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 Everyone is different! Some want a business/lifestyle -- they want to make their hobby or trade profitable.  Some business owners want to reinvest every nickel in their business and  live frugally while they plow most money earned into new equipment, and grow the business over a number of years.  Some want the business to be profitable right away.  Mothers, now known as Mompreneurs , may want to start a small business while taking care of growing children, and as a result, need to factor in time and flexibility. A retiree may want to focus on a lifetime dream venture.  A business or strategic plan forces you to think about  your personal goals. Some want to manage every aspect of the business and should have a small business to retain control.  Others are comfortable with administration and would rather delegate the work than get highly involved in the details. Do you want to be the sole leader or can you share leadership? It is important to be scrupulously honest with yourself so that you don't plan a business that is not right for you.  It helps to put it on paper, to organize, to focus on your goals and to really think about what you are about to do. Will the business you start meet your career plans?  And use your own capabilities? Click for Virtual Advisor!

WHAT WILL A BUSINESS PLAN DO FOR ME?

Entrepreneurs are "doers"-- active people that find it frustrating to stop and analyze.  Sitting down to write a 20-40 page document is not what they are about. However, the one person to benefit from the business plan is you, the entrepreneur.  You will:

• Gather critical market information.

• Gain competitive advantage.

• Focus your activities to make good use of materials and resources.

• Understand the industry.

• Be able to anticipate business problems later on.

• Discover more profitable market niches.

• Gain introspection regarding your own goals.

• Provide information needed by others to evaluate your financing proposal.

• Avoid a failing business venture.

Here are some questions you should ask yourself before you consider a business:

Good entrepreneurs are optimists and risk takers -- are you?

Why are you considering this project?

Do you have the self-starter determination, to get going, and discipline to keep going?

• Do you work hard and can you take responsibility?

• Do you make decisions?  Are you a good organizer?

• Do you have the physical stamina to work long hours?

• Do you believe in this business so much that you would consider financing it yourself?

• Will your family be supportive of your efforts?

• Do you know what basic skills are required to run a business?

• Do you have business or management experience?

• Have you worked in a similar business?

• Or do you have direct personal knowledge of what is required?

You cannot simply hire someone who has the experience you lack.  (Although it is good to compensate in hiring for your deficiencies to some extent, you don't want to just drop a whole aspect of the business on someone else).

After you make the business plan, you may find out that the type of business you wanted to start would not be as profitable as one in as another slightly different area. Great!  Now you can investigate another niche that may be more profitable. You may find out that this particular business would not work out-period.  Then you have saved yourself a lot of time and money and you can refocus your efforts in another area.  It's true that many successful business owners never had a business plan, but:

• We are not all business masterminds!  

• There is more competition now for investment dollars.

• Gone are the days when investors were throwing money at dot.coms.

• Bankers are more impressed and may take your loan application more seriously if you have a business plan. 

• Most venture capitalists and other investors require a business plan.

• The plan that stands out from many will most likely be the company that gets the funds. 

It is important to either write your business plan using a PC word processing application or hire someone to do it for you.  Then it will be easy to change data with your ongoing business.  Purchase the very best paper for your plan and have a see-through plastic cover with spiral binding -- you want it to look very professional.

Because each business plan should be tailored for its audience, you may want to have several versions.  You may want one for your loan officer, your investor, your employees and one for yourself.  It is common practice to keep one copy for internal use as a management tool and provide a more detailed version when seeking outside funding. Before you start your business plan, it would be helpful for you to read sample business plans in your specific industry.  A college or university business library will typically have publications with sample business guides for various types of industries.  Click to view Sample Business Plans!

FOCUS OF THE BUSINESS PLAN

The focus of every business plan will consider four main factors:

• Marketing:

This will include market research, market strategy, assessment of customer groups and of market growth (evidence that customers would be interested in your product).

• Operations:

This section will briefly cover:

1.  How you propose to develop the product (research and development).

2.  How you actually will produce (manufacture)  this product. Consider factors such as:

• Human Resources:

• Financial:

  Prepare all of these with the help of an accountant. 

THE OUTLINE

There is no perfect outline for a business plan.  It's best to settle on one and get going.  Most books on business planning will have an outline. What is important is to build your business plan in sections, like building blocks so you can focus on each part separately. Here is a typical business plan outline:

1.   Cover Sheet

2.   Title Page

3.   Executive Summary

4.   Description of the Business

5.   Product or service description

6.   Operational plan:    

a.  Research and development of product

b.  Plant, equipment, material and labor

c.  Techniques and processes, including maintenance and services

d.  Service support plan

e.  Protection such as licenses, trademarks, or copyrights

f.   Government regulatory impact

g.  Timing of major operations:  new model roll-out, business expansion, web site  launch, etc.  

7.   Marketing: including research, strategy, competition

8.   Human Resources/Management:

a.   Backgrounds of managers and principals, key employees

b.   Organizational chart-plus future organizational developments

c.   Selection policy

d.   Style of management -- participatory, or top-down

9.   Financial Plan

a.  Present several projections, based on various scenarios.

b.  Set of assumptions -- anticipated sales volume; cost of goods sold and gross profit; and data from trade  associations,  regarding average inventory turnover.

c.  Projected income statements, monthly for 1-2 years, then quarterly 3-5 years

d.  Projected cash flow statements monthly for 2 years, quarterly for years 3-5

e.   Current balance sheet typically projects year-end balance sheets for 5 years

f.    Break-even analysis 

10. Business Strengths and Weaknesses

11. Growth projections

12. Exit Strategy -- will you buy back stock from investors if they decide to withdraw their financial support? 

COVER SHEET

The cover sheet identifies the business and documents the location and phone numbers of the business or where the principals (owners) can be reached, and the person who writes the business plan. Here is a sample of the information typically presented on a cover sheet.  You will want to place this type of information in a pleasing arrangement on the cover page.

Sunshine Café
222 W. State St.
Anyplace, MI. 48321
345.678.1234
To be Submitted to:
The Friendly Bank and Trust Co.
Business Proposal for Frank Evans and Bob Thornton (987.123.2947)

STATEMENT OF PURPOSE

You may also want to include the Statement of Purpose on another page which provides information such as:

1.  Who wants the money?

2.  What is the business structure?

3.  Exactly how much money is needed?

4.  What is the money for?

5.  How will the funds benefit the business?

6.  Why does this loan or investment make business sense?

7.  How will the funds be repaid? Remember that investors may want to know when they will be able to invest their funds in another way.

Example-Statement of Purpose:

Sunshine Café, a partnership, seeks loans totaling $250,000.00 for property and building at 222 W. State St. in Any town, MI to perform renovation to expand facility and maintain cash reserves to provide working capital during renovation on existing restaurant facility.  This money will finance transition through the expansion of this restaurant in order  to operate at a more profitable rate.  The loan will be repaid according to loan agreement.

EXECUTIVE SUMMARY

Since this is a brief overview of your entire plan, it should be written after you write the plan.  Some lenders only look as far as the summary, so you will want to make it interesting. This will be a combination of sales document and a professional summary of your business. The executive summary should be short -- about one to four pages.   It should be concise, factual and business like, and yet be exciting and generate interest.  You need to have a history and some highlights of the business as well as its current status. Write a section on marketing, stating impressive results of market research and specific target markets. List principle owners and key personnel. A financial summary, possibly stating when the company will be profitable; when new facilities will be open; how new sales techniques have influenced profits, etc.  Include the most impressive highlights, such as major positive events in the company's history. You will want to spend some time to polish this section. Review it with your friends and associates to be sure that it is understandable and that you have provided data to back up your statements.

DESCRIPTION OF  BUSINESS  

Some business plans place a description of the business after the business summary. It can be lengthier than the summary. It is less concerned with the marketing aspects of the business and more of a general description.

• Describe the concept of the business.

• Describe, with the help of your accountant, the legal structure of the business:  such as sole proprietorship, partnership,  or corporation.

• Business objective:  type and stage -- start-up, expanding, beginning to market.

• Names, such as "dba" (doing business as), subsidiary or brand names, model names and domain names.    

• Licenses, trademarks, copyrights, patents, equipment leases. Description of new technology in general terms.  Do not disclose sensitive information.

• Describe your business and why you think it will succeed.

• Define your customers, your products or services. 

• Describe your product and why it is going to take the market by storm. 

• Describe financing -- loans, grants, sold stock, etc.

• List the hours of operation or if this is a seasonal business.

• Buying a business?

          1.     Reasons for owner selling -- check with your banker.

          2.     Business' history and legal liabilities.

          3.     Verify accuracy of owner's business tax returns.

• Management -- describe briefly how personnel will be managed.

• Management of stock, inventory, and real property.

• List vendors and contractors, describing what will be supplied and credit terms.

• Is the company going public or will it be up for sale?

THE OPERATIONAL PLAN

Your operational plan will show how the work will be done. It is not important to go into every detail about your processes.  Talk about the research and development of the product and costs associated with its development.  Often a company will continue product development as an ongoing process.  How will the product be manufactured? Describe the product, equipment, labor and materials. You may want to include photographs or charts in the main body of the plan or in the appendix. What are the production rates or capability of the business?  Will there be a just-in-time supply system for an assembly line?  Describe your location and facilities, why they are favorable.  Describe equipment and plans for labor.  If you are developing new technology or copyrighting specific designs, include information in general terms and be careful to not give away any key information. You will want a non-disclosure agreement for viewers of your business plan, but these are not always respected. List licenses and trademarks. Detail your service support plan -- how will you provide customer service, maintenance or repair services?  Discuss the impact of government regulations and how you will handle compliance. 

THE ON-LINE BUSINESS

The Internet is a great way to do business, or to expand your regular business.  Doing business on the net, however, is not inexpensive. The business plan is very similar to business plans that are not on-line, except that just as you become familiar with construction elements when building a physical store, you will have to become familiar with the electronic "bricks and mortar" of the Internet.  Here are some terms that may be useful to you.

Bandwidth is the "pipe" or connection to the Internet that determines how fast electronic information can be sent over the Internet: 

A web site with fewer graphics compared to text will need less bandwidth.  For example, an insurance company that transmits text online will need less bandwidth than a graphics firm because anything visual needs lots more speed.  Corporations often have T-1 lines, T-3 lines or wireless transmission that handle from 1.5 mbps to 45 mbps.

Be aware of how many graphics you have on the site.  Customers will get impatient and just click to another site if downloading is taking more time than a few seconds.  You will want to anticipate the amount of traffic your website will generate, because if your computer hard drive does not have enough space (RAM), the whole site could shut down.  Consider having a search engine on your web site if it is a very large site.  If you are selling on-line you will need a credit-card purchasing system to accept payments.

Design it Myself?

In the operations section of your business plan you should have a diagram of the site that you and/or your web designer have created. If you are very computer savvy, you can design the web site yourself using programs such as Flash by Macromedia, MS FrontPage, the JavaCommerce Toolkit from Sun Microsystems, or Fusion by NetObjects.  Suggestions from Macromedia to improve your design are:

• Have a consistent top heading so that the whole site with many pages looks coordinated.  (The user should feel that he or she is still on your site.)

• Keep your site goals and quickly lead the user to the main areas of the site.

• Remind users where they have been by programming links to change color after use. 

• Reuse design elements to ease navigation.

• Keep the initial screen download less than 40K

Your web designer and you need to consider the web site content that will be covered such as demos, catalogs, order forms, media releases, company history, product information and your annual report.  Establish good keywords in the initial html tags (meta tags and title tags) for your site to enable search engines to find your site easily.

Prior to sitting down with your designer to arrange the site, you should look at the sites of your competitors.  Analyze why certain sites appeal to you more than others.  Simplicity and a non-cluttered look make for a better impression, especially on the home page.  You will need to market your site by listing it on business cards, stationery, brochures, and in advertising.  This should be part of your marketing plan and strategy.  Giving away free information, demos or samples can draw users to your site.

Web Hosting

Besides designing the site, you also must  "publish" the site to a  "server" (computer dedicated to keeping yours and other sites on the Internet) also called a "host" server. This is why many small business purchase a "web hosting" service or Internet Service provider to continually provide them with sales data, e-commerce software, and tape back ups.  Your Webmaster or Internet Service Provider (ISP) can also make your site pop up first rather than last on several search engines such as  Yahoo! ,  Google ,  Clusty ,  MSN ,  A9.com , and  Ask.com .  In addition you can purchase more server capacity as your business grows from the web hosting service or ISP. That is why web-hosting services have an advantage over do-it-yourself sites; they can provide a scaleable system so that large variations in traffic can be handled. 

Registering a Domain Name

You will need to register a domain name or URL (universal resource locator), a unique name for the site, using providers such as  doteasy  ,  Verisign , GoDaddy.com or  register.com .  Try to select something catchy, memorable and short. You will also need an e-mail service such as Hotmail , Yahoo! , or Outlook Express .

Do I need an Intranet?

Consider whether you need an Intranet or internal web pages accessible only to company employees or suppliers. Intranets can help you systematize company operations and do save money.   If you have a lot of information on your Intranet that would be costly to replace if lost, you may need an Intranet plus a security system or "firewall" to protect private company information. You will not want everyone to see sensitive data on your payroll, prices, names of customers, and suppliers. These pages should have a password for entry.  Secure software is also an option.  You may want to consider wireless transmission that is cheaper for more web transmission than a T-1 line.  Note that security for wireless is usually not as secure as for a wired system.

E-Commerce Software Packages

E-Commerce Software can help your business be much more efficient. The software packages will have modules for inventory, purchasing, marketing, and on-line ordering, etc. Some popular ones are Oracle and SAP (Systems, Applications & Product in Data Processing).  This is a large investment for a small firm. These packages are typically for large corporations who have in-house IT staff to manage the system.   

The management section of your business plan should consider a less top-down form of management as your firm goes toward an on-line organization. Organization based on teams or line form organization with less hierarchy seem to work better for many technology firms. You may also consider how telecommuting could lower overhead. 

The business plan for an on-line business must have a niche market just like any other business plan.  Factors such as a good management team, well thought out financial projections, and an excellent pricing/marketing strategy will interest investors and have customers coming to the site.

MARKETING

Sales are really what its all about. Your business will ride on your marketing strategy. You must know who your customer is, where that customer is located and how to best distribute the product to that customer. You also must know your competitors in the real world and why your product could stand out above all the rest.  You need to consider all the various ways one can market this particular product such as special promotions, advertising, direct marketing, on-line sales or a combination of all of these may be your recipe for success. Try to find an industry that has less competition or try to find a market niche that no one else has created.

Market Analysis

It's important to analyze the industry and to provide the reader with a lot of solid facts about the industry.  You could describe the market in terms of dollars.  List major trends that might influence your business such as mergers of major manufacturers in the industry, new products, development of new service concepts, technical developments, etc.   Remember that the bank or investor has probably seen many business plans, with glowing descriptions of future sales.  They are more likely to be impressed with solid research about the industry.

Be sure you understand just what it is you are selling -- your market niche. How does a customer benefit from your particular mousetrap?  Are you selling time-saving products for busy women?  Are you selling the idea of a bargain?  Are you selling the get-away aspect of a product like a vacation, spa or entertainment videos. What is your market -- be as specific as possible.   Market research can be as close as a web site or the  Yellow pages .  Visiting a competitor to find out what they offer and what they specialize in could help you define a niche business for yourself.   Professional and trade associations  and their journals will offer lots of business growth figures, sales figures. You want a growing market rather than a shrinking one.  Some of this is demographic, as the baby boomers age; there will be more call for medical supplies, health foods, exercise equipment, home care, etc. Many business services are making money doing all the things that women used to do before they went back to work.

Competition

Analyzing the marketing approach of the competition can be informative -- how much is spent on TV or web site ads, radio, direct mail -- what is their emphasis and why.   You can speak to mutual suppliers in general terms, asking general questions. If you are already in business, your own employees that service the public directly will have information on the competition.   Do a customer survey or just ask customers for their preferences.  Research each major competitor through business directories,  professional associations ,  newspapers  and trade journals .  Giving solid facts when evaluating the competition will show that you did your research and will impress lenders.  Working for a similar business is an excellent idea.  Many businesses have grown from the ideas of an employee who thinks he or she can do it better.

Marketing Strategy and the 4 P's Product, Price, Place and Promotion

• PRODUCT: In today's economy you are more likely to provide a service than a product.  Will your service or product really benefit customers by making their life more convenient, more comfortable or give them information? 
   

• PRICE: Pricing is a strategy, also -- Are you trying to maximize profits, remain competitive? Introduce a new product?  Price can vary -- typically a huge discount for large orders, price cuts to those who will arrange to pick up and transport the product if it is large, financing (payment) plans, etc. Most small business owners make an error in trying to lower prices to gain market share.  Often there are other reasons than price to influence a customer. Have you ever bought something with a higher price just because the store was convenient, classier, or had convenient parking? Have you ever spent more on a meal because of the restaurant atmosphere?  Everything enters into this.  Some customers tend to shop where the help is friendlier, and where the products have better quality, or where there is a good return policy.  Sometimes its better to be first than best -- the first T-shirt commemorating an event will be sold quickly. 
   

• PLACE is important -- There are more and better supplied hardware stores where the population has a lot of trades people.  They are servicing a good customer base.  The area where you can conveniently bring together supplier and customer may be key.  Realtors, bankers and the local chamber of commerce may have helpful information on the best locations.  Manufacturers and wholesalers value inexpensive warehouse space and access to the freeway systems.  Retailers want to be close to the customers as well as the main roads.
   

• PROMOTION: Advertising includes the anything that touches the customer -- signs, trademarks, business cards, web sites, telemarketing,  professional advertising campaigns, advertisements in the community  newspaper , brochures, flyers, free samples, and coupons.  You will want to have an advertising strategy -- advertising is expensive. You may want to hire a professional ad agency initially because you want your advertising dollar to be very focused.

RESEARCH  

The  trade association  for your specific product will have a lot of information on that specific industry. Trade magazines frequently have sales analysis and other research reports. The  Michigan Small Business & Technology Development Center  in your area or  Chamber of Commerce  should also have business start up kits designed for entrepreneurs.  The  Small Business Administration  site is a good place to start.

There are also resources available at your  library  -- such as the  Thomas Register  (which lists products and companies in almost every area of endeavor in the United States) or databases by firms such as  Gale Research  and  Dun and Bradstreet  that can help you in your research.  Companies are categorized by SIC (Standard Industrial Classification) and recently by the new code  NAICS (North American Industrial Classification System) . The  NAICS  adds industries such as fiber optics, software development and other computer industries that the SIC did not cover.

The  U.S. Census Bureau  can help you find the number of people in your county broken down by sex, age and nationality.  You can find census survey information from the NAICS (North American Industrial Census Survey) for your company in the county where you wish to have your business.  It will have sales data. You will also be able to review surveys showing average income, age and other factors in various geographical areas such as state or county. Focus on your industry, your competition and your customers.  If you are catering to a wealthy upscale population with lots of disposable income, it is important to find out which counties have high average incomes and then market your product to those geographic areas.   Some helpful  research web sites include: The Security and Exchange Commission (SEC's) EDGAR ,  FedStats - Statistics ,  Hoover's Online ,   Claritas , and  SurveySite .    Many local libraries have databases that can give you information on publicly owned companies.  The Michigan Manufacturers Directory will give you basic information on companies by product and by area.  After you have investigated the market thoroughly and you have developed a product prototype, you may want to invest in specific market research testing.  The Small Business Sourcebook   is a excellent  reference tool and available in most  libraries .  It has trade associations, trade shows, advice from owners in your specific business -- it is a must for small business research. 

MANAGEMENT AND ORGANIZATION PLAN

People can make or break your company.  Business owners give careful consideration to the hiring of key personnel or "principals." There should be a listing of key employees, describing the experience, education, and strengths of each person.  You should include a job description and a delineation of duties and responsibilities. Include any outside consultants you will be using.  You may want to set up a volunteer advisory board.  List amount and type of compensation in salary for key employees.  This can be in stock or stock options, benefits, bonuses, profit sharing etc.

The plan should show clearly who is responsible for basic business functions such as marketing, personnel and finances.  You will need to determine if you want divisions of responsibility by product line (electronics division, widget division) or by function  (a marketing department, an accounting department, a production department, and a personnel department).  When you are preparing these items for investors, focus on the skills of the managers to show how the management team will provide excellent leadership.  Typical items include:

• Goals and structure of organization
• Communication and reporting systems
• Work environment

FINANCIAL PLAN

Most manufacturing and retail businesses do not start to make a profit until having been in business for at least 2 years.  The reason is that there is a lot of overhead involved in purchasing a store, inventory, and personnel.

Service businesses may make a profit sooner, since they tend to have less initial financial outlay. The point at which profits become greater than costs and overhead is called the " break-even point ."   Frequently a start-up business does not know when the break-even point will occur, so it is not essential to the beginning business plan.

The financial part of your business plan is extremely important. From these projections you will make a budget. That is why your business plan should be realistic.  You won't want to be keeping up with a plan that has unrealistic projections after you start your business. It is better to give yourself some room when you are starting a business. 

The financial plan is critical for raising cash. The business plan is both a realistic analysis of the company's future and a sales paper.  It cannot forsake a true financial picture to be great advertising copy. You will have to be true to both of these aims. Re-evaluating how your business plan is keeping up with your original goals yearly, quarterly or monthly should help your business.

Investors will be very interested in how the money will be used and how the business will be doing.  The financial part of the business plan is more standardized than other sections.   There are standard financial forms such as cash flow statements, income projections and balance sheets.  Include former tax forms if you have been in business prior to the plan. Have a section on start-up costs.  Describe how you will be repaying the loan and include a timetable.  The  Michigan Small Business & Technology Development Center  in your area should have samples of these forms in spreadsheet programs.  You should have an accountant help you with these, or at least review your statements.

Now it's time to get moving on your plan.  Begin on the section which interests you the most and start writing to avoid the "terror of the blank page."   You can always edit what you have said, but just like a term paper, it helps to get something down on paper first. You can always start the Introduction later.  In the end, your business plan should be trying to convince, sort of like a lawyer presenting a case in court, except you are describing why your business will succeed, section by section.  You will be repeating some of the basic information from section to section, but this takes place in all business plans.  Each section should have its own distinctive emphasis.  Try to have fun with this and express your enthusiasm for the business.  At the same time be sure you back up what you say. When you have a draft, get friends to review your plan.  When you have a final draft, give it to your accountant and attorney for review. Pay special attention to the summary and to the financial section.  After you have the plan, use it to guide your business along -- don't let it gather dust in a corner.  After all it is your road map to success!      

BUSINESS PLAN SOFTWARE

There are some popular software programs such as  Business Plans Pro ,  BizPlanIt , and  Ultimate Business Planner  that can give you some ideas for business plan development.  The visual side of these software programs is interesting.  You can take some areas of your plan that you would like to emphasize and make eye-appealing charts or graphs.  Standard financial forms are also included to help you with projections and other variables.   In using software, however, you want the plan to retain its individuality. So use the software as a guide rather than a strict regimen.   BizStats.com  has free and instant business statistics that may be useful in your business plan.