THE ACTUAL PLAN
The four main elements of the actual business plan are: Business Description, Marketing and Sales, Management and Financial.
1. Business Description
In this section, provide a detailed description of your business. An excellent question to ask yourself is: "What business am I in?" In answering this question include your products, market and services as well as a thorough description of what makes your business unique. Remember, however, that as you develop your business plan, you may have to modify or revise your initial questions.
The business description section is divided into three primary sections. Section 1 actually describes your business, Section 2 the product or service you will be offering and Section 3 the location of your business, and why this location is desirable (if you have a franchise, some franchisors assist in site selection).
1. Business Overview
When describing your business, generally you should explain:
- Legalities: business form (proprietorship, partnership, corporation); licenses or permits you will need.
- Business type: merchandizing, manufacturing or service.
- What your product or service is.
- Is it a new independent business, a takeover, an expansion, a franchise?
- Why your business will be profitable. What are the growth opportunities? Will franchising impact on growth opportunities?
- When your business will be open (days, hours)?
- What you have learned about your kind of business from outside sources (trade suppliers, bankers, other franchise owners, franchisor, publications).
A cover sheet goes before the description. It includes the name, address and telephone number of the business and the names of all principals. In the description of your business, describe the unique aspects and how or why they will appeal to consumers. Emphasize any special features that you feel will appeal to customers and explain how and why these features are appealing.
The description of your business should clearly identify goals and objectives and it should clarify why you are, or why you want to be, in business.
2. Products/Services
Try to describe the benefits of your goods and services from your customers' perspective. Successful business owners know or at least have an idea of what their customers want or expect from them. This type of anticipation can be helpful in building customer satisfaction and loyalty. And, it certainly is a good strategy for beating the competition or retaining your competitiveness. Describe:
- What you are selling.
- How your product or service will benefit the customer.
- Which products/services are in demand; if there will be a steady flow of cash.
- What is different about the product or service your business is offering.
3. The Location
The location of your business can play a decisive role in its success or failure. Your location should be built around your customers, it should be accessible and it should provide a sense of security. Consider these questions when addressing this section of your business plan:
- What are your location needs?
- What kind of space will you need?
- Why is the area desirable? the building desirable?
- Is it easily accessible? Is public transportation available? Is street lighting adequate?
- Are market shifts or demographic shifts occurring?
It may be a good idea to make a checklist of questions you identify when developing your business plan. Categorize your questions and, as you answer each question, remove it from your list.
2. Marketing and Sales
Marketing plays a vital role in successful business ventures. How well you market you business, along with a few other considerations, will ultimately determine your degree of success or failure. The key element of a successful marketing plan is to know your customers-their likes, dislikes, expectations. By identifying these factors, you can develop a marketing strategy that will allow you to arouse and fulfill their needs.
Identify your customers by their age, sex, income/educational level and residence. At first, target only those customers who are more likely to purchase your product or service. As your customer base expands, you may need to consider modifying the marketing plan to include other customers.
Develop a marketing plan for your business by answering these questions. (Potential franchise owners will have to use the marketing strategy the franchisor has developed.) Your marketing plan should be included in your business plan and contain answers to the questions outlined below.
- Who are your customers? Define your target market(s).
- Are your markets growing? steady? declining?
- Is your market share growing? steady? declining?
- If a franchise, how is your market segmented?
- Are your markets large enough to expand?
- How will you attract, hold, increase your market share? If a franchise, will the franchisor provide assistance in this area? Based on the franchisor's strategy? How will you promote your sales?
- What pricing strategy have you devised?
1. Competition
Competition is a way of life. We compete for jobs, promotions, scholarships to institutes of higher learning, in sports-and in almost every aspect of your lives. Nations compete for the consumer in the global marketplace as do individual business owners. Advances in technology can send the profit margins of a successful business into a tailspin causing them to plummet overnight or within a few hours. When considering these and other factors, we can conclude that business is a highly competitive, volatile arena. Because of this volatility and competitiveness, it is important to know your competitors.
Questions like these can help you:
- Who are your five nearest direct competitors?
- Who are your indirect competitors?
- How are their businesses: steady? increasing? decreasing?
- What have you learned from their operations? from their advertising?
- What are their strengths and weaknesses?
- How does their product or service differ from yours?
Start a file on each of your competitors. Keep manila envelopes of their advertising and promotional materials and their pricing strategy techniques. Review these files periodically, determining when and how often they advertise, sponsor promotions and offer sales. Study the copy used in the advertising and promotional materials, and their sales strategy. For example, is their copy short? descriptive? catchy? or how much do they reduce prices for sales? Using this technique can help you to understand your competitors better and how they operate their businesses.
2. Pricing and Sales
Your pricing strategy is another marketing technique you can use to improve your overall competitiveness. Get a feel for the pricing strategy your competitors are using. That way you can determine if your prices are in line with competitors in your market area and if they are in line with industry averages.
Some of the pricing strategies are:
- retail cost and pricing
- competitive position
- pricing below competition
- pricing above competition
- price lining
- multiple pricing
- service costs and pricing (for service businesses only)
- service components
- material costs
- labor costs
- overhead costs
The key to success is to have a well-planned strategy, to establish your policies and to constantly monitor prices and operating costs to ensure profits. Even in a franchise where the franchisor provides operational procedures and materials, it is a good policy to keep abreast of the changes in the marketplace because these changes can affect your competitiveness and profit margins.
3. Advertising and Public Relations
How you advertise and promote your goods and services may make or break your business. Having a good product or service and not advertising and promoting it is like not having a business at all. Many business owners operate under the mistaken concept that the business will promote itself, and channel money that should be used for advertising and promotions to other areas of the business. Advertising and promotions, however, are the life line of a business and should be treated as such.
Devise a plan that uses advertising and networking as a means to promote your business. Develop short, descriptive copy (text material) that clearly identifies your goods or services, its location and price. Use catchy phrases to arouse the interest of your readers, listeners or viewers. In the case of a franchise, the franchisor will provide advertising and promotional materials as part of the franchise package, you may need approval to use any materials that you and your staff develop. Whether or not this is the case, as a courtesy, allow the franchisor the opportunity to review, comment on and, if required, approve these materials before using them. Make sure the advertisements you create are consistent with the image the franchisor is trying to project. Remember the more care and attention you devote to your marketing program, the more successful your business will be.
A more detailed explanation of the marketing plan and how to develop an effective marketing program is provided in the SBA Workshop on Marketing. See Training Module 3 - Marketing Your Business for Success.
3. Management
Managing a business requires more than just the desire to be your own boss. It demands dedication, persistence, the ability to make decisions and the ability to manage both employees and finances. Your management plan, along with your marketing and financial management plans, sets the foundation for and facilitates the success of your business.
Like plants and equipment, people are resources - they are the most valuable asset a business has. You will soon discover that employees and staff will play an important role in the total operation of your business. Consequently, it's imperative that you know what skills you possess and those you lack since you will have to hire personnel to supply the skills that you lack. Additionally, it is imperative that you know how to manage and treat your employees. Make them a part of the team. Keep them informed of, and get their feedback regarding, changes. Employees oftentimes have excellent ideas that can lead to new market areas, innovations to existing products or services or new product lines or services which can improve your overall competitiveness.
Your management plan should answer questions such as:
- How does your background/business experience help you in this business?
- What are your weaknesses and how can you compensate for them?
- Who will be on the management team?
- What are their strengths/weaknesses?
- What are their duties?
- Are these duties clearly defined?
- If a franchise, what type of assistance can you expect from the franchisor?
- Will this assistance be ongoing?
- What are your current personnel needs?
- What are your plans for hiring and training personnel?
- What salaries, benefits, vacations, holidays will you offer? If a franchise, are these issues covered in the management package the franchisor will provide?
- What benefits, if any, can you afford at this point?
If a franchise, the operating procedures, manuals and materials devised by the franchisor should be included in this section of the business plan. Study these documents carefully when writing your business plan, and be sure to incorporate this material. The franchisor should assist you with managing your franchise. Take advantage of their expertise and develop a management plan that will ensure the success for your franchise and satisfy the needs and expectations of employees, as well as the franchisor.
4. Financial
Sound financial management is one of the best ways for your business to remain profitable and solvent. How well you manage the finances of your business is the cornerstone of every successful business venture. Each year thousands of potentially successful businesses fail because of poor financial management. As a business owner, you will need to identify and implement policies that will lead to and ensure that you will meet your financial obligations.
To effectively manage your finances, plan a sound, realistic budget by determining the actual amount of money needed to open your business (start-up costs) and the amount needed to keep it open (operating costs). The first step to building a sound financial plan is to devise a start-up budget. Your start-up budget will usually include such one-time-only costs as major equipment, utility deposits, down payments, etc.
The start-up budget should allow for these expenses.
Start-up Budget
- personnel (costs prior to opening)
- legal/professional fees
- occupancy
- licenses/permits
- equipment
- insurance
- supplies
- advertising/promotions
- salaries/wages
- accounting
- income
- utilities
- payroll expenses
An operating budget is prepared when you are actually ready to open for business. The operating budget will reflect your priorities in terms of how your spend your money, the expenses you will incur and how you will meet those expenses (income). Your operating budget also should include money to cover the first three to six months of operation. It should allow for the following expenses.
Operating Budget
- personnel
- insurance
- rent
- depreciation
- loan payments
- advertising/promotions
- legal/accounting
- miscellaneous expenses
- supplies
- payroll expenses
- salaries/wages
- utilities
- dues/subscriptions/fees
- taxes
- repairs/maintenance
The financial section of your business plan should include any loan applications you've filed, a capital equipment and supply list, balance sheet, breakeven analysis, pro-forma income projections (profit and loss statement) and pro-forma cash flow. The income statement and cash flow projections should include a three-year summary, detail by month for the first year, and detail by quarter for the second and third years.
The accounting system and the inventory control system that you will be using is generally addressed in this section of the business plan also. If a franchise, the franchisor may stipulate in the franchise contract the type of accounting and inventory systems you may use. If this is the case, he or she should have a system already intact and you will be required to adopt this system. Whether you develop the accounting and inventory systems yourself, have an outside financial advisor develop the systems or the franchisor provides these systems, you will need to acquire a thorough understanding of each segment and how it operates. Your financial advisor can assist you in developing this section of your business plan.
The following questions should help you determine
the amount of start-up capital you will need to purchase and open
a franchise.
- How much money do you have?
- How much money will you need to purchase the franchise?
- How much money will you need for start-up?
- How much money will you need to stay in business?
Other questions that you will need to consider are:
- What type of accounting system will your use? Is it a single entry or dual entry system?
- What will your sales goals and profit goals for the coming year be? If a franchise, will the franchisor set your sales and profit goals? Or, will he or she expect you to reach and retain a certain sales level and profit margin?
- What financial projections will you need to include in your business plan?
- What kind of inventory control system will you use?
Your plan should include an explanation of all projections. Unless you are thoroughly familiar with financial statements, get help in preparing your cash flow and income statements and your balance sheet. Your aim is not to become a financial wizard, but to understand the financial tools well enough to gain their benefits. Your accountant or financial advisor can help you accomplish this goal.
Information Resources
U.S. Small Business Administration (SBA)
The SBA offers an extensive selection of information on most business management topics, from how to start a business to exporting your products. This information is listed in "Resource Directory for Small Business Management." For a free copy contact your nearest SBA office.
SBA has offices throughout the country. Consult the U.S. Government section in your telephone directory for the office nearest you. SBA offers a number of programs and services, including training and educational programs, counseling services, financial programs and contract assistance. Ask about:
Service Corps of Retired Executives (SCORE), a national organization sponsored by SBA of over 13,000 volunteer business executives who provide free counseling, workshops and seminars to prospective and existing small business people. Small Business Development Centers (SBDCs), sponsored by the SBA in partnership with state and local governments, the educational community and the private sector. They provide assistance, counseling and training to prospective and existing business people. Business Information Centers (BICs), offering state-of-the-art technology, informational resources and on-site counseling for start-up and expanding businesses to create business, marketing and other plans, do research, and receive expert training and assistance.
For more information about SBA business development programs and services, call the SBA Small Business Answer Desk at 1-800-U-ASK-SBA (827-5722).
Other U.S. Government Resources
Many publications on business management and other related topics are available from the Government Printing Office (GPO). GPO bookstores are located in 24 major cities and listed in the Yellow Pages under the "bookstore" heading. You can request a "Subject Bibliography" by writing to Government Printing Office, Superintendent of Documents, Washington, DC 20402-9328.
Many federal agencies offer publications of interest to small businesses. There is a nominal fee for some, but most are free. Below is a selected list of government agencies that provide publications and other services targeted to small businesses. To get their publications, contact the regional offices listed in the telephone directory or write to the addresses below:
Consumer Information Center (CIC). P.O. Box 100, Pueblo, CO 81002. The CIC offers a consumer information catalog of federal publications. Consumer Product Safety Commission (CPSC). Publications Request, Washington, DC 20207. The CPSC offers guidelines for product safety requirements. U.S. Department of Agriculture (USDA). 12th Street and Independence Avenue, SW, Washington, DC 20250. The USDA offers publications on selling to the USDA. Publications and programs on entrepreneurship are also available through county extension offices nationwide. U.S. Department of Commerce (DOC). Office of Business Liaison, 14th Street and Constitution Avenue, NW, Room 5898C, Washington, DC 20230. DOC's Business Assistance Center provides listings of business opportunities available in the federal government. This service also will refer businesses to different programs and services in the DOC and other federal agencies. U.S. Department of Health and Human Services (HHS) - Public Health Service. Alcohol, Drug Abuse and Mental Health Administration, 5600 Fishers Lane, Rockville, MD 20857. Drug Free Workplace Helpline: 1-800-843-4971. Provides information on Employee Assistance Programs. National Institute for Drug Abuse Hotline: 1-800-662-4357. Provides information on preventing substance abuse in the workplace. The National Clearinghouse for Alcohol and Drug Information: 1-800-729-6686 toll-free. Provides pamphlets and resource materials on substance abuse. U.S. Department of Labor (DOL). Employment Standards Administration, 200 Constitution Avenue, NW, Washington, DC 20210. The DOL offers publications on compliance with labor laws. U.S. Department of Treasury - Internal Revenue Service (IRS). P.O. Box 25866, Richmond, VA 23260, 1-800-424-3676. The IRS offers information on tax requirements for small businesses. U.S. Environmental Protection Agency (EPA). Small Business Ombudsman, Crystal Mall - No.2, Room 1102, 1921 Jefferson Davis Highway, Arlington, VA 22202, 1-800-368-5888 except in DC and VA, 703-557-1938 in DC and VA. The EPA offers more than 100 publications designed to help small businesses understand how they can comply with EPA regulations. U.S. Food and Drug Administration (FDA) - FDA Center for Food Safety and Applied Nutrition, 200 C Street, SW, Washington, DC 20204. The FDA offers information on packaging and labeling requirements for food and food-related products.
For More Information
A librarian can help you locate the specific information you need in reference books. Most libraries have a variety of directories, indexes and encyclopedias that cover many business topics. They also have other resources, such as:
Trade association information. Ask the librarian to show you a directory of trade associations. Associations provide a valuable network of resources to their members through publications and services such as newsletters, conferences and seminars. Books. Many guidebooks, textbooks and manuals on small business are published annually. To find the names of books not in your local library check Books In Prints, a directory of books currently available from publishers. Magazine and newspaper articles. Business and professional magazines provide information that is more current than that found in books and textbooks. There are a number of indexes to help you find specific articles in periodicals.
In addition to books and magazines, many libraries offer free workshops, lend skill-building tapes and have catalogues and brochures describing continuing education opportunities.
Last Modified: 1997/09/01 by the US Small Business Adminstration (SBA)
Updated: 2002/09/14 by Nafta Technology Trading Inc.
|
