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WRITING AN EFFECTIVE BUSINESS PLAN

Nathaniel R. Calloway


Copyright © 2011 by John Wiley & Sons, Inc. All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except as permitted under Sections 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, website www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030-5774, (201)748-6011, fax (201)748-6008, website http://www.wiley.com/go/permissions. To order books or for customer service, please call 1(800)-CALL-WILEY (225-5945). Printed in the United States of America. ISBN 978-1-118-28615-9

 


WRITING AN EFFECTIVE BUSINESS PLAN OBJECTIVES ™ Understand the primary advantages of developing an effective business plan ™ Describe how the economic recession in the United States has led to increased entrepreneurial interest in individual proprietorships and the growth of small business ™ Describe the basic components of a business plan, and the significance of each to an effective start-up business venture ™ Explain the risk factors that the small business entrepreneur must clearly understand and carefully implement, in order to achieve financial and management success ™ Discuss available resources that can provide assistance to the small business owner in creating and using a business plan

INTRODUCTION “Above all, you want to create something you are proud of. That’s always been my philosophy of business. I can honestly say that I have never gone into any business purely to make money. If that is the sole motive, then I believe you are better off doing nothing.” Richard Branson, Virgin Atlantic First of all, let’s define what is a business plan: “A business plan is a written document that defines what a company’s objectives are, how these objectives will be achieved, how the business will be financed, and how much money the company expects to bring in.” 1 Effective business planning has become increasingly more important to the success of starting a small business in the United States. But what are we talking about when we say “business planning”? There are different types of business (proprietorship, partnership, corporation), and different methods of operating a business (in a home office, in a physical store or office location, via telephone or postal mail order, or using the Internet). Already, we need to decide on a business type, and a method of operating the business – even though we may have an idea of what we would like to do in this business (sell products or provide services). Well, making these business decisions is called “business management”, and operating your chosen business is the execution of your idea or plan. There’s an old adage that states you should “Plan your work and work your plan”. Effective business planning Writing an Effective Business Plan | 3    


depends greatly upon how well you take your idea, and add to it the above business decisions we have discussed, and then the accumulated information being set forth clearly in the form of a written document, the business plan. You might say – “I know now all of the details about my new business, and have them in my mind. Why can’t I just tell people my idea, and explain verbally all of the things that I want to do and accomplish in my business?” The principal focus of this writing is small business, although the concepts and procedures can be equally applicable to “large” firms (which you very likely want your business to become someday). For our purposes, small business will utilize the definition that is generally accepted by the United States Small Business Administration: a business operation that employs 500 or fewer people. 2 Our assumption is that you are an aspiring entrepreneur who desires to start a business that although will have its beginnings at home – will also need at some future time to obtain capital funding. The investment of money by either a financial organization (bank, credit union, venture capital firm) will permit growth by establishing the business location, hiring employees and arranging for advisory services, and acquiring the equipment and inventory that are sufficient to serve an identified consumer market with goods and/or services. Remember, Apple Computer, Incorporated today, a multi-billion dollar, multinational corporation, began as the combined ideas and work in a single home residential garage of Steve Jobs and Steve Wozniack. 3 So - What is it so important for a company to write an effective business plan? Let’s look at why experts in the business/government world frown upon the lack of an effective business plan in the start-up of new business ventures. According to the Home Business magazine, the growth rate of home-based businesses has been rising at a significantly high annual rate. 4 In addition, the Small Business Administration (SBA) states that many new businesses fail within 4 years from start-up , providing for us a range that should be exceeded to achieve a successful launch. The number of home-based businesses in the United States is a very fast-growing sector, although the foregoing data regarding this trend also varies by those small business research organizations, both private and public. The number of U.S. households that currently are operating either a full or part-time business (home-based) exceeds 12 percent of all U.S. households (Office of Advocacy, Small Business Administration). The small business sector is a significant part of the U.S. economy, because of its ability, with proper capital infusions, to hire employees and generate sales revenue. 5 4 | Writing an Effective Business Plan   

Writing an Effective Business Plan  

Writing an Effective Business Plan

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