Читать книгу You Can Do It : - Thomas Greenbaum - Страница 14

CHAPTER THREE

The Business Plan

One of the first questions that clients raise when coming to SCORE for counseling is whether they should write a business plan. The correct answer to this question is almost always YES, whether the individual is planning to use the business plan as a working document in the venture, or only as a one-time exercise to help raise money needed to start the business. The business plan should be a living document that is developed when a business is started, and then maintained and updated at regular intervals as the venture matures.

Why Develop a Formal Business Plan? – There are several very important reasons why a business would benefit from the exercise of writing a business plan. Specifically:

* It provides a discipline that forces the writer to think through all the aspects of a business which will be important to the success of the venture. This includes both the strategic approach (i.e., overall business strategy, marketing strategy, pricing strategy, etc.) and the tactical elements (promotion programs, advertising, networking, etc.) of a program to launch the business.

* It increases the likelihood that the writer of the plan has carefully evaluated the competitive marketplace, is familiar with the category/business where they will compete and, importantly, knows the profile of the major competition to whom they will face as they begin the venture.

* It provides a very important communications vehicle for explaining the business to other parties. For example, a potential investor or loan provider would not consider giving money to the venture without a thorough business plan. This is because they need to be able to understand the market in which the business is operating and what their plan is to enter the category in light of the competition. It also provides the very important financial details such as P&L projections, cash flow analyses and balance sheet estimates for the first three years of the venture.

* It forces you to set financial goals for the business that will become the benchmark for success as the venture matures. These goals should be updated at least semi-annually based on the experiences in the actual marketplace.

* It gives you the discipline to set specific goals for the business for the coming year. For example, what are the 3-5 things that you would like your business to accomplish in the plan year? Do you want to generate “x” number of new accounts, “y” levels of awareness, “z” levels of retail distribution, etc. These are very important benchmarks against which you would be able to judge the progress of the business as time goes on. Importantly, this is an exercise that should be ongoing, and not just something that is implemented only in the first year of preplanning the business.

How to Write a Business Plan - An effective business plan is generally written over an extended period (weeks or months) as each section will require research and analysis. Some SCORE clients come to us with the goal of seeking to develop an effective plan, and our goal is often to try and write one section every week or two based on the learning at that point in time. There are a few key steps that should be taken in the process that will facilitate writing the plan.

* Conduct your own research of the business category in which you will enter, with the objective of learning as much as possible about how the category operates, and importantly what it takes to be successful in the market. Before you write the plan, you should be able to identify the 3-5 keys to success in the business you will be entering. It is much more beneficial to develop your own plan, possibly with the help of others, rather than to pay someone else to write the plan for you. This is because when you write the plan you completely understand every element and will be much better equipped to run the business when it begins.

* Seek secondary sources that can add to your knowledge of the categories. For example, some business libraries will have examples of business plans written by others that you could use as an example of how you plan to approach the venture. One library in New York City (Science and Industry Business Library…SIBL) contains hundreds of business plans for different types of companies, and you might find one written about your type of business or something very close to it. Another excellent source for business plan examples is the website www.bplans.com. They also have hundreds of sample plans you can use to help develop your document.

* Identify a business plan format that appeals to you. There is no “right” business plan format. If you search Google for business plan formats you will get 20,800,000 results, none of which is the ideal, but most of which are probably adequate. In this chapter, we will identify the sections of a business plan that we believe to be most important. You can decide if this is right for you, or you go to other sources for an approach that makes you feel more comfortable. This book provides two options for business plans, both of which are extremely effective.

* Determine your personal goals. Specifically, what are you trying to achieve with your venture. Are you seeking to develop a large business with many employees that will generate approximately $XXX in personal income? Or is your goal to just create a successful one-person venture that can give you $YYY income each year? Perhaps your goal is to be a high-profile businessperson who is regularly quoted in the papers and on-line, and this is more important to you than the income you make from the business? There are infinite combinations of personal goals, but it is essential that you carefully think through yours, as they will impact significantly on the type of business plan you develop.

Length of a Business Plan – One of the most common questions we get from clients is how long the plan should be. We have seen plans that are three pages and others that are eighty pages. Generally, the length of the plan depends more on the complexity of the business and the depth of planning you have done, than any “formula” which suggests that it should be a certain number of pages long.

Two Types of Business Plans - There are hundreds, if not thousands of different formats for writing business plans. In my 40+ years of working with both large and small clients, I have found that one type of format works best for a small business and another works better for a medium or large organization. In this chapter, we will provide a format for both, as small organizations do grow larger over time. However, it should be noted that in the nine years I have been working with relatively small companies I have tended to recommend the “Small Company Business Plan” which is reviewed below. The plan for larger companies follows it in this chapter. There is no reason that an entrepreneur cannot mix and match sections if it works for them.

Small Company Business Plan - The intent of the Small Company Business Plan is to provide in one simple document the information that a company should develop to effectively plan its business and contain enough information so that the document could be used with investors if raising money for the organization is necessary. This plan contains only eight sections as follows:

SECTION ONE: Business Definition - This consists of a succinct description of what the business is, so that an uninvolved party would have no difficulty understanding what the organization is offering in terms of products or services.

SECTION TWO: Market Environment - This section is intended to provide a framework for the environment into which the business is entering. It is NOT intended to contain growth statistics about national or regional market size and growth as one might include in a business plan for a large company, but rather a discussion of the general market the company is entering. For example, if the entrepreneur is going to open a lady’s shoe store, the discussion should talk about the number of competitors in the area and the relative importance of them as potential threats to the desire to develop a local ladies shoe franchise. If the entrepreneur is opening a human relations consulting firm, the discussion would focus on the number of other similar types of organizations that exist within the regional market, and what is perceived to be the demand for this type of consulting service.

SECTION THREE: Target Market - This is a discussion of the primary target market for the product or service from the perspective of the buyers of the offering. For example, if the company is making a new type of toy, the target market is not the children who will play with the toy, but the retail outlets or wholesalers who will carry the toy. This does NOT suggest that the marketing will not be directed at the end users (i.e., children or parents) but the primary target is the buyers, because without the distribution you would never get to the children.

SECTION FOUR: Product/Service Positioning or “Reason Why” - This section should briefly indicate the unique point of difference of the product or service that will be offered, so that the target audience has a reason to buy. Said differently, it is what you would like your customers to think about your company when the name is raised. One commonly used example is BMW cars. They have long had the positioning as the Ultimate Driving Machine. TD Bank has positioned itself as the convenient bank, with more locations, better hours, etc.

SECTION FIVE: Marketing Plan - This consists of a one-year program that outlines in detail how you will come to market with your product or service, in terms of developing awareness of the item/service, generating trial/purchase, generating distribution, etc. It should also include a point of view on the type of customer service you plan to provide to build and maintain a good reputation for your company.

A key part of the marketing plan is the development of an appropriate name and logo for the company, and also a 5-7-word slogan/tagline that would be used in addition to the name to help describe the business (more about this elsewhere in the book).

SECTION SIX: SWOT Analysis - This is a section where the company would look at what the strengths, weaknesses, opportunities and threats are relative to the venture. It is an excellent exercise to help in the analysis process when starting a new business.

SECTION SEVEN: Operations Section - This is the section that describes how the business will be structured, and what tasks each of the people in the organization will be responsible to accomplish. For example, it will describe how the product/service will be created or manufactured, and what will be the process of “selling” it to the target market.

SECTION EIGHT: Financial Analysis - This is the principal section that an investor will study, to determine whether they will want to become involved in the organization. It also is the most important section for the entrepreneur in terms of projecting the possible income that the business will be able to generate. At a minimum, it should include the following sub-sections:

a.Start-up Costs - What funds are required to begin the business before the first dollar of revenue is generated.

b.Sources and Uses of Funds Generated - This is a brief section that identifies the total financial needs and where the money will come from and then how it will be used to get the company launched

c.Financial Projections (pro forma P&L) - This is a document that will outline the first three-year projection of revenues and expenses for the business and indicate what the projected profit or loss will be during each of those years. This document is covered in detail elsewhere in the book.

d.Cash Flow Analysis - This is a report that will help to determine the cash needs of the business over the first year of operation. Unlike the pro forma P&L, this document deals with money collected rather than revenue projections utilized in the Pro Forma. This document is also covered in detail elsewhere in the book.

Medium or Large Company Business Plan - The following will provide a description of the various sections of a business plan for a medium or large company. Each of these is essential to the plan. Should you wish to add other sections that would be fine based on your own judgment.

* Executive Summary - This is the first section of any business plan but the last one that should be written. The goal of this section is to provide a 1-2-page overview of the key information in your plan, so a reader could quickly read the summary and get a general idea about the business category you will be entering, how you will approach the venture and what the anticipated financial results are that you are anticipating.

* Market Overview - This section should consist of a very brief, but thorough overview of the business category in which you will be entering. Specifically, what are the key characteristics of the business in terms of operations, marketing, sales and distribution? What have been the growth-patterns of the business in the past and what is the anticipation for the future? In the event you are creating a new category where there is no specific history, this section should provide information about other similar categories and what you have learned from their dynamics and growth patterns that will provide a sufficient background for your specific entry into the related business.

* Competitive Environment – This is a very important section as it provides a detailed analysis of the various competitors in market in terms of their overall business strategy, how they have performed, and what you believe to be the key reason for their success. For example, were they the first in the market, do they have the strongest brand name, the best distribution system, the largest advertising budget? Each of these is very important. Further this section should explore the key messages of the various brands that would give their customer a “reason why” to purchase them versus the other similar brands in the market.

* Description of your Product or Service – This is a brief section that provides a detailed description of the product or service you will be marketing. The key to this section is to ensure that a person who knows nothing about your venture could read this section and have a complete understanding of what you are offering.

* Overall Business Strategy – This is a one-paragraph statement of the goals of the business and the strategic approach to achieving this goal. The implementation of the plan would be a direct outgrowth of the strategies from this paragraph. The following would be an example of a business strategy for a new dry-cleaning business:

The overall objective for the XYZ dry cleaning business is to be the leading supplier in ABC County in terms of both volume and profitability. To achieve this objective our strategic focus will be:

-To provide a level of quality and professionalism that is unique to the industry

-To be the premium price dry cleaner in the area, justifying the higher price by offering a much higher level of service than is currently offered

-To generate customers by offering convenience via multiple drop-off outlets and free pick-up and delivery

-To execute a marketing plan unique to the industry involving both awareness generating advertising and trial and repeat promotional programs

* Keys to Success - This is an essential section of the business plan as it identifies the key elements of your program that will lead to the success of your product or service. This section would consist of a description of the element(s) of the marketing program that will determine the success or failure of your program. It is based on an in-depth analysis of the market in which you determine that the real leverage in the category and reason you will succeed will depend on being able to deliver on the key(s) to success you have identified. Some examples of potential keys to success might be:

-The ability to obtain in-depth distribution in independent toy stores

-The ability to generate substantial traffic to our web site

-The capability to communicate that we offer a superior service, at a justifiably higher price

-Our ability to deliver on the promise of providing 12-hour service for our equipment in the event of failure.

* Marketing Plan - The marketing plan is the tactical part of the business plan, and it identifies the programs you have developed that will make you successful in the marketplace. It consists of several sub-sections as identified below:

-Description of the USP for the product or service - This consists of a clear articulation of why your product or service is different (and hopefully more appealing) than the others in your category. Does it meet a need that others do not, or does it fulfill a wish that customers have but cannot get from the other items in the category.

-Positioning of your product in the category - Positioning is essentially how you would like your target customers to view your product or service. It will be covered in greater detail in a later chapter of this book.

-Description of your target audience - This is a brief description of the market segment to which you will direct your marketing effort, and from which you anticipate your sales.

-Program(s) to generate awareness of your offering - If your target customers are not aware of the item you have available it cannot succeed. Therefore, you should identify what programs you will be implementing to create awareness of your offering. This would include a discussion of any of the following:

--Media advertising

--Social media

--Networking

--Speaking engagements

--E-mail blasts

--etc.

-Program(s) to generate trial and usage of your product or service - Once you have created some awareness of your offering, it is necessary to do something to motivate the target customer to become a buyer/customer/client. In some product categories, this consists of offering coupons or refund offers, in others it might be a free consultation and in a third it could be a storewide promotion offering a special event to draw in customers.

* Management and Organization - This is a section where you will identify your plans for operating the company for the first three years. It should include a discussion of your legal structure (i.e., “C” Corp, “S” Corp, LLC, PC, etc.), and an overview of the personnel requirements of the organization. For example, if you will require a sales effort to generate revenues, how will you achieve this in terms of using employees, brokers, distributors or just yourself as the selling entity for the organization.

The section should also outline the organizational structure in terms of reporting relationships for employees who will work for the company for the initial three years.

* Start-up Expenses - This is a section that will identify all the expenses that will be required to get you into the business. It will include only the ONE-TIME expenses such as the purchase of computers, office equipment, supplies, etc. that are needed to get the operation started.

* Financial Projections - This is the most important part of the entire business plan, as it outlines your sense of the revenue and cash flow that will be coming to the company for the first three years. It should consist of four documents:

-Proforma P&L – This is a projected profit and loss statement for the initial three-year period of operations. It is a very difficult worksheet to create, as most new ventures do not have a clear path as to their revenues for the initial 12-18 months. Therefore, it is important to make assumptions (which you will keep as an Appendix to the plan), so they can be revisited as the business begins operating. Do not make the mistake of assuming your revenues will be flat for the first 12 months. Every business experiences a ramp-up time as you get started so the revenues in the early months will be significantly less than in the later months. It should be relatively easy to project expenses, as most of the expenses you will incur will probably be easily identified. These are items such as rent, utilities, staff salaries, product cost of goods, etc. A sample P&L for a company is shown at the end of this chapter.

-Cash Flow Statement - This is an essential document that most business plans do not include. It shows the monthly flow of cash for the first year of the business. The intent is to identify cash needs of the business during the early stages of operation. It starts with the opening balance of your business account and reflects both the revenues and the expenses each month, showing the cash balance each in the company each month. A sample cash flow statement for a hypothetical company is shown at the end of this chapter.

-Balance Sheet - This is a statement of the assets, liabilities and net worth of the organization and is a vital document when seeking funding for the organization. The balance sheet is covered in detail in the next chapter.

-Sources & Uses Report – This is a document that identifies the amount of money that the organization will use to start the business (before it opens) and then the money needed to fund the business during the first year. Then it identifies the sources of funds that will be obtained to operate the business. This could include both sales of products/services and loans/investments from outside resources.

If a business plan is being developed for applying for a loan, then it also must include a personal financial statement. This is essentially a statement of the assets you own, the income you have coming in from work or investments, and the liabilities you currently have such as mortgages or car loans. Virtually every loan to a small business will be secured based on the assets of the individual. Generally, this is the equity in the home. For this reason, it is very important that new businesses carefully think through their needs for start-up monies, as there is considerable risk in putting your house up as the collateral for obtaining operating cash for your business.

SUMMARY - It is almost impossible to do too much planning when starting a new business. While developing a business plan might appear to be an academic exercise to the aggressive entrepreneur, it will pay you back in dividends over time. Take the extra time to develop your plan, and then use it as a dynamic document as the business proceeds. You will be glad you did.