Developing a Business Plan

"Being an Entrepreneur is like Being a Parent!"

The Small Business and Technology Development Center compares the art of developing a small business to the art of parenthood, "People who try to start a business in order to fix a shaky economic or employment situation do not tend to be any more successful than people who decide to have a baby in order to fix a shaky marriage."

America is the first nation in the world to have one million millionaires living in its borders. Most of these millionaires have become wealthy through developing and operating their own business. Thus, most millionaires are entrepreneurs. However, like being good parents, developing a business requires common sense, thoughtful planning, ability to learn from mistakes, responsibility, commitment, self confidence and perseverance. Businesses are like babies, they are very demanding!

The Business Plan: Your Road Map for Success

Developing a workable business plan can help you get where you are going. When planning a trip, you don't just leave your house without thinking about gas and directions. Would you travel from Raleigh to San Francisco without a map? Leaving without gas and directions will get you nowhere. That is why many businesses fail, they never reach their destination because they did not develop a plan. That is why we often hear that 9 out of 10 businesses will fail within two years. These businesses did not develop a plan.

*A strategic vision of your company;

*A document to obtain capital and investments;

*A tool for measuring and improving performance;

*A basis for sound decision making;

*A way to motivate yourself and employees;

*A working document.

*What business am I in?

*What services do I provide?

*Who will buy the services?

*Who is my competition?

*What is my sales strategy?

*What merchandising methods will I use?

*How will I get the work done?

*How much money is needed to operate my business?

*Do I have enough capital or will I need to raise the money?

*When can I expect to earn a profit?

Business Plan Format

The following material is a suggested format of what to include in your business plan.

Cover Page

*Name of Company

*Company Address and Phone Number

*Company Logo

Title Page

*Repeat the Name, Address and Phone Number of Company

*Names, titles, and addresses of owners

*Date plan was issued

*Name of preparer

Summary Page

*Mission or Statement of Purpose

*Business structure (sole proprietorship, partnership)

*Company Objectives

*Why you will be successful

*How much money is needed

*Source of money - loan

*Collateral to secure a loan

*How loan will be repaid

1. What business are you in?

(Describe your product or service in detail, estimated wholesale and retail prices, proposed distribution methods, number hours per week you will work, etc.)

2. What market will the business serve?

(Describe your customer including demographics - age, sex, income ...)

3. How can you serve the market better than your competitor?

(Describe your competitive edge in regards to product differentiation, pricing, packaging, promotions)

4. What is the present status of your business?

(Are you starting a new business or expanding an existing one?)

5. Who are your prospective suppliers?

(List their names and addresses)

6. Methods of Record Keeping.

(Who will do your recordkeeping and how will you use your records in analyzing your business?)

7. What kinds of insurance will you need and who will provide it?

1. What is your business address and why did you choose that location?

2. What renovations will be needed and at what cost?

3. What legal considerations will impact your business?

(Are you zoned for business? What special licenses and permits are needed?)

4. How much can the business expand before you will need to relocate?

5. Security of inventory and property.

Management

1. What is your business management experience?

(Include your education, volunteer and work experiences.)

2. What is the organizational structure of the business?

(Include a brief description of who does what and an organization chart.)

3. What are the proposed salaries and wages of employees?

(Include yourself)

4. What resources are available to you?

(Attorney, small business consultant, Small Business Center)

Marketing

1. Target Market

(Identify characteristics of your customers. Describe how you arrive at you results. Back up your information with statistics and surveys.)

2. What is the growth potential of the market.

(Demographic and Industry trends)

3. How will you attract and keep your customers?

(quality prices, unique advertising, special promotions, special services)

4. Product Design including packaging.

5. Methods of Distribution.

(How will products and services be made available to customers?)

6. What special features or services will you offer to justify your price?

7. How will you handle payments?

8. How will your advertising be tailored to your target market?

1. Describe your competition in terms of products, price, selling methods and special services.

2. What are their strengths and weaknesses?

3. How do you differ from your competition?

1. Summarize your start up costs.

2. Sources of Uses of Fund Statement.

(Describe how loan funds will be dispersed.)

3. Cash Flow Statement

(This describes your cash inflow and outflow over a period of time.)

4. Three-year income projection.

(This includes a cash flow statement for the first year and the projected following two years based on industry trends.)

5. Break-even analysis.

(The time when the company's expenses match the income.)

6. For a business already in operation:

     *Balance Sheet (assets, liabilities and net
worth)

     *Income Statement
     *Financial History (history from start to
present)

Supporting Documents

1. Personal Resumes of Owners.

2. Copies of contracts, licenses and other legal documents.

3. Letter of reference.

4. Examples of the following:

     *Product Drawing

     *Business Cards
     *Sample Flier/Newspaper Advertisement
     *Press Release

1. Summarize your mission, goals and objectives.

Your Best Foot Forward

Your business plan should be complete, clear, and accurate. The length of the plan will depend on your business. Some plans vary from 3 pages to 25 pages. If you plan is extensive, professionally bond your plan to provide a professional package.

References:

Adapted from Entrepreneurship: Growing Success from the Ground Up (Western NC Entrepreneurship & Heritage Skills Education Committee of the NC Cooperative Extension Service) by Davina Hickman, Family and Consumer Agent, North Carolina Cooperative Extension Service, 1996.

Planning ... The Most Important Ingredient, U.S. Small Business Association Fact Sheet, Number 3 of a series.

So You're Thinking of Having a Business, The North Carolina Small Business and Technology Development Center.