Small Business Video Library

Volume 2: The Business Plan

Your Road Map for Success

Produced by U.S. Small Business Administration and Bell Atlantic

Copyright 1990

Authors: J. Anthony Cord and Glenn G. Kautt.

What is a business plan and what can you do with it?

• Your roadmap to your chosen destination and route in an organized, printed manner (put it in a 3-ring binder).

• A tool for measuring and improving performance.

• A way to ensure partnerships last

• Plays a role in educating and motivating employees

• A basis for sound decision making.

• Strategic vision of your company, a means of steering it where you want it to go.

• Used to communicate your vision inside and outside of your company.

• Update it when you rethink it or have a detour. Have a format that allows you to revise your plan when needed.

• Much more than a document used to obtain funding.

• Provides a clear picture of where your business is heading.

Three things your business plan needs.

1. Evidence of focus, one or two things you can do better than anyone else. Proprietary position, barriers to entry.

2. Evidence of customer acceptance. Who are your target customers or clients and how do they perceive you. Why will they buy what you have?

3. Appreciation of investor needs. What do they want in return? Returns every year? Long term growth? Buyout or you build it up to buy back their shares?

Don't delegate the planning. You have to do it! Get assistance as needed. Self-awareness, your business style, you have to figure this out. YOU have to know where you want the business to end up. Are you a business starter who moves on, or do you want to stay with it all the way, or sell it but still manage it? Lifestyle owner looks for material benefits, research owner is excited about new product or service development. Which one are you?

Seven parts:

1- Executive Summary

• Most important section.

• Concise overview of document and history.

• Have sizzle, hook the reader. Why are you more likely to be successful?

• Write this last, though it comes first.

• The mission statement is the most important two-three sentences in the document.

• Describe milestones and accomplishments. No more than four pages. Credibility is the key.

2- Organization and Staffing

• Even if only one or two persons, show who does research, product development, marketing, finance, administration, etc.

• Create a diagram to show your business at a glance.

• How do you plan on attracting and keeping top people? Salaries, benefits, incentives, etc.

3 - Management

• Resume of each key manager or executive.

• Show that you have people that compliment you. Show how each member adds something to the company. If you are a researcher, make sure someone else is expert in sales and marketing.

• Recommend you supplement your management team with a volunteer advisory board with the credentials and success you don't have (yet). 7 at the most. Have both people from your industry and those outside of it (fresh ideas).

• For the volunteer board, use flattery and truth to contact them over the phone and ask them to be on your volunteer board to provide informal advice often, usually 2-3 hours per quarter is their time investment. They can also help provide referrals, credibility, prestige, better business decisions assistance, and they have an ego stake in your success.

4 - Products or Services

• Talk benefits, not features.

• Attach sales brochures here if available.

• Identify the problem that your product or service is to solve.

• Differentiate your solutions from the others as best as possible.

• Focus on areas where you have an advantage.

• If you’re a manufacturing company, you need sections on R&D and production.

5 - Marketing Plan

• Be realistic in your goals.

• Be specific in strategies and tactics.

• Be comprehensive in your analysis of your competition.

6 - Impact of Economic Conditions

• Have a section on how your business works when economic conditions change.

• What if interest rates go up or the economy is sluggish - describe what you would do if this occurred.

7 - Financial Plan

• Check with your local SBA district office, you can get free, in-depth management assistance.

• Only do these basics:

1. Balance sheet. Shows the financial condition of your company at a given point in time, assets and liabilities. Update monthly.

2. Income statement. Actual dollars for past year, forecast for next year. Operating expenses and earnings. Update monthly.

3. Monthly cash-flow forecast. Cash in, cash out, and timing. Let's the reader know when your business needs cash and when lenders can get repaid. Do not use accruals, us a cash basis.

• Make sure your using industry standards. If you exaggerate this, outside readers will be suspicious of everything. Use footnotes to explain any assumption. Be prepared to answer any questions!

Tips...

• Share this with your associates. They will feel ownership if you do.

• Test drive it with a friendly colleague or your volunteer advisory board.

• Use consultants to advice, not create. You success depends on you.

• Practice your business "rap" with a recorder. Be exciting, be upbeat. Practice so you can communicate to others what your business is all about.

• To succeed, you need a team of people who buy into your ideas and share your vision and can implement your business culture as things happen. That's when exciting things happen!

Sources of money...

Bankers, Venture Capitalists, Officials with the SBA, friends and relatives. Whomever you use, your business plan is essential to provide to them confidence and understanding of your goals, strategies, and tactics.