Business Plan University

Business plans, small business and entrepreneurship.

Sunday, February 18, 2007

NEW SITE

This blog has moved to it's permanent site: www.mybizplansite.com

Friday, February 02, 2007

I'm back

It's been awhile since I updated this blog. I should be back pretty soon...

Friday, April 14, 2006

The Four 'P's of Marketing

Product, Place, Price and Promotion
Here's a number of sites that discusses marketing mix.

1. http://www.netmba.com/marketing/mix/

2. http://www.abcsmallbiz.com/bizbasics/marketing/4ps.html

3. http://www.websitemarketingplan.com/TacticsArticle.htm

4. http://www.ces.purdue.edu/extmedia/EC/EC-730.pdf

Wednesday, April 12, 2006

Enough with these books!

Ok, I promise, those are the last batch of my recommeded reading to you all! I'll get back to all the strategies and business planning stuff so I could bombard you again with books that I've read that I like to share.

Ciao for now!

5 People You Meet in Heaven



There is really, really excellent restaurant just across Wharton School at the University of Pennsylvania. It's actually located at the back of Borders Bookstore, it's called the Pod. That's where I had dinned with friends. While waiting for them, I browsed the books at Borders and what caught my eye was this book The Five People You Meet in Heaven. It's a small book and I thought, I can finish this in one day. So I bought it.

It's melodramatic. It's about a guy whose life flashed in front of him... er.. I can't give you the details. I loved the book and I was so hooked into it, I finished it in a few hours. But I was really, really surprised. One of those five is a little girl. A filipina! (Sorry!) and the setting was in the Philippines!!!

In any case, I got home, turn the TV on, guess what?!!!! It's a TV movie and titled "Five People You Meet In Heaven!!!' I mean, WOW! Is somebody telling me that I MUST read this book?! And so I sat in front of my TV and finished watching the show that I really enjoyed. It did changed my on the way I look at things! Ha! Ha! Ha!

I know, this is not a MBA book, but likewise, it'a great, great read!

Tuesday, April 11, 2006

Business Startups: EntrePinoys Atbp

Our source of information and tips on potential investment and livelihood plan for aspiring and existing Filipino entrepreneurs.

This is a must visit site to all you out there who are planning to start a business with a very minimum or no capital at all. Check out what this whiz guy has done. He is a virtual web crawl machine on the look out for those start-up businesses’ how to. No wonder his site gets hits like crazy, it’s insane!

I mean, haven’t you sat on your computer one time, thinking of starting a business, and you have no friggin idea where to begin? You don’t even have any clue on what to type at google? Worst, it’s come back to you with all those stupid porn sites that you don’t need? Well, some of you do, but… well… I mean gezz… Think about this, someone else has already cooked it all for you. It’s this guy from EntrePinoy.

Check it out!

The Apprentice

The Apprentice Blog - Season 5

Everyone's an armchair MBA with The Apprentice Blog. What will get them the job? Learning or leadership? Book smarts or street smarts? Business savvy, short skirts or skills?

Have you read any of Donald Trump's books? Wanna get rich?

Most of his books are interesting, I mean what can I say about the guy. He is unbelievable! I love this guy! I actually learned a lot even from watching his show The Apprentice and my friends and I would even have an Apprentice Party.

I recently interviewed for a job and if it was not for the Apprentice, I would have no idea how to answer those questions thrown at me. With those questions thrown at me, I thought I was interviewing for the Miss America contest! I mean, check these questions:

1. How do you define success?
2. Are you willing to learn?
3. Define "humility".
4. Who do you admire and why?

I'll let you know in my next blogwrite the scoop about those questions, but my point was - if I did not watch the Apprentice, heck, duh! What do I know?

Ciao for now!

How to be a smart MBA student

My secret? Soundview Executive Business Summaries! HA! HA! HA! Can you believe I am actually endorsing them?

Subscribe and receive 5 popular summaries FREE!

I didn't have a life when I was doing my MBA, 3 years in all. I could not even spend time with the love of my life, my niece. I seldom see my friends as well. I have tons of assignments, research, presentations, meetings, discussion events and more breakfast meetings. In the meantime, we have books to read. Just how do you juggle your schedule, worst finish reading a 2 inch thick book and make a presentation out of it in class? It seemed like this MBA was not meant for me. But you know, when you want something that bad, you look for ways, and so I did.

Honestly, I'm not even a partner of this company, but they saved my MBA. I've bought a lot of summaries it's not even funny anymore!. They should give me a year-end bonus. But I know how hard and difficult it is to work on your master's. And I know all the tight schedules that you go through and I hate that I am advertising them but trust me, if you are an MBA student, gotta have this site and search all your business, strategy, management and human resource summaries here.


Sunday, April 09, 2006

Porter's Five Forces

I was introduced to Michael Porter when I was doing my MBA at Temple University and since then, I have read several of his books. One of which is this one, Competitive Strategies. If you are a business, MBA student or an entrepreneur, this would be a very good read, if not, there are summaries that you can order as well.



A very good reading on Michael Porter's teaching on his Five Forces can be found in this site:

http://www.quickmba.com/strategy/porter.shtml

Top Business Schools

Top Business Schools: Rankings

Business School rankings is a weird stochastic, analytical, quantitative, chuvalinga, bonamaringka process, following some wada-wada-zizchavoomba methodologies. Really. In other words, it really depends on what magazine or newspaper that you are reading. Enrollment in business schools in the United States, and I'm sure it's also true overseas, is highly competitive. I know that most business schools have an entire platoon of commanders that travels overseas to market their schools and find student applicants.

What you will see here is a listing of the top business schools as ranked by a magazine, a newspaper or whoever. Here are the links of a few of them:

  1. Financial Times
  2. US News & World Report
  3. BusinessWeek
  4. Forbes Magazine
  5. Wall Street Journal

Here's an interesting site I found that lists business school rankings side by side, except that some of the columns are not updated. Here's the link: http://www.bschool.com/intlsbys.html. Again, I have no idea what methodologies were used in ranking these schools. I told you already - it's some wada-wada process, ok?

If you find another magazine, newspaper, website, a robot or a human being doing some wada-wada-zizchavoomba rankings, post it here and I'll update the list or feel free to email me.

My email address is: ofwcenter@gmail.com


A League Of His Own

A League Of His Own: Entrepreneur Bijoy Goswami reinvents the schmoozefest

Kevin Koym has a degree in electrical engineering, a résumé that includes stints at IBM, Motorola, and NeXT Computer, and a two-person software company called Enterprise Teaming. But last summer, when a computer glitch at his bank kept him from paying one of his bills, Koym was flummoxed. He dashed off an e-mail asking for help, and within 45 minutes he had 20 referrals.

The next day he changed banks. Koym has a secret weapon against the administrative irritations, management challenges, and everyday frustrations that plague entrepreneurs. Koym is a member of the Bootstrap Network, a group of business owners who linked up in 2003 in Austin, Tex., to trade advice about building companies. The title refers to the practice of bootstrapping a company, or building it without outside financing. Koym, 37, joined the group early on and is one of its most active members. "When I have to make a tactical decision, the first thing I do is send out a request to the Bootstrap Network," he says.

In an age of information overload, a new style of networking is getting entrepreneurs' attention. Unlike most business groups, Bootstrap Network emerged organically, starting with a few friends of an entrepreneur named Bijoy Goswami, who were running businesses on their own dimes. In less than three years, the network has grown to more than 500 members in Austin and spurred offshoots in 10 other cities. Perhaps that's because there's precious little bureaucracy or politics to slow it down, much less the meaningless small talk and business-card swaps that usually pass for networking.

The simple Yahoo! e-mail group that came to Koym's rescue is at the heart of the network. Members talk openly on the list, but mere chitchat is discouraged. Instead, discussion is limited to advice, ideas, and encouragement that will help bootstrappers take action. For those who typically toil in isolation and learn by making mistakes, it's invaluable support. "I've seen a lot of techniques for providing services to entrepreneurs," says Gary Hoover, founder of business information service Hoover's, who frequently weighs in with his input. "It's the most powerful thing I've ever seen."If the e-mail list is the network's engine, its us-against-the-world ethos is its fuel. In a tech mecca like Austin, where most networking is geared toward winning the venture capital lottery, it's easy to forget that fewer than 1,000 of the half-million businesses started each year in the U.S. receive venture capital.

As Goswami, the network's founder, constantly reminds the group: "Entrepreneurship is not one thing."Goswami, a 32-year-old Stanford University grad, gets most of the credit for figuring out how self-funded entrepreneurs could support one another in the Information Age. The son of a textile company executive and a teacher, Goswami was born in India and lived in Taiwan and Hong Kong as a child. After postgraduate work at the University of Oxford, he landed at Austin's Trilogy Software in 1995. At the time Trilogy was a breeding ground for dot-com startups. Goswami quit in 2000 to strike out on his own, buoyed by a few hundred thousand dollars in seed money and lots of naive confidence.

His software company, Aviri, landed Cisco Systems and Cirrus Logic as trial customers. But most of his pilot projects ended in the dot-com bust, and Goswami had to lay off his 12 employees.Hoping to keep Aviri alive, Goswami started thinking about bootstrapping. He didn't have much choice, but he'd also soured on venture funding and didn't want to cede control to an outside investor again. In retrospect he decided that gobs of startup money had bloated his company and dampened the drive to innovate.But when Goswami checked in with business networks around town such as the Chamber of Commerce, the technology associations, and even academic groups, he didn't think they had much to offer an entrepreneur who wanted to go it alone. Still, he wanted to share what he'd learned at Aviri.

He soon became a resource for friends and friends of friends who wanted to know more about entrepreneurship and meet like-minded colleagues.In July, 2003, Goswami gathered some of those acquaintances for the first official Bootstrap meeting at an Irish pub in Austin's warehouse district. Many were young refugees from the tech wreck. They agreed to meet monthly, with more focused brown bag lunches in between. And they immediately established the e-mail list, which fast became a useful tool for finding everything from cheap desk chairs to CPAs.Soon, Goswami was attracting seasoned entrepreneurs such as Hoover to the monthly gatherings to share their advice. After each meeting he followed up on his blog at www.bootstrapnetwork.com/blog/ and suggested references for further study.Meanwhile, the e-mail list was hopping. By late 2004 members were posting about 100 new messages a month, compared with fewer than 20 the year before.

When Jonathan Davis, part-owner of human resources outsourcer Acadia HR, was at wits' end trying to communicate with an employee, he turned to the list for help. Within a few minutes he had four referrals to the same workplace consultant, who was able to iron out his problem. Others have found customers, job candidates, and software through the group. Says Valdis Krebs, an expert on social networking who has studied grassroots efforts to connect small business owners: "It works because the community always knows more than the individual."That may sound simple, but building a community is anything but.

Take the e-mail list, for starters. Who has time to read every e-mail? Yet for the list to be useful, Bootstrappers' e-mails must be answered quickly and honestly. So Goswami limits membership to company founders. VC-backed startups need not apply, nor should businesses wishing to sell Bootstrappers a product or service.Goswami also encourages intramural activities to strengthen bonds among members. A year ago six Bootstrappers began gathering for monthly four-hour dives into each other's specific business problems. Tina Schweiger, founder of Yellow Fin, an 11-person graphic design and branding company, credits the sessions with getting her out of a cash-flow crisis caused by poor tracking of employees' time. Says Schweiger, who is also launching a line of yoga clothing: "It's like having a board of directors. We're helping each other grow and learn."Instead of charging dues, Goswami asks each member for a commitment of time or an in-kind donation.

Any bureaucracy that might distract from the mission -- think bylaws, officers, or committees -- is verboten. Goswami thinks even applying for nonprofit status would be a waste of the group's time.As Bootstrap Austin took off, entrepreneurs in other cities began to approach Goswami about joining. Rather than expand the Austin group, Goswami asked the newbies to start their own networks, preserving the group's tradition of face-to-face gatherings. By last summer, Bootstrappers were organized in Dallas, Boston, Washington, and Houston, as well as Pune and Bangalore in India. "To have someone sitting there and saying 'I've been through that' is enormously helpful," says Sean Murphy, an entrepreneur who founded a software company called Groundbuzz and established Bootstrap D.C. in January, 2005.Now Goswami is starting to attract notice from the very business groups he thought were ignoring entrepreneurs like him. "Bijoy's really good at the grass roots," says Alisha Ring, president of Austin Technology Council, a group of about 10,000 businesses. "He tapped into a real need." Ring hopes to work with Bootstrap Austin and other groups to link entrepreneurs with mentors who can help them expand their companies.Meanwhile, Goswami is pushing ahead with his own bootstrapped company. Aviri 2.0, as he calls it, has but one client and one employee: himself.

Headquarters is his Asian-themed condo overlooking a greenbelt. Armed with the software Aviri built before the bust, Goswami offers himself to corporations who want to build more effective internal teams. He has even self-published a book, The Human Fabric, outlining his ideas on linking people based on their talents and passions. He calls himself an evangelist for building models to connect people and get things done. Nothing seems to stifle his passion and enthusiasm. "Bijoy's personality is so magnetic," says Acadia HR's Davis. "He draws people in and gets them excited about entrepreneurship again." This guy might just have a future in networking.

Women Leading the Way in Startups

A report finds women still lag in the number of startups, but these entrepreneurs have important success stories to tell.

Cary Marsh sold streaming video in the business-to-business environment in Britain. Then she went on maternity leave, and her career path changed forever. After four months of changing diapers and snuggling with her first son, she got the itch to go back to work. That's when she came up with the idea for Mydeo.com, a service that allows home moviemakers to upload their films to a streaming network. She launched the business in 2004 and had teamed up with Microsoft (MSFT ) by August, 2005. Her business, located in Kingston Upon Thames near London, is growing.

Now the proud mother of two sons, ages 3 and 1, Marsh is among a growing number of women entrepreneurs who say they want to control their own destiny and are unafraid of being the boss. "Women are catching up to men across the world," says I. Elaine Allen, professor of Statistics and Entrepreneurship at Babson Collegein Massachusetts, where she worked on the Global Entrepreneurship Monitor (GEM) 2005 Report on Women and Entrepreneurship that was released on Mar. 7.

Female entrepreneurs say being your own boss enables you to crash through the glass ceiling, maintain job security, and better balance family and work. The GEM report, prepared by scholars at the Center for Women's Leadership, shows that women have lots to celebrate. The study, based on data from more than 107,400 respondents in 35 countries, found that women entrepreneurs feel more optimistic than men even though men are still twice as likely to launch startups in high-income regions like Britain and the U.S.

FILL THE NEED. The study demonstrated that women across the globe envision a higher growth potential in early-stage and established businesses than men do. Part of the reason women to take risks: They develop strong networks and see other women succeeding (see BW Online, 10/30/05, "What Women MBAs Want: Role Models"). Almost 32% of women in middle-income countries and nearly 31% in high-income countries reported knowing an entrepreneur who started a business in the past two years.

Women are taking the leap into entrepreneurship, especially in countries the GEM study terms middle-income, such as Venezuela and China, because a startup is often a necessity. GEM researchers found that 34.6% of women, compared to 31.4% of men, in middle-income countries started businesses out of necessity. "It's a way to improve their standard of living," says Allen. "If jobs aren't there, you go out and make them. That's what women are doing."

Even though women in high-income countries are more likely than their counterparts in middle-income countries to start a business because of an opportunity, the rate of males entering a new venture for that reason -- as opposed to out of necessity -- is higher than that of women.

FEELING SECURE. When the economy takes a tumble in middle- or high-income countries, women start looking for ways to make ends meet. When the dot-com bubble burst, Sharon Schanzer found herself without a job -- and with no apparent hope of finding one. So she created employment for herself by launching Red Letter Day, a graphic-design business in San Francisco.

Today, she has two other businesses as well. One is the soon-to-launch Omago.com, which sells magazine subscriptions, and the other is a greeting card company featuring her travel photos. Schanzer says she sees her job today as much more secure than positions in the corporate world, where people often get laid off and are vulnerable to the changing market and uncertain economy.

Necessity isn't always a bad thing, and it takes many forms -- from wanting out of Corporate America to raising a family. Keeping vigil while her mother was in a coma in 1993, Rebecca Schumacher reflected on her life and career. A career that could endure as long as she desired and would allow for rest if and when she needed it was suddenly important, says Schumacher. Starting her own business was the obvious solution. She's now the president and founder of The Schumacher Group, an executive search firm she launched in 1995 in San Francisco, where she employs a team of three women.

BABY ON BOARD. A desire to climb the corporate ladder has also prompted women in high-income countries to take the leap into entrepreneurship. Christine Wellens had worked for high-tech companies for 20 years when she decided to start her own business. "The higher I got in management, the more business life seemed like a private club or clique," she says. "My strength was not schmoozing and politics, and I didn't think I could face another 20 years of that."

Today, she is the president and founder of InterWorking Labs, which creates products to test network protocol implementations for correct operations under adverse conditions.

Even though entrepreneurs tend to put in more hours than others, especially when starting out, they don't usually have to answer to anyone. Marsh, for example, often had her sleeping newborn at the conference table during meetings.

Having the flexibility to create your own schedule, which makes it easier to have a family and a career, also encourages women to become their own bosses. "I refused to outsource the upbringing of children," says Corinne Wayshak, CEO of Groovy Goddess in Sunnyvale, Calif. "I found the entrepreneurial path as a way to be a leader who had the power to engender a more family-oriented environment."

A GOOD IDEA. Wherever they came from and whatever their motivation for starting a business, the women entrepreneurs interviewed for this story had one thing in common: a vision of what they wanted to do with their lives. They see the future as bright, especially since technology -- from the Internet to mobile phones -- is making it easier to set up sophisticated virtual offices at home or wherever your heart desires.

All women need is an idea. Take Catalina Girald, a second-year MBA student at the Stanford Graduate School of Business. A former attorney, she's working with a team to develop an online platform that will allow women to find clothes that fit their particular body, personality, and style. Girald says she hopes that, in the future, women entrepreneurs will pursue their dreams without feeling intimidated. It seems that many of them already are.

Here's the article link: http://www.businessweek.com/print/smallbiz/content/mar2006/sb20060308_856238.htm

Summary

Summary : Appendices

The major sections of your business plan should only contain summarized findings and highlights for your business. Including every piece of information you have collected in the main sections of your business plan only results in information overload for your reader, and makes it difficult to determine if reading the entire plan is worth the effort. Instead, include detailed research, sources, and other related information about your business and your business plan in the appendix.

You may want to consider including the following information in the appendix of your business plan:

Management resumes
Pictures of products, locations, etc.
Copies of purchase orders
Floor plans
Marketing materials
Details of the manufacturing process and machinery
Market research surveys and results (highlights only!)
Any other supporting documents
Be careful not to include every piece of material you have in the appendix section. Only include those materials that provide significant support or additional clarification for your business plan.

Table of Contents

Table of Contents: Business Plan Basics

A well-designed table of contents ensures that the readers of your business plan don't waste time searching through your plan for the information they are most interested in. Very few investors will read your plan from front to back. Instead, they will normally jump around looking for the details they need to make an informed investment decision.Ê Keep this in mind when you create your table of contents, and organize it to make it as easy as possible for readers to find their way around your plan.

BizPlanIt suggests inserting the table of contents immediately after the executive summary in your business plan. Most readers will start with your executive summary, and then want to locate specific information that they want to address first.

Your table of contents should list all the major sections within your business plan, and can also be broken down into important or clarifying sub-sections. Make sure your table of contents page is organized, clear, neat and properly numbered.Ê Mistakes, sloppiness, or misspellings in the table of contents give your reader the impression that you are unorganized and careless right from the start.

Mistakes to Avoid

Your table of contents should be be clean, well organized and free of mistakes. To avoid a poor initial impression, double check the layout and pagination before you send out your business plan and avoid these common mistakes:

Important sections and/or subsections are missing
Page numbers do not match up correctly with the content of the plan
The table of contents is two pages in length when it could neatly fit onto one page
The table of contents provides too much detail and is cluttered.
The text layout is not uniformly aligned and looks sloppy
It appears that little or no thought went into its design and creation

Exit Strategy

Exit Strategy: Business Plan Basics

In order to attract investment dollars for your business, it's critical to supply an exit plan to investors so they can get their money back (hopefully with a healthy return) and exit your company. The exit strategy section of your business should also outline your long-term plans for your business.

Begin by asking yourself why you are getting into business. Do you see yourself running your company twenty years from now, or are you interested in moving on after a few years? Are you in it for the big money at the end of the rainbow, or are you more interested in running a solid and steadily growing family business?

It's important to think through these issues and decide what you intend to do with your business before you can adequately answer the questions, and address the issues, concerning how your investor will exit your company. The requirements of each investor will vary in terms of return and exit strategy they seek. Two examples follow:

Venture Capital
These investors look for a high return and an exit strategy of approximately 3-7 years. They work almost exclusively with companies that may go public or can be sold for a significant profit. However, keep in mind that going public is very rare and is unattainable for most companies.

Angel Investor
These investors typically are looking for a high return but are more flexible with the terms of the exit strategy. Angels are typically less sophisticated than venture capitalists or institutional investors, and will become involved in your business because of a personal relationship with you.

Here are some possible exit strategies to consider:

Initial Public Offering (a very, very rare event for most startups)
Merger/Acquisition
Buyout by partner in business
Franchise the business
Hand down the business to another family member

Mistakes to Avoid

The following are several common mistakes found in the exit strategy section:

Assuming you have a business with the potential to go public.
Failing to explain how your investor will specifically recoup their investment and a sufficient return.
Failing to take your personal goals into account when planning your exit strategy.
Completely ignoring this aspect of the planning process, or having no exit strategy at all.

Financial Projections

Financial Projections: Business Plan Basics

Your financial plan will be highly scrutinized by your business plan reader. All the ideas, concepts and strategies discussed throughout your entire business plan form the basis for, and should flow into, your financial statements and projections in some manner. When it gets down to it, your reader wants to know if and when you will make money and become profitable.
Financial statements and projections should follow Generally Accepted Accounting Standards and must (at a minimum) include properly prepared balance sheets, income statements and cash flow statements. Bankers and investors are familiar with the correct content, organization and presentation of financial statements, and expect to see them in your business plan.Ê Don't cut corners or attempt to devise your own method of financial and pro forma statement presentation.
In most cases, capital sources expect financial projections for a three to five year period, and historical statements for the past three years (or since inception if operating period is less than three years).

Consider organizing your financial statements as follows:

Income Statements
Year 1 - Monthly Projections
Years 2 thru 5 - Quarterly or Yearly Projections
Existing businesses should provide income statements for the last 3 years if available.

Balance Sheets
Year 1 - Quarterly Projections
Years 2 thru 5 - Yearly Projections
Existing businesses should provide current balance sheet and balance sheets from the prior 2 years if available.

Cash Flows
Year 1 - Monthly Projections
Years 2 thru 5 - Quarterly or Yearly Projections

Other information that you may consider including:
Financial Assumptions
These are critical to properly convey the "reasons behind the numbers" for outsiders reviewing your financial projections. Explain how you calculated the numbers you used in your financial statements.Ê For example, we will sell 1000 units per month at $5.00 per unit. This is projected to increase by 4% every month, etc.

Break-Even Analysis
These figures demonstrate the volume of sales, in units and dollars that must be generated to cover fixed and variable expenses. At the break-even point, you start becoming profitable. Normally this data is presented in a graph format with sales on the X-axis and units sold on the Y-axis.

Sources and Uses of Funds
This section explains to your reader which sources you expect to secure capital from, and what you specifically plan to spend it on.

Investment Structure and Objectives
This section outlines the amount of capital needed, various investment structures, and the estimated return to your investor. ÊIt is critically important to tell your investor how they will recoup their money, when they can cash out, and what they will receive as a return.

Financial Ratios
Providing standard financial ratios helps your business plan reader to analyze how well your company will perform compared to other companies within your industry. For existing companies, show the trends over the last 3 to 5 years to outline any improvements in your performance.

Mistakes to Avoid

Here are some of the most common mistakes found in the financial projection sections of business plans:

Failing to include the "Big 3" statements and projections (income statement, balance sheet, cash flow).
Presenting sales and profit projections that are unrealistic and unfounded.
Omitting financial assumptions to explain where the "numbers" originated.
Presenting "creative" rather than "accepted" financial statements.
Underestimating expenses and not budgeting for unexpected costs.
Lack of financial investment on the part of the founders.
Including excessive salaries and office expenses at start-up.
Offering a lower percentage of ownership than the investment requirement demands.
Offering a return on investment that is out of line for your industry.
Absence of contingencies and projections for worst case scenarios.
Financial statements that are not prepared or reviewed by a reputable accountant.

Operational Plan

Operational Plan: Business Plan Basics

The operational plan deals specifically with the internal operations and equipment necessary to produce your product or service. The following are selected areas that need to be addressed in this section.

Location
Where will your business be located? What square footage is needed, in how many locations? What type of space is it? Office, warehouse, manufacturing, or a combination? What is the advantage, if any, of your location? At what point will the goals of the business exceed the above mentioned facilities? Provide a layout of your facility in the appendices of your business plan.

Equipment
Outline and describe the significant equipment needed, including cost. What does the equipment do, how do the pieces function together, and how much can be produced? Will you purchase or lease your equipment? Why and from whom? Be sure to include manufacturing equipment, vehicles, computers, and office equipment.

Labor
How many employees will you need? Full-time? Part-time? Break them out by function, number of hours worked, and hourly pay. Describe the skill sets needed. What are the salaries of those in management, production, distribution, sales and administration? Will you run multiple shifts? What are your hours of operation? What criteria is used to locate and hire quality employees?

Manufacturing & Service Process
Walk the reader through your manufacturing and service process from raw material through finished product. Where will you obtain and store raw materials? Outline your key suppliers, the purchasing process, and unique purchasing requirements. Where will finished goods be stored, and what is the associated space and cost? How will finished goods (or services) be distributed? What is the lead time for the entire process? How will quality be measured, controlled, and improved? Explain the technology requirements for your manufacturing process.

Other Issues to Consider:

How will you keep track of inventory? Provide specific procedures and equipment used.
How will you maintain quality control? What are the procedures to ensure that you are providing the top quality product or service?
What type of insurance does your business need? Discuss the legal liability issues of your business.

Mistakes to Avoid
Here are some of the most common mistakes found in the operational section of business plans:
Failing to clearly outline the process by which you manufacture, distribute and sell your product or service.
Failing to account for all production costs (direct and indirect).
Failing to assess the manufacturing process in terms of manufacturing costs, taxes, shipping, installation, maintenance, serviceability, etc.
Failing to develop adequate inventory control and quality assurance guidelines.
Failing to identify all machinery and equipment needed.
Failing to properly plan the layout of the plant, the workflow process, and the material handling procedures.
Failing to properly outline personnel management, scheduling, and hiring practices.
Failing to properly plan for contingencies to meet production and staffing challenges.
Failing to plan for long term facility and equipment changes

Management Team

Management Team: Business Plan Basics

Many investors base their entire investment decision on the management team behind a venture. Investors expect a well-rounded team of professionals with experience in every function critical to the business. Your management section should clearly demonstrate who each person is, why he or she is on your team, and what each person will do.

Try and limit your management team to 3 to 5 people - and to those individuals involved in the day to day operations that have the greatest impact on the future success of your business. Everyone else is considered either an employee, or if not involved in day to day operations should be included as a member of the Board of Advisors, Board of Directors or consultants. A discussion of your employees should be included in the operations section.

The basic components of the management section include:

Specific Team Members
Construct a narrative description for each team member, clarifying his or her background and intended contribution. This should include:

Title of this position
Duties and responsibilities of this position - what will they be doing, which functions will they be overseeing, who do they supervise, who do they report to, etc.
Previous industry and related experience - should be those that relate directly to this new position. Who have they worked for, what were they doing, for how long did they do it, etc.
Previous Successes Ð what did they accomplish, what successful teams or projects did they spearhead, did they grow a company or a division, were they responsible for a turnaround or some new breakthrough idea.
Education Ð keep educational descriptions brief
Board of Directors
Briefly describe who is on your Board and what role they play within your company. Briefly list the names, backgrounds, and contributions that will be made by each board member.

Board of Advisors
Your board of advisors should consist of individuals with valuable industry expertise and insight, and they help and consult with you on your business. A solid and experienced board of advisors goes a long way towards building credibility in the eyes of investors. Briefly list the names, backgrounds, and contributions that will be made by each of your board members.

Consultants
The last part of your management section should include a brief mention of the outside consultants you will work with as your company grows. A typical list of consultants would include accountants, attorneys, bankers, insurance agents, and experts such as technology advisors, web developers, and payroll specialists, for example.

Explain the background of the founder(s) of the company at some length. However, limit this background information to under 1Ú2 a page. Stick to the facts on all your management team bios, making it evident why each person is experienced, why they hold their position and the benefits they provide your company.

One last note:Ê Always keep in mind that given the choice between an excellent business concept with second-rate managers and a mediocre business concept with top-notch managers, investors prefer the latter.

Mistakes to Avoid

The following are several common mistakes that decrease the effectiveness of the management team section of your business plan:

Depending on unqualified friends or family in key management positions.
Assuming that previous success in other industries applies to your current industry.
Presenting a "one-man-team" management philosophy. Investors know it's difficult to wear every hat and successfully run and grow a company.
Attempting to attract top managers without sharing ownership.
Lacking non-compete agreements for critical management staff.
Failing to attract and assemble a knowledgeable board of advisors.

Competitive Analysis

Competitive Analysis: Business Plan Basics

The competitive analysis section of your business plan is an objective overview and comparison between your company and your competitors. Begin by identifying your direct and indirect competitors, what and how much they sell (in units and sales dollars), the number of years they have been in business, and their specific market niche. Outline the strengths and weaknesses of each of your competitors from an unbiased perspective.

It is advisable to include a chart or pie-graph showing what share of the market each of your competitors commands, the trends and changes over time. Explain the percentage of the market you intend to capture, and from whom or how you will achieve this market penetration.

More than anything else, it is important to be straightforward and honest about your competitors and their strengths and weaknesses. Many first time business plan writers don't realize that investors want to see that other businesses are profitable and successful in your chosen market. If you fail to present your competitors, or claim you have no competition, why should investors assume that a market even exists from your product or service. Instead, present comprehensive information and point out how your unique strengths and tight market niche will result in your success.

Mistakes to Avoid

The following are several common mistakes that can decrease the effectiveness of your competition section:

Assuming you have no competition! (Please don't do this! Claiming you have no competition or anything remotely similar, is a sign of inexperience that readers pick up on immediately.)
Failing to identify both direct and indirect competitors.
Underestimating the power and strength of competitors.
Omitting the specific competitive advantages you hold over your competition.
Demonstrating a lack of knowledge or strategy to combat changing competitive conditions.
Failing to define and clarify your position, strength, and market niche focus.

Marketing & Sales

Marketing & Sales: Business Plan Basics

Every good marketing plan should include two major parts - a definition of your target market and a specific outline to market, promote and sell your product or service.
Target Market
It's critical to clearly define your target market in your business plan - investors expect it. Tell your business plan reader about your customers and describe their defining characteristics in detail. Include information such as age, gender, geographic location, income bracket, buying similarities, and more.

The goal of this section is to build a demographic profile of your typical customer. The more clearly you pinpoint the defining traits of your customer, the easier it is to construct a marketing program to reach them effectively.

The information and research included in your target market section should originate from primary and secondary sources. Primary sources includes information that you discover or conclude from personal observation and research, such as personal studies, results of questionnaires, site visits, and conversations with experts in your industry. Secondary sources include such sources as journals, books, published reports, government statistics, or internet findings.

Marketing Program
After you define your target market, you need to determine specifically how you will reach them. Outline the details and steps necessary to reach potential customers and convert them from prospects to paying customers. It is important to demonstrate to investors that you have identified specific marketing avenues and procedures to effectively sell your product or service. Answer questions such as the following in your marketing program section:

What specific marketing mediums will you use to reach your customer?
How often will each be used? What will they cost? Why did you choose these marketing avenues over others?
What marketing materials will you need?Ê (brochures, website, etc)
Who will design your marketing materials? What will they cost?
What is the cost of marketing materials per prospect or client?Ê (You may choose to include marketing pieces in the appendix of your business plan)
Will your company be able to attract PR? Why will they run your story? What's the "angle"? Which publications and mediums will you target?

Mistakes to Avoid

Here are some of the most common mistakes found in the marketing and sales section:

Defining your target market too widely, and assuming success will result from simply capturing a "small portion" of this enormous market.
Unclear definition of your target market.
Attempting to attack an entire market instead of a narrow niche.
Making assumptions about your target market without research or concrete support.
Not specifically identifying the mediums you will use to advertise and promote your product.
Omitting details such as when, where, why and how you will reach your target customer - along with costs.
Making the assumption that offering a lower price will lead to increased sales.
Underestimating the importance of packaging, brand name, and reputation.
Attempting to immediately fill several lucrative but unrelated markets.
Lacking clarity about how future changes might effect your market.

Industry Analysis

Industry Analysis: Business Plan Basics

Every business operates within the larger classification of an industry. Your business plan must address the forces at work in your industry, the basic trends and growth over time, and where your company fits in. Demonstrating to outsiders that you understand and have anticipated the important factors of your industry builds a case for your company's success.

Think of your industry as those companies providing products and services similar to yours. This includes those companies selling similar products and services, as well as complementary or supplementary products or services. Any business that falls between the supplier of raw materials to the end of the distribution channel for your type of product or service are part of your industry.

In the industry section of your business plan, provide answers to the following types of questions:
  • What is the size of your industry by both revenue and number of firms?
  • Discuss the characteristics of this industry such as growth trends, units sold, or employment.
  • What factors are influencing growth or decline in your industry?
  • What have been the trends in previous years?
  • What trends are expected in the coming years? (include supporting research)
  • What are the barriers of entry for your industry?
  • How many companies are expected to enter your industry in the future?
  • What government regulations effect your industry and your business?
  • Is your industry highly regulated or does it fall below the government's radar?
  • Provide a general explanation of the distribution system for products and services in your industry.
  • Is it difficult to gain distribution access to your industry?Ê Explain.

Product & Service Description

Product & Service Description: Business Plan Basics

The product/service section is one of the most important parts of your business plan. It's your chance to clearly explain you products/services, identify their features and benefits, and discuss what needs or problems they address in the market.

Product Overview
If you are selling a product, your reader will want to know what it is, what it does, and its features and benefits. Consider including pictures if they would help your reader get a better understanding of your product. Discuss its size, shape, color, cost, design, quality, capabilities, technological life-span and patent protection. You may also wish to explain how it is produced, the materials required, and the type of labor needed.

Service Overview
If you offer your customers a service, explain what that service(s) are, how they work, and what need they address in the marketplace. Where will you operate? What makes your service different? What materials or equipment is needed? What are your days and hours of operation? Explain the steps in your service process and the benefits you offer your clients. Write this section with enough information to satisfy an outsider's need to understand your service without boring them with trivial details.

Mistakes to Avoid
The following are the some of the most common mistakes we find in the product and service description section:

Failing to identify the benefits of the product or service (focusing instead on the features)
Describing the product/service in language that is too technical, with too many many industry specific words or phrases
Omitting the specific problem the product/service addresses and how that problem is solved
Assuming an improved product/service will "sell itself"
Describing the product/service in terms that are too broad
Failing to include a third-party evaluation or analysis of your product
Underestimating the importance of legally protecting your product/service

Company Description

Company Description: Business Plan Basics

The company description section of your business plan should outline your company's basic background information and business concept. Explain in general terms who you are and what you do. It should also cover the history of your company, how you reached this point, and where you intend to go in the future. Consider covering the following in your company description section:

Legal Description
Include details about where and when the company was formed, where and when it was incorporated, a one line description of what business you are in, and a brief overview of what your company offers. If the location of your company is important, explain the advantages and benefits to your reader.

History of The Company
Provide a general overview of the history of your business. Organize details of your company into a timeline or narrative format, and include your achievements and significant milestones. Explain why you started the company, the driving force behind its inception, and how your product/service mix has changed over time. Include historical data on sales, profits, units sold, number of employees, and other important facts to build a case for your business.

Current Status
Provide a snapshot of where your company is today. Are you in one location, what do you sell now, how many employees do you have, and how successful are you? Point out your current strengths, but also honestly and frankly address your weaknesses. Investors know all businesses have weak points, and you demonstrate business maturity by acknowledging your weaknesses and outlining steps to combat them.

Future Goals
This section gives your reader an idea of where your company is heading. What are looking to accomplish over the next 1, 3, 5 and 10 years? Relate these goals to the investment you seek so an investor understands why you need their money and what you intend to do with it. Explain the overall approach for reaching growth and profit goals in optimistic language, but make sure it's realistic. It's easy to make rosy projections about the future of your company, but it's harder to make them believable.

Mistakes to Avoid

The company description should clearly explain your company and the product or services you offer. This section could be considered the who, what, why, where, when and how of your company, with the focus on significant highlights of your business. Here are some of the most common mistakes that we find in the company section:

Including far too much detailed information about your business
Providing information that an investor would consider your "personal opinion"
Appearing as though you have no business history or business purpose
Leaving out important business and legal particulars
Writing the section in an unorganized or confusing manner

Mission & Vision

Mission & Vision: Business Plan Basics

The mission and vision statements set the tone for not only your business plan, but also for your company. They define the path your company will follow and act as a guiding principle by which your company functions.

Your mission and vision statements tell your reader what you and your business are all about - what your company stands for, what you believe in, and what you intend to achieve.
Economy of words is critical. This doesn't necessarily mean that they should be short at the expense of effectiveness, but that each word should be powerful and meaningful. Be clear and concise and make it obvious what your company is attempting to do.

Is there a difference between a mission and vision statement? Yes, the differences are:

Your VISION defines your long-term dream.Ê It should not be achievable. That may sound ridiculous, but the objective is for your vision to always be just slightly out of your reach.Ê It's what you constantly strive to attain, and it becomes your reason for being.

Your MISSION is what you intend to become or accomplish. It should be challenging but achievable. A well-written mission statement demonstrates that you understand your business, have defined your unique focus, and can articulate your objectives concisely to yourself and others.


Here are some of the "don'ts" to avoid when writing your Mission Statement or Vision Statement:

Don't regurgitate a description of your business.
Don't make it boring.
Don't make it the length of a Ph.D. thesis.
Don't fake emotion.
If you don't believe it, don't include it.
Don't lie or claim to be something you aren't (i.e. intend to do exactly what you say you are going to do in your mission statement).
Don't forget to get the input of everyone on your team.


The Executive Summary

Executive Summary: Business Plan Basics

The executive summary is potentially the most important section of your business plan. It is normally the first section of your business plan that investors will read, and could be the last if it is poorly written. An executive summary should briefly describe the company, the product or service, and the unique opportunity your company is offering. It should also provide a short description of your key management team members and an outline of the investment you are seeking. Don't forget to tell the reader why you need the money and how and when they can expect to be paid back!

A good executive summary is essentially a condensed but powerful summary of your entire business plan. It creates a first impression in your reader's mind of both you and your business. Use clear and concise language - although this applies to your entire business plan, it is especially important in your executive summary. Use words that command attention, and that get your reader excited about the opportunity you are presenting.

The following excerpt is from David Gumprt's book, "How to Really Create a Successful Business Plan". His insight clarifies the importance of a powerfully written executive summary:
Certainly the most significant part of any business plan is its executive summary. What is an executive summary?Ê Probably the best way to begin defining it is to explain what it isn't.
The executive summary is not an abstract of the business plan. The executive summary is not an introduction to the business plan. The executive summary is not a preface. The executive summary is not a random collection of highlights.

Rather, the executive summary is the business plan in miniature.Ê The executive summary should stand alone, almost as a kind of business plan within the business plan. It should be logical, clear, interesting - and exciting. A reader should be able to read through it in four or five minutes and understand what makes your business tick. After reading your executive summary, a reader should be prompted to say, "So that's what those people are up to."

Limit the length of your executive summary to no more than 2 to 3 pages and stick to the facts. Investors are searching for evidence that justifies the soundness of your opportunity, and that gets them excited about what you intend to achieve. If your executive summary is clear and concise, you are one step closer to impressing your reader, and on your way to a terrific business plan.

Here are several common mistakes that can make your executive summary less effective:

Lacking a specific focus
Too long and wordy, and failing to get to the point
Trying to be all inclusive (it should be a powerful summary)
Failing to demonstrate a special or unique opportunity
Failing to outline the terms of the investment sought
Failing to generate enthusiasm in the reader
Some suggestions to combat these problems:

Limit your executive summary to a maximum of 3 pages (at the very most)
If possible, attempt to present your executive summary on 1 or 2 pages
Focus on the opportunity you are presenting your investor and explain why it is special
Make certain that the opinions and claims in your executive summary are fully supported in the other sectionsÊof your business plan
Attempt to use only concrete facts and figures that explain your business concept, market niche and financial projections
Don't forget to include the details of your investment (the amount you need, what you will spend it on, and the return you offer your investor)
Keep your reader in mind - why are they reading the plan and what response/action to you hope to generate?

For more information on writing the executive summary section of your business plan:

Executive Summary Business Plan Basics
http://www.bizplanit.com/vplan/execsum.html




Saturday, April 08, 2006

Creating an Effective Business Plan

This workshop will help you create a business plan to guide your business through the start-up or growth phase, a search for capital, or any other endeavor your small business undertakes (see how an American Express Card can help your business).

To make sure you are ready to create the best possible plan for your business you can experiment on someone else's business! In the Try It Yourself section you have an opportunity to test your skills on a fictional business plan and be rated on how prepared you are to create your own.

If at any time along the way you have questions, check the FAQs or post a question to our
Small Business Advisor.
Introductory Elements
Business Description
The Market
Development & Production
Sales & Marketing
Management
Financials

Read the rest of this article on:

http://www133.americanexpress.com/osbn/tool/biz_plan/index.asp

Using the Plan

A business plan is a tool with three basic purposes: communication, management, and planning.

As a communication tool, it is used to attract investment capital, secure loans, convince workers to hire on, and assist in attracting strategic business partners. The development of a comprehensive business plan shows whether or not a business has the potential to make a profit. It requires a realistic look at almost every phase of business and allows you to show that you have worked out all the problems and decided on potential alternatives before actually launching your business.

As a management tool, the business plan helps you track, monitor and evaluate your progress. The business plan is a living document that you will modify as you gain knowledge and experience. By using your business plan to establish timelines and milestones, you can gauge your progress and compare your projections to actual accomplishments.

As a planning tool, the business plan guides you through the various phases of your business. A thoughtful plan will help identify roadblocks and obstacles so that you can avoid them and establish alternatives. Many business owners share their business plans with their employees to foster a broader understanding of where the business is going.

Writing the Business Plan

What goes in a business plan? The body can be divided into four distinct sections:

  1. Description of the business
  2. Marketing
  3. Finances
  4. Management Addenda should include an executive summary, supporting documents, and financial projections. Although there is no single formula for developing a business plan, some elements are common to all business plans. They are summarized in the following outline:

Elements of a Business Plan

1. Cover sheet
2. Statement of purpose
3. Table of contents

I. The Business
A. Description of business
B. Marketing
C. Competition
D. Operating procedures
E. Personnel
F. Business insurance

II. Financial Data
A. Loan applications
B. Capital equipment and supply list
C. Balance sheet
D. Breakeven analysis
E. Pro-forma income projections (profit & loss statements)
Three-year summary
Detail by month, first year
Detail by quarters, second and third years
Assumptions upon which projections were based
F. Pro-forma cash flow

III. Supporting Documents

  • Tax returns of principals for last three years Personal financial statement (all banks have these forms)
  • For franchised businesses, a copy of franchise contract and all supporting documents provided by the franchisor
  • Copy of proposed lease or purchase agreement for building space
  • Copy of licenses and other legal documents
  • Copy of resumes of all principals
  • Copies of letters of intent from suppliers, etc.

Business Plan Basics

A business plan precisely defines your business, identifies your goals, and serves as your firm's resume. The basic components include a current and pro forma balance sheet, an income statement, and a cash flow analysis. It helps you allocate resources properly, handle unforeseen complications, and make good business decisions. Because it provides specific and organized information about your company and how you will repay borrowed money, a good business plan is a crucial part of any loan application. Additionally, it informs sales personnel, suppliers, and others about your operations and goals.

Plan Your Work

The importance of a comprehensive, thoughtful business plan cannot be overemphasized. Much hinges on it: outside funding, credit from suppliers, management of your operation and finances, promotion and marketing of your business, and achievement of your goals and objectives.

"The business plan is a necessity. If the person who wants to start a small business can't put a business plan together, he or she is in trouble," says Robert Krummer, Jr., chairman of First Business Bank in Los Angeles.

Despite the critical importance of a business plan, many entrepreneurs drag their feet when it comes to preparing a written document. They argue that their marketplace changes too fast for a business plan to be useful or that they just don't have enough time. But just as a builder won't begin construction without a blueprint, eager business owners shouldn't rush into new ventures without a business plan.

Before you begin writing your business plan, consider four core questions:
What service or product does your business provide and what needs does it fill?

  • Who are the potential customers for your product or service and why will they purchase it from you?
  • How will you reach your potential customers?
  • Where will you get the financial resources to start your business?