Where we left off
As we left off in Part 1 of Basics of a Business Plan, any business plan you create is ultimately your business plan despite how much input you get from professional individuals, friends, family and other folks. That having been said, let’s get a consensus garnered from such entities as the Small Business Administration (SBA), National Federation of Independent Business (NFIB), Independent Business Association (IBA) and more. That consensus indicates that the biggest causes of business failure is poor management and lack of planning. In other words, without a plan by which to operate, no one can really manage; and without a direction in which to aim its efforts no business can attain any real success.
With that in mind, make sure to start your plan in a simple, methodical, step-by-step manner that is similar to the following outline: On the very first page, which is the title page, write/type the name of your business – AAA Computer Repair Service – with your business address underneath. then skip a couple of lines, and write in all in capital letters: PRINCIPAL OWNER–followed by your name if you’re the principal owner. On your finished report, you would want to center this information on the page, with the words ‘Principal Owner’ off-set to the left about five spaces.
Examples: AAA Computer Repair Service
111 Center Street
Anywhere, USA 55555
PRINCIPAL OWNER: Your Name
That’s all you’ll have on this page except the page number which could either be written simply as, “1” or spelled out as, “One”
Following your title page is the page for your statement of purpose. This should be a simple statement of your primary business function, such as: We are a service business engaged in the business of repairing, servicing and restoring personal computers, laptops and other digital devices.
The title of the page should be in all capital letters across the top of the page, centered on your final draft – skip a few lines and write the statement of purpose. This should be direct, clear and short – never more than (2) sentences in length.
Then you should skip a few lines, and from the left hand margin of the paper, write out a sub-heading in all capital letters, such as: EXPLANATION OF PURPOSE.
From, and within this sub-heading you can briefly explain your statement of purpose, such as: Our surveys have resulted in the consensus that most computer users lack the very basics in computer usage and maintenance. And while most people put these digital devices in the same category as other regular electronics and technology products, the fact remains that computers should be considered the kind of tools that can be used for more than the casual activities such as video playing, Internet browsing, or document creation. In an added service to the community in which we do business, we provide a free newsletter in which folks can learn how to maximize their computer’s use and overall life.
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Through our business, advertising and publishing experience, it is our goal to capture at least half of the market consisting of computer users, and with our publication we intend to offer educational articles and content that will help to advance knowledge and intelligent discussion to the market we serve. Our market research indicates we can achieve this goal and realize a profit of $1,000,000 per year within the next 5 years.
The above example is generally the way you should write your “explanation of purpose,” and in subtle definition, why you need an explanation. Remember to keep it short since very few business purpose explanations justify more than a half page long.
Next comes your table of contents page. Don’t really worry about this until you’ve got the entire plan completed and ready for final typing. It’s a good idea, though, to list the subject (chapter titles) and then check off each one as you complete that part of your plan.
By having a list of the points you want to cover, you’ll also be able to skip around and work on each phase of your business plan as an idea or the interest in organizing the particular phase that you’re really passionate about. In other words, you won’t have to make your thinking or your planning conform to the chronological order of the “chapters” of your business plan, which is another reason a loose leaf notebook is recommended.
In describing your business, it’s best to begin where your statement purpose leaves off. Describe your product or service, the production process, who has responsibility for what and, most importantly, what makes your product or service unique – what gives it an edge – in your market, your USP (Unique Sales Proposition), so to speak. You can briefly summarize your business beginnings, present position and potential for future success, as well.
Next, describe the buyers you’re trying to reach – why they need and want or will buy your product/service – and the results of any tests or surveys you may have conducted. Once you’ve defined your market, go on to explain how you intend to reach that market and how you will introduce these prospects to your product or service and induce them to buy. You might want to break this chapter down into sections such as publicity and promotions, advertising plans, direct, sales force, and dealer/distributor programs. Each section would then be an outline of your plans and policies.
Moving into the next chapter on competition, identify who your competitors are – their weakness(es) and strong points – explain how you intend to capitalize on such weakness(es) and match or out perform the strong points. Talk to as many of your “indirect” competitors as possible – those operating in different cities and states.
One of the easiest ways of gathering a lot of useful information about your competitors is by developing a series of survey questions and sending these questionnaires out to each of them. Later on, you might want to compile the answers to these questionnaires into some form of directory or report on this type of business. It’s also advisable to contact the trade associations and publications serving your proposed type of business. For information on trade associations and specific trade publications, visit your public library, and after explaining what you want ask for the librarian’s help.
Personnel & operations
The chapter on management should be an elaboration on the people operating your business. Those people that actually run the business, their job descriptions, titles, responsibilities and background resumes. It is important that you paint a vividly clear picture of your top management people because the people coming to work for you or investing in your business, will be investing in these people as much as in your product ideas. Individual tenacity, mature judgement under fire, and innovative problem-solving have won over more people than all the AAA Credit Ratings and astronomical sales figures put together.
People becoming involved with any new venture will want to know that the person in charge – the guy running the business – knows what he’s doing, will not lose his cool when problems arise, and has what it takes to make money for all of them. After showing the level of commitment and the mental and ethical fortitude of this person, go on to outline the other key positions within your business; who the persons are you’ve selected to handle those jobs and the sources as well as available slots to be filled by new hires capable of doing good work.
If you’ve been in business of any kind or scale, the next chapter is a picture of your financial status – a review of your operating costs and income – from the business to date. Generally, this is a listing of your profit & loss statements for the last six months, plus copies of your business income tax records for each of the previous three years the business has been an entity.
The chapter on the explanation of your plans for the future growth of your business is just that – an explanation of how you plan to keep your business growing – a detailed guide of what you’re going to do, and how you’re going to increase your profits. These plans should show your goals for the coming year, two years, and three years. By breaking your objectives down into annual milestones, your plan will be accepted as more realistic and be more understandable as a part of your ultimate success.
Following this explanation, you’ll need to itemize the projected cost and income figures of your three year plan. It will take a lot of research, and undoubtedly a good deal of erasing; but it’s very important that you list these figures based upon thorough investigation. You may have to adjust some of your plans downward, but once you’ve got these two chapters on paper, your whole business plan will fall into line and begin to make sense. You’ll have a more precise map of where you’re headed, how much it’s going to cost, when you can expect to start making money, and how much.
Now that you know where you’re going, how much it’s going to cost and how long it’s going to be before you begin to recoup your investment, you’re ready to talk about how and where you’re going to get the money to finance your journey. Unless you’re independently wealthy, you’ll want to use this chapter to list the possibilities and alternatives.
Make a list of friends you can approach, and perhaps induce, to put up some money as silent partners. Make a list of those people you might be able to sell as stockholders in your company – in many cases you can sell up to $300,000 worth of stock on a “private issue” basis without filing papers with the SEC (Securities and Exchange Commission). Check with a corporate or tax attorney in your area for more details. Make a list of relatives and friends that might help you with an outright loan to furnish money for the development of your business.