Your Business Plan Gameplan

Write a Business Plan in Three Months

By Amanda McCormick, About.com Guide

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While the idea of writing a business plan may be daunting, it's an essential step toward defining
your vision and, more importantly, raising money. So below find an outline on all the steps you'll
need to take to write your business plan, along with a timeline and tips.

Executive Summary

Your Executive Summary should run 1-2 pages and touch on the key items from the rest of the
business plan. It's mean to be scannable, so use short sentences and paragraphs.

What you need to define:

What makes your business unique

A general overview of everything in the business plan
Tip: Write this after you've written everything else.

How much time to budget: Two days

Company Description

In the company description, you'll have the chance to do a more involved description of your
goals, your unique selling proposition, the size of your operation, and your financing requirements.

What you need to define:

The concept of your business

Where you'll be located

How large your operation will be
Why you are likely to be profitable
A detailed description of your product(s) or service(s)
Your legal structure (LLP, sole proprietorship, C Corp, etc)
The history of your business
Your financing requirements, including an overview of the costs of starting up
How much time to budget: Four days

Market and Competitive Analysis

In the Market and Competitive Analysis, you'll delve into the intricacies of your target market.

What you need to define:

The size, characteristics and demographic breakdown of the target market for your business
How large of a share of the market you are likely to capture and your opportunity for growth
Your target audience and their defining characteristics
Your competitors
A SWOT Analysis of your company: Strengths, Weaknesses, Opportunities and Threats
How much time to budget: Three weeks

Marketing Strategy

How will you attract the attention of your market? Define this in the marketing strategy section of
your business plan.

What you need to define:

Your "unique selling proposition": a combination of your products benefits, price and position
relative to others on the market.
Pricing strategy: how much people will pay for your product or service.
Sales and distribution plan: how you will get your product to a willing market.
Advertising and Promotions plan: where you will advertise and to whom.
Tip: make sure this information reconciles with your financial projections.

How much time to budget: Two weeks

Operational Overview

The Operational Overview will help you define the nitty-gritty of how your business will be run
day-to-day.

Things to define:

Personal and labor requirements

Space requirements
Zoning requirements (if applicable)
How much time to budget: Three weeks

Management Summary

Who will be involved in the running of your business? Beyond your bio, the management summary
paints a picture of your key organizational players.

Things to define:

Owner/CEO bio
Job descriptions - experience required, salaries, and resumes of key players
Org chart
How much time to budget: One week

Financial Projection

Your Financial Projection is one of the most important part of the business plan. They are where
the rubber meets the road in terms of the feasibility of your business and thus is where potential
investors will flip to first when evaluating your business plan.

Financial projections are comprised of three items:

Expenses: both your startup costs and general operating expenses.

Cash flow statements: a breakdown of all cash in and cash out for a set period of time (usually two
to five years).
Balance sheet: all of your current assets and liabilities./li>
How much time to budget: Three weeks

Appendix: Use the appendix to include the resumes of key players, as well as your financial
projection spreadsheets.

The Business Plan: Not Just a Blueprint

How to choose the right business plan format
From Shelley Peever, MBA

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Business planning is a vital component of starting and growing a successful enterprise. Many different templates and
variations of business plans exist, so you must choose the right one for your purpose and your enterprise.

Who is the intended audience?

Some business plans are designed for internal audiences (owners, employees, Boards of Directors or Advisors, and senior
management) for an existing organization for the purposes of implementing a growth strategy and may be referred to as a
strategic plan. It can also serve as a guide solely for the owner of a new business to help clarify their vision and goals.

A business plan could also be for external audiences (investors, clients, suppliers, new hires, bankers and other lenders
such as government) for the purposes of attracting financing, talent or suppliers for a new or existing business. A
document for this audience may initially take the form of a condensed version of the larger business plan, especially for
attracting funding. This version is known as the business opportunity document or business funding proposal and is
typically followed by the business plan itself. Obtaining financing is a significant issue for many businesses and this tool
can be an enormous advantage when approaching investors or lenders.

What goes in the business plan?

The business plan is a comprehensive document that is created to describe the future of the venture, consisting of:

executive summary
company history and background
clear description of the business concept and value proposition
marketing analysis including competitive analysis and market development plan
production and operations assessment and development plan

financial assessment and projections

management and human resources assessment and plan
implementation plan
identification of resources
proposed deal structure for investors (if appropriate)
survival strategy describing inherent risks and mitigation strategies
growth strategy
exit strategy
appendices

Some of these may be longer or shorter, or even optional, depending on the format and the intended audience.

The reader should be able to clearly understand what the value proposition is, why the business will succeed and how it is
going to achieve this success. If the plan is being pitched to investors, the investor should understand as soon as possible
what the proposed deal structure is and what the return will be. To do this you must support any claims and assumptions
about what the business will do with realistic research. Unrealistic financial projections are a sure fire way to lose
investors interest or for an owner to lose perspective.

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(Continued from Page 1)

How long should it be?

A typical business plan may consist of 20 pages although some business plans can be 100 pages or more, depending on
the purpose of the plan, who the target is, and the nature of the business. For example, if the plan is going to be used to
attract investors it may require more detail than if it was to be used internally to communicate a growth strategy, while if
the business concept is relatively simple it may be conveyed more briefly than a more complicated enterprise.

Should I use a template? Or a consultant?

There are so many business plan templates to choose from that its tempting to simply cut and paste or hire outside
consultants to write your business plan. However, its best for the owner(s) of an organization to write the plan, even if
you decide to bring in outside help to review and refine it. Often entrepreneurs do not take the time, nor do they feel a
business plan is necessary for their businesses to succeed. They often think that taking time to write a business plan is just
impossible and would be a waste of time. But when they learn how the process could benefit their organization they are
more likely to get started! Even if there is no immediate audience for the document itself, the planning process itself is
invaluable.

Conclusion

A business plan is an easy way to communicate the business idea to the prospective audience, to assist in preventing
problems, and to identify growth strategies, as well as a tool used in the search for funding. A business plan should be
used as a tool for the entrepreneur to guide the business operations rather than a strict manual or blueprint to be adhered to
and implemented exactly. The business plan can also be designed to help owners of businesses to clarify the strategy of a
particular business and provide insight to manage risks.

Entrepreneurial training is becoming a significant component of many learning institutions in response to the escalating
numbers of business start-ups worldwide. Business plan writing is being taught to would-be entrepreneurs more than ever
before. New venture analysis is an integral part of the business plan creation process as is what to do with the opportunity
once it is identified.

Although being a successful entrepreneur is attractive, over 70% of new businesses do not survive after year two. Having
a business and knowing what to do with it are very separate issues and creating a well-executed business plan for the right
reasons will enhance the odds that your venture will be one of the ones to succeed.

Business Plan - Planning Your Exit Strategy

The final portion of your business plan outlines your exit strategy. It may seem odd to develop a
strategy this soon to leave your business, but potential investors will want to know your longterm plans. Your exit plans need to be clear in your own mind because they will dictate how you
operate the company. For example, if you plan to get listed on the stock market, youll want to
follow certain accounting regulations from day one. If you plan to pass the business to your
children, youll need to start training them at a certain point.
Heres a look at some of the available strategies for entrepreneurs:
Exit Strategies for Long-Term Involvement

Let it run dry: This can work especially well in small businesses like sole proprietorships. In the years before you
plan to exit, increase your personal salary and pay yourself bonuses. Make sure you are on track to settle any
remaining debt, and then you can simply close the doors and liquidate any remaining assets. With the larger income,

naturally, comes a larger tax liability.

Sell your shares: This works particularly well in partnerships such as law and medical practices. When you are ready
to retire, you can sell your equity to the existing partners, or to a new employee who is eligible for partnership. You
leave the firm cleanly, plus you gain the earnings from the sale.

Liquidate: Sell everything at market value and use the revenue to pay off any remaining debt. This is a simple
approach, but also likely to reap the least revenue. Since you are simply matching your assets with buyers, you

probably will be eager to sell and therefore at a disadvantage when negotiating.

Exit Strategies for Short-Term Involvement
Go public: The dot-com boom and bust reminded everyone of the potential hazards of the stock market. While you
may be sitting on the next Google, IPOs take much time to prepare and can cost anywhere from several hundred
thousand to several million dollars, depending on the exchange and the size of the offering. However, the costs can

often be covered by intermediate funding rounds.

Merge: Sometimes, two businesses can create more value as one company. If you believe such an opportunity exists
for your firm, then a merger may be your ticket to exit. If youre looking to leave entirely, then the merger would

likely call for the head of the other involved company to stay on. If you dont want to relinquish all involvement,

consider staying on in an advisory role.

Be acquired: Other companies might want to acquire your business and keep its value for themselves. Make sure the
offered sale price meshes with your business valuation. You may even seek to cultivate potential acquirers by courting
companies you think would benefit from such a deal. If you choose your acquirer wisely, the value of your business

can far exceed what you might otherwise earn in a sale.

Sell: Selling outright can also allow for an easy exit. If you wish, you can take the money from the sale and sever
yourself from the company. You may also negotiate for equity in the buying company, allowing you to earn dividends
afterwards it clearly is in your interest to ensure your firm is a good fit for the buyer and therefore more likely to
prosper.

Writing a Business Plan - The Executive Summary

First impressions matter, and brevity is key
From Daniel Richards

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The executive summary is the introduction to a formal business plan. It summarizes the business proposition, key
financial projections, where the business stands at present and elements that are critical for success. While you may be
tempted to rush through this part before attacking the bulk of your business plan, remember this is the first thing a
potential investor will read. If your executive summary doesn't grab his or her attention, then he or she probably won't
bother reading the rest of your package.

Brevity is key. A good executive summary ranges from half a page to two pages; anything longer and you risk losing your
reader's attention or appearing unfocused. A safe bet is to keep it under one page.

Although it leads off the business plan, the executive summary should be written last. That way, you can cull information
from the rest of the report, and make certain there are no inconsistencies.

The executive summary is also the best place to describe your mission statement. Develop a concise description, no more
than a few sentences, that explains:

Why your business exists

What its goals are

How you will achieve those goals

Next, develop the business description or concept. This is where you offer more detail about the type of business you want
to open, who the customers will be and what the competitive advantage is. A competitive advantage explains why
customers will chose your business over marketplace rivals. Your reasons may include:

Filling a void in the marketplace

Offering a better product than what currently exists

Offering a comparable product, but at a better price than your rivals

From there, you'll move onto a brief description of your financial outlook. This part of the executive summary should
mention the expected costs of starting up, as well as your bottom-line financial projections for the short and long term.

The next issue to address is the status of your business. It may still be only in the idea stage. Perhaps you've already raised
a little money. Or, it may be that you are fully operational and looking to expand. Investors will interpret your current
business position as a signal as to how much capital is needed to advance your company, and whether or not this matches
the type of opportunity they are looking for.

The final part of the executive summary will focus on critical factors that will determine your chance for success. These
items will be specific to your business, but may include:

Low staff turnover

A technology patent
A strategic partnership

Externalities, such as the continuation of a marketplace or economic trend

Overall, the executive summary should offer a glimpse into what the business plan holds. Hit on all the important points;
if you hold off on composing it until after you've written the rest of your business plan, it should practically write itself.
Business Plan - Outlining a Growth Strategy
Potential investors who read your business plan will want to know how you plan to grow your
business once it is off the ground. This entails more than just demonstrating how your revenue
will grow. The growth strategy section of your business plan is about proving to others that you
have a plan for bringing your product to new customers and new markets, and perhaps even
introducing new products.
The obvious objective in outlining your growth strategy is to show how these moves will increase
sales. This can happen in a number of ways:
Multiple locations: If your business requires a retail presence, outline where you might seek to
open additional shops and what your geographic strategy will be. Dont assume you can go
national just because your product is regionally successful.
New client bases: Once youve reached your original core customers, who else might be
interested in your products? If youre a business-to-consumer company, think about offering
business-to-business services, and vice-versa. Office supply stores, for example, have been very
successful at catering to the needs of individuals as well as small-business owners.

New products: New products are an obvious way to grow sales, but their issuance often is
poorly executed. Discuss your plan for introducing new products or services in the short,
medium and long term. These can be variations of your core product or completely new offerings
that expand your overall base.
Franchising: Restaurants often turn to franchising, and it is a feasible option for many other
industries as well. Franchising works best when your product is consistent and customers have
certain expectations about your brand.
Online strategy: How will you use the Internet to grow your sales? Will you sell your product
on your own corporate Web site, partner with an existing Internet retailer or maybe advertise
online to build local brand awareness? Using the Web is not mandatory for selling your product,
but your growth strategy should include an online element.
Marketing: Look back at the marketing section of your business plan. If youve already
addressed facets of your business growth strategy in that section, you can use it to detail your
expansion, and then refer to your marketing section as an implementation tool.
Decreasing costs: Growth has bottom-line advantages, too. The more business you do, the
more you can take advantage of learning curves and economies of scale. Learning curves allow
you to become more efficient as you gain experience. Economies of scale refer to a reduction in
average cost over time because of factors such as buying power and managerial specialization.
Acquisitions: A final option to address is growth through acquisition. This would come into play
after your startup is more established and ready to expand into other markets. At this stage,
you may want to address which companies, or types of companies, would make ideal acquisition
targets. Look for companies that are a good fit for your product and distribution methods, but
that also present new opportunities for growth. Any duplication from an acquisition should be
balanced out with growth areas.
Business Plan - Company History
The business plan background, which follows the executive summary, should detail your
companys history. This part will vary, depending on how developed your business is. The history
of a startup is obviously different than for an existing company. This section should be about a
page long, although its OK to stay under that limit if youre starting a brand-new company.
Here are a few points that you should be sure to include in this section:

The origin of the idea for the business

Your progress to date

Other companies youve worked for

Problems youve faced so far

Short-term growth plans
For a new business you might want also to include some personal history and business
background. Some points to make in this section:
Your educational history

Previous businesses youve started

Your technical skills
Your areas of expertise in your industry segment

Your areas of weakness or inexperience and how you plan to compensate for them
Any relevant professional clubs or associations you belong to
Overall, this section of your business plan should give an interested investor a better idea of who
you are and how this business idea came about. Again, keep it concise and avoid extraneous
personal information.
SURVIVAL STRATEGY
A strong business is one that can ride out the tough times. Your business plan should be able to
account for a soft economy or an industry slump and should have the built-in flexibility youll
need in order to react quickly and nimbly in the face of change.
Take these business survival measures to insulate your company in the event of an unexpected
downturn.
Maximize Your Cash Holdings
Remember that cash is king, and with it you can pay your suppliers and the bank. A quick way
to boost your cash reserves is to sell off surplus inventory and then cut back your inventory
orders until the situation improves. You can also push to improve your accounts receivables
collection.
Diversify
Your infrastructure may allow you to quickly start selling alternative products that are unaffected
by adverse market conditions. For example, during Prohibition, Anheuser-Busch Inc. sold malt
syrup and a non-alcoholic beverage. When the ban on alcohol was lifted in 1933, the company
had the resources in play to begin producing beer again.
Be Aggressive
If you can afford to do so, a slowdown can be the perfect time to introduce a new product or
strike a strategic partnership. Surprise your competition while theyre busy worrying about their
own future.
Use Freelancers and Part-Timers
They can help build business at a lower cost because, unlike full-time workers, you typically
dont have to provide benefits like health care and you can pay them at a lower rate than fulltime employees.
Focus on Service

Good customer service will always help to differentiate you from your bigger competitors. In an
economic slowdown, your clients may be looking to cut costs, too. If you boost your customer
service efforts toward existing clients, its more likely theyll stay you with during the slowdown - and they may even expand their business with you once things pick up again.
Look for Substitute Materials
If your business is heavily dependent on raw materials, look for less expensive, substitute
goods. The savings will go straight to your bottom line.
Revise Your Revenue Projections
Use the new projections to try and renegotiate the terms of your trade credit and bank debt.
Involve Your Employees
You may be surprised that your employees are willing to help come up with ways to cut costs.
But smart workers realize their job status is tied to the overall health of the business.
Dont Abandon Development
The costliest mistake you can make during a rough period is to focus entirely on cutting costs to
survive and abandon product development. New products can help differentiate you in a tough
market. Also, when the market improves, you dont want to be caught with an empty
development pipeline.
It is crucial that your business plan states your business concept and value proposition. Since
this part of the business plan follows the executive summary and company history, readers
already should have a general idea of your company. The business concept, however, comprises
your vision of the company, explaining the value your product or service will bring to the
customer, why you are especially qualified to offer it, as well describing your offering's
uniqueness and growth potential.
This in turn enables you, as well as interested parties and potential investors to research and
analyze the concept for feasibility, both from a market and financial perspective.
The Feasibility Test
Think of a feasibility test as a reality check for your big idea. According to Entrepreneurship For
Dummiesby Kathleen Allen, a feasibility test weighs the validity of your business concept by
examining four points:

The product your firm will offer

The customer you will target

Your value proposition

How you will get the product to its intended users

By this stage you should have a firm grasp on what product or service you intend to offer, as
well as who you believe will be your primary customer. The final item requires weighing various
distribution channels, but, again, should be answerable with a little leg work.
The Value Proposition
In essence, your value proposition is what makes customers choose you, instead of the
competition. It's part marketing, part operations and part strategy.
On a subconscious level, customers will compare the value proposition of your company against
those of your competitors when deciding where to take their business. With that in mind, a few
things to remember when writing your value proposition:

Keep it short and uncluttered. Your value proposition explains why customers should buy from you. If you can't
sum it up in 10 words or less, chances are you won't be able to execute it, either.

Be precise. Your customers have specific needs; your value proposition should offer targeted solutions
This is about your customer, not you. Your value proposition should discuss only what matters to your customers

and the value you can bring to them.

Value comes in numerous forms. Money, time, convenience and superior service are a few of the ways you can help

deliver value to your customers.

Distribution Strategy
Business Plan - Business Concept and Value Proposition

The last part of the business concept is how you will deliver your product to your customers.
There are several factors to consider when plotting your distribution strategy:

Will you set up a brick-and-mortar shop or office, sell online or both?

What unique obstacles exist for your company in these two different channels?
If your company sells a product, will you have the space to keep enough inventory on hand, or will customers have to
agree to waiting periods?

Can you strike exclusive deals with any particular distributor or retailer? Do your competitors have any such deals that
hinder your operation?
Remember, vision is important if your business is going to grow. The more focused your
business concept is, the greater the likelihood that you'll attract investors and customers.
Business Plan - Deal Structure
If you plan to make the rounds of venture capital firms or approach potential angel investors,
you need to keep the lenders interests firmly in mind. Simply put, these institutions or
individuals want to protect their investment and generate a high return. With that in mind, here
are some things to remember when structuring an investment deal:

Corporate structure: The legal structure you choose for your business will dictate your tax
obligations and legal liability, as well as how you handle outside investment. Remember, if you
plan to sell shares to more than 100 investors, you must set up as a C-Corp.
Preferred shares: Investment firms may insist on purchasing a special class of preferred stock
with their shares. Generally, these shares are more expensive, but it gives them priority over
regular shareholders. The firm may also want preferred shares to be convertible, meaning they
can be converted to regular stock at any time.
Returns: Anyone putting capital into your business is going to want a dramatic return on their
investment, so explain how theyll get it. These investors want to know about an exit strategy -by sale, IPO or buyback -- giving them a way to cash in on their investment. Be specific about
the exit options; one way is to name possible buyers of your business. If this exit is a long way
off, however, set up a dividends distribution schedule.
Non-monetary incentives: Will the investor be able to handpick a member of the companys
board? A VC firm or angel may want to reserve the right to purchase more equity at a later date
or have a clause that automatically sells them more stock once certain revenue benchmarks are
reached.
Restrictions: This protects you, the entrepreneur, from investors prematurely dumping their
shares. Most investment agreements have rules stating when shares can be sold and in what
quantities.
Protect your equity with non-compete clauses: All top managers should sign non-compete
clauses to make sure they dont leave your firm to immediately work for your top competitor.
Investors will want to see these to make sure your companys intellectual property is well
protected. They may also insist on a clause that keeps you tied to the company.
State laws: Are there any state regulations that make your investment particularly attractive or
unattractive? States have different rules regarding equity ownership, and some states dont
assess an income tax.
Future offerings: How will additional equity offerings be handled? Investors want to make sure
their shares dont get diluted as the company grows and may insist on having right of first
refusal.

Writing a Business Plan - Market Analysis

You may possess all the confidence in the world that yours is a perfect product with a clearly
defined customer base. If thats the case, youll need to figure out how youre going to get your
product into the hands of those customers. Thats where the marketing analysis section of your
business plan comes into play.
Traditional marketing strategy consists of three components, known as the three Cs:

Company: Know the strengths and weakness of your firm.

Competition: Know the same about your competitors.
Customer: Know who they are and what they want.

Analyze the Competition

Of the three Cs, the competitor analysis may give you the toughest time, especially if you are new to the marketplace.
First, you should look at your direct competitors. Take, for example, a McDonalds restaurant in a busy downtown area.
Its direct competitors would be any nearby Burger King or Wendys restaurants. Its indirect competitors would be other
restaurants in the same downtown area, even upscale ones. Customers eat lunch just once a day, and all these restaurants
are fighting for this finite group of customers.

Examine any substitutes. Instead of going out for lunch, some people may opt to bring lunch from home, or skip lunch
entirely. These are both factors McDonalds would need to examine when analyzing a locations competitive position.

Assess the Marketplace

Once youve identified your direct and indirect rivals, as well as substitute competitors, youll want to gauge your
potential fit in the marketplace. Some issues to consider:

Competitor strengths and weaknesses

Whether new competitors are entering the marketplace, or existing ones are leaving
The product or products that your competitors rely on for most of their revenue
Ways to overcome the threat of substitute goods

Develop a Marketing Program

After you have addressed the three Cs, you can move on to developing a marketing program, which involves analyzing
the four Ps, collectively known as the marketing mix:

Product: What you are selling

Price: How much you will charge
Place: Where you will sell your product
Promotion: Special incentives you will use to get people to try your product

Craft a Market Development Plan

Youre now ready for the final phase of your marketing analysis crafting a market development plan. The information
you provide here likely wont come into play until youve established your company and have been running for a few

years, but investors will find it helpful to see how you envision your company evolving. Your market development plan
should address such questions as:

Does recent data show the market for your product is growing?
Do you have a plan to offer new products or line extensions in the first few years?
Are there other ways to position your company more competitively in the marketplace?
Does your marketing plan offer ways to grow overall demand within your industry sector?

These marketing and competitive analyses are vital parts of your business plan and will likely be the most extensive
portion of it. Take the time to do thorough research on your competitors and how the market has behaved in recent years.
A disorganized marketing strategy can ruin even the best of products, simply because your target customers will never
hear of them.

Writing a Business Plan - Resource Planning

Identifying business resources you will bring to the venture and those youll need to acquire in
order to start operating, such as staff, equipment and the cash to finance these necessities is
another key element of the business plan.
Among other things, youll need to describe the source and amount of your initial equity capital, as
well as account for the equipment necessary to produce your products or services. Perhaps you
already have some office furniture or computers; you may have secured financing from a bank or
investors, or will invest your personal savings in the business. Do you have existing staff, and will
you need to hire others?

Your plans for obtaining needed personnel, equipment and cash to meet your capital expenses will
be detailed throughout your plan. How about mentors and key advisers? These are non-tangible
resources whose value to your business can be immense. In describing each of the resources that
you have and need, couch each in terms of the value it will bring to your fledgling business, both in
the near term and down the road.

This is a good time to evaluate your technical resources and requirements. Some businesses rely
more heavily on technology than others, and such companies will need a strong IT network to get
started. If thats the case, you may be intimidated by the up-front cost, but keep in mind that your
product will only be as good as the technology behind it, and if you buy low-grade gear, youll
probably have to replace it in a few years.

Writing a Business Plan - Operations Strategy

Preparation and production - how are you going to get it all done?

business plan should include an assessment of your production and operations strategy.
Operations have a steep learning curve, but many successful companies, such as Wal-Mart, have
grown by leveraging their operational infrastructure.
What Role Will Operations Play in Your Company?

This will depend on the nature of your business. If youre selling a consumer good, it will be
important to make sure you can get your products to your clients at the time you promise. A
service company relies on an operational plan to make sure customers are seen in an efficient
manner. When writing your business plan, focus on where production and operational efficiencies
are needed to help the company succeed, including buying power and economies of scale.

Where Will You Get Your Sourcing Materials?

This mostly applies for startups selling goods, rather than services. In this section of the business
plan, spell out what raw materials are needed to make your product and from where you plan to
get them. Sourcing can offer a huge cost advantage (or disadvantage) in the production stage, so it
is important to do research on this. The price on commoditized products such as wood and plastic
will likely be similar regardless of where you get them, but there could be a lot of variability if you
require specialized materials.

Can You Outsource Any of This?

Sometimes the best production strategy is to let someone else handle it. As a startup, youre
unlikely to have the capital to build your own factory to produce your product, so outsourcing to a
manufacturing company is probably already in your plans. Look for a manufacturer, either
domestic or foreign, who has experience producing goods similar to yours. Companies such as
UPS, FedEx and DHL are no longer just package-shipping companies: They all offer supply-chain
management services to help firms who want to offload that responsibility, and whose scale
makes them more efficient.

Balance Opportunity Cost with Surplus Charges

An accurate projection of the demand for your product is key to a successful operational strategy.
Remember to consider opportunity costs when placing an order. If youre selling sweaters for $50,
and you run out, every person who wanted a sweater and couldnt get one represents a missed
opportunity of $50 in revenue. Of course, if you order too many sweaters, youll be left with
surplus inventory.

In your business plans, offer ideas of how you will unload any surplus. For example, selling slowmoving items to a liquidator can bring in some additional revenue, while donating surplus goods to
a nonprofit can yield a nice tax deduction. Both methods reduce the cost associated with
maintaining the inventory, such as warehousing and handling or disposing of the items yourself.

Be Diligent

Its not uncommon for entrepreneurs to get tripped up at this stage of planning. Many new
business owners have minimal experience in operations and production. Whether you develop
this strategy yourself or bring in a consultant to help, be sure your business plan clearly states the
role operations will play in your company, who will be involved in establishing this infrastructure
and what the potential costs are.

Writing a Business Plan - Implementation Plan

Even the most well-thought-out business plan is just a stack of paper if it isnt coupled with a
plan for implementation. This is the portion of the business plan where youll clarify objectives,
assign tasks with deadlines, and chart your progress in reaching goals and milestones. Here are
some guidelines for successful business plan implementation:
Objectives: Your objectives should be crystal clear and specifically spelled out, since youll use
them as a building block for the rest of the implementation plan. For example, lets assume your
startup is a small consulting firm. Your objective should be tough but reachable, and could read
something like this:

Secure office space and be open for business in three months.

Sign three clients within first three months of operations.

Sign 10 clients within first year.

Tasks: This part details what must be accomplished to achieve your objectives. Include a task
manager for each step, so that roles are clearly defined and there is accountability. As you
enumerate tasks and assignments, these descriptions should be plainly and generally stated;
dont get into a step-by-step, micromanaged explanation of how the tasks will be carried out.
Emphasize the expected results associated with these tasks. Continuing with the above example,
the tasks section might read like this:

Secure office space real estate agent

Obtain licenses and permits you
Set up office phones and computers office manager
Begin recruiting clients sales manager
Create marketing collateral marketing manager

Solicit referrals from clients relationship manager

This list is obviously very specific to this particular firm and is a brief illustration. You may wish
to go into more details, assigning tasks to yourself such as obtaining financing, networking with
prospective clients, etc.
Time allocation: Each task should be paired with an appropriate time frame for completion.
You should be aggressive but reasonable with your time allocation in order to ensure not just
completion but competent work. For assistance in framing this timescale, use a program such as
Microsoft Project, or just create your own Gantt chart a helpful tool that shows how long it will
take to complete different tasks and in what order the tasks should be finished.
Progress: You or a member of your management team needs to be in charge of monitoring
each tasks progress and the completion percentage of each objective. When delays occur, try to
get to the root of the problem. Did the person responsible drop the ball? Did he or she have too
many responsibilities to handle? Did a third party, such as a supplier or the bank, fail to hold up
its end of a deal? Adjust your Gantt chart appropriately to account for the delay, and make a
note of the previous deadline and the reason it was missed.
While the above steps may seem like overkill, the early days of a startup are critically important;
its a time when good management patterns are set and also probably a lean era when revenue
has yet to start rolling in. The more efficiently you start implementing your business plan, the
more likely it is that you will survive this early period.

Writing a Business Plan - Financial Projections

Spelling out your financial forecast in dollars and sense

Creating financial projections for your startup is both an art and a science. Although investors
want to see cold, hard numbers, it is tough to predict your financial performance three years
down the road, especially if you are still raising seed money. Regardless, a short- and medium-

term financial projection is a required part of your business plan if you want serious investors
attention. Here are some tips for crafting solid financial projections.
Get Comfortable with Spreadsheets
Spreadsheet software is the starting point for all financial projections. Microsoft Excel is the most
common, and chances are you already have it on your computer; there are also special software
packages you can buy to help with financial projections. Spreadsheets offer flexibility, allowing
you to quickly change assumptions or weigh alternate scenarios. About.coms Guide to
Spreadsheets can help you get started.
Go Beyond the Income Statement
The income statement is a standard measuring tool used to convey your projected revenues and
expenses. A good financial projection also will include a projected balance sheet, which shows
the breakdown of assets, liabilities and owners equity. In addition, it will include a cash flow
projection, which reveals the actual movement of cash through your company in a given period.
Your financial projections should include estimates of how much money you plan to borrow and
interest repayments on those loans. Additionally, be sure to follow the Generally Accepted
Accounting Principles, or GAAP, which are set forth by the Financial Accounting Standards Board,
the private-sector organization responsible for setting financial accounting and reporting
standards in the U.S. If financial reporting is new territory for you, have an accountant review
your projections.
Provide Short-Term and Medium-Term Projections
You should be able to offer investors:

A short-term projection of the first year, broken down by month

A three-year projection, broken down by year
A five-year projection. Dont include this one in the business plan, since the further into the future you project, the

harder it is to predict; however, have it available in case an investor asks for it.
When projecting growth, consider the state of the market in which you are operating, as well as
trends in raw material and labor costs, and whether you foresee needing additional funding in
the future.
Account for Startup Fees
Fees related to licenses, permits and equipment should be included in the short-term
projections. Also keep in mind the difference between fixed and variable costs; differentiate
where appropriate. Variable costs usually will be included under the category of cost of goods
sold.
Offer Two Scenarios ONLY

Investors will want to see a best-case and worst-case scenario, but dont inundate your business
plan with myriad medium-case scenarios. It will likely just cause confusion.
Make Your Assumptions Reasonable and Clear
As mentioned before, financial forecasting is as much art as it is science: Youll have to assume
certain things, such as your revenue growth, how your raw material and administrative costs will
grow, and how effective youll be at collecting on accounts receivable. Its best to be realistic in
your projections as you try to recruit investors. If your industry is going through a contraction
period and youre projecting revenue growth of 20 percent a month, red flags will begin to pop
up.

Create a Strong Financial Projection for Your Business Plan

When a potential funder receives your business plan, where would he or she turn first? If you
guessed the financial projections, you're way ahead of the pack. Focus here, on creating a
realistic picture of what you can expect to spend and earn in your first few years of operation,
and your business plan will be solid.
So what goes into a Financial Projection? Three key elements:
1. Startup Costs and Operating Expenses
Money. You'll need it to start up and you'll need it to keep running. During the business planning
process it's vital to break down which of your expenses have to do with starting up and which
are ongoing.
Here's a break down of some common startup costs:

Lawyer fees
Rent
Business
Registration fees
Down payment on property or equipment
Utility installation fees
Website design

Operating expenses will reccur montly, semi-monthly or yearly; you pay them more than once.
Common operating expenses have to do with:

Phone and internet service

Utilities
Rent

Salaries
Storage
Office supplies
Raw materials
Certification and association fees

2. The Income Statement (AKA Cash Flow Projection)

You income statement will help you project profit or loss, by month, for the first year of
operation. After the first year, you may elect to project profit or loss quarterly.
One of the best ways to get started on an Income Statement is to use a interactive spreadsheet
where you fill in your basic info and the spreadsheet calculates the values that will help you
complete a financial projection. SCORE has a good template to help you get started in
their Business Plans & Financial Statements Template Gallery.
3. Balance Sheet
The final step in your financial projection is the Balance Sheet -- that's a snapshot of the
financial overview of your business. Depending on which stage you are at in the business
planning process, the balance sheet may consist of your own assets and liabilities.
What to include:

Current Assets: What cash do you have on hand (including personal savings), inventory of product, money owed and
accounts receivable, as well as fixed assets.

Liabilities: what money do you owe? This could be salary and wages, accounts payable, and taxes owed.

Tips on Projecting Income

A big part of your business plan will consists of figuring out what you can expect to earn from
selling your product or service. When you are just starting out, that can seem a bit complicated,
but it doesn't need to be.
The best place to start is in research -- in your target market, on your competitors, and how much
of the market you can reasonably expect to capture. This part of your preparation will fulfill an
important component of your business plan.
Once you are armed with that knowledge, questions your assumptions. You may consider creating a
best case scenario, a worst case scenario, and something in between.
"Construct your financials from the bottom-up, and then validate them from the topdown,"explains Akira Hirai, entrepreneur. "A bottom-up model starts with details such as when you
expect to make certain sales or hire specific employees. Top-down validation means that you
examine your overall market potential and compare that to the bottom-up revenue projections."
Financial Projections and Funding
It's important to know how much money you need to ask for and why. It's the first question that
funders will ask you so it pays to make sure your math in impeccable. Knowing that the financial

projection section is the first place funders will turn, it makes sense to spend more of your time
here than anywhere else.
Study your market, look at the competition, and develop a financial plan that reflects current
market realities. Doing your homework will leave a long impression in the mind of potential
funders.

Question Key Assumptions in Your Business Plan

By Amanda McCormick, About.com Guide

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Constructing a business plan is all about looking at and confronting assumptions. Consider the five following key
assumptions and you'll be well on the way to a more solid plan.

Assumption 1: Is there a need for your product or service?

It's an obvious question, but one many entrepreneurs overlook. Knowing that there's a need for your product is different
than having a hunch or a feeling. How do you know the difference? You do the research to find out.

First, look at the competition. Are there others who have a similar offering and are they profitable?

Maybe you are breaking new ground -- that's no excuse for saying "there is no competition." Look around for evidence
that your proposed business fulfills a concrete need.

Without evidence to validate the need for your business, your business plan will fail.

Assumption 2: Is there a significant customer base?

The second assumption that's important to look at in your business planning preparation is whether or not there is a
significant customer base for the business you are proposing. This can be a highly subjective question, as there are a
number of successful niche businesses that serve small markets quite profitably. You are well served to look at the
concrete size of a potential market and to assign real dollar values to its potential.
Assumption 3: Can this business turn a profit?
Once you can decide that A) there is a need for your business and B) there is a sizable market for it, you are on solid
ground to establish your business' potential profitability. But don't pluck numbers from the air. You'll need to figure out
what your startup costs are, as well as ongoing business-related expenses. You'll need to figure out a pricing structure that
your customers will pay and will generate enough cash flow to keep the business running. After generating a set of
realistic financial projections, you'll have a solid picture of your business' profit potential.
Assumption 4: Are you the right person to run this business?

You believe in your business. You eat, sleep and breath it. But you're still going to have to make the case why you are
uniquely qualified to start and run the business. As CEO, you'll also need to demonstrate the ability to delegate and find
employees to complement your weaker points. First, know yourself, and second, be able to find the right people to bring
into your management structure.

Assumption 5: Is your business funded appropriately?

Financial projections are the place in the business plan that investors will flip to first. They want to know if you can
understand the financial bottom line of running a business, or if your vision is unrealistic. Demonstrate in your business
plan that you have a realistic startup budget, and you don't expect revenue to magically pour in within the first few
months. Show that you have sufficient capitalization to run the business to break even.
A Great Tool for Questioning Assumptions: The SWOT Analysis
A SWOT analysis stands for Strengths, Weaknesses, Opportunities and Threats and is a popular strategic framework for
business planners.
The first two items refer to qualities that are internal to the business. The second two items are external factors.

Consider the following in questioning your assumptions in writing a business plan around your fledgling operation:

Strengths:
What does this company do well?

What are our assets?

What expert or specialized knowledge does the company have?
What advantages does we have over competitors?
What makes us unique?

Weaknesses:
What resources do we lack?

Where can we improve?

What parts of the business are not profitable?
What costs us most time and money?

Opportunities:
What has the competition missed?
What are the emerging needs of the customer?

How can we use technology to cut costs and enhance reach?

Are there new market segments to exploit?

Threats:

What are our competitors doing well?

How do larger forces in the economy affecting our business?
What is happening in the industry?