Business Planning

Every business needs a plan; preferably written and regularly updated.

There is no shortage of business plan templates available, each with a slightly different bent. My preferable business plan is to use one that is driven by data. Data is what is going to help your plan be understood and seen as viable by those who are most important to you at the early part of the process, namely bankers, investors and realtors.

As great as your idea may be, as brilliant as your business sense may be, as wonderful as a person you may be – if your numbers don’t work, no one is going to help you build your business. Period.

Here is an outline, and identification of key questions that every entrepreneur should ask themselves before they start to write their business plan. The business plan itself should answer the questions:

  1. Executive Summary

    1. Wait until you have completed the assessment portions of your plan before preparing this section.
    2. No more than two (2) pages in length.
    3. First paragraph should include overview of your compelling proposition.
    4. Remainder of this section should summarize (without all of the supporting data that is contained in the main body of the plan) key conclusions, primarily market and financial.
    5. Remember – Needs to contain enough convincing information that a third person reader is compelled to read more of the plan.
  1. Description of Business – visualize your business and how you want it to be seen by your target markets.
    1. Compelling proposition – what and why?
    2. Who will be (are) your key customers, by group – three (3) to four (4) target markets?
    3. Where – bricks and mortar, on-line, combination of the two (2)?
  1. Organization and Licensing
    1. Ownership structures
    2. Taxpayer ID number
    3. Licensing
      1. Business license – everybody needs one
      2. Other licenses – depends on industry
  1. Market Analysis
    1. Define target markets.
    2. Project size of target market – annual for next five (5) years.
    3. Estimate your market capture rates, and justify.
    4. Remember, there are two (2) categories of markets – latent demand, and created demand. We will unpack this is a later post.
    5. Who are your key competitors (top 3-5), and what are you doing/going to do that will enable you to achieve market capture rates.
  2. Revenue ($)
    1. You have determined your compelling proposition, business structure, and who is going to purchase your products/services.
    2. Now, those projections need to be converted to revenue, which will require you to determine pricing levels.
    3. However, before you can project revenue, you need to determine what actions you are going to take to get your target markets to part with their money. This requires three (3) sub-plans:
      1. Marketing – built on a branding platform
      2. Salesmanship
      3. Customer service

Each has a definitive role to play is maximizing revenue:

  1. Marketing – create and maintain an image (up to you to create) of your business in the eyes of your target markets.
  2. Salesmanship – actions taken to seal a deal.
  3. Customer service – actions taken to keep customers coming back, and referring your business to others.
  1. Management and Operations (often referred to as corporate services)
    1. Organizational structure (the old org. chart, or its’ equivalent)
    2. Staff – key positions, job descriptions
    3. IT
    4. Facility(ies)
  1. Operations – Finance
    1. Revenue projected quarterly for years one (1) and two (2); annually for years three (3) – five (5).
    2. Operating expenses, projected for same time periods as revenue, down to chart of accounts detail. (Note: number of expense accounts should not exceed 15’ish.)
    3. Combine revenue and expense projections into an operating income statement.
    4. Not yet ready to integrate depreciation, interest and taxes. That data will be input later.
  1. Financing
    1. Estimate of capital costs to open or expand the business.
    2. Source of these capital funds; i.e., personal equity, investors, debt.
    3. Terms on capital funds.
    4. Depreciation
    5. Integrate above into operating income statement, creating a business pro forma income statement.
    6. Estimate income taxes based on ownership structure.
  1. Pro Forma Financial Reports
    1. Income statement
    2. Balance sheet
    3. Cash flow statement
  1. Implementation Plan – map what needs to be done and when


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