YOUR BUSINESS PLAN

Financial Stress Reduction has searched resources through the business communities throughout the United States to give our readers the most up to date, and comprehensive information available.  I would like to thank all of the sources we gleaned from to come up with the composite below.  We are making this information available free of charge.  We warrant none of the information below as to whether you will be able to secure funds for any source.  

Business plans assist the development of the overall structure of a company's financial and management needs. The day-to-day success of an enterprise and its ability to attract capital depends to a large degree on the completeness, clarity and precision of the business planning process.  Strategic business plans meet specific needs of a company in various stages of its life. 

New ventures needing capital must depend on a well documented and frequently updated plan. The objectives are two fold. First, to give prospective investors a realistic valuation of the feasibility and risks involved with a thorough analysis of capital needs and applications. Secondly, to provide the entrepreneurial team with a detailed operational guideline.

Rapidly growing companies require not only adequate funding, but also strong operational and financial controls. A detailed plan decreases the risks associated with rapid growth by keeping the management team focused and financing sources up to speed.

Special project plans are used to assess the reality of undertaking new markets, developing new products or services and analyzing feasibility of financial profitability related to capital acquisition.

Mergers, acquisitions and leveraged buy-outs require decisive action from a position of strength.  Business plans must reflect the financial structure of the surviving company, as well as detailing the generation of increased cash flow to meet new debt requirements.

Turnaround companies must develop solid profitability. These plans describe management's strategic focus and how the plan will be implemented and properly executed to accomplish the turnaround. It requires detailed support of increasing revenues, expense cuts, and corporate asset management to secure the proper capital sources.

The following part of this section is an excerpt from the book, Golden Entrepreneuring by James B. Arkebauer, founder of Venture Associates:   Top Of Page

Planning the Entrepreneurial Venture

Business plans boil down to operating the company on paper. The aim is to validate an idea and challenge every aspect of the business. A business plan is a written presentation that carefully explains the business, its management team, its products or services, and its goals, together with strategies for reaching the goals.

The entrepreneur or team members who write the plan will find it a painstaking process. But keep in mind, this is the selling tool, and it requires careful consideration of all the multiple facets of a start-up or business expansion. It cannot be written as an afterthought, and it should not be taken lightly.

Check with any professional investor anywhere in the country, and you'll hear horror stories about ill-conceived, poorly written, or sloppily put together business plans. As great as the company's potential may be, it is essentially doomed to rejection, before it can even get a foot in the door, if it has a poorly conceived business plan.   Top Of Page

The Primary Purpose of Your Business Plan

There are two primary purposes to a business plan. The first has an outside objective--to obtain funding. There's no business without capital. The second serves an inside purpose--to provide a plan for early corporate development: to guide an organization toward meeting its objectives, to keep the entrepreneurial business itself and all its decision makers headed in a predetermined direction, to explain in an engaging way with interesting information how the company will be run for the next 3 to 5 years.

The entrepreneur must put all the "how's" and "needs" together in one neat package. The human and physical resources must effectively interrelate with the marketing, operational, and financial strategies of the company. Unless an entrepreneur has magical powers of persuasion, this is not the time to try to fake it.

The business plan is considered a vital sales tool for approaching and capturing financial sources, be they investors or lenders. They want to know that the plan has been carefully thought out by the entrepreneurial team. They want to be convinced that the team has the skills and expertise needed to actively manage the company and that it is prepared to seize opportunities and solve the problems that arise. That's why the business plan must be well prepared, professional in tone, and persuasive in conveying the company's potential.

It cannot be stressed too strongly that a good business plan is the cornerstone of successful financing. If you want investors' money, you've got to give them good reasons to buy in. The business plan is where you lay out the reasons. It does not have to be unduly lengthy or complicated, but it must be informative and relevant. It needs to maintain logic and order, and show the company as effectively positioned as a good investment.

More important, the business plan should be specifically directed to the funding source and satisfy its particular concerns. For example, you would orient and write the plan differently for presentation to a banker than you would for a venture capitalist, an underwriter, or a private investor. The venture capitalist would want to know what risks are involved, whereas the banker wants more information about how good the security is. These concerns must be individually addressed. There are no hard and fast rules for preparing a business plan--no established, formal format. The key word is ingenuity. Strive for inventiveness; strive to be interesting and captivating.   Top Of Page

Incorporate the Nine Guiding Principles into Your Plan

Here are some general guidelines covering the basic elements of a business plan. These should be helpful in writing any business plan, no matter to whom it is directed.

#1 - Make It Easy to Read
There is so much competition for investment dollars today that if you want to get the jump on the next person, your plan will have to be well formatted and easily understood. Your introductory statement summarizing your operation is one of the most important sections; it must capture readers' attention and motivate them to read the balance of your plan. Caution: If they need a dictionary at their side in order to read, they'll stop. Construct a glossary if you have to use a lot of technical words.

#2 - Be Sure Your Approach Is Market Driven
Not product-driven. If you want to obtain money, you must understand that investors are primarily interested in how the product or service will react and be received in the market. Before they buy into your plan, they want to see your research demonstrating and substantiating how the customer will benefit and be motivated to purchase.

#3 - Qualify the Competition

Start by qualifying your product according to cost or time savings and revenue generation. Also show your projections for sales growth, how your product or service is superior to others, and how you intend to exploit the competitive advantage.

#4 - Present Your Distribution Plan
Be specific as to how the company will sell and distribute its product or service. Clearly describe the methods and what it will cost to get the product or service into the ultimate customer's hands.

#5 - Exploit Your Company's Uniqueness
Explain what will give your company a competitive edge in the marketplace--special attributes like a patent, trade secrets, or copyrights.   Top Of Page

#6 - Emphasize Management Strength
Show proof that the company is comprised of highly qualified people who can cover all the bases. Indicate the incentives that will keep them together, and how they, the directors, and the advisers possess the necessary credibility.

#7 - Present Attractive Projections
Paint a realistic picture--substantiated by assumptions--of where your company is going with funding. Be detailed and keep it credible. Good validated projections and forecasts are impressive.

#8 - Zero In on Possible Funding Sources
As mentioned earlier, it's different strokes for different folks. Design versions of the plan to fit the idiosyncrasies of each source you plan to approach. A banker's interest lies in stability, security, cash flow coverage, and sound returns, whereas a venture capitalist is more interested in high leverage resulting in outrageous returns. Both want to know how the proceeds are going to be spent.

#9 - Close with a Bang
Drive home the point that you're offering a good deal. Be definite about how investors will get their money back and when. Specify the return rates; state how the risk investor will receive a 30 percent or 50 percent compound annual return, or whatever you're offering. For lenders, show that their funds are adequately secured and that your cash flow more than covers their interest and principal payments.   Top Of Page

The Next Step: Obtain Critical Reviews

You're not finished yet. One of the big differences between ordinary plans and good entrepreneurial plans is that they have been critiqued to work. After you have drafted your business plan, solicit feedback on it. Ask a cross section of people whose judgment you respect to review it.

Don't fall in love with your wordsmith. Make any revisions that are necessary, and then prepare a good oral presentation. In fact, you should have both a 2-minute and a 5-minute oral attention grabber. Follow up with a detailed 15- to 30-minute presentation. All should be modeled on your written business plan.

A word of caution: When preparing your financial projections, avoid the shortcut of relying on packaged computerized information--those preset formats in which you plug in figures and percentages. Individualize your financial projections. Think them out carefully. No two businesses are alike.

Show when you bring on additional personnel, and remember that each new hire adds other costs beyond salary--items like benefits, desks, supplies, maybe even another computer or additional travel expenses. These items need to be tracked for each expense period.

Don't just show advertising costs as a percentage of sales. Most advertising expenditures are made some months before sales result. A lot of them have to be prepaid before they are run. It's just not justifiable to show "plugged" computer figures for most expense items. Individualize them. And keep in mind that a start-up company will not fit the standard industry norms.

Your projections should include the financial obligations of bringing your product or service to the marketplace: enlisting new management people as well as workers; taking on more physical space or manufacturing capacity; purchasing support materials and services; and monitoring buildups in inventory and accounts receivable.   Top Of Page

Outline for a Business Plan

There are many specifics that should be included in a successful business plan. The following general outline contains many suggestions which may seem obvious, but it is often easy to overlook the basics.

Again, this outline should be used as a preliminary planning guide. It's up to the reader to add lots of detail, meticulously gathered and presented in succinct entrepreneurial form. (For a complete guide to writing a business plan, see " The McGraw-Hill Guide to Writing a High-Impact Business Plan".

3. List full street address
    555 West Fifth, Suite 55, Anytown, State, ZIP USA

4. List mail address if different
    Mail address P.O. Box 55, Anytown, State, ZIP USA

5. List phone, Fax/telecopier, e-mail and web site information

6. List principal contact name and title
    E. E. Entrepreneur,- President
    Home phone number (optional)

7. Date the plan
    Month and year
 

Table of Contents
Categorize the contents. Use section names and page numbers. You have a choice of only main category headings (History, Management, Product, etc.) or detailed categories (History--date founded, founding members, place founded, etc.). Make note of any charts, tables, or graphs.

Executive Summary
A very important part, the executive summary briefly sets forth the contents, taking key sentences from each section of the plan to overview the project for the reader. Limit the summary to two or three pages: more is too many.   Top Of Page

Consider using your mission statement or a brief visionary type of paragraph. It should be concise and to the point. This section is the first thing that investors read, and they may not read further if you haven't captured their interest.

History
The first several paragraphs should briefly describe the product or service, to whom it is sold, the current status of your industry, and where your new company fits in. This is your second chance to give the reader an overview to establish a basis for detailed understanding.

After this brief introduction, include a description of how, when, and by whom the company was started, its achievements and acceptance setbacks. Then bring these experiences to current-day status.

Product or Service
To succeed with an Entrepreneuring company, you must know your product or service; to succeed in obtaining capital, you have to be able to clearly describe your product or service. After giving a simple, straightforward description, outline the need for the product or service in today's marketplace, how it will make a difference, the benefits derived from using it (or what will make the customer buy it), and its advantages.

Explain any special training needed to sell or use it. Include all relevant regulations that may affect its sale or use. Expound on any exclusivity or technological uniqueness. Unless your plan is going only to specialists in your industry area, assume you are writing for the layperson.

Forget industry jargon and replace it with words that the non-specialist can understand. If you tend to write overly technical descriptions, engage a professional writer.   Top Of Page

Prepare a Customer Profile  

Describe what customers form your market, where they can be found, why they purchase your product or service rather than another, and whether it appeals to a single individual or to groups. Document quality, warranty, service, and price significance: pinpoint the buyer and user. Point out political influences, if any. Describe market coverage, whether local, regional, national, or international.

Prepare an Industry Profile.

Discuss pertinent trends, past, present, and future. Offer available statistical data on sales and units. Use charts, graphs, and tables if they can make the presentation clearer and more impressive. Refer to trade associations if helpful.

Prepare a Competitive Profile.

Stress advantages of price, quality, warranties, service, and distribution. Include the operational strengths and weaknesses. Project potential market share trends in sales and profitability.

Don't guess in this section. Check all your facts and note all your sources. You can be sure that these will be checked with a fine-tooth comb during an investor's due diligence process. If you're citing voluminous reports or statistical information, note that you have them available for further review.

Marketing Strategy
This is a critical section that should clearly specify the company's marketing goals, how they are to be achieved, and who will have the responsibility for achieving them. Qualify all distribution methods (representatives, dealers, and so forth) and describe any planned advertising or public relations activities. Include references to sales aids, foreign licensing, and training plans as appropriate. Simply, detail how you are going to sell the product or service.

It often helps if you include current floor plans as well as expected future space plans for production or manufacturing companies. For all fast-growth companies, task/time charts can be especially useful in this section. They help impress on the reader that the Entrepreneur has a real handle on the operational challenge.

Research and Development
The length of this section depends on whether you're a service or product company and--if a you're a product company--on how technical your product is. The object is to explain all past research and development efforts and accomplishments as well as future expectations.

Here is your opportunity to justify past time and dollar expenditures. Substantiate the patent ability of inventions, proprietary processes, or other advantages that your company will have over the competition and the resultant, anticipated market impact.   Top Of Page

Take it month by month for the first year. Thereafter, indicate the progress expected quarterly. Areas that may be important include completion of prototypes, starts of beta tests, early significant sales, when key people are to be hired, physical expansions or moves, opening of branches, trade show or convention dates, major equipment purchases, and the like.

Describe how the team has worked together in the past. List all directors, consultants, advisers, and other key professionals who will be involved in company operations and point out how they add value. Detailed resumes of key management should be appended with bios of others as appropriate.

Risks and Problems
Risks could be a red flag. There are diverse opinions about the inclusion of this category. Some investors object to the obvious and prefer to discover their own negatives. Others prefer that the company openly acknowledge risks and potential problems. It's a toss-up; however, high-profile, success-threatening risks should be brought out.   Top Of Page

Use of Proceeds
Judiciously present a timetable indicating how much money will be needed, when it will be needed, and how it will be used. Most companies require multiple stages of financing, including both debt and equity. Show the proposed capital structure, including who is going to own what part or percentage of the company at what stage. Start-up plans need to detail start-up use of proceeds and then generalize on the additional stages.

Show projections, including balance sheets, profit and loss statement, and cash flow studies. These should be month by month for the first year, quarterly for the second and third years, and yearly thereafter.

It is mandatory that detailed assumptions accompany all projections. It is also very helpful if the very first part of this section summarizes the details. In fact, in many cases, details can be appended or supplied separately.

Your Plan Is a Lot of Work

It's suggested that you seek professional help, and you should also seek out available books on writing a business plan. They can be found in many bookstores and all libraries. Read two or three to give you the essence of a good background for specifically outlining your plan.  You can hire professional help and save about 100 hours of your precious time for a fee.  Our fee is low enough to save you thousands of dollars in time, maybe even tens of thousands of dollars if you are going for large grants or loans, and is very affordable.  We do as much as you need done.

Remember when you apply for grants and loans, that each grant & loan requires you to modify your business plan to meet the criteria of the grant or loan agency.  A word to the wise again, you must change your companies business plan in order to meet the criteria of the various agencies.  If you don't match most of the grant agencies requirements, it is Always NO!  They don't change for you, you must change for them.  A loan agency like the SBA may only require you to have a complete plan, but your plan still must show success by the numbers.

Each company is different and your plan must be tailor made to your particular situation. The ideal business plan just does not exist, and generic plans just don't cut the mustard for Entrepreneurial companies.

It's of little use to approach the writing of a business plan as a necessary evil. Rather, look at it as a helpful tool that can be used to exploit the advantages of your product or service.

Some companies may question the necessity of a business plan, citing successful firms that never had one. Times are changing. When the goal is to raise money, it's not only the entrepreneur's money that is at stake. Advisers, team members, directors, investors, and bankers need to be thoroughly convinced. They want to know that they won't be wasting their time and money. They want to know that the entrepreneurial management team has a clear sense of direction and is prepared to move toward its established goals.

A good business plan is the answer. What's more, much of the same information would have to be gathered anyway to be made available to potential shareholders before they place their money in the company.

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Creating a Special Executive Summary

Another unique aspect of the good entrepreneurial business plan is the putting together of a special executive summary. This summary is not the same as that in the business plan; it does, however, take advantage of the high points in the plan. It serves as an entering wedge to semi-interested parties as well as potential investors.

In essence, it's a condensed business plan that shows the company to best advantage. It's an entree, when initially seeking help, to locate and identify potential financial sources. It can also be used as an overview for those who do not need to know all that much about the company (like staff personnel or suppliers), or for those from whom management wants to keep proprietary information. It can be changed and adapted to any particular audience. It's kind of the bait before the hook, a plan used to capture one's initial interest and motivate one to request more information.

A special executive summary should not be taken lightly. It is indispensable, and should be kept updated. This is easier to do than revising a whole business plan if the entrepreneurial team simply wants to test some new plan ideas or gain some quick feedback. It may very well be the key to reaching the right source.

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Making the Transition from Business Plan to Operating Plan

Once the company is up and running, top management should convert the business plan to an operating plan. This process is simply re-titling the plan as an operating plan and then religiously keeping it updated, using it as an operational guide on a continuing basis.

The operating plan helps keep both management and staff focused on the tasks at hand. The parts that are pertinent to various departments can be pulled from the master plan and passed on to the appropriate staff individuals responsible.

Continuous updates should be given top priority in all entrepreneurial companies. The basic plan should be reviewed quarterly--at minimum, semiannually. Remember, for investors, the business plan is what they buy into. It becomes the benchmark for accountability. They intend to hold management responsible for achieving the goals and objectives that are set out in the plan.

It is inevitable that things will change as the company achieves full operation. In some cases, these changes will have only a small effect on operations. In others, they could result in a drastic shift in total company focus. Given the ultimate entrepreneurial goals, it's apparent that a continuing update of business plan strategy in the form of an operating plan helps keep everyone singing from the same songbook.

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Entrepreneurial Plans Take Your Best Effort

All companies should have a business plan. Preparing it may take months, and you won't get to first base without it. The outlines presented in this chapter may not fit every company's particular requirements, but they should contain enough general information and suggestions to provide a solid base for preparing your plan. More detailed materials and information on writing business plans can be found in many bookstores and libraries.

For Entrepreneurs, there are some very important points that need to be given extra attention to set their plan apart from ordinary business plans. These include continually updating their plans, paying special attention to the corporate structure and valuation portions of the plan, creating a special executive summary, and finally, converting the entrepreneurial business plan to an entrepreneurial Operating Plan.

A company should give its plan its very best efforts. You will discover that a well-prepared entrepreneurial plan will serve as a solid sales tool for approaching any financing source--investor or lender--as well as provide management with a written game plan for guiding operations and maintaining a check on expectations.

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A final note: Failing to plan is planning to fail.