Tuesday, December 29, 2009

What's in a plan?

So what should be included in a business plan?  Do I really need one?  That's a lot of work just for a thick report that I won't ever look at again.

Sound familiar?  Some of these issues were addressed in a previous entry.  The do I really need a business plan type questions were addressed in the December 9th post "DO I REALLY NEED A BUSINESS PLAN?".  The question of what should be included in a business plan is one I get asked frequently.  So frequently, that I have posted a Sample Business Plan Table of Contents on the resources page of my main site.  Each business and the environment in which it operates is different from most every other business.  My Sample Business Plan Table of Contents is merely a suggested starting point.  Use this list and add to or subtract from it to make it appropriate for your business.

You can download my complete sample above or by going to the resources & links page of the web site.  Here are the major topics that should be covered in most every business plan.

Executive Summary
Industry & Markets
Marketing Plan
Financial Plans

The Executive Summary should be a one-page summary of your entire plan.  It should include a summary of need, that is how much money do you need to borrow or want from an investor, how you will repay the money and what it will be used for.  You should also discuss the overview of your business and a brief summary of your marketing plan.

In the Organization section, you should describe your company from a physical, technological and intellectual standpoint.  Who are the main players, what are their qualifications, what are your professional associations, how will you handle accounting and business records and so forth.

The Industry & Markets section is one of the most important.  In this area you will discuss your industry, trends and special rules and laws that apply to your industry.  Then in more detail, you'll discuss your particular market segment within the industry.  Describe each of your competitors and what they do well and not so well.  Then identify your customers being as specific as possible.  The more specific you can be about your customers likes, dislikes, locations and so forth, the better able you'll be to provide the exact product that they need the way in which they want it.  Finally, you'll need to describe your company in strategic terms.  A SWOT analysis (Strengths, Weaknesses, Opportunities and Threats) is a good method of categorizing your firm and identifying, well, strengths, weaknesses, opportunities and threats.

The Marketing Plan describes how you will promote your product or service, how it will be priced and how you'll get the product to market.  An important part of the marketing plan is a means for measuring your success.  If you don't have an objective and a means to measure whether or not you've achieved success, how will you know i you got there?  Before you begin is the time to do this.

The final section of the plan is the Financial Plan.  In this section you'll identify your financial goals and objectives and describe the assumptions that drive your financial statements.  Historical and at least three years of pro forma statements are the general rule.  You should include an income statement, cash flow report, balance sheet, sales projections, start-up expenses, capital investments and so forth in this section.

The Addenda section is a catch-all section for additional supporting documents required by the reader of the plan.  The contents of the addenda will be driven by the banker, investor or other reader. 

The business plan can be a complicated and detailed document.  But don't let that stop you.  Pick a format and attack the process one section at a time.  I start with the sections that I know off the top of my head and work into the sections that will require research.  I generally put together a preliminary income statement and cash flow report and modify the assumptions and projections as I do my research.  Be careful not to modify your financial projections arbitrarily.  Be conservative, that is, assume you'll sell less that you hope to sell and assume your costs will be higher than you think they will.  It's always better to beat your projections than be surprised by how much it really costs to operate a business.

If you need help putting together your business plan or creating the financial statements to reflect your assumptions, give us a call and we'll see if it makes sense for us to work together.

Wednesday, December 9, 2009

Do I really need a business plan?

I get asked this question frequently.  At networking events, seminars and classes, coaching sessions.  New and prospective business owners want to shorten the process from great idea to opening the doors.  I can't blame them for wanting to get on with it.  You have what you think is an awesome idea and you're ready to take on the world with it, and right now.  I get it.

The dialogue goes something like this:

Client: "Do I really need a business plan?"

Me: "YES"  

Client: "But I'm not getting a bank loan, why do I need a business plan?"  

Me: "Oh, so you don't mind if your business fails?"

Client:  "Huh?  How does a giant report keep me from going out of business?"

Me:  "It doesn't.  One has nothing to do with the other."

Client: "Then why do I need a business plan?"

Me: "So you won't go out of business."

Client: "Huh?"

Partially I'm exaggerating to make a point and partially it really does go exactly like that.  The question the client is really asking me is do they need a fancy business plan DOCUMENT.  The answer of course is, it all depends.  But before we get to that, let's answer the unasked question first.

Every business needs a business plan.  Period.  Especially a new business.  How do you know exactly what product the market needs and how to market that product, the best distribution channels and pricing?  How do you know if you have enough start-up capital to endure the lean beginning months?  I think most people understand that the process of business planning, thinking through the issues from how to organize your company, to understanding the markets and competitors and customers and the strengths and weaknesses of your company is key to insuring the success of your new venture.  And generally speaking, even the client asking the silly question really understands that most of the time.  What they really want to know is, do I need a fancy document?

Let me expand on "it depends".  First you need to define the purpose of the document.  Is it for your banker or investment partner whom your asking for money?  Is it for your insurance company trying to get you product liability or other insurance coverage?  Is it for your management team to track the start-up progress?  Maybe you'll use the document as a recruiting tool for new employees or a communications tool for existing employees.

I generally recommend one of three options depending on the situation:

Formal Business Plan - This is the biggest and fanciest plan.  It should leave nothing out and give extraordinary details and have complete financial analysis and pro forma statements and a full range of addenda.  This plan is for bankers, investors, insurance companies and so forth.

Informal Business Plan - This document is typically used for your internal purposes.  Your management team will want to use this version of your plan.  You won't need all the details about the company and resumes of principals, I assume everyone knows this stuff already.  The informal plan will have details on industry and markets, competition and customers, your company and its products.  The financial statements will likely not be far out projections, but rather this years budget.  Addenda items are likely not needed either.

Summary Business Plan - This document is for outside, non-confidential viewing.  A summary business plan document can be used as a communication tool for your employees or used for recruitment of new employees.  You can use this version of the plan for general communication purposes and possibly new releases.  It will be only a summary of your plan, more of an expanded executive summary rather than a plan document.  This version should be a summary only and not contain any confidential information and only limited summary financial plans.  Financial information should be more in the form of general company goals and ranges of revenues rather than specific numbers.

Of course, there are as many different business plan document types as there are situations for using them.  Use common sense and the needs of the audience to craft a document that fits the situation.

Thursday, December 3, 2009

Starting a Business 101

Blue Point Strategies has announced the next offering in its business education series, START A BUSINESS 101 class.  The class will include a five night classroom instruction session plus a one-on-one coaching session to get your business started on the right footing.  If you're interested in starting a business and just aren't sure if starting a business is right for you or you don't know where to begin, this is the class for you. 

The class will begin on February 8, 2010 and will run for five weeks on Monday evenings from 5:30 PM until 7:30 PM.  The class will take place at the APEX Business Center at 600 Boulevard South, Suite 104, Huntsville, AL 35802.

The class schedule includes:

Feb 8th:  Thinking About entrepreneurship
Feb 15th:  Understanding Your Market
Feb 22nd:  The Marketing Plan
Mar 1st:  Business Financials
Mar 8th:  Business Plans & Performance Measures

The final session is a one-on-one coaching session with the instructor,Chris Gattis.  In this session, Chris will review your business plan and financial statements and help put the finishing touches on your plan and get you ready to start your business.  If you're still in the thinking stage, he'll help you fine tune your strategy plan and clarify your options.

The cost of the class is $299 and includes a Knowledge Binder with CD that includes the MS Word and Excel templates that help create a business plan and financial statements. 

Start your new year off right by getting the education that you need to start and succeed in a new business.  Sign up today.

For more information and directions to the APEX Business Center, download the pdf flyer of class information.  To register for the class, call Chris Gattis at (256) 425-8787 or email atclass@BluePointStrategies.com or signup on the web page

Payment for the class can be made by check or credit card.  Seating in the class is limited, so sign up today.