The Business PlanAn introduction

DefinitionThe business plan is a written document prepared by the entrepreneur that describes all the relevant external and internal elements involved in starting a new venture

Importance of the business planThe business plan is valuable to the entrepreneur, potential investors, or even new personnel, who are trying to familiarize themselves with the venture, its goal, and objective

The business plan is important to these people because:It helps determine the viability of the venture in a designated marketIt provides guidance to the entrepreneur in organizing his or her planning activitiesIt serves as an important tool in helping to obtain financing

Outline of a business planExecutive SummaryDescription of the Business Concept and Business Opportunity and StartegyTarget Maket and ProjectionsCompetitive AdvantagesCostsSustainabilityThe TeamThe Offering

Outline of a business planThe Industry and The Company and Its Product(s) or Service(s)The IndustryThe Company and the ConceptThe Product(s) or Service(s)Entry and Growth StrategyMarket Research and AnalysisCustomersMarket Size and TrendsCompetition and Competitive EdgesEstimated Market Share and SalesOngoing Market Evaluation

Outline of a business planThe Economics of the BusinessGross and Operating MarginsProfit Potential and DurabilityFixed, Variable, and Semivariable CostsMonths to BreakevenMonths to Reach Positive Cash Flow

Outline of a business planMarketing PlanOverall Marketing StrategyPricingSales TacticsService and Warranty PoliciesAdvertising and PromotionDistribution

Outline of a business planDesign and Development PlansDevelopment Status and TasksDifficulties and RisksProduct Improvement and New ProductsCostsProprietary Issues

Outline of a business planManufacturing and Operations PlanOperating CycleGeographical LocationFacilities and ImprovementsStartegy and PlansRegulatory and Legal Issues

Outline of a business planManagement TeamOrganizationKey Management PersonnelManagement Compensation and OwnershipOther InvestorsEmployment and Other Agreements and Stock Option and Bonus PlansBoard of DirectorsOther Shareholders, Rights, and RestrictionsSupporting Professional Advisors and Services

Outline of a business planOverall ScheduleCritical Risks, Problems, and AssumptionsThe Financial PlanActual Income Statements and Balance SheetsPro Forma Income StatementsPro Forma Balance SheetsPro Forma Cash Flow AnalysisBreakeven Chart and CalculationCost ControlHighlights

Outline of a business planProposed Company OfferingDesired FinancingOfferingCapitalizationUse of FundsInvestor ReturnsAppendicesMarket Research DataLeases or ContractsPrice Lists from Suppliers

Dos and donts for preparing a business planDosInvolve all the management team in the preparation of the business planMake the plan logical, comprehensive, readable, amd as short as possibleDemonstrate commitment to the venture by investing a significant amount of time and some money in preparing the planArticulate what the critical risks and assumptions are and how and why these are tolerable

Dos and donts for preparing a business planDosDisclose and discuss any current or potential problems in the ventureIdentify several alternative sources of financingSpell out the proposed deal how much for what ownership share and how investors will winBe creative in gaining the attention and interest of potential investors

Dos and donts for preparing a business planDosRemember that the plan is not the business and that an ounce of can-do implementation is worth two pounds of planningAccept orders and customers that will generate a positive cash flow, even if it means you have to postpone writing the planKnow your targeted investor group (e.g., venture capitalist, angel investor, bank, or leasing company) and what they really want and what they dislike, and tailor your plan accordinglyLet realistic market and sales projections drive the assumptions underlying the financial spreadsheets, rather than the reverse

Dos and donts for preparing a business planDontsHave unnamed, mysterious people on the management team (e.g., Mr. G who is currently a financial vice president with another firm and who will join you later)Make ambiguous, vague, or unsubstantianted statements, such as estimating sales on the basis of what the team would like to produceDescribe technical products or manufacturing processes using jargon or in a way that only an expert can understand, because this limits the usefulness of the plan

Dos and donts for preparing a business planDontsSpend money on developing fancy brochures, elaborate Power Point and Flash Presentations, and other sizzle; instead, show the steakWaste time writing a plan when you could be closing sales and collecting cashAssume you have a done deal when you have a handshake or verbal commitment but no money in the bank (The deal in done when the check clears!)

Why some business plans fail?Goals set by the entrepreneur are unreasonableGoals are not measurableThe entrepreneur has not made a total commitment to the business or to the familyThe entrepreneur has no experience in the planned businessThe entrepreneur has no sense of potential threats or weaknesses to the businessNo customer need was established for the proposed products or service