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Saturday, 07.31.2010 |
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| The ABC's of Writing Winning Business Plans |
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Product Details
Notes
CHAPTER 1 - PLAN TO WIN
beginners underestimate the time, energy, money and experience needed
most people want "get rich quick" schemes, they won't invest the time to plan
entrepreneurs are willing to delay immediate gratification
they invest time and energy to gain experience and education
they make mistakes and often fail, but they learn from their failures
they start small and build, letting their ability grow with their experience
only 5% of new businesses will succeed in the long term
investors and lenders will ask these questions:
1) can i make money investing in this business?
2) do i like and understand the business i'm investing in?
3) do i trust the people i'm investing with?
a successful entrepreneur has the following, regardless of age or gender:
1) vision - ability to find opportunities that others can't see
2) courage - ability to act despite tremendous doubt
3) creativity - ability to think outside the box
4) ability to withstand criticism - all successful people have been criticized
5) ability to delay gratification - work for the long term rewards
plan your exit at the beginning, know the final goal for your business
there is never a perfect time to start a business, so just start now
CHAPTER 2 - WHY DO YOU NEED A PLAN?
remember that a B quadrant business is about building assets and a team
don't write a business plan to get an S quadrant job that scales by your time
focus on great people, then great systems, and finally great products
great products on their own mean nothing without systems and management
the most successful companies often don't have the best product in their market
CHAPTER 3 - BUSINESS PLAN BASICS
business plans should answer the basic questions:
1) who are the major players, the management as well as the target customers
2) what are you trying to achieve, what is your sustainable advantage
3) when will the business start, when will it reach certain goals
4) why are you in business, why would customers want your products
5) where are you located, where is your audience, where are new opportunities
6) finally, how do you get from where you are now to where you want to be
money follows management, investors mostly invest in the people
a business plan is the intersection of everything inside and outside the business
don't forget about the outside, the market, competition, trends, politics, etc.
no business is an island, understand your marketplace and where you fit in
outline your goals, communicate strategies, and plan for best and worst cases
you're not just selling your business concept, you are selling yourself
crafting a business plan also lets you figure out what you really need to succeed
start writing a business plan immediately, you can always revise it over time
four standard segments of a business plan:
1) business - strategy, description, organization, operations, business model
remember to sell the one reason your business will generate strong cash flow
2) marketing - advertising, pricing, distribution, competition, trends
make a good plan to leverage public relations, word of mouth, guerilla marketing
3) financials - income, funds, cash flow, balance sheet, forecast, projections
show all short and long terms costs and revenues, break-even points and goals
4) supporting material - resume, letters of reference, credit, legal, contracts
sample outline:
cover sheet, table of contents, mission statement, executive summary
the business - strengths and weaknesses, legal structure, business description,
product or service description, intellectual property description, location,
management and personnel, records, insurance, security, litigation, risk factors
the marketing - markets, competition, distribution and sales,
marketing, industry and market trends, strategy
the financials - uses of funds, income statement, cash flow statement,
balance sheet, income projection, break-even analysis
the supporting documents
ease of understanding is the cornerstone of any good business plan
there are no federal or state laws mandating what has to be in a business plan
involve your management team and anyone affected in the design of the plan
if you use your business plan to raise money, you must follow securities laws
a private placement memorandum (PPM) is prepared by a securities attorney
use your executive summary to do a ten minute pitch to capture interest
you want to show a great idea, strong potential cash flow, and business acumen
gathering materials and supporting documents often takes as long as writing
CHAPTER 4 - MISSION AND GOALS
the mission statement must be clear and strong, why are you in business
success businesspeople want to serve people and make money
set goals that you can measure quantitatively in time, dollars, or by comparison
don't put anything in your business plan you wouldn't want to see in a newspaper
CHAPTER 5 - EXECUTIVE SUMMARY AND BUSINESS STRATEGY
write your executive summary last, it's the hardest part and most read
it should be brief, one page, and to the point, it's the sales letter
start with the words, the words drives the numbers
beware of technical jargon, keep the tone conversational
be concise and clear, use short, crisp sentences, bullet lists are good too
CHAPTER 6 - KNOW YOUR BUSINESS
common strength - something you do well that is useful
competitive strength - something you do better than others in your field
your strengths should result from deliberate strategies in your business plan
your competitors will be analyzing your strengths and weaknesses
so do the same analysis on your own business and on theirs
look for ways to leverage your personal strengths into business strengths
read the business plans of your competitors, and know that they read yours
look at your competitors' advertising and marketing, study their business
strengths are strengths because they serve customers and increase profits
common weakness - shared with others, generally can be overcome
catastrophic weakness - can't overcome, put you at the bottom of the market
CHAPTER 7 - KNOW YOUR REAL ESTATE
a real estate plan is like a business plan, but with important differences
find a consultant who actually knows real estate plans, not just business plans
CHAPTER 8 - STRUCTURE AND STRATEGY
never use a sole proprietorship or general partnership in a big business
explain why you chose your corporate structure and how you will maintain it
describe the problem you will solve for your customers
explain future plans and how your business will grow over time
describe your organization and departments, put the most important first
show your knowledge of your industry or market and how you fit into it
you might share your business plan with employees to show them the costs
that can motivate them to feel ownership and work harder to grow the company
discuss research and development, patents, trademarks and key processes
don't give away any trade secrets and don't make it overly technical
cover all areas, vendors, suppliers, inventory, office space, personnel
protect your intellectual property rights, including domain names and branding
CHAPTER 9 - THE LOGISTICS
your management team is key, money follows good management
make a list of all tasks and skills you need, and figure out personnel
figure out all your tasks and how much time they will take up in a week
go ahead and include your personal accomplishments to make it interesting
figure out employees vs. subcontractors, hourly vs. salary, when to offer benefits
discuss your recordkeeping and accounting and security of documents
describe insurance coverage, product liability, personal liability, workers comp
security personnel, surveillance cameras, technology, training, insurance
know which areas of your business are sensitive to theft and how you'll handle it
CHAPTER 10 - MARKETING YOUR BUSINESS
identify your market by demographics like age, sex, income, occupation, race
but also factor in psychographics like needs, interests, attitudes, and lifestyles
be realistic, know who won't care about your product and why
decide distribution channels based on the results of your market research
CHAPTER 11 - MARKET TRENDS AND TIMING
bankers follow conventional wisdom, you have to know how to argue against it
factor in outside forces like the competition, market, industry, and government
are costs or profit margins rising or falling in your industry? are there cycles?
follow news on new technology, new changes that could affect your business
watch out for changes in laws or regulations from state and federal government
note expirations of any contracts, intellectual property rights, trademarks
describe how your pricing strategy may change over time depending on trends
time your entry into the market, check seasonal variations and holidays
CHAPTER 12 - FUNDING AND FINANCIALS
financial statements: income statement, balance sheet, cash flow statement
financial projections: income projection, break-even analysis, use of funds
do not write the financials section first, write the business and marketing first
don't tweak your numbers to make them work, that hurts your own business
put the financials near the end, you want them to read concepts before numbers
know when to quit and never talk past the sale, don't give unneeded information
general areas to discuss:
1) how much money is needed to operate the business
2) how borrowed funds will be used
3) how much and how company funds will be used
4) how much money is needed in the future
5) the break-even point
6) current and past spending
include a start-up budget if it's a new business, separate from ongoing costs
write a funding plan for yourself, how you will raise enough capital over time
nonequity funding: bank, yourself, credit union, loan and finance company,
SBA loan, community development company, life insurance company
equity funding: sell shares in your company, follow securities laws carefully
the first round of securities sales (founder's round) has fewer restrictions
you can't advertise the first round, investors should sign a subscription agreement
exempt offering for a private company - Rule 506 of Regulation D
an accredited investor has over $1M in net worth or $200k/yr income for 3 years
you need a PPM (private placement memorandum) for unaccredited investors
maximum of 35 unaccredited investors according to Rule 506
a venture capital company wants to manage, they may boot the founder
CHAPTER 13 - FINANCIAL FORECASTING
an income statement is a snapshot of your business at one point in time
it's also called an earnings statement or profit and loss statement (P&L)
cash flow statement shows movement of money coming in and going out
balance sheet matches assets and liabilities to determine total net worth
break-even analysis balances income and expenses to determine profits
generally forecast about three to five years ahead for an income projection
always check with your target audience to find out their preferences for details
bottom-up forecasting - ask managers and front line people to estimate numbers
top-down forecasting - start with a goal and backtrack the steps needed
pay attention to the difference between profit and cash flow
plan for the time lag of accounts receivables so you don't get caught short
liquidity ratios - current ratio, quick ratio
debt management ratios - debt ratio, times interest earned ratio (TIE)
asset management ratios - inventory turnover, average collection period (ACP)
profitability ratios - return on sales (ROS), on assets (ROA), on equity (ROE)
CHAPTER 14 - PRESENTING THE PLAN
first impressions are important
use white paper, one inch margins, few font styles, conservative colors
print on one side only, single-spaced with double spaces between paragraphs
don't be afraid of using white space, use bulleted points when you can
be consistent with formatting of tables, graphs, charts, titles, section headings
use neat, professional binding, don't staple, use a spell-checker
include table of contents, get someone you trust to review the formatting
cover sheet includes all contact info, date, name of preparer, company logo
typical business plans average about 20-40 pages, including support materials
possible support materials:
resumes, letters of reference, maybe personal finances, leases, contracts, legal
CHAPTER 15 - USING YOUR WINNING PLAN
review your plan monthly, adjust goals and projections, update any data
most business problems creep up in small increments
use your plan to detect problems before they get too big
watch your market timing and market trends so you know what to expect
periodically review your vision and goals and remember the big picture |
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