How-To Create A Business Plan

by Scott Farrell and Allen Jaszcar for The How-To Network

This is the single most important document you can create for your new business. Without a business plan, you'll have nothing to show potential investors, angels, and any potential sources of financing. 

“Writing the plan forces you to think through all aspects of the company. Putting your ideas into words can be an enlightening process and is also a very creative one. It is the primary step of taking an idea and turning it into reality. It is a dynamic process and not a single event. It is the blueprint from which you build.” Scott Farrell, CEO The How-To Company

With all this mind, you can imagine how much time will need to go into the creation of the single most important document your company will probably ever produce. Don't expect to knock out your business plan in a day. Even if you've had this business idea in your head for years, the creation process can take weeks, possibly months before you get it right. Research alone will take several days, as will the editing and fine-tuning of your work. If you have other partners or employees already at work for you, you can divvy out the different sections of this document to the respective areas (Marketing receives the Marketing Plan, Business Development receives Industry Analysis, etc.). 

Full disclosure is the law! Remember that in order to get your project funded you must look at everything under a microscope. Everything that is outlined in the business plan, valuation study, financing plan, and due diligence package will be verified by third party references or audited by the investing party or bank funding your project. It is a criminal and civil offense to either misrepresent or omit material facts that would affect the decision of the investor or lending institution. 

The following pages explain the basic elements that go into every business plan, as well as some helpful hints in making the process as painless and stress-free as possible. And get excited! You're about to embark on a great adventure: the creation of your own company,

Create a world-class cover page, and make it look great. Because this is the first portion of the business plan that anyone will see, you want to make sure it accurately reflects your business's ideals and direction. 

A. At the top, type “Strategic Business Plan.” A good font to use is Arial or Verdana. 

B.  Insert your logo into the page. (Using Word you would select “Insert" from the menu bar, then "Picture." Find the logo on your hard drive and insert it.)

C. Type your company name.

D. If you want to get fancy, you can lay in a background. If you plan on using artwork, make sure that it is professional, not some cutesy clip art of Dilbert. If you have any question at all about your artistic sensibilities, keep the cover text-only, and keep it as simple as possible. 

E. Start writing. Remember, this may take weeks to do it right.

On the next page, include confidential language.  Also include your company name, address and phone.

Here is an example of legal lingo to put in there:

"CONFIDENTIAL INFORMATION: The (Your Company) Strategic Business Plan is intended for use on a confidential basis only. The use of the plan document for purposes other than the review of the company’s proposed structure, operations and performance might involve serious legal consequences. 

This plan contains information that is proprietary and confidential to (Your Company) This obligation of confidentiality shall apply until such time that (Your Company) makes the information contained in this Business Plan available to the public, if ever.

With receipt of this plan, recipient acknowledges and agrees that: In the event the recipient does not wish to pursue this matter, this document will be returned to the address listed above as soon as possible. The recipient will not copy, fax, reproduce, divulge, or distribute this Plan, completely or in part, without the express written consent of (Your Company). All of the information contained herein is to be treated as confidential material with no less care than that afforded to your own company’s confidential material.”

Fill this in last after the whole plan is written so you can create page numbers, etc. 

Contents

Executive Summary ....................................................................  3

The Company ............................................................................  6

Mission Statement ......................................................................  7

The Website ..............................................................................  8

Industry Analysis ........................................................................  9

Products & Services .................................................................... 12

Customers & Competition ............................................................  15

Marketing .................................................................................  17

Management .............................................................................  21

Financials .................................................................................  22

This is where it goes, but finish it last. As an outline (usually only 2-4 pages long) of the complete business plan, the executive summary is best created when all other components of your plan have been finalized. Make this as good as you can because most people do not read past it. 

The summary includes and describes principal markets, personnel, financial highlights, and the proposed deal structure. At times you may be asked for this section only, since the executive summary is a more concise version of the overall document. This section should include:

This section should include:

•  
• Company Overview 

  "Can't act. Slightly bald. Can dance a little." - 1920s movie studio executive commenting on Fred Astaire's screen test.

• Products and Services 
• Market Analysis 
• Funds Requested and Uses 
• Summary of 3-Year Financial Projections 
• Exit Strategy
• Management Team Bios 

 When preparing the executive summary, keep in mind the following:

• Keep length between 2-4 pages. 
• Include a description of all elements covered in the business plan; highlight key points. 
• Include pertinent investment information and provide relevant data (i.e., clearly state and define the amount of funding required, when these funds are needed, the specific use of these funds, and the repayment method). 
• Identify the market being pursued. 
• Identify the market opportunity or problem you are trying to solve. 
• Articulate the strategy for attacking the market. 
• Identify any significant risks as far as milestones, technical aspects, market response, and steps being taken to eliminate risks. 
• Identify an exit strategy (merger, buy-out, go public, etc.). 
• Consider including 10 PowerPoint slides.

Do your own due diligence on the funding sources to ensure that they match your type of company and they have been active in your space in recent months. 

OK. You may be a start-up but you have to think big. The company description should paint a portrait of the company you're hoping to 

create. Include the following:

• Describe how the business is/will be organized. 
• Identify the current owners. 
• Describe the opportunity the business is capitalizing on. 
• Describe the business's products or services. 
• Describe how the business and product/service are unique. 
• Describe what makes the business qualified to succeed in the market. 
• List your corporate objectives. What do you plan on accomplishing in the first month, 3 months, 6 months, and one year? 
• Describe the legal structure of the company.  

 Remember to keep your business plan brief. Prepare an “Elevator Pitch,” an explanation of your business in 30 seconds or less.

This is a single statement that should be your corporate guiding light, the reason for the company’s existence. 

Example mission statement:

If you're thinking of having a website constitute a large portion of your business, make sure you include this information. Include the following: 

• Destination of the site (what does it provide?)  

  As of August 2000, the highest price paid for a domain name was $7 million. In April of 2000, the owner of hell.com put the domain name on the market block and expects to make at least that much.

• Summary of Services Business Model  
• How will you turn traffic into money?  
• What is the key to making this a wise business decision?

Site Positioning  

• What is your market's most important need(s)?   
• How do you plan on meeting these needs?  
• Who are your main competitors (summary)?  
• How is your site better than the competition?

Traffic Forecast  

• How and what do you plan on measuring (hits, visits, etc.)?  
• Explain growth rates.  
• Provide background on due diligence.  
• Why is your traffic forecast believable?

Front End  

• Is the site graphic or HTML?  
• How fast can it load?  
• Is it aesthetically pleasing?

Back end  

• What technology are you planning on using?  
• How will you handle the dynamic parts of the site (newsletter, admin. page, registration and business database, contact page, etc.)?

Future Development  

• Look ahead to future benefits and services you may want to provide.  
• Present an outlook for future services.  
• Is there a long-term service strategy?  
• Is there a relationship between market segments, market demand, market needs, and service development?

You know that your industry is going to be big in the future. Not just big, but BIG. It's going to be the next Internet, right? That's all fine and dandy, but the likelihood of convincing your investors based on your gut instinct is probably about the same as Sinead O'Connor having tea with the Pope. 

In order to be truly persuasive, you'll need to provide some cold hard facts. This is where your research skills will come in handy. Even five years ago it would have been very difficult to conduct all the research necessary to complete a business plan. Today, especially with available software, websites, and search engines on the Internet, this has become much easier, efficient and - dare we say - fun.

 Be sure to cite any possible legal and regulatory problems and the way in which they are being handled.

In this section you'll outline the demographics you'll be targeting for your product or service. This will include basic research, done principally by the entrepreneur, to identify a market niche for the product or service offered. Identify the size, dynamics, competition, and other factors affecting the proposed business operation prior to investing large sums of money or proceeding with a "missionary marketing" venture with little or no chance for success. Be sure to answer the following questions:

• Who are the proposed customers? 
• What are their demographics? 
• What products/services are these customers presently buying to fulfill the need that the company hopes to fill? 
• What are the customer's true needs, and what trends are affecting these needs? 
• How do you plan to capture customers and generate growth? 
• Who are the major competitors? 

  Andy Warhol designed the Rolling Stones' now-famous lips-and-tongue logo.

• How large are the major competitors? 
• What are their strategies? 
• What are the strengths and weaknesses of the competition? 
• How will the competition respond?

 Provide a chart or table that provides a summary comparison of the competitors.

13. Marketing Plans

Because many business plans fail to adequately cover marketing aspects, you'll want to make sure you are as thorough as possible. Be sure to include an outline of plans for: 

• Pricing 
• Distribution Channels 
• Promotion

Be sure your material answers the following questions:

• How do you plan on introducing the product or service and generating long-term sales? 
• What are the specifications of the product or service? 
• At what price point will the offerings be sold? 
• How does the company plan to promote the product or service? 
• Who makes the purchase decisions? 
• Is the industry seasonal or cyclical? 
• What are the switching costs? 
• What are your promotional strategies? 
• How do you plan on distributing the product or service? 
• What are the service and support requirements?