Business Plan

A business plan is a written document used to describe a proposed venture or idea. It typically includes the current state of a business, future vision for the business, target market analysis and challenges, sales and marketing strategies, and funding requirements to reach stated goals. Many business plans are designed with the intention of securing funding and investors to support a proposed idea; others are designed to assist with reorganization, takeovers, or to serve as an internal planning document. On its Web site, the U.S. Small Business Administration (SBA) describes it this way:

A business plan precisely defines your business, identifies your goals, and serves as your firm's resume. It helps you allocate resources properly, handle unforeseen complications, and make good business decisions. Because it provides specific and organized information about your company and how you will repay borrowed money, a good business plan is a crucial part of any loan application. Additionally, it informs sales personnel, suppliers, and others about your operations and goals.

In addition to these continuing benefits, a business plan can also offer clear, immediate advantages to struggling companies, or to those intending to sell their business concepts. Mike McKeever gives several of these advantages in his book, How to Write a Business Plan (2007):

1. A business plan will help the business find financial backers. Since investors require a business plan before giving a company any significant backing, it is a good idea to plan and write one before looking for aid. After creating a plan, leaders of the business will understand more clearly where their money goes and what it is spent on—information the investors will want to know.
2. A business plan will help a starting company decide whether to proceed or stop. Creating a plan for a new business allows leaders to examine potential strengths and weaknesses of the business, giving them the confidence to move forward or possibly the knowledge to reassess the functionality of their ideas.
3. A business plan allows leaders to improve the business concept. In making the plan, leaders may realize parts of the organization they need to change or reevaluate. Writing the plan gives a chance to change the goals of the business for the better.
4. A business plan helps keep the business on track. With the straightforward rules, goals, and parameters of the plan written down, a business has more focus.

GETTING STARTED

The article “Write the Right Business Plan” lists ten things to consider before tackling the document:

1. Decide why you're writing your plan—what is your motivation?
2. Do your homework—read some books, explore web resources.
3. Compile your information—locate articles and financial statements.
4. Start typing—write down all your ideas, notes, and questions in outline form.
5. Write a rough draft—flesh out the outline with full sentences and paragraphs.
6. Do more research—support your case with data via small business association contacts, annual reports, and competitors in the chosen industry.
7. Think about the numbers—develop pro forma financial statements.
8. Write a final draft—demonstrate attention to detail with accuracy and clarity.
9. Get feedback—have someone else read over your plan and offer advice.
10. Polish your plan to perfection—include a cover page, table of contents, nondisclosure form, and an executive summary containing highlights.

Employees with the right skill set and expertise can collaborate to create the business plan. Alternatively, a consultant can be hired to assist with the process. A consultant can bring expertise and professionalism to the appearance and tone of your business plan, provide informed market analysis and research assistance, and supply educated projections for a market that the entrepreneur might be unfamiliar with or have little experience analyzing.

After determining who will be working on the plan, it is useful to decide on the scope of the plan and timeframe for completion of the plan. Once the team or consultant is in place, research and analysis can begin. Internal and external assessments should be conducted and then examined. The interpretations of these assessments will be the framework of the plan and will guide goal setting and strategies for the company. Once goals and strategies are determined, a solid business plan can be formed toward fulfilling these goals.

From a management perspective, a business plan allows managers to set priorities and allocate resources effectively. It brings order and direction to an organization and provides a vision of the future that employees throughout the company can put energy into and get excited about. This shared vision and focus will benefit the company at every level and ensure that all constituents are working cooperatively and cohesively. Ideally, all employees will utilize the information from the business plan to assist in goal setting, and guide in decision making and performance assessments.

A 2005 guide by Covello and Hazegren on beginning business plans reports that a strong plan will take approximately fifty to one hundred hours to complete. From an entrepreneur's stand, that is about six months of review, study, analysis, and research. This time devoted to making the business plan is useful, since by the end, the entrepreneur is aware of most of the positive and negative aspects of the business, and has a clear idea how to market it to outsiders.

ELEMENTS OF A BUSINESS PLAN

The U.S. Small Business Administration recommends that a business plan describe four main elements of the proposed venture: an overview of the business, a marketing analysis, a financial plan, and a management plan. An executive summary and other supporting documents should also accompany the plan. These elements provide a solid starting point for a general plan, but there is no single formula to a business plan and a multitude of factors will impact the amount of content needed in a good business plan.

The executive summary is a synopsis of the entire business plan. It is critical that this summary be carefully crafted and compelling. This is the first and possibly the only information that a potential investor will read; if it is not informative enough or if it is lacking crucial data, the investor might not read beyond this summary component.

The business overview segment is a profile of the company and its primary industry. Projections, trends, and industry outlooks should be included. In this section the company describes the unique elements that make it a prime candidate for its proposed venture.

A market analysis details how the company will handle its sales and marketing strategies. This analysis includes information on the company's products or services and intended customers, and how customers will be made aware of the product or service. This section should also include a competitive analysis with a breakdown identifying Strengths, Weaknesses, Opportunities, and Threats

(SWOT) to the company and the business proposed. A plan of action should explain how the company will address, exploit, or withstand each of these eventualities.

The financial section discusses the current financial state of the company and what types of financing will be required for the proposed venture. In this area, it is appropriate to discuss the specific dollar amounts required for the business venture, the cost to maintain and sustain the venture, and projections of income, balance sheets, and cash flow. Statistics, facts, and research should support any financial projections listed. In a 2008 article, “Successful Business Plan,” Amy Tailor details the SMART model of financial analysis, which many experts watch for. According to the SMART system, the business should be able to list and explain how its goals are Specific, Measurable, Achievable, Realistic, and Timed. Specific goals should be natural to a strong business plan. Measurable goals should include current and expected data, along with systems of analysis to track changes. Achievable and realistic goals can be met within the framework of the business's assets and skills, and timed goals are set forth at the proper moment in the organization's evolution.

The management plan section should discuss the strengths, experience, achievements, and expertise of the person or team undertaking the business venture. Investors want to know that they are offering their support to a person or team qualified and capable of handling the business proposed and the funds loaned.

A complete business plan will provide evidence to the lender that the entrepreneur has performed a thorough investigation of this new business venture, because it details how the business will generate cash flow, pay for operating expenses, and service debt repayment.

The accompanying table offers several elements for inclusion in designing a business plan.

In addition to these structures, Edward Rogoff gives six main strengths every business plan should convey in his 2007 book Bankable Business Plans: Second Edition. These strengths Rogoff calls the six immutable points, the goal being to prove these points to any reader of the business plan.

Elements of a Business Plan

1. Cover sheet
2. Statement of purpose
3. Table of contents
   • The Business
     1. Description of business
     2. Marketing
     3. Competition
     4. Operating procedures
     5. Personnel
     6. Business insurance
   • Financial Data
     1. Loan applications
     2. Capital equipment and supply list
     3. Balance sheet
     4. Breakeven analysis
     5. Pro-forma income projections (profit and loss statements)
        1. Three-year summary
        2. Detail by month, first year
        3. Detail by quarters, second and third years
        4. Assumptions upon which projections were based
     6. Pro-forma cash flow
   • Supporting Documents
     1. Tax returns of principals for the last three years
     2. Personal financial statement (all banks have these forms)
     3. For franchised businesses, a copy of franchise contract and all supporting documents provided by the franchisor
     4. Copy of proposed lease or purchase agreement for building space
     5. Copy of licenses and other legal documents
     6. Copy of resumes of all principals
     7. Copies of letters of intent from suppliers, etc.

1. You are profit-oriented.
2. You are honest.
3. You are qualified.
4. You are thorough.
5. You are committed to meeting everyone's needs.
6. You are flexible.

CUSTOMIZING FOR INVESTOR TYPE

Bankers, venture capital fund managers, and business angels each look at different features of a business plan when assessing it for investment. Bankers tend to focus on the financial aspects of the plan and give little emphasis to marketing and management issues. Venture capital fund managers are typically most interested in both the marketing and the financial aspects of the plan. Business angels focus on entrepreneurial elements and “investor fit” considerations. Thus business plan writers should customize their proposals based on the audience they are trying to reach.

Bankers are interested in businesses that will be successful over the long term and entrepreneurs who will remain committed to the project as described in the business plan. When making their lending decisions, they are interested in collateral as security for the loan, and tend to support projects that are less risky. A banker's main interest is the repayment of the loan.

Venture capital fund managers invest for capital gain, and when a venture is successful, they also benefit. Likewise, if a business fails, venture capital fund managers stand to lose significantly and at much cost to the outside investors whose funds they are managing. Therefore, venture capital fund managers focus on the uniqueness of the product or service, the status of the market, and the management team's potential for success. Venture capital fund managers' main interest is growth potential and potential returns.

Business angels' interests align more closely with venture capital fund managers than with bankers. Business angels focus on how their interests match up with the entrepreneur's and how well they are able to work with the entrepreneur over the length of the project. They seek out entrepreneurs who have strong, positive qualities, such as integrity and responsibility, and with whom they feel a connection. Because the investment is personal for the business angel, he or she is interested in financial gains, but also enjoys the opportunity to participate in the venture itself. A business angel's main interest is potential returns, camaraderie with the entrepreneur(s), and personal involvement.

Steingold, in his 2007 Complete Guide to Selling a Business, says that a good business plan will aid investors in several other, more intangible ways. The strength of a strong vision for business direction can inspire interested buyers, communicating the power of the idea as well as the financial prospects. Investors who believe in the organization's goals will be much more likely to understand business models and provide financial support for endeavors. Also, Steingold believes a strong business plan gives buyers a cushion, something to rely on when they get cold feet. Negotiations can go on for weeks, and when the time lends uncertainty to the buyer's decision, they can rely on the business plan as proof the sellers know what they are doing.

RECENT TRENDS

An article by A. Gome investigates a growing trend among certain entrepreneurs to move away from the old-style business plan that contains an extended, long-term outlook. They are opting instead to use an abbreviated, shorter-term document that better fits their business strategy.

Long-range planning documents don't work as well for some entrepreneurs because of the fast-changing markets they are entering into, which renders the business plan irrelevant within months. And, the short-term nature of some ventures precludes the need for a long-term plan. It is unnecessary to have a five-year plan if the entrepreneur expects to conclude his venture within a shorter time frame.

LIVING DOCUMENTS

Replacing the traditional business plan is what is called a “living document,” typically one page in length and with a forward-looking range of one year. Goal-setting may be projected on three- to six-month timeframes, which are more easily monitored and attainable. The living document contains similar elements of a typical business plan—vision, values, objectives, methods toward reaching objectives—but abbreviated to fit on a single page. This document needs constant updating and adjusting, with ample flexibility to respond to customer and market fluctuations. Highly-tailored documents may also need to be prepared for each type of stakeholder, whether bankers, venture capital fund managers, or business angels.

RESOURCES

There are many resources for the entrepreneur looking to write a business plan. Local business organizations, public libraries, colleges and universities may offer useful workshops, seminars, or courses.

Local SBA offices or Web sites (<http://www.sba.gov>) also offer resources. The SBA has sponsored more than 200,000 loans worth more than $45 billion, making it the largest single financial backer of U.S. businesses in the country. The SBA provides free online courses, e-mail guidance, print materials, and face-to-face consultations to small business owners.

The SBA also administers the Small Business Development Center Program to provide management assistance to current and prospective small business owners. This program provides a broad-based system of assistance for the small business community by linking the resources of federal, state and local governments with the resources of the educational community and the private sector.

There are also several books and software programs that assist with creating a business plan.

SEE ALSO Entrepreneurship; Venture Capital

BIBLIOGRAPHY

Bunderson, Gaye. “Have Your Business Plan in Hand Before Seeking $$$.” Idaho Business Review 31 January 2005.

Business Plans Handbook. Farmington Hills, MI: Gale Group, Inc., 2004.

Covello, Joseph A., and Brian Hazelgren. Your First Business Plan. Sourcebooks, Inc., 2005.

Delmar, F., and S. Shane. “Does Business Planning Facilitate the Development of New Ventures?” Strategic Management Journal 24 (December 2004): 1165–1185.

Gome, A. “Plan Not to Plan.” BRW 27 (February 2005): 72–73. Lasher, William. The Perfect Business Plan Made Simple. New York, NY: Broadway Books, 2005.

Mason, Colin, and Matthew Stark. “What Do Investors Look for in a Business Plan?” International Small Business Journal 22 (June 2005): 227–248.

McKeever, Mike P. How to Write a Business Plan. Berkeley, CA: Nolo, 2007.

Office of Small Business Development Centers. U.S. Small Business Administration. Available from: http://www.sba.gov/sbdc/aboutus.html.

Pinson, Linda. Anatomy of a Business Plan: A Step-By-Step Guide to Building a Business and Securing Your Company's Future. Chicago, IL: Dearborn Trade Publishing, 2005.

Rogoff, Edward G. Bankable Business Plans: Second Edition. New York: Rowhouse Publishing, 2007.

Steingold, Fred S.The Complete Guide to Selling a Business. Berkely, CA: Nolo, 2007.

Tailor, Amy. “Successful Business Plan.” Alternative Library of Stock Market. http://alternativestocklibrary.com, 2008.

U.S. Small Business Administration. “Elements of a Business Plan.” Available from: http://www.sba.gov/starting_business/planning/writingplan.html.

BUSINESS PLAN

A business plan is a document written by an individual or group of individuals interested in launching a new business. Along with helping to determine whether or not an idea can be transformed into a functional company, a business plan is also used to secure capital and recruit executives. During the dot-com mania of the late 1990s, several analysts began to criticize the many Internet-based ventures operating without a formal business plan, as well as the business investors pouring funding into these upstarts.

A March 2000 study of 300 e-commerce businesses in California revealed that most had launched operations with no business plan in place. Those who did develop e-business plans tended to produce documents much less exhaustive than their traditional counterparts. This lack of planning began to backfire for a variety of reasons. When the Internet revolution took off, many existing brick and mortar businesses built World Wide Web sites without figuring out who it was they were targeting; as a result, traffic remained minimal and those who did visit such sites complained of poor design and limited customer service. In some cases, companies that began selling directly to consumers via the Web alienated their traditional retailers. For example, Macy's and J.C. Penney threatened to stop selling Levi brand clothing in their stores after Levi Strauss began selling its merchandise via the Web; as a result, Levi Strauss abandoned its e-commerce efforts.

In 2000, the highly publicized bursting of the dot-com bubble prompted venture capitalists to begin scrutinizing business plans, particularly those for Internet-related ventures, more closely. As a result, the business plans developed for Internet-based businesses began to resemble those created for more traditional ventures, in terms of both length and level of detail. Rather than favoring condensed 15-page plans, lenders began paying attention to more thorough documents, which numbered 25 pages or more. Although business plans continue to vary in format and style, they typically include the following information, regardless of industry.

TARGET MARKET

Most business plans cover both the existing size and the anticipated growth rate of the market they are targeting. For example, a business plan for an online discount travel service might point out that travel is the most successful segment of the online industry, and that despite the rapid demise of many dot-com businesses, analysts continue to forecast substantial growth in online travel bookings, particularly as a weak North American economy prompts travelers to search for discounted options. Business plans also quite often include descriptions of potential customers, including their gender, age, level of education, marital status, how they make purchases, and the reasons behind those purchases. When clothing retailer Lands' End began creating a business plan for Land-send.com, the firm knew that a large portion of its customer base owned a personal computer and was twice as likely to have online access than the rest of the population. A typical Lands' End shopper was between the ages of 35 and 54, with an average household income of $60,000. Nearly 88 percent had earned a college degree, and two-thirds were employed in a professional or managerial position.

Discussions of target market also provide information on the history of the market, as well as various trends within the market. While e-commerce entrepreneurs planning to target an emerging market might be unable to produce historical data, they might be able to make comparisons with related markets. Although Amazon.com founder Jeff Bezos was unable to analyze the online consumer book industry—which for all practical purposes did not exist prior to Amazon's launch—while creating his business plan, he was able to examine the traditional book industry. In fact, it was only after researching 20 different products that he believed could be sold via the Internet—including magazines, CDs, and computer software—that Bezos settled on books, guessing that this sizable market, with its wide range of purchase choices, would be well served by the electronic searching and organizing capabilities of the Web.

PRODUCTS AND SERVICES OFFERED

Along with describing exactly what it is a company will sell, business plans also explain why these products or services are more likely to sell than similar offerings by competitors. For example, travel discounter Hotwire.com could have justified in its business plan the superiority of its services to those offered by rival Priceline.com, a name-your-own-price travel service, by pointing out key differences. Online shoppers who purchase airline tickets on Hotwire.com know their dates of travel, their estimated number of layovers, and the exact purchase price before they actually complete a transaction. They also know they are getting the lowest fare possible among those listed on Hotwire. In comparison, shoppers on Priceline.com are required to commit to a purchase—if the price they request is available—before knowing the exact travel dates or approximate number of layovers. Priceline also does not alert the consumer if a price lower than the one requested is available.

MARKETING TACTICS

An explanation of how customers will be made aware of your products and services is another key feature of most business plans. Often discussed are advertising mediums—including print, television, and the Internet—as well as pricing strategies, major promotions, and any guarantees or warranties that might be used to attract customers. Priceline.com could have included in its business plan mention of its intent to use celebrity William Shattner in a flurry of television advertisements designed make Priceline a household name. Similarly, America Online's decision to give its software away for free in an effort to attract a wide base of customers is an example of the type of activity that might be included in this section of a business plan.

DISTRIBUTION

Business plans describe the channels through which customers will obtain products and services, including retail stores, catalogs, and Web sites. In the case of Amazon.com, the ease of distribution was a key concern for Bezos, who believed the small size of most books would facilitate easy shipping. Another of his decisions related to distribution was location. Liking its proximity to the warehouse of Ingram, a leading U.S. book distributor, Bezos chose Seattle, Washington, as his base of operations. According to Bezos' plans, upon receipt of an order, he could request the title or titles be shipped to his home, where he would package the order and take it to the post office. Using this process, customers would receive their books within five days of placing an order, and Bezos could ship books to all 50 states and 45 countries throughout the world, an incredibly broad market for an upstart.

COMPETITION

Analysis of competition is an essential component of most business plans. This section tends to cover the strengths and weaknesses of rivals and includes information about their market share, profitability, and pricing strategies. Prior to choosing books as Amazon's initial focus, Bezos analyzed his competition and realized that market share was distributed among many leading book publishers. In fact, industry leader Barnes & Noble held less than 12 percent of the $25 billion book retailing market. This market fragmentation, Bezos believed, left room for upstarts. He also planned to gain a competitive advantage over traditional book retailers by offering a wider selection and undercutting prices by 10 to 30 percent. Successful brick and mortar firms drawing up business plans for new online ventures might also include a discussion of how their established customer base and distribution outlets affords them an advantage over rivals only operating online.

TRADEMARKS AND LICENSES

The steps a business has taken or will take to gain protections like trademarks and licenses are also relevant to many business plans. In the case of businesses engaged or planning to engage in e-commerce, domain name registration plans may also be included.

PRODUCTION

Information about how a business will obtain what it is selling, whether it be by manufacturing it or simply purchasing it wholesale, is also important to a business plan. A discussion of production processes can cover anything from the cost and construction of needed facilities to the availability of qualified labor. Quite often, the location of a company's headquarters is based on proximity to things like needed supplies and labor pools. Many Internet-based ventures landed in California, particularly Silicon Valley, because business owners planned to tap into the technologically savvy talent base there.

MANAGEMENT

According to a June 2000 article in BusinessWeek Online, a survey of venture capitalists completed by Centurion Consulting revealed common problems with business plans. "The No. 1 problem they identified was the lack of a management team,&rquo; stated Barbara Lewis, co-owner of the business plan consultancy. "Understandably, it's hard for a new entrepreneur without the contacts or the ability to get contacts to come up with a high-powered management team. But at least they should try to find an advisory board that will help them find management-team members." Resumes of any managers or board members recruited by the time the plan is completed can be included, as well as discussion of how it is they can help the business succeed. The section might also include a listing of the desired qualifications for positions that remain vacant, an explanation of how candidates will be recruited, and an organizational chart that details chain of command and the roles that will be played by various executives.

NECESSARY FINANCING

Most business plans also set forth how much capital is needed to sustain operations for five years. According to an April 2000 issue of Tampa Bay Business Journal, "Most new businesses stumble and fail somewhere during the first and fifth year. One of the biggest stumbling blocks is not having the cash when you need it to grow your business. The better you anticipate your need for capital the less it's likely to cost. That's why its important to have a business plan." Along with the dollar amount needed, most business plans detail plans for securing the needed funding, such as selling off a portion of the company to private investors or conducting an IPO.

FINANCIAL PROJECTIONS

Many analysts argue that this section is the most consequential portion of a business plan, particularly in terms of securing funding. In short, lenders and investors want to know what kind of revenues a business will generate and how soon it will be profitable. While many dot-com investors in the late 1990s appeared willing to wait several years for profitability, an October 2001 article in Inc. stated "the business plan that impresses investors today is a very different beast from the one that pulled in the dough two short years ago; the path to profitability has to be both clear and short—a year to 18 months." Detailed profit and loss statements, balance sheets, and cash flow projections for the first five years of operations are usually included in an appendix.

EXECUTIVE SUMMARY

Although it appears at the beginning of a business plan, most business plan experts recommend that entrepreneurs write the two-or three-page executive summary, perhaps an even more important business plan component than the financial projections, last. The executive summary gives readers a thumbnail sketch of the contents of the entire plan. It briefly describes the type of business detailed in the plan, as well as what need it is that the business is meeting. The more concise and compelling the executive summary, the more likely readers will be to continue examining the remainder of the plan.

FURTHER READING:

Barker, Emily. "The Bullet-Proof Business Plan." Inc. October 1, 2001.

Belgum, Deborah. "Study Finds Few E-Commerce Firms Have Real Business Plan." Los Angeles Business Journal. March 6, 2000, 4.

Hawk, Ken. "10 Weeks to a Business Plan." Catalog Age. July 1997, 189.

Klein, Karen E. "Building Your Business Plan: Where to Begin, Part 1." BusinessWeek Online. June 20, 2000. Available from www.businessweek.com.

——. "Building Your Business Plan: Where to Begin, Part 2." BusinessWeek Online. June 22, 2000. Available from www.businessweek.com.

Regan, Keith. "New Rules for Writing an E-Business Plan." E-Commerce Times. October 30, 2001. Available from www.ecommercetimes.com.

Simon, Geoffrey. "Anticipate Cash Needs Through Business Plan Development." Tampa Bay Business Journal. April 14, 2000.

SEE ALSO: Financing, Securing

Business Planning

Business planning in the modern sense has a fairly long history. Henry Mintzberg, in The Rise and Fall of Strategic Planning, pointed out that business planning with modern characteristics (10-year horizon, five-year reviews) was already practiced in the mining industry in France in the 19th century. The current form took hold in the U.S. in the 1950s as an extension of budgeting processes. It became a very major corporate activity and continues so to this day.

With the twenty-first century underway, corporate planning (also known as long-range planning and strategic planning) may become transformed beyond recognition. Resistance to it became visible in the early 1990s. Peter Drucker, the renowned management guru, wrote in 1992 in The Wall Street Journal as follows: "Uncertainty—in the economy, society, politics—has become so great as to render futile, if not counterproductive, the kind of planning most companies still practice: forecasting based on probabilities." Since then uncertainty has increased (terrorism, potential problems of global warming, a looming shortage of hydrocarbon fuels, and waves of epidemics); the electronics age has vastly increased the speed of communications and the Internet has created a vast, global theater of activity. The chorus of critics has also grown louder. Despite these signs of a changing "planning culture," formal planning is still practiced in many if not all major corporations.

WHAT IS BUSINESS PLANNING?

A corporate plan may be a simple statement of objectives, including indications of methods to be used to achieve them—or it may be a very extensive planning process in which every element of the corporation routinely takes part: a formal planning cycle.

An example of the first category might be a simple statement such as the following: "Increase market share by 30 percent within five years by acquiring and integrating two of our smaller competitors, increasing our own sales by exploiting the cost advantages of the triploid valve, and divesting our holdings in toys and children's furniture by spinning them off."

Much more common are formal plans built from the bottom-up by the synthesis of projections and plans produced by the operating element (divisions, wholly-owned subsidiaries). In these cases the corporate expression of objectives will tend to be more abstract and financial, e.g., a projected growth rate for revenues, profits, and return on investment. Communication of such financial goals to operating elements may kick off the process. Each business manager then attempts to make his or her contribution to the corporate objective.

The fundamental elements of formal planning are 1) corporate goals to be met; 2) projections of earnings, costs, and returns; 3) actions to be carried out in light of opportunities and barriers (e.g., competition); and 4) a fixed time horizon. In most corporate environments, plans are for the next twelve months but will have projections out five, 10, or even 15 years. Time horizons in retail industries are typically much shorter: a long-range plan may be a year; the operational plan may be for the next quarter. The corporate budget, including not just cost projections but every aspect of future financial outcomes, is the skeletal framework of the corporate plan. The numbers are used to measure the performance of operational managers; the stock price is used as the way to judge top management.

The complex process is by far the most common. It has become deeply institutionalized. The planning cycle is usually referred to tongue-in-cheek as the "silly season." In many corporations a substantial bureaucratic structure ("the planning staff") has developed; it runs the exercise, coordinates inputs from operating elements, and synthesizes the evolving plan in successive waves. A major draw-back of formal planning is that operating units benefit by promising as little as possible to make it easier to meet plan. Top management objectives are to incentivize operating units to stretch themselves as much as possible. Conflicts are inherent in the process. In recent decades, accelerating change has made it ever more difficult accurately to predict what will happen six months out, much less a year out. Planning structures have grown very large, ritualized, and rigid. Information systems have improved to such an extent that constant adjustment to the environment is somewhat easier. "Rolling" budgets are becoming more popular and resistance to fixed long-range budgets is stiffening. All of these factors are playing a role in the foreseeable transformation of business planning in the years ahead.

PROS AND CONS OF BUSINESS PLANNING

As Henry Mintzberg pointed out in his 1994 book, nothing ever really happens without planning; we cannot even make a sandwich without "looking ahead" a little. He wrote, concerning this subject, that as far back as the late 1960s the business community could no longer come up with a single coherent definition of what "planning" and "long-range forecasting" meant. These phrases had taken on special meanings in every corporation.

It appears, therefore, that business planning, in the modern sense, as described above, is a technique of management in which routine planning (which goes with any kind of activity) is carried out consciously, formally, and with the deliberate projection of measurable outcomes based on a fixed future date.

At the time when this management technique came into widespread use (the 1950s and 1960s), it was well-adapted to business conditions generally. In many industries long-time horizons are required to build new capacity (e.g., the process industries like power, chemicals, and petroleum); in such operations long-range planning remains unquestionably superior to "doing what comes naturally." Even in industries where change has accelerated, a periodic, formal look ahead provides valuable insights. Well-conceived future goals always clarify current decisions. The principal benefit of formal business planning is therefore unlikely to be changed by changes in the environment. Looking ahead is good; looking ahead with concentration and some effort to understand a wide variety of forces that impinge upon our actions is even better. What is likely to change is the frequency with which this will be done and the methods used to arrive at the plans.

The primary negatives associated with modern business planning (the annual cycle), arise chiefly from three factors: 1) the bureaucratization of the process and the resulting high costs associated with it, 2) uncertainty brought about by rapid change, and 3) performance evaluation issues which, many claim, stifle innovation and result in unproductive gamesmanship. To this list some add a fourth issue: namely that the planning process poorly matches the quarterly stock market cycle. Such observers advocate a 3-month rolling planning cycle which matches plans to quarterly reports; such reports influence stock analysts who, in turn, influence stock price.

Business plan contents will be discussed elsewhere in this volume (see Business Plan.) What follows here is a discussion of two of the problem areas in modern planning that will likely undergo change.

FORECASTING UNCERTAINTIES

Forecasting the future is the very essence of modern business planning. It provides the measurements that justify the planning effort. The operating manager planning for his or her unit makes the best possible projections about future costs, sales, capital needs, and returns. Some of these will be relatively easy to document. Others will be mere guesses. But after a plan has been approved, these forecasts tend to be transformed into something much more solid than they actually are: they turn into numbers which will determine promotions, bonuses, even the future of a job.

In times of rapid change, ability to forecast far ahead becomes more difficult. Pressures increase, therefore, to shorten the time horizon. An unforeseen flu epidemic or terrorist action may severely restrict travel, soften demand, and disrupt supplies. In the 1960s a competing retailer may have had to find and furnish retail outlets and establish warehouse distribution sites; in the 2000s he or she may enter the market suddenly with Internet distribution and a flurry of publicity. In a global market where much specialized labor is outsourced, international conflicts, well beyond a manager's control, can instantly put labor resources out of reach without much warning. Not surprisingly, therefore, pressures are now mounting to replace long-range planning with rolling budgets adjusted monthly or quarterly after brief assessments of changes in the environment.

PERFORMANCE TIED TO ANNUAL PLANS

In today's ever more uncertain business environment, the concepts of trust, empowerment, flexibility, and small, innovative front-line teams capable of rapid adaptation have become popular approaches for gaining a competitive edge. The Planning Group, a major management advisory group, has established the Beyond Budgeting Round Table (BBRT) of which 29 major corporations are currently members (2006). David Marginson and Stuart Ogden recently wrote in Financial Management, (UK) citing BBRT sources, that the necessary conditions of trust and empowerment in today's organizations "are not possible with budgets still in place, because the entire system perpetuates central command and control." Innovation is vital for economic survival. But "budgeting stifles trust and empowerment, according to its critics, which in turn stifles innovation."

Rapid changes in plans and flexible responses to competitive pressure—or to take advantage of suddenly appearing opportunities—are very difficult if individual managers' performances are measured based on formal plans. Long-range plans, out of time-phase with the rhythm of current events, are viewed as obsolete in today's environment. In addition to this emerging factual situation, gaming the system by carefully adjusting projections so that they can be met—in order to achieve bonuses, stock-options, or other benefits—has weakened the originally rational structure of formal business planning.

SUMMARY

Business planning, in some form, is here to stay. Highly evolved and complex planning cycles are in use in most corporations. In many sectors which are somewhat immune to rapid changes in the business environment—for structural reasons, above all, such as the long lead time necessary to plan and to build a power plant, for instance—the established form of planning (the annual cycle) will continue to be used as a major management technique. Elsewhere signs are present that business planning will undergo a radical change soon. The annual cycle is already being abandoned by some. The new style of planning will most likely introduce much shorter time horizons, more fluid budgetary methods, and restructure managerial rewards to provide incentives for flexibility and innovation.

see also Budgets and Budgeting; Strategy

BIBLIOGRAPHY

Ackoff, R. L. A Concept of Corporate Planning. Wiley-Interscience. 1969.

Drucker, Peter. "Planning for Uncertainty." Wall Street Journal 22 July 1992.

Hope, Jeremy and Robin Fraser. Beyond Budgeting. Harvard Business School Press, 11 April 2003.

Marginson, David and Stuart Ogden. "Budgeting and Innovation: Do budgets stifle creativity?" Financial Management (UK). April 2005.

Mintzberg, Henry. The Rise and Fall of Strategic Planning. The Free Press, 1994.

                              Hillstrom, Northern Lights

                                updated by Magee, ECDI

Business Plan

Most business plans produced each year are prepared by operating elements of corporations. These plans contribute to a broader corporate strategic or long-range plan which may itself never be widely disseminated. Plans may be elaborate and detailed or may be little more than projections of revenues and estimates of costs ("the budget").

Management gurus and management writers strongly urge every business to prepare an annual business plan, but small businesses rarely do so except under certain circumstances. By their very nature, small businesses tend to be in touch with their markets. Their two or three principals interact constantly; they are always, in a sense, planning. And small businesses have fewer resources to expend on formalities. But small businesses also prepare plans when selling the business or when they seek funding—be that at start-up or when trying to obtain second-tier financing. These plans are, if anything, more complete than annual corporate plans. In addition to the usual content, they will contain a thorough description of the business (rarely included in corporate plans) and also argue that the management team, which is presented in the plan complete with resumes of individuals, is well-suited to achieve the goals of the enterprise.

Aside from these differences, all business plans have the same general content. They discuss the environment, they formulate objectives based on changes in the environment, they lay out alternative actions and the chosen strategy, they estimate outcomes by forecasting revenues, costs, and returns; they specify capital expenditures that will be necessary; finally, they lay out benchmarks over time to measure progress toward achievement of the goals.

It is well to remember that most business plans are written by someone seeking funding—from top management, a bank, the Small Business Administration, a rich individual, or a venture capitalist. Business plans therefore, are documents intended to persuade. For this reason, plans focus on important issues and leave out what might be called "boiler plate." The boiler plate is present, but usually only in the budget details.

PLAN DEVELOPMENT

Environmental Assessment

Business planning, like all planning, is an attempt to deal with change. Elements of the business likely to operate pretty much as they did the year before do not need special focus.

Business planning therefore begins with an assessment of the environment: the market itself and trends in that market, the competition the business faces and what competitors might do; changes in the supply chain on which the business depends, including technology; changes in the distribution channel by means of which the business sends its product to the customer; and finally changes in the business itself, including its products, its labor, housing, and so on. Sometimes changes in the legal structure are an important issue. The focus of the planning is on change and how change produces opportunities or threats. The environmental assessment results in a few important issues that should be addressed by the plan. Change is a constant; some issues, therefore, should always emerge.

A new business intending to enter a market will, of course, focus on features of the market poorly served by existing suppliers, features of the company's own products that differentiate it, innovations in distribution it intends to exploit, and so on. In such a situation, an important part of the environmental assessment is the business itself—and how it will fit into the environment.

Formulating Objectives

The "issues" that emerge from the environmental assessment are next translated into objectives. A nursery might discover that its revenues are threatened by the repaving of the urban artery on which it sits. The producer of an attractive composting system may discover that price hikes to its popular system will be resisted by its wholesalers. The nursery may set as its objectives at minimum matching its last year's sales. The compost system producer may plan to roll back its price hike.

Broad objectives may be imposed from above. The corporate goal, for instance, may be to increase return on investment (ROI) by minimally 2 percent. This case illustrates the manner in which the "environment" may be an internal factor—namely the parent corporation itself.

Evaluating Alternatives and Making Choices

Once the environment has been evaluated and objectives have been formulated, alternative actions will be considered to reach the objective. The nursery, for instance, may consider substantially increasing advertising, providing deep discounts to attract customers despite traffic delays, or setting up auxiliary "tent sales" in parking lots, by special arrangements, to give its customers easier access elsewhere. The compost system producer may look at cutting costs through reengineering, changed materials, or a new painting system. The corporate element reaching for higher ROI may look at its inventory levels and seek ways to reduce these by "just in time" procurement and/or by speeding up collection of payables: both of which would lift ROI.

All such choices imply variable costs and benefits that must be calculated and compared; they have further intangible costs which have to be assessed. The optimum alternatives are selected for implementation.

In the very nature of things, alternative actions may fall into any of the known categories of business and often into several at the same time: marketing, sales, distribution, warehousing, engineering, patents, production, procurement, distribution, finance, law, personnel, and so on. Manuals and books on the subject tend to focus on major activities, but in practice everything is always on the table.

Budgeting and Implementation

By the time actions to be taken have been decided, the basic planning is virtually done. But business planning tends to be an iterative activity. In the next phase, budgeting, plans are more fully developed. All costs are calculated and revenue forecasts are refined. Quite frequently, in this process, new discoveries are made. If necessary, the process is repeated and actions are modified. Such might be the case, for instance, if the compost system producer discovers that its new painting system will take much longer to install and therefore it must use some other route to cut costs.

Benchmarking

The final step in the business plan is to establish benchmarks by which achievement of the objectives can be measured—internally as well as by the source of funding. Benchmarks are often a combination of financial goals by quarter and particular achievements such as, for instance, leasing parking lot space for the nursery's "tent sales."

BUSINESS PLANS AND PLANNING DOCUMENTS

Every business operates under a plan: the absence of a plan is itself a kind of plan. In the small business environment plans tend to be informal: they arise from periodic discussions between the principals and are understood as a kind of consensus in which all individuals involved will be aware of the important issues and expectations. Active planning tends to take place when change is perceived and "something must be done." The transition to formal planning tends to evolve with increasing size—when management realizes that formal communication of intentions will be beneficial and necessary to obtain everyone's cooperation. At first such plans may be in the form of memoranda with the subject "The Year Ahead." They may take the form of a Mission Statement that, in part, specifies goals and broadly outlines the means to their achievement. Later such plans will become ever more structured.

Planning documents come in two forms. One is the "business plan" entrepreneurs use to obtain funding. The other is the "annual plan" that business elements submit to the next level of management for approval. Annual plans may take the form of budget requests with minimal descriptive text or they may be structured documents with "required" rubrics such as "competitive analysis" and "human resources." In many corporations, the planning process is highly structured; planning staff may distribute spreadsheet templates in which budgets must be elaborated and outlines which must be filled in with appropriate text.

The ideal business plan, whether written or merely "understood" will be 1) comprehensive, covering all relevant aspects of the business; 2) structured around changes in the internal and external environment; 3) realistic rather than promotional or defensive in nature; thus it will attempt to document facts; 4) analytical in that it presents alternatives each of which is weighted; and 5) within the competence of the planner to implement and control.

BIBLIOGRAPHY

Abrams, Rhonda. The Successful Business Plan: Secretes & Strategies. The Planning Shop. 2003.

Belkin, Lisa. "The Art of Making a Plan and Making It Happen." New York Times. 18 December 2000.

De George, Richard T. "A History of Business Ethics." Paper presented at the Third Biennial Global Business Ethics Conference, Markkula Center for Applied Ethics. 19 February 2005.

Jones, Rebecca. "Business Plans: Roadmaps for Growth and Success." Information Outlook. December 2000.

McKeever, Mike How To Write A Business Plan. Nolo. 1 January 2005.

"Your Business Plan." Phoenix Business Journal. 29 September 2000.

                              Hillstrom, Northern Lights

                                updated by Magee, ECDI

Business Plan Template

Business Plan Template

USING THIS TEMPLATE

A business plan carefully spells out a company's projected course of action over a period of time, usually the first two to three years after the start-up. In addition, banks, lenders, and other investors examine the information and financial documentation before deciding whether or not to finance a new business venture. Therefore, a business plan is an essential tool in obtaining financing and should describe the business itself in detail as well as all important factors influencing the company, including the market, industry, competition, operations and management policies, problem solving strategies, financial resources and needs, and other vital information. The plan enables the business owner to anticipate costs, plan for difficulties, and take advantage of opportunities, as well as design and implement strategies that keep the company running as smoothly as possible.

This template has been provided as a model to help you construct your own business plan. Please keep in mind that there is no single acceptable format for a business plan, and that this template is in no way comprehensive, but serves as an example.

The business plans provided in this section are fictional and have been used by small business agencies as models for clients to use in compiling their own business plans.

GENERIC BUSINESS PLAN

Main headings included below are topics that should be covered in a comprehensive business plan. They include:

Business Summary

Purpose

Provides a brief overview of your business, succinctly highlighting the main ideas of your plan.

Includes

• Name and Type of Business
• Description of Product/Service
• Business History and Development
• Location
• Market
• Competition
• Management
• Financial Information
• Business Strengths and Weaknesses
• Business Growth

Table of Contents

Purpose

Organized in an Outline Format, the Table of Contents illustrates the selection and arrangement of information contained in your plan.

Includes

• Topic Headings and Subheadings
• Page Number References

Business History and Industry Outlook

Purpose

Examines the conception and subsequent development of your business within an industry specific context.

Includes

• Start-up Information
• Owner/Key Personnel Experience
• Location
• Development Problems and Solutions
• Investment/Funding Information
• Future Plans and Goals
• Market Trends and Statistics
• Major Competitors
• Product/Service Advantages
• National, Regional, and Local Economic Impact

Product/Service

Purpose

Introduces, defines, and details the product and/or service that inspired the information of your business.

Includes

• Unique Features
• Niche Served
• Market Comparison
• Stage of Product/Service Development
• Production
• Facilities, Equipment, and Labor
• Financial Requirements
• Product/Service Life Cycle
• Future Growth

Market Examination

Purpose

Assessment of product/service applications in relation to consumer buying cycles.

Includes

• Target Market
• Consumer Buying Habits
• Product/Service Applications
• Consumer Reactions
• Market Factors and Trends
• Penetration of the Market
• Market Share
• Research and Studies
• Cost
• Sales Volume and Goals

Competition

Purpose

Analysis of Competitors in the Marketplace.

Includes

• Competitor Information
• Product/Service Comparison
• Market Niche
• Product/Service Strengths and Weaknesses
• Future Product/Service Development

Marketing

Purpose

Identifies promotion and sales strategies for your product/service.

Includes

• Product/Service Sales Appeal
• Special and Unique Features
• Identification of Customers
• Sales and Marketing Staff
• Sales Cycles
• Type of Advertising/Promotion
• Pricing
• Competition
• Customer Services

Operations

Purpose

Traces product/service development from production/inception to the market environment.

Includes

• Cost Effective Production Methods
• Facility
• Location
• Equipment
• Labor
• Future Expansion

Administration and Management

Purpose

Offers a statement of your management philosophy with an in-depth focus on processes and procedures.

Includes

• Management Philosophy
• Structure of Organization
• Reporting System
• Methods of Communication
• Employee Skills and Training
• Employee Needs and Compensation
• Work Environment
• Management Policies and Procedures
• Roles and Responsibilities

Key Personnel

Purpose

Describes the unique backgrounds of principle employees involved in business.

Includes

• Owner(s)/Employee Education and Experience
• Positions and Roles
• Benefits and Salary
• Duties and Responsibilities
• Objectives and Goals

Potential Problems and Solutions

Purpose

Discussion of problem solving strategies that change issues into opportunities.

Includes

• Risks
• Litigation
• Future Competition
• Economic Impact
• Problem Solving Skills

Financial Information

Purpose

Secures needed funding and assistance through worksheets and projections detailing financial plans, methods of repayment, and future growth opportunities.

Includes

• Financial Statements
• Bank Loans
• Methods of Repayment
• Tax Returns
• Start-up Costs
• Projected Income (3 years)
• Projected Cash Flow (3 Years)
• Projected Balance Statements (3 years)

Appendices

Purpose

Supporting documents used to enhance your business proposal.

Includes

• Photographs of product, equipment, facilities, etc.
• Copyright/Trademark Documents
• Legal Agreements
• Marketing Materials
• Research and or Studies
• Operation Schedules
• Organizational Charts
• Job Descriptions
• Resumes
• Additional Financial Documentation

Business Plan Template

USING THIS TEMPLATE

GENERIC BUSINESS PLAN

USING THIS TEMPLATE

A business plan carefully spells out a company's projected course of action over a period of time, usually the first two to three years after the start-up. In addition, banks, lenders, and other investors examine the information and financial documentation before deciding whether or not to finance a new business venture. Therefore, a business plan is an essential tool in obtaining financing and should describe the business itself in detail as well as all important factors influencing the company, including the market, industry, competition, operations and management policies, problem solving strategies, financial resources and needs, and other vital information. The plan enables the business owner to anticipate costs, plan for difficulties, and take advantage of opportunities, as well as design and implement strategies that keep the company running as smoothly as possible.

This template has been provided as a model to help you construct your own business plan. Please keep in mind that there is no single acceptable format for a business plan, and that this template is in no way comprehensive, but serves as an example.

The business plans provided in this section are fictional and have been used by small business agencies as models for clients to use in compiling their own business plans.

GENERIC BUSINESS PLAN

Main headings included below are topics that should be covered in a comprehensive business plan. They include:

Business Summary

Purpose

Provides a brief overview of your business, succinctly highlighting the main ideas of your plan.

Includes

• Name and Type of Business
• Description of Product/Service
• Business History and Development
• Location
• Market
• Competition
• Management
• Financial Information
• Business Strengths and Weaknesses
• Business Growth

Table of Contents

Purpose

Organized in an Outline Format, the Table of Contents illustrates the selection and arrangement of information contained in your plan.

Includes

• Topic Headings and Subheadings
• Page Number References

Business History and Industry Outlook

Purpose

Examines the conception and subsequent development of your business within an industry specific context.

Includes

• Start-up Information
• Owner/Key Personnel Experience
• Location
• Development Problems and Solutions
• Investment/Funding Information
• Future Plans and Goals
• Market Trends and Statistics
• Major Competitors
• Product/Service Advantages
• National, Regional, and Local Economic Impact

Product/Service

Purpose

Introduces, defines, and details the product and/or service that inspired the information of your business.

Includes

• Unique Features
• Niche Served
• Market Comparison
• Stage of Product/Service Development
• Production
• Facilities, Equipment, and Labor
• Financial Requirements
• Product/Service Life Cycle
• Future Growth

Market Examination

Purpose

Assessment of product/service applications in relation to consumer buying cycles.

Includes

• Target Market
• Consumer Buying Habits
• Product/Service Applications
• Consumer Reactions
• Market Factors and Trends
• Penetration of the Market
• Market Share
• Research and Studies
• Cost
• Sales Volume and Goals

Competition

Purpose

Analysis of Competitors in the Marketplace.

Includes

• Competitor Information
• Product/Service Comparison
• Market Niche
• Product/Service Strengths and Weaknesses
• Future Product/Service Development

Marketing

Purpose

Identifies promotion and sales strategies for your product/service.

Includes

• Product/Service Sales Appeal
• Special and Unique Features
• Identification of Customers
• Sales and Marketing Staff
• Sales Cycles
• Type of Advertising/Promotion
• Pricing
• Competition
• Customer Services

Operations

Purpose

Traces product/service development from production/inception to the market environment.

Includes

• Cost Effective Production Methods
• Facility
• Location
• Equipment
• Labor
• Future Expansion

Administration and Management

Purpose

Offers a statement of your management philosophy with an in-depth focus on processes and procedures.

Includes

• Management Philosophy
• Structure of Organization
• Reporting System
• Methods of Communication
• Employee Skills and Training
• Employee Needs and Compensation
• Work Environment
• Management Policies and Procedures
• Roles and Responsibilities

Key Personnel

Purpose

Describes the unique backgrounds of principle employees involved in business.

Includes

• Owner(s)/Employee Education and Experience
• Positions and Roles
• Benefits and Salary
• Duties and Responsibilities
• Objectives and Goals

Potential Problems and Solutions

Purpose

Discussion of problem solving strategies that change issues into opportunities.

Includes

• Risks
• Litigation
• Future Competition
• Economic Impact
• Problem Solving Skills

Financial Information

Purpose

Secures needed funding and assistance through worksheets and projections detailing financial plans, methods of repayment, and future growth opportunities.

Includes

• Financial Statements
• Bank Loans
• Methods of Repayment
• Tax Returns
• Start-up Costs
• Projected Income (3 years)
• Projected Cash Flow (3 Years)
• Projected Balance Statements (3 years)

Appendices

Purpose

Supporting documents used to enhance your business proposal.

Includes

• Photographs of product, equipment, facilities, etc.
• Copyright/Trademark Documents
• Legal Agreements
• Marketing Materials
• Research and or Studies
• Operation Schedules
• Organizational Charts
• Job Descriptions
• Resumes
• Additional Financial Documentation

Business Plan Template

USING THIS TEMPLATE

GENERIC BUSINESS PLAN

USING THIS TEMPLATE

A business plan carefully spells out a company’s projected course of action over a period of time, usually the first two to three years after the start-up. In addition, banks, lenders, and other investors examine the information and financial documentation before deciding whether or not to finance a new business venture. Therefore, a business plan is an essential tool in obtaining financing and should describe the business itself in detail as well as all important factors influencing the company, including the market, industry, competition, operations and management policies, problem solving strategies, financial resources and needs, and other vital information. The plan enables the business owner to anticipate costs, plan for difficulties, and take advantage of opportunities, as well as design and implement strategies that keep the company running as smoothly as possible.

This template has been provided as a model to help you construct your own business plan. Please keep in mind that there is no single acceptable format for a business plan, and that this template is in no way comprehensive, but serves as an example.

The business plans provided in this section are fictional and have been used by small business agencies as models for clients to use in compiling their own business plans.

GENERIC BUSINESS PLAN

Main headings included below are topics that should be covered in a comprehensive business plan. They include:

Business Summary

Purpose

Provides a brief overview of your business, succinctly highlighting the main ideas of your plan.

Includes

• Name and Type of Business
• Description of Product/Service
• Business History and Development
• Location
• Market
• Competition
• Management
• Financial Information
• Business Strengths and Weaknesses
• Business Growth

Table of Contents

Purpose

Organized in an Outline Format, the Table of Contents illustrates the selection and arrangement of information contained in your plan.

Includes

• Topic Headings and Subheadings
• Page Number References

Business History and Industry Outlook

Purpose

Examines the conception and subsequent development of your business within an industry specific context.

Includes

• Start-up Information
• Owner/Key Personnel Experience
• Location
• Development Problems and Solutions
• Investment/Funding Information
• Future Plans and Goals
• Market Trends and Statistics
• Major Competitors
• Product/Service Advantages
• National, Regional, and Local Economic Impact

Product/Service

Purpose

Introduces, defines, and details the product and/or service that inspired the information of your business.

Includes

• Unique Features
• Niche Served
• Market Comparison
• Stage of Product/Service Development
• Production
• Facilities, Equipment, and Labor
• Financial Requirements
• Product/Service Life Cycle
• Future Growth

Market Examination

Purpose

Assessment of product/service applications in relation to consumer buying cycles.

Includes

• Target Market
• Consumer Buying Habits
• Product/Service Applications
• Consumer Reactions
• Market Factors and Trends
• Penetration of the Market
• Market Share
• Research and Studies
• Cost
• Sales Volume and Goals

Competition

Purpose

Analysis of Competitors in the Marketplace.

Includes

• Competitor Information
• Product/Service Comparison
• Market Niche
• Product/Service Strengths and Weaknesses
• Future Product/Service Development

Marketing

Purpose

Identifies promotion and sales strategies for your product/service.

Includes

• Product/Service Sales Appeal
• Special and Unique Features
• Identification of Customers
• Sales and Marketing Staff
• Sales Cycles
• Type of Advertising/Promotion
• Pricing
• Competition
• Customer Services

Operations

Purpose

Traces product/service development from production/inception to the market environment.

Includes

• Cost Effective Production Methods
• Facility
• Location
• Equipment
• Labor
• Future Expansion

Administration and Management

Purpose

Offers a statement of your management philosophy with an in-depth focus on processes and procedures.

Includes

• Management Philosophy
• Structure of Organization
• Reporting System
• Methods of Communication
• Employee Skills and Training
• Employee Needs and Compensation
• Work Environment
• Management Policies and Procedures
• Roles and Responsibilities

Key Personnel

Purpose

Describes the unique backgrounds of principle employees involved in business.

Includes

• Owner(s)/Employee Education and Experience
• Positions and Roles
• Benefits and Salary
• Duties and Responsibilities
• Objectives and Goals

Potential Problems and Solutions

Purpose

Discussion of problem solving strategies that change issues into opportunities.

Includes

• Risks
• Litigation
• Future Competition
• Economic Impact
• Problem Solving Skills

Financial Information

Purpose

Secures needed funding and assistance through worksheets and projections detailing financial plans, methods of repayment, and future growth opportunities.

Includes

• Financial Statements
• Bank Loans
• Methods of Repayment
• Tax Returns
• Start-up Costs
• Projected Income (3 years)
• Projected Cash Flow (3 years)
• Projected Balance Statements (3 years)

Appendices

Purpose

Supporting documents used to enhance your business proposal.

Includes

• Photographs of product, equipment, facilities, etc.
• Copyright/Trademark Documents
• Legal Agreements
• Marketing Materials
• Research and or Studies
• Operation Schedules
• Organizational Charts
• Job Descriptions
• Resumes
• Additional Financial Documentation