How to write the best Business Plan

I. TYPICAL OUTLINE OF A BUSINESS PLAN

A. The Executive Summary
1. Gives a brief overview of what is to follow
2. Helps put all of the information into perspective
3. Should be written last (only after the entire business plan has been completed)
4. Must present the quality of the entire report
5. Is essentially a summary of each significant section from the plan
6. If seeking money (debt or equity), you need to explain specifically what you want and an approximation of what you are willing to offer in return.
B. Business Description
1. The name of the venture should be identified and the nature of the opportunity should be
outlined (why do you believe there is an opportunity for this venture to be successful)
2. The industry background should be presented in terms of historical development, current status, and future trends (how has the industry developed and why is there an opportunity now)
3. The new venture should be thoroughly described along with its proposed potential (specifically, what are you going to provide in detail)
4. The potential advantages the new venture possesses over the competition should be discussed at length (specifically, what makes your offering unique in the face of competition)
C. Marketing Segment (Only research-based information is acceptable)
1. Must convince investors that there is a market (you need to provide justifiable research that affirms the size of the market for this opportunity)
2. Must convince that sales projections can be achieved (how much work will you be able to capture in this market and why)
3. Must convince that the competition can be beat (how many competitors are clamoring after the same opportunity, why aren’t there more, and why are you better?)
4. Market niche and market share
a. A “niche” is a homogeneous group with common characteristics (specifically, describe who is your market and how many of them are willing to do business with you).
b. The writer should address the basis of the customer purchase decision (explain the process of getting business, what makes the most difference in this process and why will customers choose you).
c. There should be a list of potential customers who have expressed interest in the product or service, together with an explanation for their interest (if possible, get letters of commitment and display in the appendix)
5. Competitive analysis
a. Assess the strengths and weaknesses of the competing products or services
b. Comparison of competing products or services
c. Short discussion of the current advantages or disadvantages of competing products and services and why they are not meeting customer’s needs
d. Review of competing companies (describe each competitors strengths and weaknesses separately)
6. Pricing policy
a. Pricing strategies should be examined (what is the rationale for your prices)
b. One pricing method should be convincingly presented (with realistic sales conclusions)
7. Advertising plan
a. All advertising media that is being considered should be presented (be sure to explain why each media type is appropriate considering the customers that it is intended to reach)
b. The schedule and cost of promotion and advertising should be presented (be sure to research these costs).
8. Market strategy
a. The general philosophy and strategy of the company should be outlined (For example, low cost strategy or high quality strategy. Why?).
b. Discuss the kinds of customer groups that will be targeted for initial intensive selling effort (who will be targeted first and why)
c. Discuss the customer groups that will be targeted for later selling efforts
d. Discuss methods of identifying potential and contracting potential customers in these groups
e. Discuss the features of the product or service that will be emphasized to generate sales
f. Discuss an innovative or unusual marketing concept that will enhance customers’ acceptance.
D. Research, Design, and Development Segment (IF APPLICABLE)
l. The extent of any research, design, and development in regard to cost, time, and special testing should be covered in this segment
2. If this section is necessary, you should have technical assistance in preparing a detailed discussion
E. The Location Segment
l. Describing the location of the new venture (explain why this location/area)
2. Production needs should be discussed if relevant
3. Other factors are the suppliers and transportation costs involved in shipping materials
4. The cost data associated with any of the above factors should be presented.
F. The Management Segment
l. Identify the key personnel, their positions and responsibilities, and the career experiences that qualify them for those roles (provide job descriptions for each significant position)
2. The entrepreneur’s role in the venture should be clearly outlined (if this person is to be the CEO explain why they are best suited for this position)
3. Any advisers, consultants, or members of the board should be identified and discussed
4. The structure of payment and ownership should be clearly outlined.
5. Any joint venturing arrangements need to be disclosed here.
G. Critical Risks Segment
l. Potential risks (Identify likely risks and provide alternative courses of action)
a. Effect of unfavorable trends in the industry
b. Design or manufacturing costs that have gone over estimates
c. Difficulties on long lead times encountered in purchasing parts or materials
d. New competition that was not planned for
e. Lack of available specialized personnel or labor forces.
2. “What-ifs” (EXAMPLES)
a. The competition cuts prices
b. The industry slumps
c. The market projections are wrong
d. The sales projections are not achieved
e. The regulations change.
f. The management team breaks up.
H. The Financial Segment (Displayed in the following order:
1. Notes/Assumptions, 2. Budget, 3. Cash Flow, 4. Income Statement, 5. Balance Sheet)
5. The pro forma balance sheet
a. Projects what the financial condition of the venture will be at a particular point in time
b. Prepared at start-up, quarterly for the first year, and at the end of each of the first three to five years
c. Details the assets required to support the projected level of operations
d. Show how these assets are to be financed
4. The income statement
a. The projected operating results based on profit and loss
b. The sales forecast
c. Production costs must be budgeted based on the level of activity needed to support the projected earnings
3. The cash flow statement
a. Sets forth the amount and timing of expected cash inflows and outflows
b. The cash flow forecast will highlight the need for and the timing of additional financing and will indicate peak requirements for working capital
c. Can direct the entrepreneur’s attention to operating problems before serious cash crises arise
2. The budget
a. Similar in design to the income statement but broken up in monthly increments for the first year (budgets are monthly—income statements are yearly).
1. Notes/Assumptions of the financial statements
a. Explain the rationale for each line item on each financial statement (For example, rent = $600/month; Questions to be answered: What is the term of the lease, will this figure rise during the lease and, if so, by how much each year. This is typical information that is explained in the Notes.).
b. You MUST supply detailed notes/assumptions to the financials. Without the explanations for the financial figures the financial statements don’t mean anything.
I. The Harvest Strategy Segment (Optional)
a. Long-term strategy for disposition of the firm (Liquidity event—IPO or sale).
b. Succession strategy and plan (identify successor and rationale for selection).
c. mention the preparations (insurance, trusts, etc) needed for continuity of the
business.
d. Venture capitalists want to see this section.
J. Milestone Schedule Segment
a. Provides investors with a timetable for various activities to be accomplished.
b. Shows the relationship of events and provides deadlines for accomplishment.

K. Appendix
a. Display letters, resumes, graphs, surveys, blueprints, organizing documents, certificates, contracts, etc.
b. Any information that may need further inspection but does not belong in the text of the business plan..

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