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OfficeReady
Business Plans
Tutorial
Table of Contents
Introduction to Writing a Business Plan 7
Who needs a business plan? 7
Chapter One ‑ Before You Get Started 8
Getting Started Checklist 8
Chapter Two ‑ Business Plan Writing Tips 10
Write, Edit, Re-Write, Edit, Re-Write 10
Clarity, Conciseness, and Coherence 10
Write for Your Reader 11
Business Plan Reader’s Needs Analysis Checklist 11
Writing for Funding 12
Funding Sources Checklist 12
Common Information Needs of Capital Providers 12
Writing for Management, Employees and Prospective Employees 13
Professional Writing Style 14
Make It Look Good 14
Points of Style Checklist 15
Planning Horizon: How Far Out Do We Go? 15
Use Numbers to Make Your Case 15
The Cover Page 16
Chapter Three – Types of Businesses 17
Technology 17
Manufacturing 18
Service 18
Retail 19
Chapter Four ‑ Executive Summary 20
Type of Business 20
Company or Business Summary 20
Company or Business Summary Checklist 21
Financial Objectives 21
Management Overview 22
Products and Services 22
Funds Requested 22
Use of Proceeds 22
Exit Strategy 23
Executive Summary Checklist 23
Chapter Five ‑ Company Background 24
Business History 24
Growth and Financial Objectives 24
Legal Structure and Ownership 24
Legal Forms of Business 25
Sole Proprietorship 25
Partnership 25
Limited Liability Company 26
Corporation 26
Company Location and Facilities 27
Location and Facilities Start-Up Checklist 28
Plans for Financing the Business 28
Preparing a Financing Proposal Checklist 28
Chapter Six - Organization 30
Team Members 30
Team Member Information Checklist 30
Organizational Structure 31
Other Key Employees 31
Principal Stockholders 31
Chapter Seven ‑ Market Analysis 32
Industry Analysis 32
Industry Description Checklist 34
Standard Industrial Classification System Explained 35
Using a Table to Summarize the Industry 36
Target Market 36
Target Market Checklist 36
Customer Profile 37
Major Competitors and Participants 38
Market Segmentation 38
Projected Market Growth and Market Share Objectives 39
Chapter Eight ‑ Product and Service Offering 40
Product and Service Uniqueness 40
Product and Service Descriptions 40
Product and Service Description Checklist 40
Future Products and Services 41
Competitive Comparisons 41
Research and Development 42
Patents, Trademarks, Copyrights, and other Forms of Intellectual Property Protection 42
Chapter Nine ‑ Manufacturing or Production Plan 44
Current Plant Production and Capacity 44
Production Issues 44
Outsourcing 45
Quality Control 45
Labor Force 46
Chapter Ten ‑ E-Commerce 47
E-Commerce Objectives 47
E-Commerce Infrastructure 47
Web Site 48
Web Site Functionality Checklist 48
Storefront Solutions 50
Web Site Hosting 50
Monitoring Your Web Site 51
Chapter Eleven ‑ Marketing Plan 52
Creating and Maintaining Customers 52
Product Pricing Strategy 52
Product Positioning 52
Sales and Distribution Plan 53
Sales Force Plan Checklist 53
Promotional Strategy 54
Promoting Web Presence 56
Promoting Web Site Checklist 56
Public Relations 57
Chapter Twelve - Financial Plan and Analysis 58
Financial Plan as a Modeling Tool 58
Financial Plan as a Control Tool 59
How to Use the Excel Workbook to Prepare the Financial Plan 59
Step 1: Enter Your Assumptions 59
First Year and First Month of Forecasting Period 60
Selecting a Sales Forecast Method 60
Selecting a Cost of Sales Forecasting Method 61
How to Express Dollars: In Thousands (000’s) or Actual? 61
Product or Service Descriptions 63
Step 2: Enter Past Performance 63
Step 3: Preparing Your Sales Forecast 64
Step 4: Forecasting Cost of Sales 67
Step 5: Start-Up Costs 69
Start-Up Capitalization 70
Step 6: Create the Personnel Plan 71
Step 7: Prepare the Income Statements 72
Step 8: Cash Budgets 73
Dynamic Balance Sheet 74
Break-Even Analysis 77
Financial Highlights 78
Plan versus Actual 78
Chapter Thirteen ‑ Venture Capital 80
Chapter Fourteen ‑ Appendix of Your Business Plan 82
Business Plan Appendix Checklist 82
Chapter Fifteen ‑ Information Resources 83
U.S. Small Business Administration (SBA) 83
SBA Web Site 83
Service Corps of Retired Executives (SCORE) 83
Small Business Development Centers (SBDCs) 83
Small Business Development Centers (SBDCs) Locations 84
Small Business Institutes (SBIs) 85
Other U.S. Government Resources 85
Sources of Free or Low Cost Government Information 85
Your Library 85
Trade Association Information 86
Small Business Books 86
Glossary 88
Introduction to Writing a Business Plan
Writing a business plan is the starting point for one of the keys to business success: planning. You dramatically increase your odds of success by preparing a good business plan. One of the top reasons for business failure is a lack of planning (along with poor management and under-capitalization). Writing your business plan is the first step of what should be a continuous planning process. As you compile your plan, keep in mind that it should give your venture direction and communicate that direction to others. Your plan should make clear to anyone who reads it that you have thought through your business, set reasonable goals and objectives, prioritized the most important, and anticipated problems.
Who needs a business plan?
Although business plans are very often written to solicit financing, there are other reasons for writing a plan. You may need to show your plan to potential investors, venture capitalists, and bankers, but, beyond that, your plan should be a useful internal document. Your plan should:
? Clearly communicate purpose.
? Build commitment.
? Ensure consistent decisions.
? Promote effective and efficient allocation of resources.
? Help to establish performance criteria and benchmarks for success.
? Establish a business model for your company.
Business plan preparation is a learning process. To write a good business plan, you evaluate and analyze all aspects of your business. You think about your management team’s background, your markets and customers. You examine your products, services, and marketing to best meet the needs of your customers. You document production and operations management and project your financial standing and cash needs into the future. In a nutshell, you learn a lot about your business when you write a business plan.
This tutorial was developed to help you learn to develop a business plan. Certainly, you will find the software a great tool. However, you need more than just a great piece of software to write a good plan. For starters, you need to know how to write a clear and concise document that will capture the attention of the audience and meet the needs of every decision-maker who reads it. The first few sections of this tutorial give you some tips on how to get ready to write. Most people lack the information and inputs to just sit down and start writing. Carefully review that section and the related Getting Started Checklist before you begin. Then, go on to read Chapter Two: Business Plan Writing Tips so that you can compile a planning document that will meet the needs of all those who read it.
Chapter One ‑ Before You Get Started
Writing a business plan can be intimidating. Some people will procrastinate, stalling the process because they do not know where or how to start. There are ways to overcome the intimidation and procrastination. Begin by learning about the components that typically go into a plan. This tutorial can help you better understand the parts of a plan and how to start them. Take time to read the tutorial and understand the purpose of each section of a business plan. Remember that you can come back to useful parts of this tutorial as necessary.
Like many business tasks, preparing your business plan may need to be a collaborative effort. Think about areas of the business on which you are the expert. In those areas you can start gathering key information and perhaps even start writing. For areas outside your expertise, call upon your key managers and advisors to give you critical input and content. A great team effort will not only produce a better planning document but will bring key players together to endorse the common vision or mission of the venture. You probably already have a substantial warehouse of information about your company and can incorporate that data into a business plan.
This information may exist in your mind and in the minds of your managers, in written form (memos, letters, and reports), in accounting and finance reports, marketing plans, and in brochures, tax returns, and photographs. All that information and content is waiting to be organized, analyzed, and summarized in your business plan. Your task is to find it, gather it, and begin writing. A checklist of basic information sources for developing a business plan follows. Use it to gather what you need to start the process.
With key source data in place, begin writing the plan. Many people like to move past the Executive Summary and begin writing the detailed sections like the Organization, Market Analysis, and Financial Plan. Once the details have been written, many people find it easier to summarize those details into an Executive Summary. No matter where you begin writing, make sure it is a section that you feel comfortable with. That high comfort level will help you build momentum.
Getting Started Checklist
Here’s a checklist of information sources to help you get started:
? Copy of corporate charter, partnership agreement, or other founding documents.
? Company’s mission or vision statement.
? Copies of recent company and product promotional materials such as press releases, brochures, newspaper ads, and so forth.
? Recent SEC filings (if a public company) that help describe the company and its plans for the future.
? Annual report.
? Auditor’s report.
? Recent marketing plans.
? Recent production or operational plans.
? Budgets.
? Documents that help describe the industry in which the firm operates such as articles, trade association reports, white papers, and so forth. See the tutorial section entitled Industry Analysis for more suggestions on Industry source data.
? Copies of recent tax returns.
? Copies of recent financial statements (Balance Sheet, Income Statement, and Statement of Cash Flows).
? Basic financing information such as terms of outstanding loans and other debts, common and preferred stock arrangements, and details regarding future financing arrangements.
? Web site statistics, copies of key Web pages, descriptions of Web site goals and content.
? Written profiles of the company’s target markets and the customer.
Chapter Two ‑ Business Plan Writing Tips
As you begin to write your business plan, keep in mind that there is no one best way to do it. Some people write the executive summary first and then flesh out the details. Others prepare the financial plan first, then write the detailed narrative, and finish with the executive summary. You may find yourself writing about what you know best and then delegating the other sections of the plan in a more collaborative approach.
You will need to develop a plan compilation process that works best for you. In any event, no matter what approach you use, writing a business plan is more of an art than a science. One guiding principle does hold true: You must try to meet the needs of the reader. Therefore, as you write the plan and prepare the financial projections, keep in mind the needs of the audience. Your goal should be that, once they read the plan, they should have very few questions.
Also keep in mind that your plan is both a selling tool and a feasibility study. It should communicate what you believe is achievable and why your company will succeed. It should clearly communicate your vision, mission, and dreams. Make sure that the reader of the plan has the information he or she needs to really understand your business model and if necessary, make decisions about your company.
Write, Edit, Re-Write, Edit, Re-Write
Despite the fact that this software can help you put together a polished plan, the task will still be a lot of work. Put enough time and effort into plan preparation and do your homework. A good business plan is the result of many hours of thinking, analyzing, researching, writing and re-writing. Do not expect to write a business plan on the first attempt. Even though you may have a terrific understanding of your business model and believe you can communicate it clearly, good writing is the result of a recursive process. You need to go through the circular process of writing, editing, and re-writing until your business plan meets the needs of the user.
Again, very few people can write a good business plan on the first try; it usually takes many drafts to get it right. Once you write the first draft, put the plan aside for awhile. Most writers find that if they give the plan a break they can come back to it with a fresh set of eyes. While re-examining the first draft, you will see flaws that you missed the first time. You will see that some useful rearrangement and editing is needed. After you edit and print a second draft, have someone else proofread it. Find a proofreader who understands business and who can empathize with the needs of a business plan reader. Then act on their recommendations. Keep at it till you are sure you have it right. You may have only one chance to make a great impression on your reader. Therefore, work hard and take the time to prepare a well-written and attractive document.
Clarity, Conciseness, and Coherence
Clear writing does not just happen. You must make it happen! When you edit your document, make changes that promote the three Cs: clarity, conciseness, and coherence. Anyone who is reading a business plan wants it simple and straightforward. Most serious business plan readers will want to read the document quickly. Clarity is extremely important.
Clear writing is understandable and easy to read. If your writing has clarity, your reader will immediately grasp your meaning; he or she will not have to stop and figure out your meaning. In addition to making your points clear, use few words. Most business plan readers do not have time to mull over your plan. They are going to want a quick read.
They will need to move freely from section to section. Brevity is also important. Be clear and direct. Make every word advance your meaning. Weed out unnecessary words. Delete redundancies, needless phrases, overblown phrases, and clichés.
Coherence is about good logic, linking sentences, and discernable threads of thought. Coherent writing will lead the reader through your business plan. It lets you give a guided tour of your business model. Business plan readers look for coherent thought and your logic. You can recognize coherence in your plan. Look at your sentences and how they make up your paragraphs. Do your sentences help weave a good story or are they random thoughts that do not link well with the other sentences and paragraphs? Are the sentences in any paragraph unified? Do your sentences and paragraphs communicate your message in a clear and logical way? Your business plan will be coherent if the relationships between the sentences in each paragraph are clear and logical and the links or relationships between paragraphs and sections are readily apparent.