Who’s afraid of the Big Bad Business Plan?

For some reason, those two words seem to put terror into the hearts of even the biggest, meanest hard-core business people…not to mention poor little red riding hood.

So today, I want to reassure you that you are already 3/4 of the way there to putting together a killer business plan for your new venture.

But first, let’s talk.  Why do you need a business plan, anyway?

The number one reason entrepreneurs usually write a business plan is because they are trying to get financing from a lender.  That is a pretty good reason.  You just can’t get a loan or venture capital without a good business plan.

But the real reason you should write a business plan is to force yourself to set goals and strategies for your business, and to have a way to track measurable outcomes.

As multi-millionaire Zig Ziglar has said, “A goal properly set is halfway reached.”

So what goes into an effective business plan…and how are you 3/4 of the way there?  Just take out your notes from our previous sessions and you will see that you have most of the information outlined below.

This is not a place to get too creative.  There are recognizable forms and templates for business plans, and you want to give lenders exactly what they expected to see.  The only thing that should stand out is your killer content!

Most business plans start with a cover page, table of contents and executive summary.  We won’t talk about those here because they are easy to create when the actual content of the business plan is finished.  Just remember, the executive summary is the first thing most people will read, so you need to make it sizzle!

The body of the business plan can be divided into four main sections: 1) a description of the business, 2) marketing information, 3) finances and 4) management.

Description of the Business

If you’ve been taking notes as we go along, you should be almost done with this section.  Lead with your vision and mission…the heart and soul of your business.  Then describe the specifics of how your business will operate: the business entity, products or services you will offer, facilities (if any), and the people in your organization.

If you are a start-up business seeking funding, you need to sell yourself here.  What qualities and experience do you have that will make you successful in this business?  Who are the key members of your team and what do they bring to the table?

You also need to “sell” your products or services.  How do they fill a unique need in the marketplace?  How do you plan to distinguish yourself from the competition?  Remember your Unique Selling Proposition and include it here.

Marketing Information

This section of the plan must demonstrate that there is a market for your product or service, and that you have figured out strategies to reach that target market.  We began work on this early on, when you did your online research to define your niche.

You will need to do a bit more research here to identify your competitors, analyze their strengths and weaknesses, and figure out how to differentiate yourself from them.  You also should try to quantify the number of people in your target market, and how you plan to reach them (what marketing channels will you use)?

Next week, we will go into this in more depth.  You will define your “ideal customer,” identify their needs and the benefits you can offer to them, and develop a plan to promote your product or service to them.

Finances

This is the most difficult section for most start-up businesses to write.  You have no sales history to rely on, yet you have to do projections about income and expenses, profits and losses.  But don’t panic, we have already started working on this.

Remember your gap analysis?  There we figured out what it would take to get from where you are today to where you want to be in one year.  You did some calculations about how many products or services you would have to sell and how they would have to be priced to reach your goal.  If your goals were not realistic, we talked about diversifying your products or services to provide multiple streams of income.  That exercise set the foundation for your income projections.

As a start-up business, you also need to clearly lay out your start-up costs and how they will be capitalized.  These include things like equipment, office supplies, rent if necessary, inventory of products and the like.  If you did the barn-raising exercise, you have already identified these costs and figured out how you are going to get what you need.  By the way, if you bartered your way to acquiring what you need, that is a legitimate source of capitalization that will show on your business plan as “in-kind” goods or services.

Unless you are a financial wizard, you will probably need to work with an accountant to produce the technical documents.  If you are good with numbers, inexpensive software systems like QuickBooks can product the necessary forms.  These include projected profit and loss statements, projected balance sheet, projected cash flow, and a break-even analysis.

Don’t let all of this scare you.  The key to remember is that you start with your goals and work backwards.  Your projections have to be realistic, but let your goals determine where you want to go and how you plan to get there.

Management

This section should be relatively straightforward.  Remember, you have given a lot of thought to how you want to structure your business, who you want to work with, and what kinds of strategic alliances you will have.

This section should describe your organizational structure and how your company will be managed and resourced.  If it fits into a neat organizational chart, that is fine.  But don’t be afraid to talk about outsourcing or creating other kinds of alliances, such as affiliates and joint ventures.  Funders like to see that you have thought carefully about how to get the labor you need for the least amount of up-front capital.

Sigh of Relief

Obviously, we have not covered every detail of what will go into your business plan document.  But I hope you see that you have already done much of the planning.  This does not have to be a daunting task if you take it one step at a time.   And there are plenty of free resources out there to help you if you get stuck.  So just get going, and remember this…

We are very near to greatness; one step and we are safe;

can we not take the leap?—Ralph Waldo Emerson

Recommended Readings and Resources

There are a lot of free online services for entrepreneurs, but I think one of the best is the Business Owner’s Tool Kit.  They have extensive guides to starting a business, writing a business plan, obtaining financing, and just about anything else a new business owner needs to know.

Another great resource is Bplans.com.  They are selling business planning software, but they give away a lot of free sample business plans for various kinds of businesses.  They also have a nifty fill-in-the-blank template you can use to get started.

Every new business owner should check out the resources at the U.S. Small Business Administration.  They offer lots of free training, and can walk you through the process of applying for an SBA loan.