Question

How to Write a Business Plan

Answer 1

How to Write a Business Plan
If you are starting a business or even if you already launched a business, a business plan can be extremely beneficial. Business plans are sort of road maps for a business. They detail a business’ main purpose and define its market, strategy, products and mission. Business plans can be difficult to write if you are unclear about your business’s goals or if you are unorganized. However, by writing a thorough and organized business plan, you can better understand your business’s goals and be more productive as a result of it.

Why Create a Business Plan?
There are two main reasons entrepreneurs write a business plan. The first reason is that they require financing and the second reason is that they want to organize their business on paper in order to analyze it better and ultimately use this knowledge to succeed in the marketplace.

Writing a Business Plan for Financing
Many entrepreneurs require financing to launch their business. While you might be able to explain your great business idea to your best friend or parents hoping that they will lend you money, if you go to a bank and have nothing written down on paper, the bank’s response will be a definite no-go. When people or corporations are looking to lend money out, they want lending opportunities that are genuine. One of the ways to convince lenders that you are serious, organized and have a well thought out business idea is to write a business plan. Without a business plan, very few lenders will take you seriously.

Writing a Business Plan for Success
Another reason one should consider creating a business plan is that the act of creating a business plan makes you think about your business, analyze it in many different ways and realize its possible strengths and weaknesses. A business plan is an exercise in creating a roadmap for success. A business plan can be looked at as a plan of action or an intricate detail of your business’s purpose. Writing a business plan is extremely beneficial and can lead to several new ideas for success.

Elements of a Business Plan
A business plan is usually a lengthy document. There are many elements to a business plan and each business plan (depending on the type of the business) will have its own specific parts, however, here are some common components to a business plan.

Executive Summary
Since business plans can be very lengthy, an executive summary is presented. An executive summary is just that- a summary of the business plan. Because anyone who reads your business plan will usually focus on your executive summary, make sure this part of the business plan is written well. The executive summary should be straightforward and focus on some basic questions such as:

What kind of company are you?
What are the products or services that you offer?
What is unique about your products and/or services?
Who are the managers or executives in your company and what special skills or experience do you bring to the table?
If you are creating a business plan specifically for financing answer questions such as:

What type of financing do you need?
How would you use the money?
Table of Contents
A table of contents is a useful component to have included in your business plan. Not only does it make it very easy for others who read your business plan to find information fast and easily, but for those writing the business plan, it can work as an outline making your business plan easier to organize.

Company Description
The company description is where you tell others about your company and specifically the history of the company, how you got started and how you have grown your company since its inception. You can also detail your current sales and include your big plans for the future. The company description is an excellent place to sell your company to those that read your business plan. No matter what type of business you are in, this is the part of the business plan that you can definitely show off how great your company, products and ideas really are.

Products and Services Your Company Offers
In this section of your business plan, you will want to describe the specific products and services that you offer. You should try to be as straightforward as possible. It is also important to answer specific questions such as how do your products and/or services differ from other companies? What do your products and/or services offer that other companies can’t? How are your products created? Are any of your products patented? Can they be patented?

Marketing Analysis
You should prove to the reader that you know how your products perform in the market and understand how to sell your product in the current marketplace. In order to write the marketing analysis component, you should engage in a market analysis for your company. One type of marketing analysis that is popular is called SWOT (Strengths, Weaknesses, Opportunities and Threats).

This section is very important to investors, because they want to be sure that you have done your research and have already figured out how much potential a product has in the current market and later down the road.

Marketing Plan
A marketing plan announces your strategy to sell and succeed in the marketplace. Some of the factors that should be taken into consideration in this section are how will customers learn about your products or services, what will make them choose your company over the competition and which resources you will use to both advertise and sell your products or services.

Operations Plan
Your day to day operations are extremely important to most investors. An operations plan will help you detail how you will run your business on a day-to-day basis, what resources you will need to tap, where your will business be located, what type of equipment or supplies you will need, how much labor you will need to run your business and any other specifics regarding operations.

Financial Plan
Your business’s main goal is to make a profit and understanding your company’s financials is essential. A financial plan should communicate to the reader that you and your company understand the financial aspects of your company. You should show knowledge of sales forecasts, cash flow, balance sheet, P&L statements, etc. If you have hired a team of accountants or other financial officers, mention that in this section.

Management
Your management team can be extremely important to those that want to invest in your business. This is the section to state who is part of your core management team and what special skills and credentials they bring to the table. For many lenders, a strong management team can be a huge plus for approving financing.

Appendices
The appendices is the place all your charts, pictures of products, resumes, promotional materials and independent assessments should be located. Although the appendices section doesn’t sound like a vital component of your business plan, sometimes the contents of a company’s appendices is what wins financing.

Resources for Writing a Business Plan
Writing a business plan is not easy and takes a considerable amount of time, energy and analysis. You should be aware of the many resources that can help an entrepreneur write a business plan. Online alone, there are dozens of great sites and forums that can help one understand the intricacies of a business plan and offer free templates and advice on writing the perfect plan. Besides online resources, there are tons of articles and books available that go deep into the process of creating a business plan.

Once Your Business Plan is Completed
Once your business plans is completed, you should definitely have other entrepreneurs, your local small business association or close friends proofread it. Many times what seems clear to us can be quite confusing to others. By having it reviewed by others, you can gain a good idea on how effective it is.

Answer 2

This is the single most important document you can create for your new business.

Without a business plan, you'll have nothing to show potential investors, angels, and any potential sources of financing.

Writing the plan forces you to think through all aspects of the company. Putting your ideas into words can be an enlightening process and is also a very creative one. It is the primary step of taking an idea and turning it into reality. It is a dynamic process and not a single event. It is the blueprint from which you build.

With all this mind, you can imagine how much time will need to go into the creation of the single most important document your company will probably ever produce. Don't expect to knock out your business plan in a day. Even if you've had this business idea in your head for years, the creation process can take weeks, possibly months before you get it right. Research alone will take several days, as will the editing and fine-tuning of your work. If you have other partners or employees already at work for you, you can divvy out the different sections of this document to the respective areas (Marketing receives the Marketing Plan, Business Development receives Industry Analysis, etc.).

Full disclosure is the law! Remember that in order to get your project funded you must look at everything under a microscope. Everything that is outlined in the business plan, valuation study, financing plan, and due diligence package will be verified by third party references or audited by the investing party or bank funding your project. It is a criminal and civil offense to either misrepresent or omit material facts that would affect the decision of the investor or lending institution.

The following pages explain the basic elements that go into every business plan, as well as some helpful hints in making the process as painless and stress-free as possible. And get excited! You're about to embark on a great adventure: the creation of your own company,


Preliminary Steps:
1. Get a computer, preferably a PC.

2. Learn Microsoft Word.

At least the basics. Sorry, we are not owned or financed by Microsoft, but they are the office software provider. Write the plan in Word and process as a PDF for e-mailing. More on this later.

3. Create a company logo. If you already have one, good for you - make sure you include it in your business plan at least on the cover page. If you don't, see How-To Create a Logo

4. Cover Page
Create a world-class cover page, and make it look great. Because this is the first portion of the business plan that anyone will see, you want to make sure it accurately reflects your business's ideals and direction.

A. At the top, type “Strategic Business Plan.” A good font to use is Arial or Verdana.

B. Insert your logo into the page. (Using Word you would select “Insert" from the menu bar, then "Picture." Find the logo on your hard drive and insert it.)

C. Type your company name.

D. If you want to get fancy, you can lay in a background. If you plan on using artwork, make sure that it is professional, not some cutesy clip art of Dilbert. If you have any question at all about your artistic sensibilities, keep the cover text-only, and keep it as simple as possible.

E. Start writing. Remember, this may take weeks to do it right.

5. Confidential Language
On the next page, include confidential language. Also include your company name, address and phone.

Here is an example of legal lingo to put in there:

"CONFIDENTIAL INFORMATION: The (Your Company) Strategic Business Plan is intended for use on a confidential basis only. The use of the plan document for purposes other than the review of the company’s proposed structure, operations and performance might involve serious legal consequences.

This plan contains information that is proprietary and confidential to (Your Company) This obligation of confidentiality shall apply until such time that (Your Company) makes the information contained in this Business Plan available to the public, if ever.

With receipt of this plan, recipient acknowledges and agrees that: In the event the recipient does not wish to pursue this matter, this document will be returned to the address listed above as soon as possible. The recipient will not copy, fax, reproduce, divulge, or distribute this Plan, completely or in part, without the express written consent of (Your Company). All of the information contained herein is to be treated as confidential material with no less care than that afforded to your own company’s confidential material.”


6. Table of Contents
Fill this in last after the whole plan is written so you can create page numbers, etc.

Contents

Executive Summary .......................... 3

The Company ................................ 6

Mission Statement .......................... 7

The Website ................................ 8

Industry Analysis .......................... 9

Products & Services ......................... 12

Customers & Competition .................... 15

Marketing .................................. 17

Management ................................. 21

Financials ............................................ 22


7. Executive Summary
This is where it goes, but finish it last. As an outline (usually only 2-4 pages long) of the complete business plan, the executive summary is best created when all other components of your plan have been finalized. Make this as good as you can because most people do not read past it.

The summary includes and describes principal markets, personnel, financial highlights, and the proposed deal structure. At times you may be asked for this section only, since the executive summary is a more concise version of the overall document. This section should include:

This section should include:

-Company Overview "Can't act. Slightly bald. Can dance a little." - 1920s movie studio executive commenting on Fred Astaire's screen test.

-Products and Services

-Market Analysis

-Funds Requested and Uses

-Summary of 3-Year Financial Projections

-Exit Strategy

-Management Team Bios

When preparing the executive summary, keep in mind the following:

-Keep length between 2-4 pages.

-Include a description of all elements covered in the business plan; highlight key points.

-Include pertinent investment information and provide relevant data (i.e., clearly state and define the amount of funding required, when these funds are needed, the specific use of these funds, and the repayment method).

-Identify the market being pursued.

-Identify the market opportunity or problem you are trying to solve.

-Articulate the strategy for attacking the market.
Identify any significant risks as far as milestones, technical aspects, market response, and steps being taken to eliminate risks.

-Identify an exit strategy (merger, buy-out, go public, etc.).

-Consider including 10 PowerPoint slides.

Do your own due diligence on the funding sources to ensure that they match your type of company and they have been active in your space in recent months.

8. Company Description
OK. You may be a start-up but you have to think big. The company description should paint a portrait of the company you're hoping to create. Include the following:

-Describe how the business is/will be organized.
-Identify the current owners.
-Describe the opportunity the business is capitalizing on.
-Describe the business's products or services.
-Describe how the business and product/service are unique.
-Describe what makes the business qualified to succeed in the market.
-List your corporate objectives. What do you plan on accomplishing in the first month, 3 months, 6 months, and one year?
-Describe the legal structure of the company.

Remember to keep your business plan brief. Prepare an “Elevator Pitch,” an explanation of your business in 30 seconds or less.

9. Mission Statement
This is a single statement that should be your corporate guiding light, the reason for the company’s existence.

Example mission statement:

To be the most respected and successful sports league and sports marketing organization in the world. (The NBA)

10. Website Description
If you're thinking of having a website constitute a large portion of your business, make sure you include this information. Include the following:

-Destination of the site (what does it provide?)
-Summary of Services Business Model
-How will you turn traffic into money?
-What is the key to making this a wise business decision?

Site Positioning
-What is your market's most important need(s)?
-How do you plan on meeting these needs?
-Who are your main competitors (summary)?
-How is your site better than the competition?

Traffic Forecast
-How and what do you plan on measuring (hits, visits, etc.)?
-Explain growth rates.
-Provide background on due diligence.
-Why is your traffic forecast believable?

Front End
-Is the site graphic or HTML?
-How fast can it load?
-Is it aesthetically pleasing?

Back end
-What technology are you planning on using?
-How will you handle the dynamic parts of the site (newsletter, admin. page, registration and business database, contact page, etc.)?
Future Development

-Look ahead to future benefits and services you may want to provide.
-Present an outlook for future services.
-Is there a long-term service strategy?
-Is there a relationship between market segments, market demand, market needs, and service development?

Answer 3

11. Industry Analysis
You know that your industry is going to be big in the future. Not just big, but BIG. It's going to be the next Internet, right? That's all fine and dandy, but the likelihood of convincing your investors based on your gut instinct is probably about the same as Sinead O'Connor having tea with the Pope.

In order to be truly persuasive, you'll need to provide some cold hard facts. This is where your research skills will come in handy. Even five years ago it would have been very difficult to conduct all the research necessary to complete a business plan. Today, especially with available software, websites, and search engines on the Internet, this has become much easier, efficient and - dare we say - fun.

Websites to use in your research will depend on your industry. However, every industry analysis should answer the following questions:

-What is the size, in units and dollars, of the market in which the company competes?
-What market trends, if any, are affecting the market size?
-How many competitors are there?
-What are the barriers to entry?
-How do these industry parameters favor the company?

Be sure to cite any possible legal and regulatory problems and the way in which they are being handled.


12. Products & Services
Now's when you get to showcase your idea. In this section, you will describe the status of your product or service, and detail how you plan on bringing it to fruition, how it will be produced or delivered. While you'll want to provide enough information to satisfy your readers, try to remain as brief as possible while still covering any major questions that might arise. In summary, you should describe:

Each of your products or services
The proprietary features of each product or service The economic or other benefits to the customer that will drive demand (i.e., what is the value proposition?)

The competitive element of the product or service
Patents or other forms of intellectual property protection being sought

13. Customers & Competition
In this section you'll outline the demographics you'll be targeting for your product or service. This will include basic research, done principally by the entrepreneur, to identify a market niche for the product or service offered. Identify the size, dynamics, competition, and other factors affecting the proposed business operation prior to investing large sums of money or proceeding with a "missionary marketing" venture with little or no chance for success. Be sure to answer the following questions:

-Who are the proposed customers?
-What are their demographics?
-What products/services are these customers presently buying to fulfill the need that the company hopes to fill?
-What are the customer's true needs, and what trends are affecting these needs?
-How do you plan to capture customers and generate growth?
-Who are the major competitors? Andy Warhol designed the Rolling Stones' now-famous lips-and-tongue logo.
-How large are the major competitors?
-What are their strategies?
-What are the strengths and weaknesses of the competition?
-How will the competition respond?

Provide a chart or table that provides a summary comparison of the competitors.


13. Marketing Plans:
Because many business plans fail to adequately cover marketing aspects, you'll want to make sure you are as thorough as possible. Be sure to include an outline of plans for:

-Pricing
-Distribution Channels
-Promotion

Be sure your material answers the following questions:

-How do you plan on introducing the product or service and generating long-term sales?
-What are the specifications of the product or service?
-At what price point will the offerings be sold?
-How does the company plan to promote the product or service?
-Who makes the purchase decisions?
-Is the industry seasonal or cyclical?
-What are the switching costs?
-What are your promotional strategies?
-How do you plan on distributing the product or service?
-What are the service and support requirements?

While these next two sections are just as important as the rest of your business plan, they should be relatively brief.

14. Design & Development Plans
-What is the current status of the product or service?
-When is the proposed "finish" date of development?
-What obstacles, if any, must be overcome?
-What specific tasks must be completed?
-Who, if anyone, outside the company will be involved?
-How is the company protecting proprietary information/technology?

15. Operation Plans
-What functions will be needed over time to make the venture a success?
-What specific tasks will be performed?

16. Management Team
Every successful business has a team of knowledgeable professionals behind it. Ensure your investors that you have assembled an experienced, reliable team by providing the following information about your current staff:

-Key management personnel and their backgrounds
-Other investors and/or shareholders
-Members of the Board of Directors or Board of Advisors
-Professional advisors (e.g., lawyer, accountant, etc.)
-Particular strengths of your management team
-Your strategy, including a recruitment schedule, for filling the roles of missing members of the management team


17. Financial Plan
Every business decision has financial implications. Assure your investors that your strategy is well thought out by providing the following:

Assumptions to use in forecasts:
-Sales The continuity experts were a little lax during the filming of 1987's Wall Street. -Although the film supposedly takes place during 1985, the 1986 space shuttle disaster is mentioned.
-Cost of Sales
-Product Development Expenses
-Other Expenses
-Balance Sheet
-Cash Flows
-Actual or Pro-Forma Income, Balance Sheets and Cash Flow Statements
-Amount of needed capital, with a timetable
-Exit strategy

State and Federal Securities laws must be observed in all cases when seeking equity capital and debt financing. Prior to any action taken in raising funds, a securities attorney will be required to render an opinion on each project as to the requirements specific to that business. Consulting a CPA and a Tax Attorney is also recommended.


18. Final Steps
Now that you've created all the elements of your business plan, you'll want to make sure you've organized them in a presentable manner. Make sure you include a table of contents and any necessary charts/graphs/diagrams that you may have mentioned along the way (there's nothing worse than telling someone to turn to diagram B and not having the diagram be there!). You can even include appendices with the following:

-Financial spreadsheets and calculations
-Product or service specifications
-Copies of all pertinent legal documents
-Statistics and articles

Once you've created a table of contents - don't forget page numbers! - consider having your business plan professionally bound. This can be done either in-office (if you have the appropriate materials, i.e., a binding machine and/or report covers) or at a professional printer, such as Kinko's. The final look of your business plan can make it stand out from the hundreds of others that are working their way amongst investors.

Assemble the contents in this order:

-Cover Page
-Executive Summary
-Mission Statement
-Company Description
-Website Plan
-Industry Analysis
-Product or Service The unfinished pyramid on the back of a $1 bill symbolizes the future growth of the country.
-Analysis of Customers and Competition
-Marketing Plan
-Design and Development Plan
-Operations Plan
-Management Team
-Financial Plan
-Appendices


Do's
-Do be brief. The unfinished pyramid on the back of a $1 bill symbolizes the future growth of the country.
-Do let the reader know early on what business you're in.
-Do state the company's objectives.
-Do describe the strategy and tactics that will enable the company to meet objectives.
-Do cite clearly the amount of funding required.
-Do have a clear and logical description about the investor's exit strategy.
-Do be realistic in making estimates and forecasts.
-Do discuss the company's business risk.
-Do be specific.
-Do summarize and properly structure internal budgets and plans.
-Do enclose the proposal/business plan in an attractive but not overdone cover.
-Do provide extra copies of the plan to help speed up review.
-Do involve your management team in the business plan development process.

Don'ts
-Don't use highly technical descriptions of your product or services.
-Don't make vague or unsubstantiated statements.
You're well on your way. Now go do it. Good luck!