
Hire a professional typist to type the entire plan on ordinary white
bond paper. Make sure you proof read (or is it "proofread") it
against the original. Check for and correct any typographical
errors then one more time - read it through for clarity and the
perfection you want of it.
Now you're ready to have it printed and published for whatever use
you have planned for it - distribution amongst your partners or
stockholders, as the business plan for putting together a winning
financial proposal, or as a business operating manual.
Take it to a quality printer in your area, and have three copies
printed. Don't settle for photocopying... Have it printed!
Photocopying leaves a slight film on the paper, and will detract
from the overall professionalism of your business plan, when
presented to someone you're trying to impress. So, after going to
all this work to put it together properly, go all the way and have
it duplicated properly.
Next, stop by a stationery store, variety store or even a dimestore,
and pick up an ordinary, inexpensive bind-in theme cover for each
copy of your business plan. Have the holes punched in the pages of
your business report to fit these binders and then slip each copy
into a binder of its own.
Now you can relax, take a break and feel good about yourself... You
have a complete and detailed business plan with which to operate a
successful business of your own... A plan you can use as a basis
for any financing proposal you may want to submit... And a precise
road-map for the attainment of real success...
Congratulations, and my best wishes for the complete fulfillment of
all your dreams of success!!!
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