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ОглавлениеA business plan is a written document that summarizes how a business owner intends to organize the business and how it will run and earn a profit so that the business will succeed. It defines the strategy that will be used to establish, operate, and market the venture. The business plan has value because it forces the entrepreneur to engage in the planning process through which she will gain a better understanding of the industry, the business, and the various options available. It is also an essential selling point when looking to obtain loans from banks or individual investors.
Business plans come in many forms. Many are very detailed documents while others are more informal. A typical outline of a business plan follows.
Executive Summary
The executive summary must be impressive because it is the first thing people read in your plan, and we all know the power of a strong first impression. This is where you want to wow people. It is like the coming attraction, or trailer, at the movie theater. You want it to highlight the business idea and make readers want to find out more. While it is at the beginning of the business plan, it is often written last after all of the pieces of the plan have been determined.
Features and Advantages of Your Products or Services
At this point you need to describe what it is you do and how you do it. As a service business, you need to lay out what services you provide and what expertise your business brings to the table. Also, answer the question: What makes your services different from those of other, similar, businesses?
The Market/Industry
Illustrate, briefly, the market your business will be a part of. Be specific and show how and why this is a growing market. Also demonstrate how you fit into this market. It’s hard to prove you belong in an oversaturated market, so do your homework to make sure there is room for you to compete in your city or town. Since a contracting business is dependent on a location, define the industry in the local market.
If need be, find a niche to fill in an otherwise crowded market and explain why you are invaluable. Also make sure you explain your demographic market and discuss your competition, not from a negative approach, but simply by explaining your competitive edge over other similar businesses.
Marketing
Your marketing plan is all about knowing your target audience and explaining how you are going to reach out to them. Before including this in your business plan, do your homework and figure out where potential customers look for such services. For example, if you remodel kitchens and bathrooms, you will market yourself on websites and in magazines that homeowners or builders look at. However, before you can start reaching out to potential customers, you also need to define what services you are selling, at what price(s), and in what location(s). Also discuss your pricing strategy (are you competing with low prices or perhaps providing specialized services to discerning customers who are willing to pay). To simplify, you can use the four Ps of marketing: product, price, place, and promotion.
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Business plans can take several months to prepare. A large percentage of entrepreneurs use outside professional advisors such as accountants or lawyers for help; many also attend business plan seminars.
The census website at http://census.gov is a great place to start searching for demographic data. You can also learn a lot about marketing research by going to the Marketing Research Association at www.marketingresearch.org.
Management and Key Personnel
It’s important when doing a business plan to feature yourself first. After all, you are the person, the entrepreneur, behind the business venture, and it is you who will have to put your neck on the line, answer the hard questions, and take the criticism—as well as the praise and acclaim, should there be some.
Many people invest largely because they believe in the owner and the management team. Provide key information on each person on the team. If you are a one-person operation, explain how you can handle the jobs and from where you will hire subcontractors. Explain your criteria for such hires and compensation. You should also include outside advisors, such as lawyers, accountants, or financial consultants, and describe their backgrounds and input into your business. If you have a management team, or advisory team, briefly describe the background of each member and what makes that person important to your business.
Operations or Production
An Operations or Production section is all about how you do what you do. This can cover a lot of ground in a short section where you include a description of your services; sourcing raw materials, hiring labor, acquiring facilities and equipment; and how you complete and get paid for a project. Also include the overall costs of equipment such as tools, a truck (or several), and both office and mobile communications tools. Then discuss what you will do both on- and off-site and your access to the necessary materials you will need to complete a project. Where will you buy them and store them?
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Mini business plans of five to ten pages have become the popular concise models that may stand on their own for smaller businesses. It’s to your advantage to run long when creating your initial plan (15 to 20 pages) and then narrow it down for presentation purposes.
Many such presentations are made with PowerPoint decks, using 10 to 12 slides to tell your story. This is a great starting point, but you should have at least a more detailed mini-plan available, especially if you are seeking lots of money.
The basic rule for your operations section is to cover all the major areas including labor, materials, facilities, equipment, processes, and payment to illustrate the details that are critical to your business operation.
Finance
Your goal in this section is to explain how your business will work from a financial perspective. You want to show the projections of expenses and sales over one, three, and even five years. Be conservative in your estimates, and always have the math ready to back them up. Make sure you include existing liabilities coming into the business. You can typically gather information and use Excel or another financial software program to make the spreadsheets you’ll need to support your written overview of your future financial picture. Business plan software is also readily available with the necessary spreadsheets.
The most important financial statement you will need is an income statement (also known as a profit and loss statement (P&L) or an earnings statement. Income statements answer the questions, “Am I making or losing money?” and “How?” A cash-flow statement can show how you will stay liquid, which is vital to any business, and a break-even analysis will show that you have a good idea of what you need to reach before you can come out with a profit. You should also let it be known how much money you are putting into the business since investors will always take a project more seriously if they know you have invested in the undertaking.
Risk Planning
It’s important for you and for your investors to know that you are accounting for risks, which can include anything from unfavorable industry-wide growth trends, to low sales to lack of skilled labor to a major competitor undercutting your process to a recession.
Whether you are using a version of Microsoft Word or one of the popular software programs to guide you along the way, you can go back to earlier versions and revise and rewrite as you go. Some people still enjoy printing out an early draft of their business plan and marking it up at the kitchen table, while others prefer reading everything on their computer and/or iPad, tablet, or iPhone.
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There are many sources of information about how to prepare a business plan. One excellent source is the Small Business Administration (www.sba.gov), which provides assistance over the internet. Numerous books covering business plans such as Write Your Business Plan by Entrepreneur Media, Inc., can be found at Amazon (www.amazon.com), Barnes and Noble (www.barnesandnoble.com), and other online booksellers. You might also visit www.bplans.com, which is a very helpful website for anyone starting a business and writing a business plan.
Business plans can be 5 to 50 pages. More often than not, the smaller plans, or mini-plans, have become more fashionable in a world in which time is of the essence. Most plans today are sent electronically to potential investors, but you should be ready with hard copies if the situation presents itself. Also, you always want to double-check everything and proofread your work.
And finally, be ready to back up anything you have in your business plan and answer any questions a possible lender, investor, or potential vendor or partner may throw at you.
While you remain in the driver’s seat, writing the plan and doing all the heavy thinking, business plan software can handle research, organization, calculations, and more.
Of course you don’t have to use specific business plan software to write your plan. Microsoft Office or any similar software in which you can write each section of your plan can serve your purpose. You can even use Excel or other spreadsheet software to handle the financial pages.
However, should you want to the guidance of a software program, find one that meets your computer capabilities, has tech support readily available, and is highly rated. The difference between a $59 and $99 software program is typically the features.
Some of the most popular choices are: Business Plan Pro from Palo Alto Software at www.businessplanpro.com/; BizPlanBuilder® a cloud-based program from Jian software at www.businesspowertools.com/project/2015-a_bizplanbuilder-business-plan-software-template/; and Ultimate Business Planner from Atlas Business Solutions at www.abs-usa.com/business-plan-software/overview.
Every business has a purpose for its existence. A written mission statement, usually one to four sentences long, says what your company is, what you do, what you stand for, and why it’s important. An example of a poorly written mission statement is: “We build fine homes.” A much better example is: “We are dedicated to providing services and solutions that meet the dreams of our clients. Quality construction is delivered with friendliness, professionalism, individual pride, and company spirit.” The best mission statements focus on satisfying customer needs rather than on the products that are sold. Certainly everyone wants to have a fine home, but it is more important for a client to know how he will get that fine home. The client will have positive feelings about hiring a company with a compelling and personal mission statement, and employees will understand the goals and objectives of the company they work for.
There are two ways to finance your new business: equity and debt. Equity financing involves raising money from investors who will often have an ownership stake in the new business.
Most small businesses start with the owner(s) putting some money into the project themselves. This will often encourage other investors, knowing that if the owner put his or her money into the business, then they are taking it seriously. Your investment should be money you have earmarked specifically for the business venture and NOT from your ongoing living expenses or your retirement savings. Other sources of funds often come from friends or relatives who have an interest in helping the new enterprise. Caution must be used when taking money from friends and relatives; personal relationships may be ruined if the business fails and these friends lose their investment. Business owners who raise capital in this manner must explain their business plan carefully and make it clear to potential investors that there are risks associated with their investment. It’s also very important to stipulate whether such investors are going to be involved in the business or “silent” partners. Spell out everything, and put it on paper in advance.
Venture capitalists (VCs) are another source of equity financing. These are wealthy individuals or companies who look for startups in which to invest their money. Generally, however, VCs prefer to invest in companies that have strong growth potential. VCs often like to get quite involved in the workings of the company and have less patience for businesses that project slow growth.
Angels are individuals who invest their own money in new ventures of interest to them. Many angels are well-off professionals, such as doctors and lawyers or former business owners. Some are retired but have tremendous expertise to share in a specific field. Others are successful business owners who have made a bundle with their own entrepreneurial efforts and are now interested in letting their money work for them in someone else’s venture. Typically they are less involved in the actual running of the business than VCs.
Angel investors used to be a difficult group to find. Not any longer. There are groups formed by angels and other organizations, such as Funding Post, that bring some angel investors together for you to meet. You can visit the Angel Capital Association (at www.angelcapitalassociation.org) or search on Google for “angel investing groups in” your area of the country.
You can also seek out debt financing, which is achieved by borrowing money from a bank, credit union, or the U.S. Small Business Administration. These entities rely heavily on the business plan, financial forecasts, and the personal finances of the owners of the business. A new business is much more likely to obtain debt financing if the owners have committed a significant portion of the capital required for the business to get off the ground, have a good credit rating, and have a business plan that looks solid and sensible. They also like to know specifically what qualifications you have to run such a business.
tip
When looking for sources of financing, go to Entrepreneur’s website www.entrepreneur.com/bestbanks, and check out their up-to-date listing of best banks for entrepreneurs.
One positive aspect of borrowing from banks or credit unions is that they don’t want control—at least beyond the control exerted in the covenants of a loan document. And they don’t want ownership. Bankers make loans, not investments, and as a general rule they don’t want to wind up owning your company.
Loan covenants may require you to do all sorts of things, from setting a minimum amount of working capital you must maintain, to prohibiting you from making certain purchases or signing leases without approval from the bank. For this reason, you want your accountant, financial advisor, and/or attorney to review your loan documents and spell out everything for you very carefully. Also review the many types of loans that are offered and determine which is best for your situation.
According to the National Credit Union, there are more than 7,000 credit unions in the country with nearly 100 million members. Since credit unions are not-for-profit financial institutions, their focus is serving the financial needs of their members and not making a profit. As a result, once you have applied for membership and joined a credit union, it may be easier to get a lower interest rate with fewer fees than found at a bank when procuring a loan. However, like a bank, you will still need to prove your credit worthiness and that you can repay the loan, or have someone co-sign for it.
Unlike banks, credit unions are not protected by the FDIC. However, they are covered by the National Credit Union Share Insurance Fund (NCUSIF), which provides federal and most state-chartered credit union members with up to $250,000 of insurance per individual depositor, per federally insured credit union.
The Small Business Association (SBA) has a variety of business loans, as well as information to help entrepreneurs get started. Founded in 1953, they have provided vital business information to scores of entrepreneurs and “millions of loans, loan guarantees, contracts, counseling sessions and other forms of assistance to small businesses.” The 7(a) Loan Program, has become the most popular of their various loans offered. Visit the SBA at www.sba.gov, or www.sba.gov/loanprograms to go directly to their loan information.
Plan Pointer
Lenders look for borrowers exhibiting the four Cs of credit:
1. Character: What’s your reputation and background?
2. Capacity or cash flow: Do you have sufficient cash flow to repay principal and interest?
3. Capital: Does your business have enough capital to keep going if you can’t pay the debt from earnings?
4. Collateral: Do you own something valuable the banker can take if you can’t pay the loan back? Hint: Don’t put up your home as collateral.
The well-developed business plan has been called a blueprint for success. It is a valuable tool that can be used to obtain financing and to communicate your goals and objectives to employees.
Financing the business can be achieved through a combination of equity and debt.
Equity investors range from friends and family to venture capitalists and angel investors.
Lenders are most likely banks but can also be credit unions or the Small Business Association (SBA).
