Anatomy of a Business Plan (If you fail to plan, you plan to fail)

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Anatomy of a Business Plan

(If you fail to plan, you plan to fail)

A business plan is essentially a map to your targeted destination. It tells the story of your company — your current position, your vision for the future, and your plans for realizing that vision. A good plan can also help you raise the money you need to build your company.

Most businesses can keep their plans under twenty pages. Uncomplicated small businesses may not need twenty pages, but anything less than ten may seem a bit light. Whatever the length, your plan will include the following basic parts:
The Executive Summary: Highlights the most important aspects of your business, summarizing key points of your business plan.
Company Description: Features the basic, factual details about your business such as company name (also identify DBA if applicable), your legal status, ownership, products or services, company mission, capitalization, area of the economy (manufacturing, wholesale, retail, service to include repairs, construction, professional including consulting and counseling), and milestones achieved to date.
Industry Analysis and Trends: Evaluates your industry and shows potential investors that you understand external business conditions. Provide a detailed description of the product or service to include:

  • Market to be targeted (who will use it)

  • Niche in the market

  • Competition with existing products and/or services
  • What makes you different (why customers will chose you over competition)

Target Market: Identifies the types of people or businesses most likely to be your customers, and explains their needs and wants. Identify the source of your customers:

  • Location of the customers

  • Position in the price pattern

  • Special appeal of your product/service

  • Contacting customers

- Media to be used in advertising

- Non-media promotion

- Public relations efforts
Competition: Provide an evaluation of other companies offering a similar product or service or filling a similar market need. Who are your competitors? What is their market share? What is their company size? What is/are their location(s)? What is their pricing? How long have they been in business? Could they be purchased?

Strategic Position and Risk Assessment: Differentiates your company from the competition. It shows where you stand in the marketplace, what makes you compelling to customers, and what advantages you have over the competition.
Marketing Plan and Sales Strategy: Outlines how you will reach your customers and secure orders or make sales. Identify your proposed budget for the various aspects of contacting customers (marketing/business development). These can include:

  • Financing Sales

- Cash only

- Credit card sales

- In-house credit program

- Combination of the above

  • Customer Contact

- In-house selling

- Outside selling

- Contract selling

Operations: Explains how you run your business and the operational factors that may give you an edge over your competition.

Technology Plan: Outlines what technology you will use and how you will use it.
Production of Product or Services: Identify the equipment needed (buy, lease, rent) and cost in detail to include such items as:

  • Cost of delivery, installation, and set-up

  • Cost of maintenance

  • Anticipated life (adjust and/or amortize for obsolescence)

  • Type and training/certification of personnel to operate

Management and Organization: Describes the key people running your business. Describes their roles, functions and responsibilities.
Community Involvement and Social Responsibility: Establishes your company's values and fosters your corporate culture.
Development, Milestones, and Exit Plan: Shows where your business will be in several years' time, how you will get there, and the milestones you plan to reach along the way.
The Financials: A set of financial statements showing the current financial status and future financial goals of your company. This is the most difficult part of the plan. Unless you are buying an established business and have access to their financial history, it will be very difficult for you to construct financial data. Through careful market research, you may be able to construct a reasonably accurate sales picture. Once this is done, various consultants and counselors may be able to help you construct the costs you will face in handling the estimated sales volume. Then this will lead to the following accounting tools which will help you manage your business as well as complete your Business Plan.

  • Income statement (Operating Statement or Profit and Loss Statement)

- Actual profit or loss

- Cash basis verses accrual basis

  • Cash Flow Statement

- Analyzes use and needs for cash rather than computing actual profit or loss

- Anticipates cash shortages by helping management plan expenditures and budgets

  • Balance Sheet: a “snap shot” of the financial condition of the business at a specified point in time

- Enables management to spot weaknesses in the financial h might cause problems
Investment Required: Using the above three financial statements, calculate the amount of funds needed for capital equipment and for working capital.

  • Amount by investors/owners

  • Amount by short term borrowing

  • Amount by long term borrowing

Restrictions: Adequate capitalization is defined by law and applies primarily to corporations

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