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Developing an Effective Business Plan

"Planning is essential to the success of any undertaking"

1. Realistic goalsSpecific, measurable, and set within time.

2. CommitmentSupported by all involved - partners, employees, team members, and family!

3. MilestonesSubgoals in order to evaluate progress.

4. FlexibilityObstacles should be anticipated and alternative strategies must be formulated.

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Pitfalls to Avoid in Planning

1. No realistic goals

2. Failure to anticipate roadblocks- don' t let objectivity go out the window

3. No commitment or dedication

4. Lack of demonstrated experience

5. No market niche (segment)

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What is a Business Plan?

A written document that details the proposed venture. It mustillustrate current status, expected needs, and projected resultsof the new business. Every aspect of the venture needs to be

described - the project, marketing, research and development,manufacturing, management, critical risks, financing, and

milestones or timetable. The business plan is theentrepreneur's road map to a successful enterprise.

Could be referred to as a "venture plan", a "loan proposal", oran "investment prospectus".

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Benefits of a Business Plan:

"If your proposed venture is marginal at best, the businessplan will show you why and may help you avoid paying thehigh tuition of business failure. It is far cheaper not to beginan ill-fated business than to learn by experience what your

business plan could have taught you at a cost of several hoursof concentrated work."

(Joseph R. Mancuso, 1985)

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Developing A

Well-Conceived

Business Plan

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Who reads the plan?A professional - lawyer, consultant, banker, investor, potential customer - may

give your plan a "five minute reading".

They' ll focus on the following:

1. Determine the characteristics of the venture and its industry.

2. Determine the financial structure of the plan.

3. Read the latest balance sheet.

4. Determine the quality of the entrepreneur(s) in the venture.

5. Establish the unique features in this venture.

6. Read the entire plan over lightly.

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What's the most important features of the business plan?

• Appearance

• Length

• The cover and the title page

• The executive summary

• The table of contents

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Guidelines to Remember:

Keep the plan respectably short

Organize and package the plan appropriately

Orient the plan toward the future

Avoid exaggeration

Highlight critical risks

Give evidence of an effective entrepreneurial team

Do not over diversify

Identify the target market

Keep the plan written in the third person

Capture the reader's interest

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Elements of a

Business Plan

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I. The Summary• a clever snapshot of the complete plan

II. Business Descriptiona. General description of the venture (product or service)

b. Industry backgroundc. Company history or background

d. Goals/potential of the venture and milestones (if any)e. Uniqueness of the product or service

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III. Marketing a. Research and analysis

1. Target market2. Market size and trends

3. Competition4. Estimated market share

b. Marketing plan1. Market strategy:

sales and distr ibution2. Pricing

3. Advertising and promotions

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IV. Research, Design, and Developmenta. Development and design plans

b. Technical research resultsc. Research assistance needs

d. Cost structure

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V. Manufacturinga. Location analysis

b. Production needs: facilities and equipmentc. Suppliers/transportation factors

d. Labor supplye. Manufacturing cost data

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VI. Managementa. Management team: key personnel

b. Legal structure: stock agreements, employment agreements, ownership, etc.c. Board of directors, advisers, consultants, etc.

VII. Critical Risksa. Potential problemsb. Obstacles and r isks

c. Alternative courses of action

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VIII. Financial a. Financial forecast

1. Profit and loss2. Cash flow

3. Break-even analysis4. Cost controls

b. Sources and use of fundsc. Budgeting plans

d. Stages of financing

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IX. Milestone Schedulea. Timing and objectivesb. Deadlines/milestonesc. Relationship of events

X. Appendix and/or bibliography

(Kuratko/Hodgetts, 1992)

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Helpful Hints for

Writing the Business Plan

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The Summar y

No mor e than thr ee pages.This is the most cr ucial par t of your plan because it must

captur e the r eader s inter est.What, how, why, wher e etc. must be summar ized.

Complete this par t after . the finished business plan has beenwr itten.

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The Business Description Segment

The name of the business.A background of the industry with history of the company (if any) should be

covered here.The potential of the new venture should be described clearly.

Any unique or distinctive features of the venture should be spelled out.

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The Marketing Segment

Convince investors that sales projections and competition can be met.Market studies should be used and disclosed.

Identify target market, market position, and market share.Evaluate all competitors and specifically cover "why" and "how" you will be

better than the competitors.Identify all market sources and assistance used for this segment.

Demonstrate pricing strategy since your price must penetrate and maintain amarket share to produce profits. Thus "lowest" price it not necessarily the

"best" price.Identify your advertising plans with cost estimates to validate the proposed

strategy.

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The Research, Design and Development Segment

Provide the advantages of your location.List the production needs in terms of facilities and equipment.

Describe the access to transportation.Explain proximity to your suppliers.

Mention the availability of labor in your location.Provide the estimates of manufacturing costs - be careful, too many

entrepreneurs underestimate their costs.

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The Management Segment

Provide résumés of all key people in the management of the venture.Carefully describe the legal structure of the venture.

Cover the added assistance of advisers, consultants, and directors.Provide information on how everyone is to be compensated.

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The Critical Risks Segment

Discuss the potential r isks before investors point them out.Some examples include:

• Price cutting by competitors• Potentially unfavorable industry-wide trends

• Design or manufacturing cost in excess of estimates• Sales projections not achieved

• Product development schedule not met• Difficulties or long lead time encountered in the procurement of parts and

raw materials• Larger than expected innovation and development costs to stay

competitive• Alternative courses of action

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The Financial Segment

Provide statements.Describe the needed sources for your funds and the uses you intend for the

money.Provide a budget.

Create stages of financing for purposes of allowing evaluation by investors atvarious points.

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The Milestone Schedule Segment

Provide a timetable or chart to demonstrate when each phase of the venture isto be completed. This shows the relationship of events and provides a deadlinefor accomplishments.

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Writing the

Business Plan

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Prewriting

Write or review notes, assemble facts, organize your thoughts, establish yourgoals, draft an outline.Very important stage!

Writing

Don' t go for perfection the first time around.Just keep going!

Revising

Revise for clar ity. Rework your sentences. Take a break and start from a freshperspective.

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Editing

Take an objective look at the plan. Does it make sense? Is it convincing? Do Ineed more, or less, information? Have I supported my most important

statements? Is it well organized? Is it readable? Style? Tone?The most crucial and most difficult stage of the process!

Proofreading

Use a spellchecker! Check the grammar. If possible, have somebody else take alook. Nothing is worse than a sloppy job of proofreading!

Good luck!