SBDC Counselor Certification Manual Module 10 â€“ Business Plan Development Table of Contents 1. Performance Objective 2. Introduction 3. Business Plan Outline 4. Why Write a Business Plan? 5. The Marketing Plan 6. The Operations Plan 7. The Financial Plan 8. Resources Useful for Marketing Research 9. Drawbacks and Limitations 10. Emerging Business Forums 11. The Writing Process: A Common Stumbling Block
Performance Objective The Business Counselor will communicate the purposes, importance, and steps involved in developing a business plan. The Business Counselor will be able to outline and critique each section of a comprehensive business plan, using the local centerâ€™s approved outline and provide the client with pertinent literature.
Your proficiency in business plan development will be evaluated by the following: 1. Providing a comprehensive business plan review. The mentor will verify this proficiency to the Training Coordinator. 2. Demonstrating to the mentor during co-counseling, the ability to assess a clientâ€™s capabilities to prepare a business plan. The Business Counselor will clearly explain the importance of planning, and will correctly describe (and guide a client to write) the information required in each of the major sections of a business plan. 3. Correctly answering case study questions concerning business planning.
How You Will Be Trained 1. Read Module 10 in its entirety. 2. Review and demonstrate knowledge of attached business plan outline. 3. Analyze sample business plans as assigned. 4. Co-counsel business plan client.
Introduction Someone once said, “Half the worry in the world is caused by people trying to make decisions before they have sufficient knowledge on which to base a decision. “Starting or expanding a business is such a monumental decision that a business plan is critical to gaining this “sufficient knowledge.” Clients are advised to prepare a business plan for one or more of the following reasons: • to judge the feasibility of the idea, • to furnish a written document that introduces your business to lenders, partners, suppliers, etc., and/or • to guide business operations for the coming year. Feasibility Test: A business plan provides a logical format for exploring all aspects of starting and managing a business. The market analysis is a key portion of the plan, because this section helps determine the extent of the market for the products or services. Other sections develop plans for the operation of the business. Together, the plan sections will provide the basis for estimating financial requirements and anticipated profitability of the client’s business. The plan provides the basis for a client’s decision of whether or not to start or expand a business. Owning a business requires a major commitment of time, effort and money. This decision also affects the client’s family life and should only be make after careful consideration. Written Document: Outsiders connected with the business will often require a written plan to evaluate a business proposal. Investors or lenders want to learn as much as possible about a company, before providing financing. Attorneys, accountants, insurance agents and advertising professionals often need the information developed in the plan to tailor their efforts to best meet the business’ needs. Key potential employees may want to learn more about the company prior to accepting offers for employment. Performance Measure: Once a company is in business, the plan should be able to be used as a basis for evaluating performance, so corrective action can be taken when necessary. Performance bonuses to mangers and key employees 3
could be determined by using the plan’s projections as a base. A business plan is much more than just a loan proposal, forgotten in a drawer after financing has been obtained! A business plan can be presented to private investors for initial information. A private placement disclaimer should be included as the first page before any other section. A formal prospectus must then be offered to serious investors. A disclaimer is available from some of the major national accounting firms and should be used only with an attorney’s advice. There are numerous outlines and software packages available to assist in writing a business plan. All tend to include the same information in slightly different order. A typical formal business plan includes: Cover Page, Table of Contents, Executive Summary, Business Description, Marketing Plan, Operations Plan, Financial Plan and Appendix. Written last, but by far the most important part of your business plan is the Executive Summary, which emphasizes strengths of the business as developed in the main body of the plan. Even though it is presented first, the text must be written last. The main purpose of the summary is to convince lenders or investors of the company’s ability to be successful. The Executive Summary should contain, but is not limited to, four elements: • What you intend to do • How you intend to do it and why you think your business will be successful • The resources you need to succeed • How you intent to payback any loans or investments you are seeking. This section of the plan can be as short as a half page, but should not exceed two pages in length, depending on the complexity of the remainder of the business plan. The Business Description provides an overall view of how all the components of the company fit together. The Description should include the following elements: •
Description of the business - What are the products or services to be offered, where is the business located, and what is the significance of that location? Business history - Is the business a start-up, acquisition or expansion? 4
Vision and Future Plans – What is your overall vision of what your business activities will look like and accomplish once fully developed and within the next five years. Describe and justify any future product/service development plans. Organization and Ownership – How is the business legally organized? Why did you choose this particular organization? Include legal details in the Appendix. Industry Trends – What are the industry trends in your business, worldwide, nationally and locally? Is the market growing or the type of customer changing? Have there been changes in the production processes? Does the demand for your product exceed current supply? Are there current or predicted future technological or legal changes that are likely to affect your business? Management, Personnel and Advisors – Management is extremely important to a lender or investor who will carefully evaluate the knowledge and skills of the owners and key managers. In essence, a loan or investment is made to the people, not the business. Therefore, the business plan should emphasize the experience, education, and abilities of the key individuals involved in the business. Explain who will manage the business and what are their qualifications to do so? What employees will you have? What are their job qualifications and responsibilities for each position. What kinds of contract help do you anticipate hiring? Include a personnel budget. List your business advisor’s names (attorney, accountant, mentors, etc.), contact information, and expertise.
The Marketing Plan contains the following components: • •
• • • •
Description of the product or service Analysis of the size, location, and characteristics of your potential market Competitive Analysis Location Analysis Sales Volume Potential Market penetration strategies
The Operations Plan will detail the operating methods that will enable the firm to produce and deliver the product or service as outlined in the Marketing Plan. The Operations Plan should include the following components: •
Implementation plan that explains the tasks and events which must first be accomplished to implement the business plan Materials needed to produce the finished product/service 5
• • • •
Sources of supply Methods of production to manufacture the product/service Methods of production to sell the product/service Risk management issues
The purpose of the Financial Plan is to attach dollar figures to the plan you have presented in the preceding sections. Include the following information in the Financial Plan: • • •
Investment required Cash flow projections Financial statements - balance sheets, ratios, income statements Break-even analysis
The Appendix contains supplementary information to verify claims made in the business plan. Providing the original research information through attachments can clarify or strengthen your narrative. Placing this information in the Appendix, provides the opportunity for those truly interested in these details to find the information and permits those with less interest to skip this information. In conclusion, a good business plan should clarify the viability of the business concept to the client and show lenders and investors the potential business owner understands how to start-up and operate the business in order to be successful.
Business Plan Outline COVER PAGE TABLE OF CONTENTS I.
EXECUTIVE SUMMARY A. Brief Description of the Business and Principals Involved
B. Method C. Resources D. Payback II.
BUSINESS DESCRIPTION A. B. C. D. E. F.
THE MARKETING PLAN A. B. C. D. E. F.
Products and Services Market Analysis Competitive Analysis Location Analysis Sales Volume Potential Marketing Strategies
THE OPERATIONS PLAN A. B. C. D. E.
The Business History Vision and Future Plans Organization and Ownership Industry Trends Management, Personnel, and Advisors
Implementation Plan Materials Sources of Supply Methods of Production Risk Management
THE FINANCIAL PLAN A. Investment Required 7
B. C. D. E. VI.
Cash Flow Projections Financial Statements Break-even Analysis Supporting Documents
APPENDIX (Examples; back-up information to the plan text. Implement as appropriate to your business.) Resumes Incorporation
Personal & Business References Layout
Plan of Interior
Leases Building Exterior
Contracts Layout Letters of Intent to Purchase
Drawing of Interior Product Photos
Endorsements Brochures, Business Cards, Statements, Advertising Pieces
* This is a basic outline of the information needed in the business plan. Following is a more detailed, annotated outline that should serve to create an effective business plan for most clients. Also, most clients find it helpful to receive a copy of a finished sample plan for a business similar to what they are contemplating.
Why Write a Business Plan? If you are applying for a loan or planning to attract investors, the business plan is essential to explain what your business is, how you plan to operate the organization, and why you believe the business will be successful. Even if you don't need outside financing, outlining the details of the business in the plan can be critical to your success. The business plan serves three purposes: 1. The plan is the business ownerâ€™s "road map" for the business, describing where you are planning to lead your business and how you plan to accomplish those objectives. 2. The plan serves as a "letter of introduction" to individuals, such as potential key employees, accountants, attorneys, and suppliers, who may make decisions that affect your business. The business plan is intended to introduce your business to these people and build your credibility. 3. The business plan is your "sales tool" to potential financiers and investors. You want these individuals to see and understand your business in a favorable light. The business plan must be written and presented in a professional manner. The narrative should be concise, precise, thorough, and realistic. In presenting your business to others, this plan represents you and your knowledge. Cover Page List the business name and address, and names, addresses, phone numbers, and e-mail addresses of the principals. You may also want to include the logo of the business. Table of Contents Include page numbers so your reader can locate specific parts of the plan. Executive Summary Written last, but by far the most important part of your business plan is the Executive Summary. It can be as short as one-half page, but should not exceed two pages in length, depending on the complexity of 9
the business. The Executive Summary must sell the business plan to the reader, usually your lender. It should contain, but not be limited to, four elements: What you intend to do, how you intend to do it, the resources you need, and how you intend to payback any loans or investments you are seeking. Business Description Briefly explain whether this is a new business venture, expansion of an existing business, or the purchase of an existing business. Explain what the business is selling (manufacturing, wholesaling or retailing a product, processing a product, offering a service, etc.), and how your product/service is unique. Mention the principals involved and briefly mention their qualifications. Also include the business structure you have chosen. Method Outline your potential market and how you intend to accomplish your goals and objectives, or simply how and why you will succeed. Resources Summarize the resources needed, including your investment, and money to be injected from any other sources, including loan(s) you are seeking. Mention amounts, terms, and rates you seek. Payback Summarize your projected profits and available cash flow to show approximate payback periods and solid payback ability. (This is extremely important to a lender.) Remember this executive summary is written after the rest of the business plan. It summaries what is to follow. It must garner the attention of the reader, which means sell the business concept to the reader. Business Description Describe your business clearly and concisely. Summarize the following information (in a short paragraph on each main heading): The Business 10
Describe the products to be produced or the services/goods to be provided. What does/will the business do?
Where is the business located? Is location important or irrelevant to your business success?
Explain if the business a start-up, acquisition or expansion?
For existing businesses: • • •
How and why was the business founded? How long has it been in business? How long have you (or the current owner) owned the business? What is the growth history? (Sales, volume, customers.)
Vision and Future Plans ● Describe your overall vision of what business activities will look like and accomplish once fully developed, and within the next five years? Describe and justify any future product/service development plans. Organization and Ownership • •
Is your business a sole proprietorship, partnership, corporation, or a limited liability company? Why did you choose that particular organization? If your business is a partnership, corporation, or a LLC, include written legal details in the Appendix.
Industry Trends •
What are the industry trends in your business? Look at international, national, and local trends, if appropriate. Is the market growing or the type of customer changing? Have there been changes in the production processes? Does the demand for your product exceed current supply? Are there technological or legal changes anticipated in the future that will affect your business? How will you deal with these changes?
Management, Personnel and Advisors 11
Management is extremely important to a lender or investor who will carefully evaluate the knowledge and skills of the owners and key managers. In essence, a loan or investment is made to the people, not the business. Therefore, the business plan should emphasize the experience, education, and abilities of the key individuals involved in the business. Consider the following: •
• • •
Who will manage the business and what is their background? How is your background relevant to this business venture? Summarize relevant paid and unpaid experience. Include a personal resume'(s) in the Appendix. Explain the duties and planned compensation (salary, bonus, profit sharing, etc.) of each manager. What employees will you have, if any, and what are their job responsibilities and skill requirements? Include their titles and whom they report to in the business. Be sure all duties are described and clearly defined. Address future staffing needs and the current labor pool in your industry. (Do not be afraid to bring-up possible risks and explain how you will address them.) Create a personnel budget, include job titles, salaries, and hours scheduled/week. These figures can be inserted into your financial spreadsheets. Include information about contract services you will use (laundry, janitorial, bookkeeping, etc.). How much will these services cost? List your business advisor's names, contact information, and expertise. (Include accountant, lawyer, business consultants, mentors, etc.)
The Marketing Plan Products/Services In one or two paragraphs, clarify exactly what your business offers, and your plans for the business' future direction. • •
• • • •
Describe the products and/or services you plan to offer in detail. If you are planning an expansion, describe any new products and services you plan to offer in the future. Are they an extension or expansion of your current offerings, or are they completely different? Will they change the definition of your business? Are they additional offerings for your current customers or will you be seeking new customers? Explain the features of each product/service and what benefit those features will bring to your customers. These features are what will prompt the public to buy from you. For example, a feature of your business might be offering free delivery. The benefit to the consumer would be convenience. What makes your product/service unique; how is your business different from others in the industry? How will you attract, hold and increase market share? Provide information on any patents, trade secrets, or other technical advantages you have over the competition. Will your products be subject to limited life cycles (i.e., VCR vs. DVD players)? Will you offer any product or service guarantees/warranties? Is there seasonality to your business? If so, explain and discuss how you will handle uneven seasonal cash flow. Describe your future growth plans. Add any other information about your product or services you think is important.
Market Analysis In one or two paragraphs describe your target market. Who are the people buying or most likely to buy your products and services? Is your market a specific segment of the population, or the entire population in general? What are the size, location, and characteristics of your potential market? If you have more than one target market, describe each market. Focus your marketing efforts on individuals or organizations that are your best customers. For products and markets aimed at individuals: 13
• • •
Describe their general characteristics (these are demographics). How old are they? What sex are they? Where do they live and work, and what is their income level? What other characteristics do they share? Describe your market's behavior pattern. Where do they shop? What do they read? What else do they buy? Describe their attitudes (these are psychographics). What are their lifestyles, interests, beliefs? How large is your market? Provide some numerical estimates, based on market research. Provide information on the number of customers you expect to serve each week or each month. Is the market growing or shrinking? (This will be an important set of figures to be used later in your financial analysis.) Describe possible future market expansion. Generally, a business can expand its market reach either by adding new products or services or expanding into new geographic areas.
For products and services aimed at other businesses: • • •
Describe the characteristics of these businesses. What size are they (employees, sales)? Where are they located? What industries do they represent? What other characteristics do they share? Describe their shared behavior patterns. What do they buy now? From whom? How do they buy similar services? How large is your market? Provide some numerical estimates, based on market research. Provide information on the number of customers you expect to serve each week or each month. Is the market growing or shrinking? Describe other organizational markets you want to access in the future.
Competitive Analysis Describe the competition, both direct and indirect. Direct competitors are businesses offering products and services similar to yours. Indirect competitors are businesses offering products and services that are substitutes for yours. Your goal is to identify others competing for the same market, get ideas about good practices you should adopt, and avoid competitors' errors. Competition is not a bad thing; being unable to identify or differentiate your business from the competition is! •
Analyze your competition. List your competitors. Compare their products and services, prices, quality, advertising, management, 14
location, customer service, marketing, reputation and image, etc. to your planned business. What special features and benefits do they offer? Think about how you will compete. What is the income level of their customers? Are your competitors a large chain or are they small independent businesses? Be honest. Your new business will not be “the best” in every aspect. Do not forget Internet and catalogue competitors. Describe indirect competition to your products and services. Who specifically offers them? What do they charge? What special benefits do they offer? Example of indirect competition: A movie theater competes directly with other movie theaters. In this day and age, however, the theater is also competing indirectly with television, movie rental stores, and other kinds of entertainment, such as bowling alleys, live theater, paintball, bars, etc.
Location Analysis •
What part will your location play in attracting customers? Do a Location Analysis to examine the pros and cons of potential locations. Look at parking, public transportation, image, proximity to competitors, zoning, space for expansion, electric capacity, visibility, etc. Will your location be convenient to receive supplies and to distribute your finished products?
Sales Volume Potential •
Utilize market research sources to determine your potential sales volume. Economic Census figures and industry trade resources should help you to make this prediction. Your sales volume must be greater than your expenses, including your salary, or the business will not be worth doing.
Marketing Strategies Present a clear and concise picture of how you plan to market/sell your product/service and how this strategy will lead to profits. The marketing strategies you devise will depend on the results of the previous sections. Once you know who your customers are, and where your customers are, you can make decisions about how to best reach them. Describe your marketing strategies - where you fit in the market place; how you plan to package your products and services; how you plan to price and distribute them; how you will advertise, promote, and sell them. You need to present a specific plan to reach your market 15
and sell your product. You also need to devise a marketing/advertising budget to finance your plan. (Suggested length is to write one or two paragraphs about each main target area.) Positioning •
Briefly compare the prices, quality, and special features of your products (your image and location; income level of your customers) to those of your competitors.
How will you address the needs of your customers better than you competition? (Be specific and certain.)
Packaging • •
List all the ways you present your products and services in the marketplace. What image will you convey? Is it consistent with your positioning? Are your brochures, business cards, advertising, location, interior décor, product packaging, and other methods of presenting your products, consistent with the markets you serve? Are there unique aspects to your packaging that will benefit your consumers (easy open, self-store, etc.)?
Distribution • •
List the methods you will utilize to get your products to your customers. What are the requirements for each distribution method? Include both your requirements and those of any intermediaries.
What is the cost of your product/service? What is the price of your product/service? On what basis did you decide on profit margin? Are there different margins for different products/services? If so, why? How many units or what sales volume is necessary, or how many billing hours are needed, to break-even each month? Describe how your prices compare to your competitors' prices? Is the market ready to pay your prices; are your prices consistent with your image and strategies? 16
Promotion, Advertising, and Direct Selling •
Describe how your market will learn about your products and services. Include your plans in terms of advertising, direct sales, and public relations methods. Include a budget for these activities. Advertising costs generally depend on frequency, reach, and ad size. How many people can you reach with each method? Will it be cost effective? Include a specific plan. When do you plan to accomplish each step of the marketing plan? What are the sales goals connected with each marketing strategy? How much will each medium cost? (If your plan is very lengthy, place your advertising schedule and prices in the Appendix.) Use a short explanation here, referring readers to that section. What will you do if your marketing ideas don't work? List any other strategies you plan to use in the future.
Customer Service • • •
As a component of your marketing strategy, how will you handle complaints? How will you handle returns? Will you offer “extra” customer services in order to better your competitive advantage? Consider free delivery, extra opening hours, exclusive previews to special customers, free shipping, free shipping on returns, gift wrap, etc.
The Operations Plan This part of the business plan varies greatly with the type of business you are in. It will not be very detailed if you are a one-person service industry. If you are in a retail business the operations plan will vary depending on your size, number of products and services offered, types of products, and complexity of the business. A manufacturing business may require a detailed explanation of the manufacture/sales/distribution processes. Think about functions such as opening and closing the business, handling bank deposits, keeping inventory levels current, and flow of work from one employee to another. (Remember the reader may not have the time or the capabilities to understand the fine details of the operation. Thus, condense this section and refer readers to a longer, more detailed explanation in the attachments section.) Implementation Plan •
Explain the tasks and events which must first be accomplished to implement the business plan. You can use a list format, including completion dates and responsible parties, if applicable. Examples of objectives might include complete business plan, obtain financing, sign lease, order furniture and fixtures, order inventory, hire employees, etc.
What are the materials, supplies, and/or products needed to produce your finished marketable product/service?
Sources of Supply •
Who are your suppliers? Do you have alternative suppliers in case of a problem with one supplier? Does the supplier have a reasonable price and reliable delivery?
Methods of Production (Manufacturing) •
Describe the production process and the specific tasks required to make your product. Include the necessary work space and tools, the labor involved in production, and the amount of production and lag time for each stage. How will you monitor quality? 18
Methods of Production (Sales/Operations) (Retail) •
Describe the basic set-up of your business. What hours will you operate? Will this match your business to your target market? Will your labor/hours be cost effective? What special items or services will be required in order to reach your target market? Will it be cost effective? Can and will you be able to monitor safety, employees, and the sales processes in your plan? Do you have alternative or back-up plans? Can they be implemented in a satisfactory manner?
Risk Management •
Describe the insurance coverage will you carry? Why? What are the limits? What are the costs?
Consider other risks your business may encounter in the future and how you will handle them? Consider safety issues, lack of employees to run the business, poor cash flow, no business, etc.
The Financial Plan The purpose of this section is to attach dollar figures to the plan you've presented. Cash flows are the crux of this section. They help you understand the cyclical nature of your business so you can plan for months when the business may need additional cash. Financial statements allow benchmarking the potential results of your business against the results of other businesses in your industry to assess your risk. If the reader has not yet decided whether to invest in your business, strong pro-forma financial figures will be necessary to persuade him/her. Also, take care to provide explanations about how you arrived at your figures. Will you, or are you, turning a profit in this business? Does this plan make sense from a financial standpoint? Is this business a good investment? Do you understand these figures, and can you defend them? Investment Required • • •
Purpose of the loan. Loan amount requested. Break-down specific uses of the loan funds by physical plant, property, equipment, inventory, operating expenses, etc. Source and timing of repayment. 19
Owner cash/equipment injection into the business. Collateral which you will use to secure the loan.
Cash Flow Projections Cash flow projections describe the cash you expect to earn, through the sale of products or services, and the cash you expect to pay out for raw materials, operating expenses and capital purchases, by month. If your business is new you will need to do at least one year of monthly projections. The following two years can be projected by quarter. (Some readers will require monthly projections up to break-even point. Be prepared to present monthly for up to three years.) An integral part of your projections are the assumptions you made in arriving at each category on the projection worksheet. Be sure to list all the assumptions and the reasons for making them, either below the figures on your spreadsheet or on a separate, attached page. (Do not ever adjust the figures to fit your needs to meet break-even or show a profit.) Be realistic in your assumptions. Be somewhat conservative in your estimates to reduce the chances of setting yourself up for failure. Figuring cash flow by month will show the month(s) of greatest negative cash flow so that you know how much money you need and when you will need it. Be sure to request enough financing upfront to get you through the year. Consider utilizing a line of credit to equalize cash flow during slow months. •
Financial Statements •
Present the latest available balance sheets. Most readers require they not be more than 90 days old. Also put together a balance sheet after a large loan injection has taken place and the purchase of assets and/or inventory using that injection. The use of ratios is important (debt to equity, current ratios, inventory turnover, etc.). Find out the most important ratios for your particular business and present them. Income statements (profit & loss) should be presented. Back up these projections with data from your marketing section using demographic information, etc. Be realistic. Don’t customize them to show breakeven or profit that doesn’t exist. Use ratios to your advantage here also. Break-even point is an important aspect to be able to identify and to present to the reader. How many clients, or billing hours, or monthly sales marks must you realize to break-even? Can you 20
break-even before you invest too much money to ever recover costs and provide an acceptable return? This is information that should be presented in a format easily understood by all readers. Investors expect to be paid back, along with a portion of your profits. If the profit potential doesn't appear larger than the risk potential, don't expect any investor interest.
Appendix This section of your business plan should contain detailed information. Remember the narrative should be concise and to the point. Most readers do not have either the time or the interest to dwell on small details. Others, especially someone interested in financing your business venture, may wish more information than you have presented in the narrative. This is why the organization, presentation, and the reference in the narrative to these attachments is very important. Providing additional information through attachments can clarify, or strengthen, certain areas within the narrative. Include information such as pictures, maps, resumes, legal documents, market research reports, etc. Remember your business plan is a reflection of you. The plan does not have to be fancy, but should demonstrate your organizational and planning skills. You own the facts and figures in the plan. You should know how they were derived, be able to defend them, and know how you are going to operate the business in order to meet your projected goals. This is your first step for success. If you need assistance seek help. Good luck!
Writing the Plan The best way to start your plan is to find out what information you will need to acquire. The preceding outline is a good sketch; now go after complete information. You don’t have to go into the business plan jungle unarmed. “Suggested Resources for Business Plan Development,” appearing later in this module can help you decide where to start looking. Another alternative: Consider enrolling in a seminar offered by your local college or university. The two most common stumbling blocks entrepreneurs face when writing business plans are finding the information and writing the document. Acquiring your information will probably be the most time-consuming part of the business plan process. Here is a brief sampling of websites that may have the kind of information you will need.
Resources Useful for Marketing Research Association Sites Even some of the most obscure industries have professional associations. The activities of these associations vary from merely collecting dues and sponsoring trade shows to collecting extensive industry data. Sometimes the data is publically available without charge. Other times, membership is required to obtain the information. Doing an Internet search on the name of the industry, plus the word “industry” is a good way to ferret out associations. Alternatively, try the websites listed below. http://www.asaecenter.org/Directories/AssociationSearch.cfm http://www.businessfinance.com/trade-associations.htm Statistics Sites There is amazing amounts of information available from the U.S. Government. Economic Census figures list gross sales, number of employees, and payroll for businesses both with and without employees by county, valuable information for predicting gross sales. Also, the Census Bureau actually does special studies on specific industries. http://www.census.gov/main/www/cen2000.html 22
http://www.census.gov/econ/census02/ http://eadiv.state.wy.us/ Telephone Directories Useful to look at competition in any specific area; can be searched by city. http://www.dexknows.com/?sourceid=00195249874585885986 Industry Research Reports http://www.bizminer.com/login.asp http://www.census.gov/cir/www/alpha.html http://www.econdata.net/ http://sbdcnet.org/index.php http://www.entrepreneur.com/benchmark/index.html http://www.virtualpet.com/industry/mfg/mfg.htm General Business Sites http://www.allbusiness.com/ http://www.morebusiness.com/ http://www.toolkit.com/ http://www.entrepreneur.com/ http://www.inc.com/ http://www.hoovers.com/free/ http://www.entrepreneurship.org/ResourcesCenter/ http://sbaer.uca.edu/ http://www.smallbusinessedge.com/ http://www.business.gov/ * If you can’t find what you need, contact the Wyoming Market Research Center.
Drawbacks and Limitations If business plans are so great, how come a lot of old, successful businesses don’t have one? Some business owners succeed without this tool because they are geniuses, they are lucky, or because they have an incredibly great product or service. What you don’t see are all the businesses that didn’t make it but might have done better if they had put a plan together. Many established business owners, quite frankly, could benefit from going through the process. I know of one 110 year-old business that decided to write a business plan because its owners needed to re23
define their target markets. For three months, they met weekly with an outside consultant, and they said they literally “turned the business inside out.” They’re pleased with the results. Two years after going through the process their sales are up 80 percent and their profits are up 300 percent. Perhaps the main reason some businesses don’t have a business plan is that this type of planning goes against the nature or personality of many entrepreneurs. They would much rather be “doing something” than planning, projecting and calculating. The thoughts of spending three months (or even three full days) doing research makes them uneasy. Finally, some entrepreneurs may feel skeptical about the value of a plan which is, after all, based upon estimates. If you are writing a plan for a new business or a new product, all of your calculations will, of course, be guesswork. The value of your “guesswork” depends upon what you are basing your assumptions. Your research needs to be thorough, accurate and applicable to your own situation. Even though business plans should take risks into account, it is impossible to identify all the unforeseen circumstances that may arise. Who can predict natural disasters or sudden serious illnesses? Insurance can help cover some losses, but it cannot ever put you back in exactly the same position you were before. Also, it can be hard to know when you have satisfactorily answered such questions as, “Who are my customers?” and, “How much of my product will they buy in a given period of time?” A common limitation of all of the resources I’ve listed is they are not interactive. In other words, they cannot ask you questions like “Have you considered __________ as a possible market?” Have you thought about this drawback?” That’s why I highly recommend you talk with someone about your plan before you consider it finished. Doing a business plan won’t guarantee success, it won’t remove risk or uncertainty, and it won’t always result in financing. Business plans can help entrepreneurs make informed decisions. For that reason alone they almost always prove to be a good investment in terms of time and effort.
Emerging Business Forums 24
There is a growing trend in formal business plan presentations today. Business forums have developed in major cities all across the United States. M.I.T. established its first business forum in 1978 in Boston. Since that time, Chicago, Milwaukee, and Indianapolis are examples of cities that have followed with similar forums. One type of forum, known as Emerging Business Forum, offers entrepreneur’s constructive critiques of their business plans by experienced business executives, venture capitalists, consultants and fellow entrepreneurs. These Forums offer evaluation and counsel to growth enterprises. Entrepreneurs typically have 30 minutes to present their business plans before the review panel and a live audience. Members of the panel offer candid comments, pointing out both strengths and weaknesses of the plan. Audience participation follows. Presenters have the opportunity to respond to the evaluations and suggestions offered. They also receive written evaluations of the oral presentation from audience members. (The entrepreneur doesn’t make the written plan available to the audience.) The Forum allows for individual contacts between the audience, panelists, and presenters.
Module 10 Training Checklist • • • • •
Business Counselor _________________ Read Module 10 _____DATE Attend training _____DATE Co-counsel client working on business plan_____ DATE Review business plan _____DATE
The Writing Process: a Common Stumbling Block Your desk is covered with pieces of information that you want to put into your business plan. You’ve had your coffee. Your phone is off the hook. But you spend the next fifteen minutes staring out the window… unable to get going. You’re not alone. Most people experience some form of writer’s block when faced with a particularly important or large-scale job. Why? Most researchers who study the act of writing currently believe that many of our writing problems are caused by our approach. They say that all writers—whether they are conscious of it or not—go through this five-stage process when they write: pre-writing, writing, revising, editing and proofreading. The majority of writing problems are caused, the researchers say, when the writer tries to do all of the steps at once. Let’s take a closer look at each of these steps: Pre-writing: This is the stage where you decide what you’re going to say. You may write or review your notes, assemble facts, organize your thoughts, establish your goals, or draft an outline. The more you have to say, the more important this stage is. Generally, the more time you spend here, the less time you will spend in the revising stage. Writing: After you know in broad terms what you need to say, you can start saying it. This is the stage where you just get it down. Resist the temptation to try to say everything perfectly. Don’t correct grammar or punctuation. Don’t stop after every sentence to critique yourself. Just keep going. Revising: When you’re done, you can start revising for clarity. Rework your sentences until you are sure that your reader will understand them. Then, take a break from the project. At the very least, return a phone call or stand up and stretch. The next stage will require you to switch gears dramatically, and it will be much easier if you approach it from a fresh perspective. Editing: This is the most crucial—and more difficult—stage of the writing process. At this point, you should take a very objective look at your business plan and ask yourself: Does it do what it should do? • Is it convincing? • Do I need to include more information? Less? • Have I supported all of my most important statements? 26
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Is it well-organized? Is it readable? Is the tone appropriate? Is the style appropriate?
Proofreading: All that is left to do now is to look for typographical errors, grammatical errors and to make sure that the business plan is spaced correctly on the page. It helps if someone else can take a look. Keep in mind that minor errors could undermine the impact of the whole business plan. The most important applications of the process approach are: Don’t correct yourself while you write, and don’t wait for “the perfect opening sentence” to come to you. Speaking from my own experience as a professional writer (who hates to write), this process approach makes a lot of sense. I consciously go through the steps about 90 percent of the time. While I taught this at the University of Wisconsin-Milwaukee, about 75 percent of my students said that this approach saved them time and was especially helpful when they had tight deadlines. —Catherine Stover, Editor FORUM