Writing an Effective Business Plan

http://www.canadaone.com/
http://www.canadaone.com/By Julie King
So you want to write a business plan. You might be looking for debt or equity financing, or maybe you need to to
develop a blueprint to help you build your business. Either way, a comprehensive business plan is a useful tool that
can help you meet your goals.

As we were starting CanadaOne I wrote a business plan for our company that won the 1997/98 National Business
Plan Competition for Young Entrepreneur, to which over 500 plans were submitted.
Since that time I've done many presentations on the basics of writing a business plan, and I've also written plans for
other companies. In this workshop I'll explain the basics of creating a business plan, based on my own experience
and input from other professionals who are tasked with writing and reviewing plans on a regular basis.
The Basic Recipe
As an entrepreneur, your starting point begins with an idea for a business.
You may want to offer new products or services, launch a business with a twist on existing competitors, take
advantage of an untapped market, or develop a niche business. Or perhaps you have decided to start your own
business with an industry that you have been working in for many years. There's a good chance that you discovered
the business opportunity in the course of your daily life.
Right now your idea or business concept is the kernel of both your business and your business plan. At this point
you don't have a business; you have an opportunity.
As you start to visualize how different aspects of your business will look, research your market, verify your
assumptions, and put together some basic financial projections you have already entered the planning process.
Once you add some structure - using an outline to direct your research and planning - you are well on your way to
creating a business plan. There are several different outlines that can be used to create a business plan; in this
workshop we are going to look at a format that is commonly used by bankers.
When looking at a standard business plan, the outline can be divided into four main sections: executive summary,
business data, financial data, and supporting data.
Why Plan?
Many entrepreneurs will skip over the planning stage, but to do so is to put your business at risk. The process of
researching and planning helps you thoroughly understand the business, your competitors, market conditions, and
the risks.
Equally important to the above, planning forces you to look at all aspects of your business. One of the key
limitations that small business owners face is that they are often needed to fill multiple positions in their company.
We all naturally have strengths in some areas, and weaknesses in others. Planning can help you identify the gaps,
areas you might otherwise neglect.

For example, someone who is going to start a computer programming company might have explained the
technology in detail, but have large gaps in the marketing section of their business plan. Completing a business plan
forces you to look at these areas.
The Executive Summary
The executive summary is a critical part of your plan. If you are taking your business plan to a bank or equity
investor, this is the first section of the plan that will be read, followed by your financial projections. In two pages or
less, your executive summary needs to describe the business opportunity, provide an overview of your plan
(including your business model, strategies, and management team) and provide a brief summary of key financial
information.
Business Data
The first section of your plan contains business data. This information describes the business, its target market (ideal
customers of your business), the strategies you will use to set yourself apart from your competition, key company
personnel, your marketing strategy, and some of the main risks facing your business. In essence, you are using
words to build a picture of your business.
Most importantly, in this section you will want to focus on the big picture. Keep this body of your plan concise (15
pages is ideal) and focus on strategies (your "big picture approach") rather than on tactics (which are the details that
will be used to implement your strategies).
When others read your plan, you will want the business opportunities to jump out at the reader. You don't want the
details of how your business will operate to detract from the big picture you are working to communicate.
Why is it important to clearly explain your business opportunity - which is why your business makes sense and
would be a good investment? According to the Profit Dynamics Inc 1998 Venture Capital Survey, as posted on
capital-connection.com, on average venture capital firms only invest in about 7 out of every 1000 companies that
contact them. When asked what the most critical mistake an entrepreneur can make when completing their
company's business plan, failure to clearly explain the opportunity was the most common response, followed by
unrealistic projections and simplistic assumptions.
Information that will be included in this section of the plan might include:
A description of the industry and your business
Essential market research and demographic information
A description of how you plan to market and sell your products and services
Information on your management team
Information about your product, services and suppliers
A SWOT (strengths, weaknesses, opportunities, and threats) analysis
A look at some of the risks, assumptions and contingencies that you are making
Financial Data
While words will describe your business strategies, numbers will define your business opportunity. For an existing
business, you will want to include financial statements for the last three years, along with projections for the next 15 years. Projections will include a balance sheet, an income statement, and a cashflow summary.
For a new business this section of the plan can be extremely challenging to create, as you only have models - and
guesses - to build on at this point. There are some free, online tools that can help you with this section of your plan.
Industry Canada has a free tool,
Performance Plus, that provides detailed financial and employment data on small businesses by industry for Canada,
the provinces and territories.
Using Performance Plus you can get detailed financial data for other companies in your industry from previous

years. This data can help you support your own financial projections and it can provide benchmarks that you can
compare your own company against.
Another option is to review financial data for publicly traded companies, who are required by law to file this
information.
By looking at actual business results for other companies in your industry, you can get some generalized numbers to
compare your projections to. However, it is important to note that there are many differences between publicly
traded companies and small businesses, so use this information carefully. Many small businesses operate much more
efficiently (as their size often means less management, bureaucracy and need to comply with regulations that govern
public companies), but their size often limits the market share they are able to capture.
To research publicly traded Canadian companies, visit SEDAR.
Supporting Data
The data that supports the concepts you have described in your business plan goes into the Appendices of your plan.
The addition of supporting data often sees a plan grow from its initial 20 pages to the final 50-100 pages. It is here
that you include relevant information on the tactics of your business. Do you have a list of major suppliers? Clients?
Rate cards from your competitors? Include this information in your plan's appendices.
Typical data in this section includes: more detailed market research, resumes/biographies of your management team,
marketing materials, intellectual property details such as trademarks, and patents that have been filed, blueprints,
environmental statements, valuations, contact numbers and justification for a loan request.
The Outline
There is no one outline that will work for all business plans. The outline you will use for your business will depend
on the type of business, the stage of business, and the reason for preparing a business plan. Nonetheless, there are
some standard items included in every plan. Here is a look at one sample outline:
Non-Disclosure Statements
Statement of Purpose
Executive Summary
I. Company Description
A. Nature of the business
1. The Industry
2. Marketplace Needs
3. Method(s) to Satisfy Those Needs
B. B. Unique Competencies
II. Market Analysis
A. Industry Description and Outlook
B. Target Market
C. Market Consultation
D. Competition (SWOT)
1. Identification
2. Strengths
3. Weaknesses
4. Opportunities
5. Threats
III. Marketing and Promotion
A. Overall Marketing Strategy

1. Strategy
2. Communication
B. Ongoing Market Evaluation
IV. Sales
A. Customer Profile
1. Today's Customer
2. Tomorrow's Customer
B. Sales Strategies
1. Sales Force
2. Sales Activities
V. Management and Ownership
A. Company Structure and Policy
B. Key Management and Operating Personnel
C. Legal Structure
D. Owners
E. Expert Advisors
VI. Economics of the Business
A. Revenue Models
B. Balance Sheet
C. 3 Year Cashflow Forecast
D. Worst Case Contingency Plan
Appendix
When selecting the outline, ask yourself why you're preparing your plan. If you are preparing your plan for a bank,
the above outline should work well. If, on the other hand, you are preparing it for an equity investor, you may want
to present the ownership and management first, as this is a critical factor that equity investors will use to make their
final decision.
Once you have an outline that you want to work with, the real work begins. Writing a business plan is not an easy
task, but it is a valuable process that will help you prepare your company for success.