CheatSheet:

Creating a BusinessPlan

What is aBusinessPlan?

Whatis aBusinessPlan?

A businessplanisawrittendocument describingthe currentactivitiesof abusiness settingout its futureaimsandobjectivesandhowtheyaretobeachievedoverasettimeperiod.

A businessplanusuallycontains awrittendiscussionknown astheplannarrativeandanumber-

based sectionalsoreferredtoas thefinancial projections.

Whycreateabusinessplan…

When itcomes tosuccessinbusinessthereis nosubstitutefor intimateknowledge ofthe marketyouserve.

If youneedmoney,youneed a formalbusinessplan-this istheentry ticketto thegame.

If you don’tneed anyoutsidecapital, you shouldstillwant tocollectasmuch knowledgeas is available aboutyourmarketandindustryandabusiness planisa greatwaytoformalizethis process.

The 10Questions YouMustAnswer

Question#1:What doesthebusinessstandfornowandwhatwillitbein the future?

This questionaddressesthequestionsofmissionandvisionforthe business.

It shouldnotonlyaddresswhat thebusinessisbutalso whatthebusinessisnot.

Question#2:What doessuccess looklike?

This is aboutgoal setting. Ifyoudon’tknowwhat successlookslikethanyoucanneverfind it.

Goals shouldbesetforspecifictimeframes.

Ask yourself:“WhatdoIhaveto accomplish bytheendof thisyear toachieve mydefinitionof

success”.

Cheat Sheet gathered from Small Biz U 2013

Question#3:What doyoumake?

Everybusinessmustcreatevalueandultimatelymakesomething.

This is aboutbasicvaluepropositionofthe business. Question#4:Howdo youmakeit?

This question is aboutyourcraft,systems, andwayofdoingbusiness.

It addressesyour inputs,processes,andoutputsofthebusiness. Question#5:Howdo yousellit?

Whilemakingsomethingisaboutthecreationofvalue, this questionisaboutmarketingor capturingvalue.

Manyentrepreneurs aregreatatcreatingvaluebut manyfail tocapture itbydroppingthe ball when itcomes tomarketingexecution.

As management authorPeter Druckerwrote,“There are onlytwo functionsofabusiness:

InnovationandMarketing.”

Question#6:Whoarethe customers?

This questionaddressesthepeople thatthebusinessserves.

Mostsuccessful small businessesoperateinturbulentanduncertainmarketingcateringtosmall

niches ofcustomersthat abigbusinessdoesn’twant toserve.

Bydoingthis theyareabletostayoffthecompetitiveradar screen ofthebigcompanies who

can’taffordto takehugegambleson suchuncertainmarketsegments.

Question#7 Whatcanyourbusinesscontributetotheworldthat no oneelsecan?

This is abouttheunderstandingof whatyour“onebigthing”is.

It involves adeep passion,understandingof whatyoucanbethebestintheworldat, anda sufficienteconomic enginetodriveit.

Question#8

Whoarethepeoplewhowill operateandgrowthe businessandhowwilltheybeorganized.

This speaksto theorganizational structureofthe business,aswellas, thelegalstructuring.

Havingagreatideaisnever enough. Greatideas arecommon- thepeople whocansuccessfully implementthemarerare.

Question#9

At theendoftheday,a businessmustbeprofitable or it’snotabusiness.

Youshouldbewellversed intherevenueandcostdriversthatmake your business profitable.

Cheat Sheet gathered from Small Biz U 2013

Withoutprofits acompanycannotgrowandwill neverbeanythingmorethanjusta lifestyle business.

Question#10: Whatstandsin thewayofsuccess andhowwillyouovercomeit?

This is aboutyour futurestory-theenemyandhowyouwillovercomeitandultimatelywin.

Upuntil now, youhavebeenaddressingquestions thatconcernyour businessmodelwhichis essentiallyyour business ina vacuum.

Butsoonerorlater,your businesswillconfrontinternal forcesor externalcompetitorsthatwill

potentiallykeepyoufromachievingyour goals.

Dealingwith this realityis,inessence,your strategy.

DeterminingYour Audience

Who’sthe audience?

Theaudiencethatthe businessplanwill bepresentedtoshoulddrivethewaythe documentis constructed.

Differentreadersexpecttoseedifferentthings in a plansoitisextremelyimportantthatyou put yourself into their shoes beforestartingtheplan.

Writingtheplanfora lender…

Lendersareconservative.Theyneed toseecollateral tosecurethe loanandthefinancial projectionsyouprovideneed to beveryconservative.

Also,makesureyoubreak downyour loanrequestintoitsessential elements. Inother words, youshouldlistouthowmuch youneedforequipment, inventory, supplies,signage,prepaid expenses, workingcapital,etc.

Themostimportant thingabanker islookingfor (aftercollateral) is thecashflowof the business. Theywant toseethat your businesshas enoughcapacitytorepaytheloanamount.

Your businessplanshouldincludetheseassumptions intothefinancial projections showingvery clearlyboththe principal andinterestpaymentsbeingmadebacktothelender.

Writingthebusiness plantoattractan investor…

If youaretryingtosecureequity, youcannotspendenoughtimeontheexecutivesummaryof your business plan. This is thefirstthing,if nottheonly thing, thatgetsreadbytheequity investor.

Theexecutivesummaryisyour business planinminiature. It shouldcontainthescopeofthe

opportunityandtheessence oftheplanin lessthana page.

After readingthe executivesummaryandmakingthedecisiontoreadon, equityinvestors look to onesectionof theplanmorethanthe restL themanagementteam. Savvyinvestors know thanan experienced andwell-roundedmanagement teamcanmakeall thedifferencewhen it

Cheat Sheet gathered from Small Biz U 2013

comestosuccessof thebusiness. Yourmanagement teamsectionshouldbevery comprehensivecitingthebackground, education,experience,skill-sets,andresponsibilitiesfor everymemberoftheteam. Also,youshouldincludeall theoutside professionalsthat youwill utilizesuchasyourattorney, accountant,managementconsultants,etc.

Evenwell-puttogether plans canflounderbecauseofthe failuretoappreciatethecrucial differencebetweenentrepreneurs andinvestors. Entrepreneurs focusonthepotential ofan idea;investors focusonitsrisks. Thekeytoraisingcapital is thereforeloweringrisk,nothyping the upside. Theentrepreneurs whosayhowthey’ll reduceriskaretheonesgettingcapital.

Of course,investorsin growingcompaniesunderstandriskis partoftheequation, butthewant

toseeevidencethat enentrepreneurrecognizestheriskfactorsfacingthebusiness andhas takenstepstocontrolthem.Thatmeans addressingquestions aboutmarketrisk,financial risk, andtechnological risk- stressingnotthe dazzlingupsidebutthereturninvestors canreasonably expect,weightedagainstalimitedandcarefullychosendefined setofrisks.

If aninvestorlikeswhattheyseeinthemanagementteamsection,they willusuallyproceedto the financial projections. Obviously,oneof themostimportant things an investor wantstoseeis what potentialreturnthere mightbeweightedagainsttheclearlydefined risks. For this,they turntotheprojectedprofits ofthe business.While your businessplanneednot discuss the amount ofownershipyouare willingtogiveup(thatwillbenegotiated later)it shouldgivethe investor someideaof whatreturns theymightreceivefrom their investmentin your business.

Writingtheplanforamanagementteam…

Writingabusinessplanfora management teamisdifferentthanwritingaplanfor lendersor investors.People in anorganizationhavetounderstandhowacompanyissupposedtobe differentandhowitcreates valuecomparetoitsrivals. This can beaccomplishedthroughthe use ofafocusedbusiness plan.

Thefundamental taskformanagersis decision-making. Thereforeabusinessplantailored to this audiencemusthelpthemanswer thebigstrategic questions:

oWhoareweandwhat dowestandfor?

oWhat arewenot?What arethetrade-offswemustmake?

oWhereareweheaded?

oHowdowecreatevaluedifferentlyfromrivals?

oWhat doessuccesslooklike?

Whatmustweaccomplishandbywhen?Howdetaileda businessplanneeds to bewith respect to themanagementstrategy andtacticsdependsonthestructureof thebusiness. A business planis usuallyusedtoconvey themission, vision, andgoalsof abusiness. Theremightalsobe somediscussion aboutthebroadstratefies employed.But businessplansusually don’tgetdown to the small, day-to-daytacticsof thebusiness- thisisinsteadthe roleof aworkplan.

Themanagementteamshouldbeable tousethecompletedbusinessplantodeveloptheirown tacticsand work plans.Onthe otherhand, itshouldn’ttryand makedecisions for them- that’s their roleandfunction. Instead, it shouldguidethemwith respecttobigpicturestrategyand goals givingthem theautonomytomakedecisionsandtrade-offs asday-to-dayissues arise.

Cheat Sheet gathered from Small Biz U 2013

Creating yourMissionandVision

WhatareMission andVision…

Thoughtheterms areoftenused interchangeably, thereisa vastdifferencebetween a missionandavision.

While thetwoconceptsplay offoneanotherthey workin verydifferentways.

Let’slookathowthese twoterms differ.

Whatismission?

A visionisaspecificfuturedestination.

A visionisa dreamwith a deadline.

It shouldchangeovertime.

It mustsay“yes”to someideasand “no”toothers.

It’s aboutwhatthefuturemightbe,couldbe,and shouldn’tbe.

Example:“Toputamanonthemoon beforetheendof the1960’s.” Thedynamic interplay…

Missionisaboutpreservingthecore…

oProvidescontinuityandstability

oFixedstakeinthe ground or thehorizon

oLimits possibilities

oConservativeact

Vision isaboutstimulatingprogress…

oUrgescontinual change

oImpelsconstantmovement

oExpands possibilities

oRevolutionarychange

Toconstructyourmission remember…

A missionstatementshouldbesomewhattimeless- itshouldapplytonotonlytodaybut possiblyeven twentytofiftyyears fromnow.

It shouldputforth ageneral direction or headingstatingwhatit is thatyoustandfor.

Inessence,amissioncanneverreallybeachieved-itshouldbeongoing. If itcanbeachieved andcompleted then itis avisionnotamission.

Youshouldthinkofyoumissionasyour truenorthheadingon your compass.

Toconstructyour bision, askyourself:

What big, audacious goal(s)doyouwanttotrytoachievefiveyears fromnow?

What doessuccesslooklikeinfiveyears?

Cheat Sheet gathered from Small Biz U 2013

Infiveyears’ time,howshouldyour business bedifferent thanitisnow?

Usingyourownmetricsofsuccess,whatmustyouaccomplish infiveyears foryoutoconsider yourself successful?

SettingGoals andObjectives

Whataregoalsandobjectives?

Objectivesclarifywhatitisyouaretryingtoaccomplishin specific, measurable goals.

For anobjectivetobeeffective,itneeds tobeawell-defined targetwith quantifiable elements that aremeasurable.

Whereasyourvisionstatementisexpansiveandidealistic,andthemissionshort, powerful, and memorable,yourobjectives aredesigned tofocusyour resourcesonachievingspecificresults.

Thepurposeof well-definedobjectivesistocausemeaningful action. What targetswillyouaimfor?

Mostobjectives canbebrokendown into thefollowinggeneral headings:

oFinancial

oMarketingandSales

oOperations

oHumanResources

oResearch and Development

oManufacturing

oPersonal

Whatdoyouneed toaccomplish?

Tocreatea solidobjectiveyoumust:

oDescribetheactivityrequired.

Example:Introducenewproducts…

oDescribewhatwillhappenandwhen.

Example:abookby6/30andaCD-ROMby8/15

Youcanthenwordsmiththesepiecesinto a completeobjective:MarketingObjective- Introduce a bookbyJune30thandaCD-ROMbyAugust15th.

Developing your goals…

Thinkbackto your visionstatementonceagain.

If yourecall,your visionstatement lookedfiveyears into the future toward aspecific destinationthat youwant toarriveat.

Nowthinkabouttheactivities youneed toaccomplishthis year inorderto movetowardthat destination.

Create5-7objectivesthatare critical toarrivingat your envisioned future.

Cheat Sheet gathered from Small Biz U 2013

The Structureof theBusiness Plan

Structuring your plan…

Therearenorequired formatsfor a businessplanandwith goodreason.Thereis,however, a fairlycommonstructurethatmostbusinessplans useas askeletalframework.

Inordertoprovidecontexttothe scopeof your businessplan,youshouldidentify thetime

periodfor whichtheplanwillfocus.Beitoneyear, two years, threeormore,this time constraintisnecessaryinordertoprovidecontextoryourthinkinganddecisionmaking.

Thetwo businessplantests…

A businessplanis,athear,a story- astorythatexplains howabusinessworks.

When abusinessplan doesn’twork, it’sbecauseitfails eitherthenarrativetest or thenumbers

test.

oThenarrativetestasks,“Doesthe storymakesense?”

oThenumbers testasks, “Dos thestoryaddup?” Thetwo sections…

A businessplanisthereforeusuallybroken down intothesetwotestsections:

oA written sectiontypicallycalled the plannarrative,and

oA numbers sectiontypicallyreferred toasthe financialprojection

. Theprojections aresimplyanumericalrepresentationofthebusinessitself anditsmarketing strategy thatispresented intheplannarrative.

Thetwo sectionsmustbecompletely entwined. Theplannarrative…

Thenarrativeof abusiness planisusuallybrokendowninto threemajor sectionsincluding:

oTheBusinessDescriptionSection,

oTheMarketStrategySection, and

oTheManagement andOperations Section.

TheBusinessDescription Section…

This sectionsimplydescribesattributes abouthebusinessitself andshouldinclude:

oTheCompany

CompanyMission(thepurpose)

CompanyVision(thebigdreamwith adeadline)

BusinessDescripition

CurrentStatus

Future Plans

oTheIndustry

Chief Characteristics

Cheat Sheet gathered from Small Biz U 2013

Trends

oProductandService

ProductandServiceDescription

ProprietaryFeatures

Future DevelopmentPlans

TheMarketstrategySection…

This sectiondocumentsallof theactivitiessurroundthemostimportantfunctionofyour business:Marketing.

It addressesthequestionsof whatyousellandhow yousell it.

TheMarketStrategyofyour planshouldinclude:

oMarketAnalysis

TargetMarket

MarketTrends andGrowth Potential

oCompetitiveAnalysis

CompetitorProfile

MarketNicheandShare

ComparisonofStrengths andWeaknesses

oMarketStrategy

MarketStrategy(cost,differentiation, focus)

PricingStrategy

DistributionStrategy

ServiceandWarranty Policies

Promotional Strategy

Advertising

PublicRelations

Personal Selling

Sales Promotions

TheManagementandOperations Section…

TheManagement andOperations sectionofyour plandescribeswhowillmanagethebusiness andhowtheywill doso.

It alsodescribes howyouproducethe productsyousell or theservicesthatyoudeliver.

This sectionbasicallydetails howthedaytodayoperationsof thebusinessareconducted.

TheManagement andOperations Sectionofyour planshouldinclude:

oA managementteamlistingincludingtheir education,background, andresponsibilities

oTheownershipstructureofthebusiness(sole proprietor, partnership, S corporation, LLC,etc.)

oA strategicpartnerandsupplierdiscussion

oA humancapitalandpersonnel needs discussion

oInsuranceandrishmanagementdiscussion

Cheat Sheet gathered from Small Biz U 2013

oA facilitiesoverview

TheRiskAnalysis…

As a final discussionofyour ManagementandOperations segment,youshoulddemonstrate the riskfactors involved.

This means addressingquestions aboutmarketrisk,financial risk,management risk, and

technological risk.

Mostaudienceswhoreada businessplanwanttoseeevidencethananentrepreneur recognizestheriskfactors facingthebusinessandhastakenstepstocontrolthem.

Anoutlinetohelp you…

Thefollowingoutlinelays theframeworkjustdiscussedin creatingthenarrativeportionofthe businessplan.

DownloadtheBusinessPlanNarrativeOutline

TheFinancialProjections…

As stated earlier,thefinancial projectionssectionoftheplanshouldbethoughtof assimply quantifyingtheeffectsofwhat was presented intheplannarrative.

Althoughtheprojectionsareconcernedwiththe futuredon’tthinkof theprojections as merely

aprediction.

Instead, theprojections areconcernedwiththe futuredon’tthinkof theprojections as merelya

prediction.

Instead, theprojections shouldbethoughtof asgoal-settingwith respecttorevenuesand expenses.

Wecannotpredictthefuture- this ispreciselywhyplanningisnecessary- butwecanmake

plans, setexpectations, andgoals.

Your projectionsshouldinclude…

At leastthefollowing:

oA listingofrequired fundsand their uses

oA sales forecast(atleast monthlyforthe firstyear andquarterlyfor additionalyears)

oA variablecostof salesanalysis

oA fixed expenseoperatingbudget

oA projectedprofit andlossstatement

Andpossibly:

oA projectedcashflowstatement

oA balancesheet

oA break-even analysis

Your requiredfunds…

Cheat Sheet gathered from Small Biz U 2013

Youshoulddetailexactlyhowmuchmoneyyouneedto makeyour planareality.

Your listingshouldbreakthesecostsdown intoFixedAssetsandWorkingCapital.

Fixedassetsarepropertiesthat usuallyhavesomesort oflong-termvalue.

Workingcapital ismoneythatwillbeused tofinancethe short-termoperationsof thebusiness.

Thesales forecast…

For your salesforecastdon’tletthefearof predictionstopyou fromarrivingata projected

revenuefigure.

Everybusinesssells units ofsomething- whetheritbe hours, projects, products, services,etc.

Simplysetgoals forthe numbersof unitsyoubelieveyoucanselltakingintoaccountany seasonalityfactors.

Finally, multiply theseunitsbyyour averageestablishedprices. Theresultisyoursales forecast indollars.

Each fundamentalassumptionthatyoumakeneedstobedocumentedin thissectionsincethe assumptions themselvescanbemoreimportantthanthefinal numbers.

Thevariable costanalysis…

Variable costsarethose costsincurredeverytimeasale ismade.Theyvarywith sales.

Theyarethedirectcostsassociated with producingorselling your products andservices.

Variable costsperunit include

oThecostof goods themselves(for retailers)

oAnydirectlaborassociatedwith creatingtheproduct

oAnymaterialsthatgointotheproductitself

Thefixed-expense operatingbudget…

Fixedexpensesdonotvarywith salesandareusuallytied tosomecontractual arrangementor indirectcostof doingbusinesssuchas rent,salaries, loanobligations, insurance,andadvertising.

Youshoulddevelopamonthlyfixedexpensebudgetfor theyear detailingtheseamountand when theyoccur.

Theprofitand loss statement…

A profit andlossstatementcommonlycalled the “P&L”combinestherevenue,variable cost,

andfixedcostamountsinorderto seeif thebusinessis operatingataprofitor ata loss.

This statementtriestoline upall revenuesandexpensestodeterminetheprofitpotentialofthe business.

IndustryAspectsandConsiderations

Theserviceindustry…

Cheat Sheet gathered from Small Biz U 2013

Theserviceindustryfundamentallysells unitsoftimeor labor. A serviceisthereforeperishable sinceit isdirectlylinked totime.Excesscapacitycannotbestored for later use,it mustbeused nowor foreverlost. This istrue duetothe factthatproductionandconsumptioncannotbe separated.

Another strategicissueofaservice-basedbusinessinvolvesthe variationin quality thatexists throughthedeliveryoftheserviceitself. Unlikea productwherethemanufacturingprocesses canbetightlycontrolled toensurecertaintolerancesof quality, aserviceisbasedonthehard-to standardizenatureof humanbehavior.

Thelastmajorattributethatmakesservice-based businessesuniqueistheir intangibility- there

islittleif anyphysicalcharacteristicsto theoutput. Manymarketingprofessionalscall this problem,“sellingtheinvisible.”Ofcourse,therearemanyways tomakeaservicetangiblewith a littlemarketingimagination.

For a service-based business plan youneedtofocus heavilyonthefollowingthreeissues:

oHowdoyouminimizetheproblemof excesscapacityandperishability?Whatstaffing levelsdo youneedtodeliveryour service,andwhat istheirmaximumdeliverycapacity?

oWhat processeswillyouusetominimizeservicevariations andmaximizeservice quality levels?

oHowwill youmarketyour serviceeffectivelysinceitcan’tbepictured inan

advertisementor displayedin a store? Whattangiblecueswillyou use?

Theretail industry…

A retailerisanorganizationthatpurchases productsfor thepurposeof resellingthemultimately toconsumers.

Locationmaybethesinglemostimportant factorin theconsiderationof whatmakes a successfulretail business.Astheysayin theretailindustry: Location,Location,Location. A businessplanforaretail business mustcontainathoroughlocationanalysiscoveringsuchissues

as:

oSellingsquare footage,access,visibility,signage,costs, renovations, leaseterms,traffic counts,area demographics, andso forth.

Emergenceof newtypesofstoresandexpansionofproductofferings by traditional storeshas intensified retailingcompetition. Retail positioninginvolvesidentifyingan underservedmarket nicheandservingthesegment throughastrategythatdistinguishestheretailerfrom others in themindofthe consumer.A retailbusiness planshoulddiscuss its positioningstrategyinthe marketplace.

Storeimagereferstothe physical elementsinastore’s design thatappeal toconsumers’

emotions andencouragebuying. Merchandisingrefers totheinventorymix astorewillprovide and howitis displayedoutacrossthestore’sfloor plan. Themarketingsectionofaretailplan needs todiscussboththeimageandmerchandisingstrategiesthatwillbeemployed.

Thelastcriticalconsiderationaretail businessplanshouldaddressistheinventory requirements. Youshoulddetail howmuch inventoryyouhaveorwillrequireatcostandin retaildollars.Theretailindustryusually worksonseveralkeyinventorymetricsincludingsales

Cheat Sheet gathered from Small Biz U 2013

persquare footandinventoryturns- whichis thenumber oftimesthe inventorywalksoffthe shelf in ayear.Youshouldbeawareof suchmetrics andpresentthemin your businessplan. Mosttradeassociationscollectandreportsuchdata.

Themanufacturingindustry…

A supplychainisalltheorganizations thatareresponsible for bringing your productstomarket.

Asupplychainmightbeshallowsaywhen asuppliersells rawmaterialtoamanufacturerwhich then sellsdirecttoaconsumer. Or itmaybedeepsaywhen asub-supplierprovidesa prime supplierwith parts who then sellstoamanufacturertoawholesaler/distributor,toaretailer andso on. Your businessplanshoulddiscuss in detailyour supply-chainandantcoordination andcommunicationissuesrelatedtoitsmanagement.

Thecompetitiveenvironment inmanufacturinghasmadehighproductqualityessentialto

success.Youshoulddiscussanyqualityprocesses,programs,or certificationsthatyouhaveor require in ordertosuccessfullycompeteinthe globalmarketplace.

With regardtomaterials andlabor youshouldpresenta discussioninyour planaboutitssupply

andavailabilityaswell ashowthe costswillbecontrolled. Youshouldalsopresentsomedetails aboutwhatmargins youareexpecting,whichisthecalculationof takingpriceminus thecostof producing your product.

Howyousellyourproductsandtakethemto market is obviouslyasimportantasyoumake them.Don’tskimponthemarketingsection andpresent onlyproductproductionand manufacturingprocesses. Your discussionshouldincludeyour sales anddistributionstrategy throughsuchchannelsassales agents, sales representatives,directmarketingtactics, distributors,or retailers. Makesureyour plandiscusses thepricingexpectations thateach channel memberexpects torealizeas itmovesfrom your businesstoward theconsumer.

The MostCommonBusiness PlanningMistakes

Mistake#1:NotDisclosingWeaknesses

It’s adifficultaspectofwritingagoodbusiness plan, butdealingwith problems,obstacles, weaknessesispartofthe planningfunction.

Everybusinesshas weaknesseswithoutexceptionandsavvyinvestors dotheir duediligencein

seekingtheseout.

Thebestwayof handingsuch issuesis tojustgetthemoutintheopen andtohavea detailed actionplanthateffectivelyaddressestheseproblems.

Mistake#2:NoDistributionstrategy

Howyourbusinesstakesits productandservices to marketis oneof themostfundamentally important questionsyour businessplanaddresses.

At all costs,resistthetemptationtocover all basesbylistingeverypossiblechannel possibility.

Businessplanningconsultant DanielMcGilverysaysmostbusiness plans read somethinglike:

Cheat Sheet gathered from Small Biz U 2013

o“Wewillmarketour productsvia internet,catalogs, distributors,value-added resellers, infomercials,wholesalers,directmail, agents,directfield sales,telemarketing, retail outlets, andsmokesignals in selected areas.”

What thistellsthe investoristhat you reallydon’thavea distributionstrategy

Mistake#3:Lackof integration

Manyentrepreneursmakethemistakeof notintegratingthenarrativewith thenumbers.

For instance,ifyousitein yourmarketingplantheadvertisingmediayouplantouseandits associatedcosts andschedulingthis shouldshowupintheexactsamewayinthefinancial projections.

Anotherexample:Statingintheplannarrativethatyouneedaloanin theamount of$100,000 yettherearenoloanpaymentsbeingmadeinthefinancial statements.

Alwayscheckforsuchintegrationbetween thetwosections ofyour plan. Mistake#4:CompetitiveAnalysis

Thekeywordhereis“analysis.”Listingthe nameand address ofyour competitors isNOTan

analysis.

Aninvestor isinterested inknowingsuchthings as:

oWhatyouexpecttoseefromyourcompetitors near tern andlongterm.

oWhat istheir strategicdirection,their core competencies,andwhatmakesthemtick.

oWhydocustomersbuyfrom them?

oHowgoodaretheirmarketingandsalesefforts?

oWhat istheir fundingposition?

oWhat aretheirweaknessesandhowcantheybeexploited?

Failingto take your competitorsseriouslyonlyhurtsyouand your business.

Remembereverybusinesshas competition-whetheritis director indirect.

Showa healthyrespectforthe incumbentswhiledemonstratinga compellingandbelievable waytocompetewiththem.

If youdownplay the competitionor statethatyouhavenocompetitioniteithermeansthat

there’snomarketor you don’tknowhowtousea searchengine.

Mistake#5:Failing ToAddressRisks

Anentrepreneurlikestohypethe upsidewhileaninvestor likesto evaluaterisk versus reward.

If youneedtoraiseoutsidecapitalyoumayneed tosubdue yourvisionsof grandeur without boundariesandinstead concentrateontheexternalfuture risksthatcouldprevent your plan frombeingsuccessful.

A clearanalysis lookingatmarket, financial,management,andtechnological riskandanyaction plans youhaveforovercomingtheseobstaclesworks best.

Cheat Sheet gathered from Small Biz U 2013

Mistake#6: Legal Problems

Savvyinvestors arealwaysonthelookoutfor potential legal snagsyour planmay havesuch as:

oWastheproductdevelopedwhileyouwereemployedsomewhereelse?

oArethereany employmentcontractsor non-competeagreements?

oIs thereanypossible patent or trademarkinfringement?

oIs thereclearownershipofyour productor service?

Full-disclosureof anyoftheseissuesisamusttoavoidlargerproblemslateron.Seean attorneyifyouneed adviceonanysuchissues.

Mistake#7:NoSalesAssumptions

Business plans thatsimplystatea projected sales numberwithoutdetailingthe precise assumptionsmadetoarriveatthe forecastedsales levels areuselesstoinvestors.

Theassumptions themselvesareoftenmoreusefulthanthefinal salesnumberanywaybecause

theybreakdownthe drivers ofthe company’srevenuemodel.

Youshouldbeable toprovidesomerationalefor howyour projectionswereputtogether.

Chancesarean investorwill expectmorethanjustyour “bestguess.”

Mistake#8:UnrealisticProfitability

Lendersandinvestorsusuallyhavea numberof companies thattheyfundin their portfolios.

Here’sasecret:A goodmajorityofthesecompanies areNOTwildlyprofitable.(Infact,manyare losing money)It’shardtopull thewool over an investor’seyesabouttheprofitabilityyouput forth inyourprojections. They knowthecold, hardrealityof thecompetitivebusiness

landscape.

Youshouldalsoknowthatmostlenderssubscribe toinformationservicesthatsummarize financial statement datathattellsthemthe actualprofitabilityof businessesinyour industry.

Inorderto avoidthismistake, itpaystoonceagaindoyourhomework. Financialstatement studies such asthoseproduced byDunBradstreetandRMAFinancial Statement Studiescan befoundat your local libraryusuallyatthereference desk. Usethis dateandcompare ittoyour projectedfinancial statements. Knowwhatthenumbers sayandbeprepared toanswer any questions aboutwhy yournumbermayvaryfrom thosecompaniesfoundin yourindustry.

Mistake#9:NoTargetMarket

Mostsmall businessescannotaffordtomarkettothegeneralmassconsumerand/or industrial markets- resourcesarejusttoolimited.

Failingtoidentifyaparticular customernichethatisbeingsoughtisthereforeamajormistake manybusiness plansmake.

Notonlyshouldthetargetmarket(s)beidentified inyour plan, butmarketresearchhas tobe

included todemonstratehowthismarketsegment has beenidentified.

Cheat Sheet gathered from Small Biz U 2013

Mistake#10:Over-diversification

Entrepreneursgetexcitedabouttheirideasandseenumerous opportunitiesformarketing them.

Butyoushouldtrytofocusthe attentionoftheplanononemainopportunityforthe

venture.

A neworearly-stage businessshouldnotattempttocreatemultiplemarketsnorpursue multipleventuresuntil ithas successfullydevelopedone mainstrength.

Plans thatpresent endlessopportunitieswithoutfocusingon anyoneofthemjustdon’tget

funded.

Cheat Sheet gathered from Small Biz U 2013