Appendix A
Preparing a Business Plan
Jeffrey E. Edelheit, for over 20 years has assisted entrepreneurs in developing their business and strategic operating plans that become the core for decision making, creating a stronger team and clarity around capital requirements. His focus is showing how developing a business plan is like a well written story. The characters are well defined, plot made clear and exciting. Jeffrey was generous enough to provide readers of this book with an eight-point plan they can follow when doing planning of the sort described in Chapter 2. Jeff, by the way, uses Business Plan Pro by Palo Alto Software ( It provides an integrated planning process including text and financials allowing you to concentrate on the integrity of the information. But you can follow these steps no matter what method you use to map out your business. He says: By taking the steps seriously of doing your plan you and your team will quickly see the inter-relationship of everything and key areas of responsibilities and time lines. Clarify elements that will have both positive and negative effects on cash flow and capital requirements. A well thought out plan will allow you to do your what ifs to see what could happen if key number are changed such as sales prices or costs. It is a common tendency when the numbers indicate a loss to change the variables to enhance the financials. This happens when you are doing a plan for the investor and want to look good. In the end this will only create more problems for you so stay realistic. It is normal to have an operating loss in the beginning as your capital will be used to gain market share and build your company. The key is how well you will be managing the process and what the long term potential for success is. The more information you can validate the greater the integrity factor of the plan. I always suggest keeping it short and meaningful.
If you are using the internet to supplement your existing business it can prove to be fruitful by getting the right support in the building and promoting of your site.
When seeking the right Web Developer look at other web pages they have created and talk to their clients. Find out how well their web promotion strategies have worked for others. How effective are their designs and easy to navigate.
“Whether you are planning an online or typical brick-and-mortar business the same rules apply. For me the first step is seeing phase one of this process of bringing your team together, clarifying your vision and collecting information. The greater the validation of information the more integrity your plan will have. Your plan first and foremost must be for you then the investor. In doing your business plan it is important to know your product, costs, general market, targeted customers and competition. ‘Build it and they will come’ has been the great illusion for so many entrepreneurs. If you plan on seeking investment dollars, the more comprehensive the plan, the greater your chances of success. Some of the important steps to keep in mind in the development of your strategic/operating business plan are listed below.”
Steps 1 and 2:Do the Research
First, determine who is your target market and ideal customer or client. . Do the research necessary to confirm that they actually want what you have to offer. This would include the price you will charge, the level of pre-sale technical support necessary, different product configurations and options, after-sales support, and other supporting/complimentary products and services.
Second, invest in market research. I always find it best to have my clients think as their customers would. Learn the evaluation process they would go through in order to become a customer. This includes your competition and their position in the market. What makes other providers credible or not? Look at their strengths and weaknesses and see how your organization will compare point by point. Look at key factors your potential customers utilize in their decision making process. Are they more sensitive to price or service? Again, this is where surveys became a key asset. People in most cases will tell you what you need to know you just need to ask. Also do web searches as if you were a potential customer and see who else comes up on the search engine. What words would you find yourself using in the search.
Find others who are experts in your field and learn from their experiences. Looking at failures can assist in seeing what not to do.
Steps 3 and 4: Make Yourself Known
Third, find a way to build an effective road map to your site. There are millions of Websites already, and more being added by the second. The most successful sites have found an effective way to be known and building easy paths for their target market to find them. Once someone is in your site, it’s equally important to presentyour products,ease to supporting information and sales options
Next, pursue marketing techniques for the Internet. I am seeing more companies combining traditional and Internet based advertising to bring people to their site. In doing your advertising plan, it is not realistic to think you can promote and generate sales on the same day unless you are incredibly creative. Its takes time as well as a unique way to generate interest and repetition to achieve brand awareness. Plan on letting your marketing take effect prior to sales generation. Use of social networking is being shown to be a very effective way to gain brand awareness and build customer loyalty. Look at successful web strategies other companies have utilized. There are now companies that are specializing in what is called search engine optimization. They basically find ways to use key words from your site to match searches and keep you on top of the list of possibilities. One key element to a successful company is having tracking of activities. Information that allows you to know how effective or ineffective your marketing is.
Step 5: Retain Customers
Come up with a plan for customer retention: How are you planning to generate customer loyalty? What factors are known to generate a satisfied customer for your industry? What would it take for them to want to promote you to others and provide a positive testimonial? If you have a physical store and using the web to enhance sales you can also use it to promote future sales in the store as well as virtual. Keeping on top of customer satisfaction and a plan to do so is important as it will help you to catch potential problems quickly.
Step 6: Build Inventory
Having sufficient inventory for quick fulfillment and the right quality is related to your relationship to your suppliers. I always tell businesspeople: know who you are buying from and make sure they can provide you with the appropriate support. This would include quick turn around on ordering, supporting with technical information and solid warranty support. If the suppliers are professional, you will know that they are just as interested in your success as you are. What do they offer to assist you in generating sales? Do they offer a co-op marketing plan, inventory rotation policy and price protection? Just in time inventory management can contribute greatly to your profitability. Many companies have underestimated the true cost to carry inventory and production steps.
Steps 7 and 8: Get a Handle on Costs and Finances
Know your true costsCash flow is all about the expenditures you will incur until sales are realized and payment received.
So many times people will think: If I purchase it for $5 and sell it for $10 I just earned a 100 percent profit. This would be true if you there we not other direct related expenses. I always tell my clients their time has a value. How long does it take for you to make the product or time to secure it? What are the other inter-related costs involved in bringing the product to market and maintaining your support organization. Your overhead costs include space, communication, cost to carry inventory, time to order and package, pre and after sales support and the use of other resources. Net profit is after the deduction of all expenses.
Financial and communication controls are another key to have in place. What methods will you use to capture customer payments and track orders? Make sure you have a way to maintain solid communication with your customer including confirmation of the order, ship date and after sales support. Leave a paper trail so you know what was ordered invoiced and how it was paid for. Know how long your credit card company will be holding on to the funds, which is part of your cash flow projections.
Doing your business plan is a key step to create a success venture. The first person you need to do a business plan for is yourself. Once you feel it is creditable and doable,and then it’s time to present to investors. Validate as much of the information by outside sources as possible. In determining the amount of capital required the plan is key. I suggest you build the plan including as much of anticipated expenses as possible and be very conservative on sales projections. It’s best to under estimate then overzealous. Have someone who is familiar with accounting go over your estimated expenses to determine if they are reasonable. Many industries have trade groups and blogs you can use to gain market and user information and surveys can be a great tool.
Once you have completed your plan and projections your balance sheet and cash flow statement will show you the minimal amount of capital required. As sales may be delayed or cost greater than anticipated best to plan to have sufficient cash to be successful. The benefits to keeping your plan as a living document it allow you to monitor your activities and have better financial controls. As information changes modify the plan. It is rare that when building a company assumptions will prove to be 100% correct. This is called budget to actual. The main purpose of the plan is to test your assumptions by re-creating your vision in writing. Through this process you will gain clarity.
Keys to enhance your potential for a developing a successful business plan:
- Make it a team effort it allows for a way to learn to work together, get buy-in and clarity.
- Research internet marketing techniques with the information provided in this book.
- Try not to put in numbers just to look good. If the plans financials look negative there is a reason that should not be overlooked.
- The more third party validation in the plan the better.
- Keep your plan short but effective. Highlight key information.
- Plans are all about cause and effect. Everything is inter-related.
- It is a great opportunity to discover just how much you know about your market and potential customers.
- When you need to make assumptions show the logic behind it.
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