(DOWNLOADABLE/EDITABLE WEB VERSION)
Copyright © 2008 Ronin Software
APPENDIX B: CREATING A BUSINESS PLAN
"If you don't inherit it, you have to borrow it."
-- Motto of a junk bond financier, quoted in
Liar's Poker, by Michael Lewis
Why Have a Business Plan?
Suggestion: Take the time to read Section 1 and
Section 2 below, to get an overview and perspective, before
you attempt to start creating your business plan, in Section
3, which is a broad outline. Since using this template
will require you to do a lot of writing, to create your
business plan, we suggest you stop now and copy this entire
file or import it into a good word processor, such as
Microsoft Word, WordPerfect, or whatever other word
processor you will use to create a professional-looking
business plan document.
STOP NOW to turn this business plan outline or worksheet
into a word processing file and save it to disk under a
different file name before you proceed, unless you have
already done so....
...
.... Good. Now that you are reading this in your word
processor program, we suggest you go ahead and read Sections
1 and 2 of this outline. (Sections 3 through 16 contain the
actual outline you will flesh out.)
At some point, before you print out the completed business
plan with your word processor or desktop publishing software
program, you will want to delete the comments and other
instructional portions of this file that are enclosed in
brackets, such as this paragraph, and you will also want
to delete all of Sections 1 and 2 of this outline, which
are for your guidance only. In addition, each separate
section of this business plan guide is followed by a "Help
Notes" section that you will also want to delete from
the document file before the business plan document is
finalized and ready to print out.
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SECTION 1: Why Have a Business Plan?
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In practice, most business plans are created, not when
companies need them, but when the owners begin to realize
that they are running out of money and will need to borrow
or raise funds through a sale of stock. That is usually
the wrong time, and is often too late to be of much
benefit. As has often been said, "A business owner who
fails to plan, plans to fail."
That doesn't mean you can't succeed in business without a
written business plan -- There are many, many large and
successful businesses that got started on an informal
basis with the only business plan being a set of strongly
held convictions and good ideas in the head of the founder,
with the only written plans being a few numbers scribbled
on a napkin. But creating a business plan can definitely
help you improve your odds of success, if you are willing
to make the additional effort that is required to create
a well thought out business plan.
By treating a business plan as a necessary evil, and as
a document that is merely another tool in the quest for
financing, you will be overlooking the most important
single user of a well-written and thoroughly researched
business plan: yourself. There can be enormous benefits
from going through the intellectually rigorous exercise of
creating a business plan before you start a business, or
even after it is in operation, to help you make needed
course corrections. You may even want to consider your
company's business plan as an ongoing set of blueprints
or an operating manual for your business, showing where
it has come from, how it works, what its goals are, and a
compass to keep you focused on where it is going, at any
given point in time -- a "living document" that is updated
regularly as conditions change and as goals are either met
or not met, or are revised, expanded, or abandoned.
This business plan worksheet is designed to help you through
the creative process of developing a business plan. We will
NOT write the business plan for you, and will not give you a
boilerplate document in which you merely fill in a few blanks
and then print out your business plan after an hour's work
and give it to your friendly banker.
Sorry, but doing a useful business plan is not that simple.
While there are business plan software products that attempt
to do the foregoing, and consultants who will help you write
(i.e, "ghost write") a plan for a fee, lenders and venture
capitalists who read or review hundreds of business plans a
year will tell you they have learned to easily spot "canned"
business plans that have been generated by a computer or by
an outsider (often using such "canned" business plan software
themselves), with little reflection, insight, or input by the
owners who will have to make the business go.
Needless to say, bankers and prospective investors are not
overly impressed by such mass-produced business plans, even
if they are expensively printed and contain glossy pictures
and reams of text and data.
So, if you use this worksheet, YOU are going to write this
business plan, not the computer. However, we will coach
you every step of the way, and will suggest numerous
resources and approaches you may want to use or consider.
(Wherever you are in this worksheet and outline, just
go to the "Help Notes" at the end of each section at any
time, for more detailed advice and suggestions on how to
go about developing the particular section you are working
on at that moment.)
Only you are likely to understand your business well enough
to pull together a plan that shows that:
. You know the market;
. You have a product or service that will sell; and
. You know how to deliver it at a price that earns a
rate of return on investment that is attractive enough
to make the business worth going into and,
incidentally, worth lending to or investing in, from
the viewpoint of an outsider, if you are seeking
outside financing.
Even if you never intend to go for outside financing,
going through the process of creating a detailed business
plan can awaken you to the fact that a proposed business
idea may not have any better chance of succeeding than
a snowball in a hot place.... In which case, you may
save yourself a great deal of time, money, energy and
disappointment by doing your homework BEFORE you start
the business, or get too deeply into it, rather than
after.
In the past, the rule of thumb for business plans seems
to have been to have a hefty document of 40 to 50 pages
in length, with an "executive summary" of about 3 pages.
Unfortunately, most such business plans have tended to
go directly into landfills, rather than being read. The
current trend reported, among those with expertise in doing
business plans, is to aim for a very short, condensed, and
well-reasoned document, often between 8 and 12 pages in
length, which IS likely to be read, if it makes a compelling
case for why the business will succeed and pay back its
lenders and investors within a short time frame. At today's
hectic business pace, most lenders simply don't have time to
linger over a novel-length business plan document, when they
have a stack of business plans to consider.
We leave it up to you as to how long a document you want
to create. We have included a very exhaustive list of
areas you may want to cover in a business plan, so if you
take all our suggestions you may have a fairly lengthy
document, though certain parts of this outline will clearly
not be applicable to your particular business.
However, keep in mind the foregoing, that most of your
intended audience will be more favorably impressed with a
concise, crisp business plan than a lengthy one that throws
in massive amounts of detail. At the same time, if there
are key issues you need to deal with, don't leave them out
just for the sake of brevity. But feel free, if you get
the sense the document is going to be too lengthy, to
shorten your discussion of any given subject by leaving
out some of the items we have suggested, if you feel can
do so without weakening your presentation.
Of course, you may also decide you don't need a business
plan at all, or at least not until you need financing
somewhere down the road. That is your choice, but we would
urge you to keep a few things in mind when you decide on
whether or not to create a business plan at a very early
or preliminary stage in your business:
. By going through this undeniably laborious process of
creating a business plan, you will be exercising the
kind of self-disciplined approach that is often
useful in selecting a potentially profitable business
and then actually make it go. You will also gain more
of an understanding of the market environment in which
you must operate, plus a grasp of the kind of financial
numbers that your enterprise will need to be able to
generate if it is to succeed. This can either give you
the confidence you need to go ahead, or can disclose
the danger signs that tell you that the business you
are considering is unlikely to succeed, before you make
a major commitment of time, energy, and financial
resources.
. In any type of potentially profitable business, you
are likely to be up against energetic and sometimes
sophisticated competitors, some of whom will have done
their own detailed business planning. If you don't
similarly do some careful planning and analysis, they
are likely to have an edge on you.
. On the other hand, many of your competitors may not
have done business plans, and may be simply "flying
by the seat of their pants," reacting to events on a
day-to-day basis, with no overall strategic plans. If
you have done your homework by thoroughly researching,
writing, and documenting your business plan, you will
have a definite edge on less organized competitors.
In today's extremely competitive marketplace, you
need every edge you can get.
. Finally, if you have a good, well-written business
plan, and keep it relatively up to date, you should
know well in advance when you will need to begin to
seek financing, and it will be useful in helping you
to obtain such financing.
Six months or more before you start your business may
be a much better time to devote yourself to creating a
business plan, which may take 50 to 150 or more hours
to research, write and document. Once you are in
business and working long hours to keep the business
afloat, meet your payroll, put out fires, and keep
creditors at bay and customers happy, it may be much
harder to find the free time to do your research and
writing of the business plan, once you realize you need
it to get financing. If you already have written a
plan before you start a business, you will undoubtedly
need to make some changes and update it after you have
been operating for a few months or a year or more,
with the advantage of hindsight. However, that will
be a much easier task than starting from scratch with
creating your business plan, at a time when you are up
to your neck in alligators.
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HELP NOTES RE: SEC. 1. WHY HAVE A BUSINESS PLAN?
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OVERVIEW:
---------
HINTS AND GENERAL COMMENTS ON WRITING A BUSINESS PLAN
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GENERAL COMMENT. In most cases, you will have already
decided that this particular business is a "go." The
business plan is usually done mainly to create evidence to
support that decision, and to project cash needs before
you need to go for financing. However, if you are not at
that stage yet, we hope you will at least have read through
Section 1 of the Business Plan Worksheet file, which discusses
a number of reasons why you should consider doing a business
plan for your new or existing business, even if you do not
see any near-term need for financing.
DON'T WORK IN A VACUUM. If you are the person in your
business organization who is preparing the business plan,
don't work alone, if you have business associates. Get
their input at an early stage, as much as possible. And
even if you don't have any partners or other business
associates, seek help while developing your business
plan from someone with business experience, like a SCORE
counselor at your local Small Business Administration
office, or someone at a nearby Small Business Development
Center, which is also there to help small businesses like
yours to get off the ground. At a bare minimum, at least
run your business plan document past some such person,
after you have done the initial draft, before you
release it in final form.
AVOID NAIVE STATEMENTS. In writing your business plan,
try to avoid the temptation of using certain trite or
naive sounding terms, like describing what you do as
"unique." In one sense, of course, every business or
product is unique; but in another sense, almost nothing
is unique. You might want to tout in a business plan that
your cookie company's chocolate chip cookies are made from
a "secret and unique" recipe. Well, maybe. But even
Coca-Cola, which has kept its soft-drink formula more
secret than the Manhattan Project for a century, doesn't
have a totally "unique" product--as any Pepsi drinker, who
may prefer the quite similar taste of the very competitive
Pepsi-Cola, will be quick to point out to you.
Also shy away from using words like "guaranteed profits"
or the like. There is no such thing as a sure thing in the
business world, particularly when it comes to predicting
future profits, and the financial people who will be
reading your business plan are painfully aware of that
fact, more so than most other people. Don't insult their
intelligence by using such terminology.
Similarly, don't ever refer to your projected financial
results as "conservative estimates." Bankers and venture
capitalists tend to be hard-nosed realists. They know
that if you think you can reasonably predict a million
dollar a year profit by Year 3, you are unlikely to do
projections that show only a $200,000 profit in Year 3 and
then label it as a "conservative estimate." The cynics
know the writer of such a business plan is more likely to
project $1.5 or $2 million profits by year three in that
case, and call THAT number a "conservative estimate" of
profit levels that can support a $10 million loan they are
seeking.
In short, remember who you audience is when you write a
business plan, if you are going to use it seek financing.
In most cases, people who make decisions to lend to or
invest in a small business are pretty sophisticated -- they
are not the proverbial "widows and orphans" who are likely
to be impressed by razzle-dazzle claims on your part.
In fact, by actually being somewhat understated in tone,
but making your case clearly and simply, you may succeed
in leaving the sophisticated financial person who reads
it with the impression that your projections really are
"conservative estimates," and that there's a good chance
that your profits and cash flow could actually be far
better than you are suggesting. But you aren't likely
to get that kind of reaction by trying to beat the reader
over the head with such self-serving language. In other
words, "walk the walk" and you won't need to "talk
the talk," in trying to convince lenders or potential
investors that they have discovered a possible diamond
in the rough, one that may even be a better investment
than you, the owner, may realize.
HAVE AN EXIT STRATEGY. Even if seeking equity investments,
you need to be able to lay out a plausible "exit strategy,"
since everyone, including equity investors, wants to know
how they'll get their money out. This, of course, means
profits and cash flow will have to be adequate to cash out
equity partners within a reasonable time frame.
COMMON SENSE APPROACH. Writing a business plan is a highly
creative process and your business plan should reflect
common sense and original thinking on your part, not just
an ability to use a cookie-cutter book or software program
to grind out a boilerplate document, "by the numbers." The
lenders or investors are considering whether they want to
commit their money into your enterprise are looking for
someone who has good business sense, not just someone who
is technically competent at using business plan software or
copying business plan forms from a book on the subject.
Sound reasoning, plus a clear explanation of how and why
your business is likely to succeed, are the features most
likely to impress the people you need to impress.
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END HELP NOTES FOR SECTION 1 (ERASE ALL OF SECTION 1
BEFORE PRINTING OUT BUSINESS PLAN DOCUMENT)
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SECTION 2: Key Elements of a Business Plan
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The key elements your business plan should contain, in
recommended order of their presentation, are as follows.
Note that while the Executive Summary is one of the first
items presented in most business plans, it should actually
be the last part you write, after you have created the
rest of the business plan and carefully honed your message.
Also, the last item shown, Monitoring the Results, will
not be part of the physical business plan document, but is
instead your ongoing follow up analysis of how your business
plan is working, if you choose to actually keep your
business plan updated as a management tool that can greatly
help in keep your company focused on its goals.
Go to the "HELP NOTES" following this section now for a
brief description of what each of the following elements
consists of, if you are unclear on what any element
comprises.
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| COVER PAGE AND |
| CONTENTS SECTION|
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|
|
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|EXECUTIVE SUMMARY|
|(INCLUDES MISSION|
| STATEMENT) |
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|
|
-----------------
| ABOUT THE |
| COMPANY |
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|
|
-----------------
| ABOUT THE |
| PRODUCT/SERVICE |
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|
|
-----------------------------------------
| |
| |
----------------- -----------------
| MARKET ANALYSIS | |INDUSTRY ANALYSIS|
| (DEMAND) | | (SUPPLY) |
----------------- -----------------
| |
| |
| -----------------
| | THE |
| | COMPETITION |
| -----------------
| |
-----------------------------------------
|
|
-----------------
| SALES AND |
| MARKETING |
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|
|
-----------------
| OPERATIONS |
| AND PRODUCTION |
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|
|
-----------------
| MANAGEMENT |
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|
|
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| FINANCIAL |
| PROJECTIONS |
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|
|
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| APPENDIX |
| (OPTIONAL) |
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|
|
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| MONITORING |
| YOUR RESULTS |
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HELP NOTES RE: SEC. 2. KEY ELEMENTS OF A BUSINESS PLAN
----------------------------------------------------------
The contents of each key element of a business plan is
briefly described below. See the more detailed specific
help for each specific element or section. Read the
text for any box below for more details.
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| COVER PAGE AND |
| CONTENTS SECTION |
-------------------
|
|
The cover sheet should contain the name and address of your
company and contact information for the person who will
handle responses from lenders or possible investors. A
table of contents, while not an absolute necessity, should
be included, to help the reader quickly find any particular
part of the business plan quickly. As an optional item,
you may also want to include a Loan Request page immediately
after the cover page or after the Table of Contents.
|
|
-------------------
| EXECUTIVE SUMMARY |
|(INCLUDES MISSION |
| STATEMENT) |
-------------------
|
|
This first segment, the Executive Summary, which is a
short summary of the entire business plan document,
should also encapsulate the "mission statement" or
"statement of objectives" for your company. While the
Executive Summary should be in the first part of your
finished business plan document, it should usually be
the last part of the document to be written, after all
the other pieces are in place.
|
|
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| ABOUT THE |
| COMPANY |
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|
|
Describes your company -- a brief history of when it began,
what type of legal entity you have selected (corporation,
LLC, or other), where you are now, and where you are going.
|
|
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| ABOUT THE |
| PRODUCT/SERVICE |
-----------------
|
|
A detailed description of the product (or service, or both)
that your company sells or will be selling.
|
|
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| |
| |
----------------- -----------------
| MARKET ANALYSIS | |INDUSTRY ANALYSIS|
| (DEMAND) | | (SUPPLY) |
----------------- -----------------
| |
| |
Description and identification Analysis of the industry
of your customers, their within which you operate,
geographic location and the or will be operating.
share of this market you expect |
to be able to capture. |
| |
| -----------------
| | THE |
| | COMPETITION |
| -----------------
| |
| |
| Describe who your competitors
| are, their strengths and
| weaknesses, and what your
| competitive advantages are.
| |
| |
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|
|
|
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| SALES AND |
| MARKETING |
-----------------
|
|
Explain and describe how you will go about marketing your
product (or service), how your product or service will be
positioned, whether you will employ an in-house sales
force and why (or why not). In this segment, also go
through your calculations as to the level of sales your
business will generate, based on your research regarding
market demand, and the amount of the market you expect to
be able to capture with your product and your marketing
program.
|
|
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| OPERATIONS |
| AND PRODUCTION |
-----------------
|
|
Discuss the nuts and bolts of how you will go about
producing your product, explain your production strategies,
and give your analysis of what it will cost to produce the
product. |
|
|
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| MANAGEMENT |
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|
|
Discuss and describe the organizational structure of your
company, who fills, or will fill, the management slots
needed to oversee the rank and file employees, with a brief
resume of each of the key members of your management team.
|
|
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| FINANCIAL |
| PROJECTIONS |
-----------------
|
|
Present your projected financial statements and results
here, including projections of profits and losses, cash
flows, and future balance sheets, which should illustrate
how the company will be able to pay off its loans or cash
out its equity (stock) investors within a reasonable time
frame. |
|
|
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| APPENDIX |
| (OPTIONAL) |
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|
|
If you are going to create a thick document, the Appendix
is a good place to put a lot of information that does not
necessarily need to be incorporated into any of the other
parts of the business plan. You can use this catch-all
segment to include backup data for assertions and statements
made in the main text of the business plan, letters of
recommendation from important people, such as customers,
detailed resumes of your key executives, copies of articles
or excerpts from research reports, significant leases,
contracts, or other legal documents, current financial
statements for your business, and the like. You can also
insert footnote references into the main text and put
the footnotes or supporting data here, in the Appendix.
While not every business plan needs to have an Appendix, it
can make the rest of your business plan document much shorter
and, therefore, more readable, if you put a lot of the detail
in an appendix, rather than trying to work everything into
the main text. |
|
|
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| MONITORING |
| YOUR RESULTS |
-----------------
This last segment is also an optional part of the process
of creating and using a business plan, but it is not a
written part of a business plan you would submit to an
outside party. However, if you are serious about using
the business plan as an ongoing management tool for your
firm, and not just a one-shot document to be used as part
of an effort to obtain financing, you will want to monitor
your results on an ongoing basis. You will be, in effect,
revising the "blueprint" for your business as conditions
change or as results show that your plan is working, not
working, or needs to be modified.
Thus, a regular monitoring and assessment of your results
can be extremely useful to you from both an operational
and a business strategy standpoint.
The remainder of this worksheet file is the actual business
plan worksheet outline. When you are finished, you should
delete everything up to this point in this file. The
business plan document you will fill-in and flesh out
starts in Section 3 below. You should either remove the
section numbers, or renumber the sections, using your own
numbering system, if you choose, in creating the final
document.]
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SECTION 3: Business Plan Outline -- Cover Page
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[SAMPLE COVER PAGE]
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| |
| BUSINESS PLAN FOR: |
| |
| ________________ (Name) |
| |
| ________________ (Address) |
| |
| ________________ |
| |
| |
| E-mail: xxxxxx@xyz.com |
| |
| JULY 200x |
| |
| CONTACT: Joan Smith, President |
| Phone: (212) 555-xxxx |
| E-mail: xxxxxx@xyz.com |
| |
| |
| |
| This business plan contains confidential |
| information that is the property of |
| [NAME]. Reproduction or release of this |
| document is not permissible without the |
| prior written consent of [NAME]. |
| |
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HELP NOTES RE: SEC. 3. BUSINESS PLAN OUTLINE -- COVER PAGE
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COVER PAGE
----------
The cover page is the first thing a prospective lender
to or investor in your company will see, so it should be
professional looking, on good quality paper or company
letterhead, ideally with your company logo displayed.
Keep it simple. The cover page should contain the
following minimum information:
. The name of your business
. The fact that the document inside is a business
plan for your company
. The address of the company
. The name of your contact person, and telephone number
. The date of its release
Other items you may also want to present on the cover page
might include any of the following:
. A brief promotional blurb about your business and
its goals or potential.
. The amount of capital you require (see the sample Loan
Request page included in this business plan worksheet
outline).
. The name of the party to whom the plan is directed,
if you are targeting a single specific lender or
investor for your financing.
. A statement that the information in the business plan
is confidential. (You may want to have a different
cover page for each individual copy you send to
each different person or institution.)
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SECTION 4: Business Plan Outline -- Loan Request Page
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LOAN REQUEST SUMMARY:
[Example, if seeking debt financing]
Borrower: XYZ Corporation
Amount requested: $100,000
Interest rate: 11.25%
Loan fee: 1.5% or $1,500
Type: Term loan
Term of loan: 48 months level
payments amortization
Payments: $2,596.71
Prepayment Option: No penalty for
prepayment at any
time
Corporate collateral: [Specify]
Stockholder guaranty: Yes
Stockholder collateral: [Specify]
Sources of Repayment [Specify]
Use of Funds: [Describe]
Guarantors: [List names, if any]
EQUITY FINANCING REQUEST SUMMARY: [Example, if seeking
--------------------------------- equity financing]
Issuing Corporation: XYZ Corporation
Amount requested: $100,000
Type of security: Convertible
preferred stock
Issue price: $25 per share
Par [or Stated] Value: $25 per share
Dividend rate: 10% of par [or stated]
value
Dividend frequency: Payable quarterly, on
January 1, April 1,
July 1, October 1,
Cumulative dividends: Yes
Convertibility Feature: Convertible at holder's
option at any time, into
5 common shares for each
share of the convertible
preferred stock
Dividend and liquidation
preferences: No distributions in
liquidation may be made
to common shareholders
until par value and any
accrued dividends are
paid on preferred; no
dividends may be paid on
common if preferred
dividends are in arrears
Voting rights None, unless dividends in
arrears for 4 quarters,
then each preferred share
votes as 3 common shares
Redemption: Required to be redeemed
by issuer at par value,
5 years from the date of
issuance, if not called
earlier or converted by
holder
Call provisions: Callable after 2 years
by issuer, at $25 per
share plus all accrued
dividends, upon 30 days'
notice
Sources of Repayment [Specify]
Use of Funds: [Describe]
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HELP NOTES RE: SEC. 4. BUSINESS PLAN OUTLINE --
LOAN REQUEST PAGE
--------------------------------------------------------
Immediately after the cover page, or perhaps as the first
page following the Table of Contents, if you prefer, you
may want to have a Loan Request Page. (Call it an "Equity
Financing Needs" page if you are seeking an equity investor
to provide equity financing, in the form of common or
preferred stock.)
This page might also be inserted at the end of the Financial
Projections segment of the business plan, if you prefer.
However, some people will prefer, as a courtesy, to let the
reader know instantly the amount of funds they are seeking,
since the amount requested may either be too large or too
small for certain institutions to even consider.
We have included a sample outline of a Loan Request Page
in the worksheet, immediately after the cover page, if
you choose to use it.
Alternatively, if you are seeking equity financing, you
might instead have an Equity Financing Request page. While
we have included an example to give you an idea of what
this might look like, DO NOT USE THIS SAMPLE, as you will
definitely need LEGAL ADVICE and assistance from a business
lawyer with corporate and securities law experience. As
a practical matter, if you are seeking equity capital, you
will in many cases be dealing with a venture capital firm
that will tend to dictate the terms of the stock, debt,
or convertible debt that they are willing to acquire from
your company, or equivalent types of interests in an LLC.
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SECTION 5: Business Plan Outline -- Table of Contents Section
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TABLE OF CONTENTS
Page
LOAN REQUEST SUMMARY [Optional]....................... i
EXECUTIVE SUMMARY..................................... 1
THE COMPANY........................................... XX
PRODUCT DESCRIPTION................................... XX
MARKET ANALYSIS....................................... XX
DEMAND.............................................. XX
THE INDUSTRY........................................ XX
THE COMPETITION..................................... XX
SALES AND MARKETING STRATEGY.......................... XX
OPERATIONS AND PRODUCTION............................. XX
MANAGEMENT............................................ XX
FINANCIAL PROJECTIONS................................. XX
APPENDIX.............................................. A-1
FOOTNOTES........................................... A-1
EXECUTIVE RESUMES................................... A-xx
LETTERS OF REFERENCE................................ A-xx
LEGAL DOCUMENTS..................................... A-xx
OTHER............................................... A-xx
---------------------------------------------------------
HELP NOTES RE: SEC. 5. BUSINESS PLAN OUTLINE --
TABLE OF CONTENTS
---------------------------------------------------------
While not absolutely necessary, it is a good idea for
you to include a table of contents in your business plan
document. It will not only make your business plan easier
to read and understand, but failing to include a contents
section may give the reader the impression that you have
not done a very professional job of putting together the
document. Since first impressions are very important, you
want to start off on a good footing, rather than force a
user to page through the entire document to find whichever
portion he or she is most interested in seeing first.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SECTION 6: Business Plan Outline -- Executive Summary
-----------------------------------------------------------
EXECUTIVE SUMMARY.
------------------
[This should be an overview and lead-in to the rest of
the business plan. It should emphasize your competence
in three key areas: marketing, technical capabilities,
and financial management. See the "Help Notes" segment
that follows this Section 6 for ideas and more assistance
in developing this Section 6 of your business plan.]
(1) Description of Your Business or Proposed Business.
[Describe below your product or service, and identify
who you are, and the present situation of your business,
such as startup, new business, or an existing business
with several years (or more) of operating history.]
(2) Mission Statement. [The following template may be
useful to you in formulating you mission statement.]
"To provide [or other active verb, like "create," "offer,"
or the like] ______ [adjectives, like "high quality" or "low
cost"] ________[description of the nature of product or
service], ______ which ______ [describe the benefits to
customers derived from using your products or services] ___.
____________________________________________________
____________________________________________________
____________________________________________________
[Use the following workpaper, which you can delete after
you are finished, to refine the concepts you want to
express in your short, preferably one-sentence Mission
Statement or Statement of Objectives. Read the "Help
Notes" following this Section 6 now for "coaching" advice
that will help you to create your Mission Statement,
which will appear above.]
-----------------------------------------------
| |
| MISSION STATEMENT WORKPAPER: |
| |
| 1. What does your business do? That is, |
| list below the products or services that |
| you will provide: |
| |
| --[Left-handed monkey wrenches, sky---- |
| ---hooks, hubcap gaskets and muffler--- |
| ---bearings, for example]-------------- |
| --------------------------------------- |
| --------------------------------------- |
| |
| 2. What are the main features of your |
| product or service that make it |
| different from the rest? |
| |
| --------------------------------------- |
| --------------------------------------- |
| --------------------------------------- |
| |
| 3. What are the key benefits to the consumer |
| or user of your product? |
| |
| ---------------------------------------- |
| --------------------------------------- |
| --------------------------------------- |
| |
| 4. Now, try writing your Mission Statement |
| or Statement of Objectives, in the |
| one-sentence format we showed you above, |
| using the facts you've identified in this |
| workpaper. |
| |
| --------------------------------------- |
| --------------------------------------- |
| --------------------------------------- |
-----------------------------------------------
(3) Business Model or Marketing Strategy.
[Provide a brief description of the market segment you will
be trying to reach. Then outline the channel(s) you will
use to reach this market, such as direct mail, retail, or
wholesale distributors. Explain the key points or factors
in your strategy that you believe will give your business
the edge or advantage that makes it successful.]
____________________________________________________
____________________________________________________
(4) Physical Needs of the Business.
[Describe in summary form the physical facilities and
other resources your business will need to acquire to
be able to achieve its goals. These will include both
tangible assets such as land, buildings, equipment,
vehicles, and inventories, as well as intangible needs,
such as working capital to finance inventories and
receivables, contracts, licenses, franchises, or any
intellectual property rights you will need to obtain,
such as patents or copyrights.]
____________________________________________________
____________________________________________________
(5) Projected Financial Performance.
[State the estimated dollar amount of sales and net
profits that you project for each of the first 3 to 5
years of operations, then set forth the amount of starting
capital you will need. Where cash flow is negative (as is
usual) in the first few years, it may be helpful to show
your net cash "exposure" or cumulative negative cash flow
for each month or quarter, to show that your initial
starting capital will be more than sufficient to cover
such maximum exposure. Or, if your cash resources will
not be sufficient at some point in time, you will have
to make a good case for how you will be able to obtain
second-stage financing at that point to carry you through
until you are able to pay off your initial loans or cash
out your initial investors.]
(6) Amount of Financing Requested.
[State the amount of financing your business is seeking to
obtain and, if appropriate, tie it to your summary of the
physical needs of the business and your projected cash flow
exposure described in paragraphs (4) and (5) above.]
____________________________________________________
____________________________________________________
(7) Repayment Timetable. (Or "Exit Strategy)
[Explain how your financial projections above translate in
your ability to repay the loans you are seeking in a timely
and orderly fashion. Or, if you are requesting equity
financing, explain how and when your business will be in a
financial position (in a relatively few years, preferably)
to cash out those equity investors at a large profit to
them.]
____________________________________________________
____________________________________________________
____________________________________________________
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HELP NOTES RE: SEC. 6. BUSINESS PLAN OUTLINE --
EXECUTIVE SUMMARY
--------------------------------------------------------
EXECUTIVE SUMMARY
-----------------
This is usually the most important section of the entire
written business plan. Many prospective lenders or
investors will read this section first, and if you have
not done a sufficient job of making the case for your
business, and why it will succeed and be able to pay off
its debts or cash out its investors at a large profit,
it will probably be the ONLY part of your business plan
that gets read.
Thus, we cannot overemphasize the importance of your
carefully crafting and polishing the wording of the
Executive Summary, as it is the heart of the business
plan.
Remember that, while the executive summary is usually to
be found at the beginning of a business plan document,
it should be the last part that you write, after you
have done all the research, analysis, and creative work
of developing the rest of the plan.
The Executive Summary should ordinarily cover all of the
following subjects:
. A brief description of what your company does, or
proposes to do, and who you are.
. The "Mission Statement" of your company. (Or you
may prefer, as some do, to call it a "Statement of
Objectives.")
. Your business model, or marketing strategy that will
make your particular business succeed in a competitive
marketplace.
. A description of your business's physical needs to
meet its goals, such as land, buildings, machinery,
inventory, working capital, and other assets.
. A brief summary of your financial projections for
the future.
. The amount and form of the financing you are requesting.
. Your repayment timetable for debt financing or your
"exit strategy" for cashing out equity investors.
Each of the above points is discussed in more detail below:
. COMPANY DESCRIPTION. Simply say who you are, what your
company does, and where you intend to take it, in a
few sentences, if possible.
. MISSION STATEMENT, or STATEMENT OF OBJECTIVES. Your
business will deal with a wide range of people,
including customers with widely varying dispositions,
tastes, education, and levels of comprehension, as well
as various suppliers, providers of professional and
business services to your firm, lenders, employees and
potential employees, and, in many cases, investors.
In your dealings with all of these diverse individuals
and interests, it will be useful if your company's
objective, or its "mission," can be communicated to
them in as clear and straightforward a fashion as
possible. To do so, we strongly suggest that you
condense your mission statement down to one sentence,
if possible.
That sentence should:
. describe what your business does, by describing
your product or service;
. define the main (and most importantly, the
distinguishing) features of your product or
service; and
. describe the benefits of your product.
Remember, in creating your Mission Statement (or "Statement
of Objectives") that:
- Your company's mission statement might be a very short
and simple one, like the Boeing Company's avowed goal
of having the lowest cost per seat of any airliner.
- Long, flowery, general statements aren't very useful,
like "We will be all things to all people and create
the best products that money can buy." Be a little
more specific than that. A lot more specific, in fact.
- The mission statement may focus on key features of your
product or service, like the Boeing mission statement
mentioned above. It should also define the benefits
of using your product or service from, the customer's
point of view. For example, if your firm is in the tax
consulting business, your mission might be "to maximize
customers' after-tax income with minimal audit risk
exposure."
- A suggested structure for your mission statement is
a single sentence like the following: "To provide
[or other active verb, like "create," "offer," or the
like] ______ [adjectives, like "high quality" or "low
cost"] ________[description of the nature of product
or service], ______ which ______ [describe the benefits
to customers derived from using your products or
services] ________."
We suggest you now return to the business plan worksheet
and use the short Mission Statement Workpaper we have
provided, to develop the ideas for your Mission Statement.
Then put the statement into words, preferably in a form
similar to that in the preceding paragraph.
(Reminder: Once you are happy with the Mission Statement
you have developed for your company, be sure to delete the
Mission Statement Workpaper from the business plan worksheet
outline.)
- BUSINESS MODEL OR STRATEGY. This is the very crux of
your entire presentation, so make it good, and spend as
much time as necessary to polish and refine it, until you
are satisfied that it says what you want to communicate.
It should explain in summary form the essence of how you
will market and position your product or service, and
what selling advantage you will have that will enable
your business to attain the level of sales that will
make it a financial success. This may be anything from
your invention of a better mousetrap, strong legal or
intangible rights, such as a patent for the ultimate
widget, a highly favorable long-term sales or supplier
contract, or a superior (lower) cost structure that
will allow you to compete successfully on price, or
some other special advantage that your firm will have.
- NEEDS ASSESSMENT. Describe briefly what items your
business will need funding for, in order to carry out
your mission. These would include land, buildings
(rented space or purchased); office fixtures and
equipment, production equipment; working capital
to finance your receivables and raw materials or
finished inventories; executives or individuals with
certain kinds of technical expertise; and other
resources you may need, such as money to acquire
licenses, patents, or trademarks.
- FINANCIAL PROJECTIONS. Summarize the bottom line
projections you have developed in the main part of
the business plan, focusing on the low points, i.e.,
the point when your cash flow "exposure" will be
deepest, and the high point, when your company will
reach a level of high profitability and substantial
cash flow.
- FINANCING NEEDS. Show how the above projections impact
on your need for funds and describe the amount of initial
financing you are requesting. If you have created a
LOAN REQUEST SUMMARY, you may want to keep this to a
minimum description, while referring the reader to the
LOAN REQUEST SUMMARY.
- EXIT STRATEGY AND TIMETABLE. Explain briefly how and
when your cash flow or ability to refinance will make
it possible for you to pay off the initial financing
you are seeking to obtain, whether it be to repay loans
or cash out equity (stock) investors.
Remember, the foregoing is an Executive SUMMARY, so try
to keep it brief, a page or two in length, if you can do
so and still get your message across. All of the points
covered in this summary, except the Mission Statement,
should be covered in greater detail in the remainder of
the business plan document, so do not go into needless
detail in the summary. Just hit the high points, and
state your key facts and arguments that you want most to
impress upon the reader.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SECTION 7: Business Plan Outline -- The Company
-----------------------------------------------------------
A. THE COMPANY.
----------------
[This section should tell the reader about your company.
It will be in part a company profile, showing what
exactly your business does, its history, when the company
was formed, and how it is organized, both in terms of
legal entity and structure and operationally. You should
also include current financial statements (or refer to
them, if included in an Appendix). Also, if the business
is already a going concern, discuss where the business is
going in the future, in its particular business environment.
Read the "Help Notes" segment that follows this Section 7 now
for more detailed instructions on what should be included
in this Section 7.]
(1) Company History. [Briefly and objectively describe
your company's history to date, or, if in the startup stage,
indicate that you have not yet started the business. Even
in that case, you may have done preliminary work, however,
such as developing a patent, writing a software program,
doing technical or market research, or the like, which you
would describe in a short history of your startup company.]
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
(2) Present Situation. [This section describes your
company's current situation, including its financial
condition and capitalization, the size of your workforce,
how well you have managed to meet your previous goals
to date, the existence of important assets, such as
favorable contracts, government licenses, patents, and
such, and potential threats, such as new competitors,
rising costs charged by suppliers, or harmful government
regulations or legislation that may be pending.]
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
(3) Current Financial Statements. [Include here your
most recent financial statements, if yours is a going
concern. Alternatively, instead of including your
financial statements here, in the main text of the
business plan, you may want to instead briefly and
clearly characterize your financial situation -- the
company's size, in terms of assets, sales and net worth,
and its level of profitability, while referring the reader
to a set of your financial statements in the Appendix at
the end of the business plan document.]
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
(4) Company Direction. [Describe where the company
is going, including the existence of any obstacles to
achieving your goals, and how you plan to overcome such
obstacles.]
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
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HELP NOTES RE: SEC. 7 BUSINESS PLAN OUTLINE --
THE COMPANY
--------------------------------------------------------
THE COMPANY
-----------
This section should be a combination of a company profile
and a short history of your business. Without getting into
too much detail about your product or service, or about the
industry you are in (which are both discussed in more detail
in subsequent sections of the business plan), you should
briefly mention what the company makes or does, and give a
general overview of the state of the industry within which
it operates and any economic trends that are particularly
relevant to your business or industry. Some of the types
of items you may want to discuss, where relevant in your
situation, will include the following:
- HISTORY. In showing where the company has been, to date,
give an objective description of when and how the company
was organized, and the type of legal form in which it
operates. Ordinarily, in the United States, this would
be a corporation, limited liability company (LLC), or
partnership or, if no legal entity of any kind has been
established, a sole proprietorship. There are variations
on some of the types of entities, such as S corporations,
limited partnerships, and limited liability partnerships
(LLPs). You may also want to mention how it obtained its
initial startup capital, in the case of an existing firm.
- PRESENT SITUATION. Describe the current status of your
company. If your business is already in existence,
briefly tell how it is capitalized is capitalized, such
as the number of shares of voting common stock, any
preferred stock or hybrid securities such as convertible
debt, and any long-term indebtedness, such as bank loans,
and describe the extent to which the assets of the
business have been pledged or mortgaged as security for
debts, and the amount of any loans personally guaranteed
by the stockholders or other owners of the firm. The
discussion of capitalization will not ordinarily be
relevant in the case of a startup company that has not
yet begun business.
Also list any exclusive licenses or intellectual property
rights the company owns. These may include various
government licenses or permit approvals that may be
important to have (or disclose if you have not yet secured
any such necessary licenses or approvals); intellectual
property rights such as patents or copyrights; and any
valuable private intangible rights that are owned, such
as a McDonald's franchise, or a well-known trademark or
trade name.
This is also an appropriate place to discuss any business
problems that your company is presently facing. For
example, low-cost competition from overseas producers
in a Third World country may be hurting your sales, so
that you may find your business is in a position where
it needs to raise capital in order to acquire expensive
new automated production equipment. Using such modern
equipment might enable you to lower your unit costs of
production, which may actually give you a significant
cost advantage over the labor-intensive foreign
competition, and greatly increase your sales and
profitability, as an example.
- CURRENT FINANCIAL STATEMENTS. For an existing business,
include copies of your most recent financial statements,
including profit and loss statements, cash flow
statements, and balance sheets. (See the explanation of
these terms in the "Help Notes" segment of Section 15
of this business plan appendix if you are not familiar
with what these accounting terms mean.) If you have
financial statements that have been audited, reviewed
or compiled by a CPA firm, they will be more credible,
generally, than financial statements you have prepared
yourself without any verification or other involvement
by an independent accounting firm.
- FUTURE DIRECTION. In this section, you should outline
where the company is going, and specify the outcomes
that are desired with respect to the existing operations
and activities of the business. In effect, this section
should outline your goals, in tangible, measurable terms,
such as describing the percentage of market share you
intend to capture, the level of unit sales, or dollar
sales, or percentage profit margin you wish to obtain.
Your goals could also be to attain certain key financial
ratios, such as a specifically defined high ratio of
current assets to current liabilities, a strong indicator
of good financial health, as compared to industry norms.
You can find industry standard ratios of numerous kinds,
for almost any kind of business, at your local library,
from companies such as Robert Morris and Associates or
Dun & Bradstreet. Or you may be aiming, in a retail
business, to generate a certain annual level of sales
per square foot of retail space. Sales Management and
Marketing Magazine publishes detailed information on
average sales per square foot for a very wide number of
types of retail establishments, to which you can compare
your desired results.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SECTION 8: Business Plan Outline -- Product Description
-----------------------------------------------------------
B. PRODUCT DESCRIPTION.
(1) Description of Product. [Provide a complete technical
description of the product or service to be offered, in
considerable technical detail, including a summary of any
test data if any sort of testing work has been done, or
describe any tests that are currently planned. Also, show
that you are already anticipating the future by outlining
any further refinements or logical next steps for developing
an improved or different product later (or comparable plans
for further innovations in a service business). This is
your chance to show that you really have something that
is a better mousetrap and is also technically feasible.]
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
(2) Key Product Features. [Describe your product's two
or three most important features, which distinguish it
from the competition.]
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
[The following workpaper may be helpful to you in writing
a product description and in analyzing and selecting the
features of your product you want to emphasize above.]
-----------------------------------------------
| |
| PRODUCT (OR SERVICE) FEATURES WORKPAPER: |
| |
| 1. What is your product? Describe the |
| nature of the goods or services that |
| you will provide: |
| |
| --------------------------------------- |
| --------------------------------------- |
| --------------------------------------- |
| --------------------------------------- |
| |
| 2. How is your product classified? That |
| is, is it goods or services? If goods, |
| is it an industrial item or a consumer |
| item? If services, is it a professional |
| service? Is it a service to consumers |
| or a business service? If goods, is it |
| a convenience good, like food, that the |
| consumer purchases frequently and with |
| a minimum of effort? Or is it a durable |
| goods item, like cars or refrigerators, |
| for which consumers may spend considerable|
| effort comparing price and quality of |
| competing products before making their |
| purchase? Or is it a specialty item |
| with a strong brand or name loyalty, |
| for which certain consumers will not |
| be particularly concerned with either |
| convenience or price? (Such as a |
| Harley-Davidson motorcycle, designer |
| clothes, or the like.) |
| --------------------------------------- |
| --------------------------------------- |
| --------------------------------------- |
| |
| 3. What are the product's features? Describe|
| the weaknesses and strengths of your |
| product, and what features distinguish it |
| from other products on the market. Also, |
| discuss any substitute products that may |
| compete with your product. For example, |
| if you sell lumber for housing |
| construction, substitute products that |
| users would likely consider, if the price |
| of lumber becomes too high, would include |
| bricks, stucco, or even steel framing. |
| |
| --------------------------------------- |
| --------------------------------------- |
| --------------------------------------- |
| |
| 4. How is the product or service used by |
| the consumer, and what key benefits does |
| it confer upon the user? |
| |
| --------------------------------------- |
| --------------------------------------- |
| --------------------------------------- |
| |
| 5. Describe any other possible uses of your |
| product. Consumers, being the creative |
| creatures they are, often discover their |
| own uses for products for items that were |
| designed for a wholly different purpose. |
| Discuss here any such alternate uses that |
| you know about, or that you think your |
| product might be put to. |
| |
| --------------------------------------- |
| --------------------------------------- |
| --------------------------------------- |
| |
| 6. How do users purchase your product? |
| Is it purchased in bulk, in single units, |
| or along with certain other products? |
| Is it a complementary product? For |
| example, if you sell bromine test kits |
| for hot tubs, your product will be a |
| complementary product to bromine tablets |
| that are sold to spa owners. |
| |
| --------------------------------------- |
| --------------------------------------- |
| --------------------------------------- |
| |
-----------------------------------------------
[Delete the Product Features workpaper from the business
plan document, after you have completed it and used the
information you have developed to write the text for this
section of your business plan.]
(3) Product Line. [If you have several products, such as
a number of different kinds of sweet snacks, like cookies
and candies, then your product line consists of some mix
of those various, related types of products. If so, you
should discuss the nature of your product line in this part
of the business plan. If you have more than one product
line in your product mix, describe the nature of each such
product line and its relative importance in the overall
product mix for the company.]
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
(4) Test Results and Approvals. [If your product has
undergone testing or you have secured any required
approvals from federal, state, or local governments
with regard to the product or service, discuss the test
results or approvals here. You may want to attach any
certificates or other evidence of such test results or
approvals in the appendix, referring the reader to
such documents in this text segment.]
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
--------------------------------------------------------
HELP NOTES RE: SEC. 8. BUSINESS PLAN OUTLINE --
PRODUCT DESCRIPTION
--------------------------------------------------------
PRODUCT DESCRIPTION
-------------------
This section will describe your product in some detail. We
will use the term "product" in this discussion to refer to
whatever it is that your business sells, or plans to sell,
to its customers, whether that be some kind of tangible
goods, or a service. In short, your "product" is either
some kind of goods you create and sell, or buy for resale,
or some kind of service you provide, either by itself, or
in connection with some kind of goods. The focus here is
on whatever it is that your customer pays you for -- that
is your "product."
- IDENTIFY AND DESCRIBE THE PRODUCT. Give a technical
description, if appropriate, of what your product is,
what it does, and what it accomplishes for the user or
customer.
- PRODUCT FEATURES. Every product has at least one or
more key features that will be your selling points.
Explain to the reader what the 2 or 3 key features of
your product are, focusing only on the most important
features. The worksheet contains a detailed and
useful Product or Service Features Workpaper you
should fill out now, before you write the text for
this segment of the business plan. (After you have
completed the Workpaper and have written the text for
this segment, you can delete the Workpaper from the
business plan worksheet.)
- PRODUCT LINE. Many businesses have multiple products,
similar in function and use, such as the various types
of beverages sold by a soft drink company like Coca
Cola, including other carbonated beverages, fruit
juices, wines, and other beverages. If your business
has a group of such similar products that are closely
enough related to consist of a product line (such
as building materials, or farm supplies, as examples),
discuss what items your product line consists of.
- TESTS AND APPROVALS. In some industries, safety or
efficacy, or even basic workability of the product
may need to be demonstrated before your product becomes
viable, or even before you will be able to get financial
backing, in many cases. Thus, if you have had product
testing done to demonstrate that the product does what
you want it to, or if you have obtained any sort of
required approvals from government agencies (such as
U.S. Food and Drug Administration approvals that are
required in order to legally market a prescription drug
or certain food additives), discuss the results of any
such tests or approvals. If there are evidentiary
materials supporting such test results or approvals,
attach them in the appendix to the business plan
document.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SECTION 9: Business Plan Outline -- Market Analysis
-----------------------------------------------------------
C. MARKET ANALYSIS.
(1) DEMAND. [Discuss in this section your analysis of
customer demand for your product. You can use the following
workpaper to help you to think through some of the issues
you need to research and focus upon, then use the parts
of the outline following the workpaper that are relevant in
your situation, to structure your discussion of the market
for your product or service. Or, you may want to organize
your discussion in a totally different way than we have
outlined it below, just using our outlined items as a sort
of checklist of items that you should cover or at least
consider in putting together your market demand analysis.]
-----------------------------------------------
| |
| MARKET DEMAND ANALYSIS WORKPAPER: |
| |
| 1. Identify the customers for whatever is it |
| that your business sells. Who are they? |
| |
| --[Businesses, nonprofits, governments, |
| individual consumers?]----------------- |
| --------------------------------------- |
| --------------------------------------- |
| |
| 2. Where are your customers located? Is |
| the market for your product or service |
| local, regional, nationwide, or without |
| any geographic boundaries? \
| |
| --------------------------------------- |
| --------------------------------------- |
| --------------------------------------- |
| |
| 3. How many customers (whether they be |
| individuals, businesses, schools, etc.) |
| are there in the market into which you |
| will be selling? |
| |
| --------------------------------------- |
| --------------------------------------- |
| --------------------------------------- |
| |
| 4. How frequently (in a one-year time |
| frame, for example) will your customers |
| use your product, on average? |
| |
| --------------------------------------- |
| --------------------------------------- |
| --------------------------------------- |
| |
| 5. What is the average price per unit your |
| customers will typically pay for your |
| product or service? |
| |
| --------------------------------------- |
| --------------------------------------- |
| --------------------------------------- |
| |
| 6. What are the characteristics of your |
| potential customer base? |
| |
| --[Demographic characteristics, such as |
| ---age, sex, income levels, social ---- |
| ---and cultural factors]--------------- |
| |
| 7. What market, economic, social and |
| government trends will affect the buying |
| habits and tendencies of your potential |
| customers? |
| |
| --------------------------------------- |
| --------------------------------------- |
| --------------------------------------- |
| |
| 8. Where is your product, in terms of its |
| "product life cycle," if this is a |
| relevant factor? |
| |
| [ ] Introductory or developmental |
| stage |
| [ ] Maturity stage |
| [ ] Saturation stage |
| [ ] Declining stage |
| |
-----------------------------------------------
[NOTE: After you fill out the above workpaper, use the
information you have developed in completing it, and
have finished writing the section on market demand, you
should delete the workpaper from this text file.]
(a) CUSTOMER IDENTIFICATION. [Identify who the customers
for your business are, or will be. Read the "Help Notes"
in the segment that follows this Section 9 now to view
suggestions on developing this part of the discussion.]
Geographic Area. [Identify and describe geographic scope
of your market.]
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
Age or sex groupings. [Identify and quantify the age or
sex groupings, if any, to whom you will be marketing the
product.]
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
Income levels. [Give a breakdown of consumers in your
primary market area by income level, and indicate which
groups, if any, you will mainly draw from as your potential
customers.]
-- Under $15,000 a year household income
-- $15,000 - $25,000 a year
-- $25,000 - $35,000 a year
-- $35,000 - $50,000 a year
-- $50,000 - $75,000 a year
-- $75,000 - $100,000 a year
-- Over $100,000 a year
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
Social, cultural, ethnic factors. [Describe how your
product will be applicable to certain segments of the
population based on these factors.]
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
Business demographics. [If selling to government or
business markets, categorize and quantify the potential
customers in that market.]
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
(b) PRODUCT LIFE CYCLE. [Identify, if applicable, where
in the product life cycle your product's market is, at
present: introductory (rapid expansion) stage; maturity;
saturation; or decline. Or, you may prefer to cover this
in the "INDUSTRY LIFE CYCLE" portion of this business
plan, under "THE INDUSTRY" segment, rather than here.]
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
(c) MARKET BREADTH OR DEPTH. [This means the number of
customers in a particular market. You will also want to
attempt to quantify and discuss market size (how many units
are bought within a given market or the number of users
who will buy); frequency of use (how many units of the
product or service a typical customer will consume in a
year, for instance); and market potential. (Based on the
number of customers times frequency of use times average
selling price per unit, what is the total potential size
of the market, in dollars, per year?)]
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
(c) TRENDS. [Discuss market trends that will affect
the demand for your product or service, such as changes
in demographics (age, birth rates, disposable income
levels, etc.); alternative or substitute products which
may affect demand for your product; social trends (such
as demands by society for non-polluting, safer, or
recyclable products); and government and economic trends
like tax rates, regulations, economic growth rates of
the larger economy, inflation, and other such macroeconomic
factors.
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
--------------------------------------------------------
HELP NOTES RE: SEC. 9. BUSINESS PLAN OUTLINE --
MARKET ANALYSIS
--------------------------------------------------------
MARKET ANALYSIS
---------------
You need to look at the market for your product from both
sides -- an analysis of the demand for it and the main
factors affecting that demand, as well as the "supply
side" of the equation, including a review of the industry
and who your main competitors are. This segment focuses
on the demand side.
DEMAND ANALYSIS. The market or market demand for your
product or service consists of all the people who might be
interested in buying it. The following discussion outlines
some of the key areas you may want to touch upon, where
they are relevant to your business or product, and some
suggestions on how to go about researching and writing up
this section of the business plan.
- CUSTOMER IDENTIFICATION. Not everyone is a potential
customer--certain age groups, income levels, geographic
areas, ethnic groups and educational levels will be more
likely to be your customers. You need to focus on who
will need your product and be most likely to buy it.
Identify, as clearly as you can, who your customers are
most likely to be. As part of this discussion, describe
the market scope and market segmentation by specifically
analyzing each of the following (if relevant):
(a) Geographic area -- Where you will draw most of
your customers from, plus any other areas from
which you expect to also be able to draw some
customers. Obviously, if you are marketing your
business entirely through the Internet, this
discussion will be very different than for, say,
a dry cleaning business, as an Internet-marketed
product may well be marketed in all geographic
areas, or perhaps in all English-speaking regions
of the world, depending on the nature of the
product and the scope of your marketing program.
Accordingly, the geographic scope of your market
may be local, regional, national, or worldwide.
(b) Ages or sex group - If your product is primarily
of interest to individuals of a particular age
group or gender, such as toys for children,
describe and quantify this potential market. Or,
if there are certain age or sex groups to whom
your product will definitely not appeal, be sure
you define the size of your market by excluding
members of those groupings.
(c) Income levels - If yours is a consumer product,
describe the income levels in your target audience
to whom the product will primarily appeal. You
may want to summarize your market research by
breaking down the targeted groups by income
strata, such as:
-- Under $15,000 a year household income
-- $15,000 - $25,000 a year
-- $25,000 - $35,000 a year
-- $35,000 - $50,000 a year
-- $50,000 - $75,000 a year
-- $75,000 - $100,000 a year
-- Over $100,000 a year
(d) Social, cultural, ethnic factors - Describe how your
product will be likely to appeal more to people in
certain social, cultural and ethnic groups than
others, if that is the case.
(e) Business demographics - Other types of market data
that may help you further segment your market,
especially if selling primarily to businesses or
government entities, would include categorized
information on local, regional, state and federal
government agencies, and breakdowns of companies
by their size, types of ownership and geographical
location. You won't need to discuss these market
segments, generally, if you are offering a consumer
product or service that is not normally purchased
by such government or business organizations.
To help develop the above information, you may have to
use a number of different sources for your research. It
may be helpful to get to know the business specialist at
your local public library, who can often be extremely
helpful in guiding you to useful library publications,
such as U.S. Census data, market research data published
by such organizations as Sales and Marketing Management
Magazine, Predicasts, Inc., trade magazines, trade
organizations, U.S. Department of Commerce publications,
information put out by your state's Chamber of Commerce
and the state office of economic development, and similar
sources. You may also want to do some primary research,
by contacting some potential customers and conducting
your own market research - ask them how they buy products
or services such as yours, what price they think such a
product or service should sell for, and how they would
want to see your product, or existing similar products,
improved.
If you are trying to project population growth and
income data in your local area, many local governments
have planning departments which can often provide you
with extremely useful information on such trends, as
well as other key factors such as projected numbers
of new homes or highways to be built. Expansions or
improvements to the local or regional transportation
system, such as new freeways or rapid transit lines,
may have a major favorable or unfavorable effect on the
potential profitability of your business, especially if
you will be opening a retail business of some kind.
- PRODUCT LIFE CYCLE. The market for most products or
services usually has a life cycle, beginning with very
rapid growth in the introductory or developmental stage,
which slows to a more moderate growth rate in the
maturity stage, flattens out in the saturation stage,
and finally begins shrinking in the declining stage.
If you believe your product or service is one which has
such a life cycle, try to determine and explain to the
reader where the market for your product is at present,
in terms of where it stands in its product life cycle.
(The product life cycle for your industry can either
be discussed here, or, if you prefer, can instead be
covered in the next segment, on the industry.)
- MARKET BREADTH OR DEPTH. This refers to the number of
customers in a particular market. You will also want
to quantify and discuss:
(a) Market size - How many units of the product are
bought within a particular market?
(b) Frequency - How many units of the product or
service will the typical consumer use in a given
time period, such as a year? For example, if
are selling hamburgers, you are interested not
only in how may customers you may have, but in
how many times a year they are likely to buy
your hamburgers.
(c) Potential - What is the market potential? That
is, based on the number of consumers in the
market you have defined, how many dollars a year
will they spend? Determine this by multiplying
the number of customers in the defined market
times the frequency of purchases of the average
customer, times the average selling price per
unit of the product. For example, if you have
a dental practice in a city of 20,000 potential
patients, who go to a dentist an average of 1.25
times a year, at an average cost per visit of
$100, you would multiply out those numbers and
get a market potential of $2,500,000 a year for
your particular market. Then identify the share
of that market which you feel your business should
be able to capture, and explain your reasoning that
backs up your assertions as to what you expect your
market share will be.
- TRENDS. Discuss various market trends that will affect
the demand for your product or service. These can
include things such as:
. Demographic changes, such as increasing numbers of
babies being born, due to the age distribution of
the population in the relevant market area, or
increasing income levels, or sociological changes
in tastes and preferences of consumers.
. Alternative products, such as substitute products
that may undercut the demand for your product at
current price levels, if cheaper substitutes are
available.
. Social trends, such as pressures by consumers to have
ecologically friendly products, increased safety, and
the like, as well as consideration of any factors
such as any rapid technological changes that may be
affecting the market or distribution methods for your
product category.
. Government and economic trends, such as rising tax
rates, increasing levels of disposable after tax
incomes of consumers, inflation, interest rate levels,
government spending levels, new government regulations
that may either crimp or expand the demand for your
product, and similar macroeconomic factors.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SECTION 10: Business Plan Outline -- The Industry
-----------------------------------------------------------
(2) THE INDUSTRY. [Discuss, in this section of your
market analysis, the characteristics of the industry you
are in. Is it fragmented or concentrated, wide open, with
no dominant market leaders, or is it an industry that is
dominated by one or a few large companies? Read the "Help
Notes" segment following this Section 10 now for an outline
of discussion points you may want to cover in your
discussion of your industry.]
(a) SIZE. [Describe how large the industry is, in terms
of annual industry sales or revenues, plus description of
any subcategories.]
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
(b) MARKET STRUCTURE. [Discuss the structure of the
industry, in terms of ease of entry, number of firms,
and the like. Read the "Help Notes" segment following
this Section 10 for further hints on what to discuss in
Section 10.]
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
(c) OVERVIEW OF COMPETITION. [Give an overview of how
firms in the industry compete, either in terms of price,
quality, or other means of product differentiation.]
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
(d) INDUSTRY LIFE CYCLE. [Discuss the state of the
industry, in terms of the industry life cycle. If you
have already covered this, under the "PRODUCT LIFE CYCLE"
segment of this business plan, don't repeat it here,
except possibly to briefly summarize your conclusions
from the "PRODUCT LIFE CYCLE" section of this worksheet.]
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
(e) INDUSTRY TRENDS. [Discuss industry trends here,
such as growing profitability, capacity expansions,
major new entrants into the industry, new governmental
regulations or taxes, and any other factors affecting
supply or output of whatever your industry sells or
produces.]
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
--------------------------------------------------------
HELP NOTES RE: SEC. 10. BUSINESS PLAN OUTLINE --
THE INDUSTRY
--------------------------------------------------------
THE INDUSTRY. This section also looks at the market
environment for your product or service, but from a more
qualitative standpoint, rather than attempting to quantify
the size of the market demand. Some of the points you may
want to analyze and address in this segment would include
the following:
- SIZE. Indicate in your description how large the industry
is, in terms of sales. You should be able to determine
this information from trade associations or trade
publications, which exist for most industries. Also
discuss the major categories within the industry, such
as a particular category in which you will compete, and
the relative size of the various categories, if known.
- MARKET STRUCTURE. Briefly address the structure of
the industry, noting whether it is an industry (like
consulting or housecleaning services) with considerable
ease of entry, or if it is one (like the auto industry)
that has high barriers to entry by new firms. Also
discuss whether the industry is dominated by one or a
few large firms, or is one characterized by large numbers
of small firms, or whatever other characteristics exist
in your particular industry.
- OVERVIEW OF COMPETITION. Analyze whether there is
significant product differentiation in the industry.
That is, are most of the participants in the industry
selling virtually the same, standardized product, like
gasoline or milk, or are the products significantly
differentiated to meet the needs and tastes of different
markets, such as wrist watches? Obviously, if product
differentiation is not significant in your industry,
this will shape your marketing strategy, since marketing
costs that would ordinarily go towards creating a brand
identity, based on perceived superior quality of your
product, may be misdirected if you are selling something
like milk or are running a gasoline station, where price
may be of paramount importance.
In general, this section should analyze how firms in
the industry compete, such as based on price, product
quality, brand name, or by other means.
- INDUSTRY LIFE CYCLE. Where in its "life cycle" is your
industry? In the developmental (growth) stage, maturity,
saturation, or decline? Note that this is essentially
the same as the discussion of your product's life cycle,
which you may have chosen to discuss in the earlier
segment of this business plan, as part of the description
of your product. It's up to you whether you prefer to
work that discussion into the section on "PRODUCT LIFE
CYCLE" or here, in this section on the industry. We
suggest you don't duplicate the discussion in both
parts of this business plan, however, although you may
want to briefly refer, in this section, to where the
industry is in its life cycle, summarizing what you
previously discussed in the section on "PRODUCT LIFE
CYCLE."
- INDUSTRY TRENDS. After you have done your research
homework on the background of the industry, you should
also develop an understanding of current and future
trends in the industry, discussing them here. These
would include subjects like the fact that, due to excess
competition (perhaps from abroad) or outside influences,
firms in the industry may be experiencing hard times and
many may be withdrawing or even going bankrupt. Or, on
the other hand, perhaps the industry is experiencing
very high profit margins, which may be attracting major
expansions in capacity, or entry into a small industry
by large new competitors, such as the entry of software
giant Microsoft into the "browser" segment of the
software industry, which until then consisted only of
small firms like Netscape. Other trends would include
new governmental regulations, new taxes, and other
governmental actions, such as new trade agreements
allowing duty-free imports from foreign countries.
This segment would also consider other indirect effects
on the industry, such as trends in related industries
with complementary products. Thus, if you sell drapes
and blinds for houses, and much of your business comes
from purchasers of new houses, you would want to pay
a lot of attention to the trends in housing starts in
your market area, which will greatly influence your
level of sales. Or, if you are starting up an airline,
changes in the price of fuel, a major cost component,
will affect the entire airline industry, as any attempt
by airlines in the past to pass along major fuel price
increases by raising fares has generally tended to
reduce the demand for airline travel.
In short, you need to know enough about your industry
to intelligently and clearly describe the major industry
currents that would be of concern or of interest to
any potential investor in or lender to your firm. If
there are negative trends at work, assume that your
reader will know about them -- in which case you had
better mention them and show, in the strategy portions
of the business plan, how you tend to deal with, or
even take advantage of, such trends. If you do not
mention the problem, a sophisticated investor or
lender, who is aware of a negative industry trend
that you have failed to mention, is likely to quickly
send your business plan document to the local landfill,
without reading any further.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SECTION 11: Business Plan Outline -- The Competition
-----------------------------------------------------------
(3) THE COMPETITION. [In this important section of your
business plan, you need to spell out the following major
items:
. Who are your main competitors?
. What is their basis of competition? (Price, quality,
better distribution, reputation, etc.)
. What is your firm's competitive advantage that will
allow you to compete effectively with in your industry?
Read the "Help Notes" segment following this Section 11 for
suggestions on how to go about preparing Section 11 of the
business plan. Before writing this section, you will first
need to do any necessary research on your competitors, and
then use the workpapers below to assist in compiling and
organizing the data you will need to write this section.
The following sample workpaper may be helpful to you in
organizing the relevant facts about each of your competitors.
You can make several copies of this form as is, or with any
modifications you wish to make to it, and fill out one for
each competitor. Obtain as much of the information listed
as possible; however, you will find that some or much of
the information items on your competitors that is listed in
the workpaper will be private and difficult or impossible
for you, as a potential competitor, to obtain from them.]
-----------------------------------------------
| |
| INDIVIDUAL COMPETITOR PROFILE |
| (SAMPLE WORKPAPER) |
| |
| Name of Company __________________________ |
| |
| Location ________________________________ |
| |
| Type of business _________________________ |
| |
| _______________________________________ |
| |
| |
| Number of employees: _____________________ |
| |
| Sales per employee: _____________________ |
| |
| Sales by fiscal year: |
| |
| Year Revenues Market share % |
| ------ ---------- -------------- |
| |
| 19___ |
| |
| 20___ |
| |
| 20___ |
| |
| 20___ |
| |
| 20___ |
| |
| Strategy: (The message this competitor is |
| sending to customers and the general public) |
| |
| --------------------------------------- |
| --------------------------------------- |
| --------------------------------------- |
| |
| Strengths? _______________________________ |
| |
| __________________________________________ |
| |
| Weaknesses? ______________________________ |
| |
| __________________________________________ |
| |
| Other comments: |
| |
| --------------------------------------- |
| --------------------------------------- |
| --------------------------------------- |
| |
-----------------------------------------------
[Once you have completed a workpaper like the above sample
for each of your main competitors, use that information to
complete the summary workpaper below.]
-----------------------------------------------
| |
| THE COMPETITION: SUMMARY WORKPAPER |
| |
| Identify your major competitors: |
| |
| --------------------------------------- |
| --------------------------------------- |
| --------------------------------------- |
| |
| What are the factors that make these |
| companies competitors? (Such as price, |
| quality, personnel, reputation, good |
| distribution, or other factors) |
| |
| --------------------------------------- |
| --------------------------------------- |
| --------------------------------------- |
| |
| Summarize the weaknesses or vulnerabilities |
| of your major competitors: |
| |
| --------------------------------------- |
| --------------------------------------- |
| --------------------------------------- |
| |
| Compare your business to the competition, |
| feature by feature: |
| |
| |
| FEATURE THE COMPETITION'S YOUR FIRM'S |
| ------- ----------------- --------------- |
| Quality |
| ---------------- --------------- |
| Technology |
| ---------------- --------------- |
| Price |
| ---------------- --------------- |
| Reputation |
| ---------------- --------------- |
| Location |
| ---------------- --------------- |
| Selection |
| ---------------- --------------- |
| Knowhow |
| ---------------- --------------- |
| Selection |
| ---------------- --------------- |
| Availability |
| ---------------- --------------- |
| Convenience |
| ---------------- --------------- |
| Delivery |
| Time |
| ---------------- --------------- |
| Financing |
| ---------------- --------------- |
| Service |
| ---------------- --------------- |
| Warranty |
| ---------------- --------------- |
| Reliability |
| ---------------- --------------- |
| Other |
| ---------------- --------------- |
| |
| Describe what you feel is your firm's |
| competitive advantage, which will make your |
| business successful: |
| |
| --------------------------------------- |
| --------------------------------------- |
| --------------------------------------- |
| --------------------------------------- |
| --------------------------------------- |
| |
-----------------------------------------------
[Once you have completed the above workpapers on your
competition, and have finished writing your "competition"
section of the business plan below, you should delete the
above worksheets from this outline.]
(a) MAIN COMPETITORS. [Identify in this section who your
main competitors are, and give some information about
them.]
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
(b) BASIS OF COMPETITION. [This is the main part of your
discussion of the competition, where you analyze the key
competitive factors, such as pricing or quality, in your
industry. Drawing on the information you have developed,
mention the strengths and perceived weaknesses of the
competitive positions of your main competitors.]
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
(c) COMPETITIVE ADVANTAGE. [Summarize your conclusions
as to the competitive advantage your firm will enjoy, or
how it will successfully meet the competition.]
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
--------------------------------------------------------
HELP NOTES RE: SEC. 11. BUSINESS PLAN OUTLINE --
THE COMPETITION
--------------------------------------------------------
THE COMPETITION. Who is the competition? This section of
the business plan should identify the main competitors that
your company will face in its market area. However, you
will need to do more than simply identify who they are --
you should do a comparison of the major features of your
business versus the competition, and demonstrate how you
will meet the competition effectively. That is, you need
to be able to convincingly show the reader of your business
plan what your company's "competitive advantage" is, which
will be one of the key selling points in your entire
presentation. Accordingly, you need to put a great deal
of thought into developing this part of the plan, not only
for the purpose of creating an impressive business plan,
but for creating a business strategy that will actually
improve your odds of making the business a success.
We suggest you attack this part of your business plan by
taking the following steps (after doing the necessary
research to find out what your competitors are doing):
- IDENTIFY THE COMPETITION. Determine who the main
companies are that will comprise the competition for
your business, and briefly mention who they are. At
this point, you are still gathering information, and
are not yet ready to begin writing the "competition"
section of the business plan yet. Once you do begin
writing this section, you may or may not want to spell
out the situation of each such competitor in detail.
Or, you may want to include "competitor profiles" for
each competitor, summarizing your research into their
operations, but provide this detailed information in an
appendix, not in the main text of the business plan.
- INDIVIDUAL COMPETITOR PROFILES. In doing your research,
it may be helpful to create individual competitor profile
workpapers for each such competitor, using a workpaper
like the sample one we have provided in the business plan
outline. Note that the workpaper is designed to help you
organize the relevant information about your competitors,
and need not be included in the final business plan
(except, as noted above, in the event you want to include
such profiles in an appendix to the business plan). Once
you have completed the individual competitor profiles,
proceed to the next step, which is to create a summary
workpaper describing your competitors and your response
to such competition.
- SUMMARY WORKPAPER -- COMPETITION. Based on the data you
have compiled on your individual competitors, using the
individual competitor profile workpapers described in
the preceding paragraph, create a summary workpaper
that outlines the basic information on your competitors
and describing how they compete (pricing, reputation,
convenience, quality, or other features). Then you should
identify and spell out the features of your product or
service, or in the way your business operates, that will
give your firm a competitive advantage that will allow
it to succeed. You can use the second workpaper we have
provided in this segment on "the competition," making any
additions or modifications to the workpaper that you feel
are useful in your situation.
Now, finally, you are ready to begin writing the
"competition" section of your business plan, using the
information you have developed from the two workpapers
described above.
- WRITTEN DISCUSSION OF THE COMPETITION. Now that you are
ready to begin writing an analysis of the competition in
your industry, use the information you have developed
so far from your research and through using the sample
workpapers we have provided in the business plan
worksheet outline, to develop this section of text.
A suggested outline of this discussion would be as
follows:
(a) Identify the competitors. List the names of your
main competitors, and provide some background
information on them, and how they operate.
(b) Basis of competition. Discuss the factors that make
your competitors effective, and also cite any
weaknesses or vulnerabilities that they may have,
which your company may be able to exploit. This
will be the heart of your discussion, mentioning
the competitive factors that you perceive as most
important to customers of the industry, such as
pricing, quality, etc.
(c) Competitive advantage. Summarize this section by
describing the competitive advantage (or advantages)
that your business will have, which you feel will
enable you to succeed in this particular competitive
environment. Make it good, as this is one of the
key fulcrum points of your entire presentation. If
you cannot make a good case here for your company's
ability to successfully meet the competition, your
business plan will not be very persuasive, as a
whole.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
SECTION 12: Business Plan Outline -- Sales and Marketing
-----------------------------------------------------------
D. SALES AND MARKETING. [Based on your analysis of the
market demand and your assessment of the competition and
your company's strengths and weaknesses, develop your sales
forecast for the business in this segment. This section
should also include a concise summary of your marketing
plan and strategies that will enable you to reach the
level of sales you are projecting. Read the "Help Notes"
segment following this Section 12 for a detailed discussion
of various points you may want to consider as you develop
your sales projections and create your marketing strategy,
both for the purpose of writing up this section of the
business plan document, and for your own actual business
strategy and planning purposes.
Discuss here your marketing plan or strategy. This will
include identifying the market segment you are seeking to
reach, and the various means through which you intend to
reach it, such as door-to-door sales, retail sales, direct
mail, media advertising, selling through sales reps,
jobbers, Amway-type multi-level distributorships, or
whatever else you plan to do to market your product.
Mention also the degree of market penetration and market
share you expect to achieve, year-by-year, for the period
for which the business plan is making projections.
Also discuss in this segment how you plan to create an
awareness of the product among its ultimate consumers,
through advertising, seminars, publicity or otherwise,
even if most of your sales may, perhaps, be made to
intermediaries such as wholesalers or retailers. Cover
all methods you will employ, such as telemarketing,
advertising circulars, print or electronic media
advertising, direct mail, catalogs, the Internet, or
other means. Here it can be helpful to include photocopies
of dummy ads, brochures or other promotional materials
that you may have already prepared, if you feel they will
be effective in selling your business plan -- or refer to
such items here, but include them in the appendix.
You may prefer to write up your marketing plan and then
follow it with the sales projections, or vice versa; or,
depending on your writing style, you may find that the
two subjects are so intertwined that you will find it
more persuasive to weave your sales projections into the
discussion of your marketing plan, rather than trying to
separate the two subjects. There is no "best" way to
present these two interrelated areas of discussion, so
we suggest you structure and sequence these portions of
business plan document in the way that seems most natural
and readable to you. Thus, while we may have given you a
number of ideas and suggestions above and in the "Help
Notes" segment for this item, we have purposefully not
given you a structured outline below for the order in
which the component segments of the sales and marketing
sections should be written, as they will necessarily be
somewhat freeform, in an order that should be determined
by you.]
____________________________________________________
____________________________________________________
____________________________________________________
____________________________________________________
[Your sales projections should be summarized in a format
somewhat similar to the following:]
SALES FORECAST BY YEAR FOR XYZ CORPORATION [SAMPLE]
(In Thousands)
YEAR1 YEAR2 YEAR3 YEAR4 YEAR5
------- ------- ------- ------- -------
Units Sold 500 550 600 720 900
Sales ($) 800 880 980 1250 1700
Less Cost
of Sales:
-Returns 25 27 30 40 50
-Discounts 0 0 0 0 0
-Bad debts 16 18 20 25 34
-Commissions 0 0 0 0 0
Net Sales 759 835 930 1185 1616
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HELP NOTES RE: SEC. 12. BUSINESS PLAN OUTLINE --
SALES AND MARKETING
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SALES AND MARKETING. This part of the business plan deals
with two different sides of the same coin, a sales forecast
and the marketing strategy that is your company's plan for
creating the level of sales that you are projecting.
As you will note in the outline of the business plan
worksheet, we have not tried to tell you which of these
two subject areas you should discuss first, since they are
closely intertwined. You may prefer to give your sales
projections first, and then explain the marketing strategy
by which you will achieve that level of sales; or you may
find it more logical to discuss your marketing strategy
or plan first, before summarizing your projections. Or
you may even find it simpler to discuss the two subjects
together, weaving your projections and marketing plan
together in a single segment, if that approach to writing
this segment of the business plan works better for you.
In any case, the discussion below will alert you to a
number of points to consider as you create your marketing
plan and sales projections, not all of which will be
pertinent or relevant to your business.
- MARKETING STRATEGY. Most businesses that fail tend to
do so because of poor marketing of a good product. In
fact, even a business with a mediocre product (or in
some cases even a poor product) will often survive or
prosper if it does a good job of marketing its product.
Like the Sony Betamax technology for VCR's demonstrated,
the best product does not always prevail over a competing
product that is technically weaker but better marketed.
Similarly, many people would agree that for most of the
time since its introduction, the Apple MacIntosh user
interface has been far superior to any DOS or Windows
in most respects, yet, due to some unfortunate decisions
in marketing strategy by Apple, it has been greatly
outsold by DOS and Windows products in recent years.
Think of a well-thought out marketing program, with
sufficient time, energy and financial resources devoted
to developing and implementing it, as a life preserver
for your business -- and don't go near the water without
it!
Marketing is an overall strategy, composed of a variety
of complementary tactics, all aimed at getting your
product into the minds of targeted customers and then,
ultimately, into their hands, as a completed sale.
These tactics should or may include:
. Advertising and Promotion. We don't need to explain
to you what advertising is, as you are bombarded
with it from every direction, every day, as endless
commercial messages directed at you seek "mind share."
Advertising is often a major component of a company's
marketing program, and typically involves the purchase
of space in newspapers, magazines, technical or trade
publications, or purchase of time on radio or TV
stations to get out the message about your product or
your company. Other common forms of advertising you
might use would include advertising circulars (handed
out on the street, distributed door-to-door, or placed
on car windshields), inserts in the local newspaper,
direct mail, or a post card included in "card decks"
distributed by advertising firms, leased billboards
in prominent locations along major streets and
highways, and listings in the Yellow Pages or in
trade or professional directories for your industry.
Advertising messages may take many forms -- they can
consist of little more than a notice to the consumers
in your market area or target market segment that your
firm or product exists, and that you are conveniently
located or otherwise easily accessible to the consumer.
This might be appropriate, for example, in a newly
developing community, where yours is the first
restaurant, first laundromat, first tax preparation
service, or other such business in that area, thus
offering a new level of convenience to consumers in
the area. Or, your advertising may be more pr