Business planning is a vital step towards creating a new business venture. You think through the pros and cons. You consider the enormity of the effort. You consider your resources, such as time, money, and expertise. “Do I have the time to dedicate to starting a new business?” “Do I have the financial where-with-all to fund the enterprise?” “Do I have the expertise or skills to support this initiative?” These are all good questions that you should ask yourself before taking on a significant business venture.

With any business start-up, questions are best answered through the more formal process of business planning. This effort forces you to focus on the questions and provide answers in a constructive manner. It makes you face your fears, think through your dreams, and ponder the whatif scenarios. We will explore the journey into planning a new business with a couple of companions. They will perform the exercises with us as we work towards creating something special.

Enjoy this introduction that explains the journey towards business planning and writing a Business Plan!

In the General Business Description section, you should describe the following:

• the Company (name, state registration, legal structure, location, etc.)
• the Company Goals and Objectives – the Vision
• your Industry (how you fit into the industry)
• your Target Market (customers)
• the Product and Service offerings
• your Go-to-Market philosophy (how you make yourself stand-out)
• your Company culture, employees, partners
• the Company structure, organization, and management team

This is supposed to be descriptive in a general way, leaving the detail to the sections that follow. The General Business Description differs from the executive summary, because it describes the business and is an introduction to the business plan.

A MARKET ANALYSIS is a collection of market information that demonstrates your knowledge of the industry and the market you wish to serve. The industry information is primarily about outside variables that affect your business. The market information is the local and internal company information that influences your business. Competitive information will give you insight into what the market will bear and what it is accustomed to seeing. A comprehensive market analysis should include the following sections:

• Industry Analysis – A description of the industry, influencers in the industry, and trends impacting the industry
• Industry Statistics – The size of your target market (customers) in your area, as well as products and services these customers buy
• Competitive Analysis – A full exploration of your competitors and potential allies
• SWOT Analysis – An breakdown of your strengths, weaknesses, threats, and opportunities

The last section of your market analysis is the most significant and educational. Through the SWOT Analysis, you will explore all of your strengths, weaknesses, opportunities, and threats. Business strengths and weaknesses are influenced by internal circumstances while opportunities and threats are driven by external factors. A SWOT analysis requires you to honestly record everything you can envision that could affect your business. After you have fully vetted your strengths and weaknesses, move on to opportunities and threats. The goals are to convert your weaknesses into strengths and either eliminate your threats or make them into opportunities. Recognizing threats is important, as you will be better prepared to face them if they do occur. Be honest. Check your pride at the door and walk into this exercise ready to eat some humble pie. You have nothing to gain by creating illusions of grandeur that cannot be achieved in reality.

Your PRODUCTS and SERVICES are vital to your business. They fulfill a need or demand in a way that is pleasing and beneficial to your customers. This drives them to continue to do business with you. This is called customer loyalty. Every business should take the extra time and effort to build a business culture that breeds customer loyalty. You should have customer loyalty in mind while you determine what products and services you will market and sell.

Products and Services Plan

Take a moment and revisit your business vision in chapter one and the competitive analysis you built in chapter five. Utilize this information to help you to determine your product and service strategy. Build out a product and service plan that thinks thru the steps that you need to take to have a solid product and service offering. What are the tasks you need to perform to create a menu of products or services? List them and arrange them in a logical sequence.

1. Select products that you would sell to your customers that would fulfill your company vision and compete in the marketplace.
2. Determine services that you would provide to meet customer demand and achieve your business goals.
3. Chose suppliers for your products and services;
   • How will you select and build relationships with suppliers?
   • Do you need to partner with other companies to fulfill customer demand?
4. Join associations or trade groups. What do they offer?
5. Acquire unique equipment or tools you need to operate your business.
6. Determine special skills or training needed to sell your products or deliver your services.
7. Evaluate technologies that will assist you in providing your products or services.

A MARKETING PLAN is a cohesive plan on how to reach your customers. It includes your brand, messaging, offerings, and ongoing strategy on how to keep old customers and how to bring in new customers. There are numerous aspects to the creation of a Marketing Plan, below is a list of tasks and aspects of marketing that you should address in your Marketing Plan.

• Brand – Your brand is a distinct identity to the marketplace. It includes colors, tagline, logo, message, vision, etc.
• Niche – Your niche is how the company fits into the marketplace. In one short paragraph, define your niche, your unique place of the market.
• Distribution Channels – How do you sell your products or services:
  • Retail
  • Direct (mail order, web, catalog)
  • Wholesale
  • Your own sales force or agents
  • Independent representatives
  • Bids/quotes on contracts
• Strategy – Outline a marketing strategy that is consistent with your brand and niche.
• Promotions – This is how you will get the word out to customers and prospects (potential customers).
• Advertising – Radio, television, social media, magazines, flyers, coupons, etc.
• Other means of Advertising – Trade shows, catalogs, dealer incentives, word of mouth, and network of friends or professionals
• Find a system or other means to identify repeat customers and then systematically contact them
• Marketing Campaign
• Opening or Business Introduction Campaign
• Ongoing Marketing Campaign strategies
• Marketing Budget – build your launch budget for year one and a monthly budget for ongoing marketing expenses.

In the Operational Plan section, we explain the daily operation of the business, its location, equipment, people, processes, and environment. In this section the Operational Plan is important for understanding the expenses in your business.

Legal Environment

• Determine the companies legal form of ownership: Sole proprietor, Partnership, Corporation, Limited liability corporation (LLC)
• Licensing, bonding and permit requirements
• Health, workplace, or environmental regulations; Other special regulations in your industry or profession
• Trademarks, copyrights, or patents (pending, existing, or purchased)
• Business contracts – lease agreements, relationship agreements, sales agreements, employment agreements, suppliers contracts, etc.

Accountant

• Consider personal financial status when deciding on the company’s legal form of ownership: Sole proprietor, Partnership, Corporation, Limited liability corporation (LLC)
• Review personal financial health and create a plan to do cleanup if necessary
• Determine software tools needed to support the business bookkeeping, payroll, credit card processing, sales tax, etc.
• Acquire proper EIN registration, sales tax ID registration, banking, etc.

Facilities

• Location – you may not have a location picked out yet or you may not need a location. Many startups operate successfully from home for a while or forever.
• Is your location important to your customers, employees, partners, suppliers, etc.? What are the nuances of a location that you require?
• Construction – estimate costs to plan and build out location
• Equipment – determine all the equipment or assets you require to run the business
• Create Asset Schedule – be prepared to identify equipment and their costs
• On-going Expenses – Estimate your occupation expenses, including rent, utilities, insurance, etc.

Personnel (Staffing)

• Number of employees by function, skill set and the pay structure
• Training methods and requirements
• Draft job descriptions for emplo Will you use contract workers in addition to employees?
• Compensation Plan – staffing plan on when to bring resources onboard at what time

Suppliers

• Names, addresses and their credit and delivery policies
• Type and amount of inventory furnished
• History and reliability, should you have more than one supplier for critical items (as a backup)? Do you expect shortages or short-term delivery problems?

Inventory

• What kind of inventory will you keep: raw materials, supplies, finished goods?
• Average value in stock (i.e., what is your inventory investment)?
• What is the rate of product turnover? How does this compare to the industry averages?
• Inventory List – Startup Inventory that list products, quantity, pricing info, reorder info, etc.

Cash Management (Financials)

• Accounts Receivable (AR)
• How do you take payment (Cash, Check, Debt Cards, Credit Cards)?
• Do you offer loyalty programs for promotions, discounts, etc.?
• How do you manage the cash flow (Checking, Savings)?
• Accounts Payable (AP)
• Leverage all the discounts you can find thru organizations and negotiations.
• Negotiate terms with your vendors/suppliers.
• How are you going to pay employees?
• How are you going to pay contractors?

Management and Organization structure is to identify the company culture, ownership, management team, and any advisory or professional support.

Management and Organization

• Who will manage the business on a day-to-day basis?
• What experience does that person bring to the business?
• What special or distinctive competencies do your employees need to have?

Create an organizational chart showing the management hierarchy. Identify who is responsible for vital operational functions. Include title descriptions for key employees.

Professional and Advisory Support

• Board of directors (BOD) – elected or appointed members who oversee the activities of the company.
• Management advisory board – an appointed group of advisors that provide advice and feedback to the management of the company. More informal than a BOD.
• Attorney – A legal advisor to assist with the legal structure, any business contracts, business permitting, or other legal advice.
• Accountant – A financial advisor to assist with the financial planning, setting up the books and advising on tax matters.
• Information Technology – Company that could assist you with purchasing, setting up and maintaining a software system, network, or other technology requirements to operate the business.
• Insurance agent – Agent to assist you with the business insurance requirements.
• Banker – A local contact at the bank of your choice to assist with account setup and loan processing.
• Consultant or consultants – Other consultants that you might require in the formation of the company or ongoing operation.
• Mentors and key advisors – Other individuals that would be key to your success.

Startup expenses occur before you even begin operating your business. A startup should estimate these expenses thoroughly in order to estimate sufficient investment requirements. Take time to estimate these and perform thorough research. The more effort you put into this the less chance you will have of overlooking critical expenses or underestimating them. Make sure you add in a contingency or padding factor to cover for any unknowns.

Startup Expenses

• One-time Expenses – expenses incurred at time of start-up that are a one-time event.
  • Property
  • Location Build-out expenses
  • Licenses/Permits
  • Start-up Professional Services fees
  • Equipment
• On-going Expenses – expenses incurred that are ongoing throughout the operation of the business.
  • Locations expenses (rent, utilities, insurance, etc.)
  • Professional Services fees (accounting, legal, technology, other)
  • Salaries
  • Sales / Marketing expenses
  • Travel/Entertainment expenses
  • Administrative expenses (office supplies. postage, etc.)
  • Miscellaneous expenses (repairs, cleaning, maintenance, etc.)
  • Loan or Credit Card payments
  • Other expenses

Sources of Capital

• Investors
• Loans
• Personal Savings
• Credit cards
• Other sources (crowdfunding, donations, grants, etc.)

Funding is a way to raise money for your business. There are primarily two means in which to obtain funding for the business. You can get funding through offering an equity position in the business, meaning offering a piece of the business in lieu for funds or as debt by taking the funds with a promise of repayment over a specified time and interest rate.

Funding

• Equity Capital
  • Angel Investor
  • Venture Capitalist
  • Crowdfunding
  • Friends and Family
• Debt Funding
  • Bank Loans
  • SBA Loan programs
  • Friends and Family
  • Credit Cards

Having a fully vetted and sustainable business model is crucial to your success. Putting a solid financial plan together against this model allows you to manage the startup finances and ongoing expenses. More important, the process of thinking through the financial plan will improve your insight into the inner financial workings of your company.

In the business plan financials you are creating the following:

• Sales Forecast
• Payroll & Operating Expenses
• Cash Flow Statement
• Income Statement
• Balance Sheet
• Break-Even Analysis

This is just the beginning to fully understanding business financial planning. You should seek industry specific advice from a financial expert. Find a professional accountant that specializes in financial planning for startup businesses that has experience in your industry.

The Goal of an Executive Summary

The goal of writing an Executive Summary section of a business plan is to invite your reader to learn more about you and your business. Where you are currently and where you are going over the next few years.

The Structure of an Executive Summary

• Make the Executive Summary two pages or less (ideally a single page)
• Read thru your entire Business plan when it is complete (edit & absorb)
• Make it enthusiastic, professional, comprehensive, and concise
• Create an elevator pitch and use this in or as your first paragraph

The Content of an Executive Summary

• Express your businesses key differentiators: Describe your most important company strengths and core competencies. What elements will make the company be successful? What are the company’s key competitive advantages?
• Explain the basics of the business: What products and services will the company offer? Who are your customers? What is the structure of the ownership? What type of employees will you hire? What will make your business stand out from the other like businesses?
• Formulate a take away or ask from your audience: If you are looking for a loan or other means of funding, state clearly how much you need, precisely how you are going to spend it, and how this funding will make the business more profitable, thereby reassuring repayment.

The Audience of an Executive Summary

If the goal of your summary is to inform, motivate, and inspire your partners, employees, or others you work with, than write it with them in mind and focus your goals on performance and deliverables as well as incentives and rewards for the positive results. Often times your readers are some or all of the above.
Make sure you think of all these different perspectives as you author your section the “Executive Summary”.