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1995-03-06
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386 lines
HOW TO PREPARE A BUSINESS PLAN
THAT GUARANTEES BIG PROFITS...
Success in business comes as a result of planning. You have
to have a detailed, written plan that shows you what the ultimate
goal is, the reason for the goal, and each milestone that must be
passed in order to reach your goal.
A business plan is a written definition of, and an operational
plan for achieving your goal. You need a complete business tool in
order to define your basic product, income objectives and specific
operating procedures. YOU HAVE TO HAVE A BUSINESS PLAN to attract
investors, obtain financing and hold onto the confidence of your
creditors, particularly in times of cash flow shortages - in this
instance, the amount of money you have on hand compared with the
expenses that must be met...
Aside from an overall directional policy for the production,
sales efforts and profit goals of your product - your basic
"travel guide" to business success - the most important purpose
your business plan will serve, will be the basis or foundation of
any financial proposals you submit. Many entrepreneurs are under
the mistaken impression that a business plan is the same as a
financial proposal, or that a financial proposal constitutes a
business plan. This is just a misunderstanding of the uses of
these two separate and different business success aids.
The business plan is a long range "map" to guide your business
to the goal you've set for it. This plan details the what, why,
where, how and when, of your business - the success planning of
your company.
Your financial proposal is a request for money based upon your
business plan - your business history and objectives.
Understand the differences. They are closely related, but
they are not interchangeable.
Writing and putting together a "winning" business plan takes
study, research and time, so don't try to do it all in just one or
two days.
The easiest way is to start with a loose leaf notebook, plenty
of paper, pencils, pencil sharpener, and several erasers. Once
you get you mind "in gear" and begin thinking about your business
plan, "10,000 thoughts and ideas per minute" will begin racing
through your mind... So, it's a good idea when you aren't
actually working on your business plan, to carry a pocket notebook
and jot down those business ideas as they come to you - ideas for
sales promotion, recruiting distributors, and any other thoughts
on how to operate and/or build your business.
Later, when you're actually working on your business plan, you
can take out this "idea notebook" - evaluate your ideas, rework
them, refine them, and integrate them into the overall "big
picture" of your business plan.
The best business plans for even the smallest businesses run
25 to 30 pages or more, so you'll need to "title" each page and
arrange the different aspects of your business plan into
"chapters." The format should pretty much run as follows:
Title Page
Statement of Purpose
Table of Contents
Business Description
Market Analysis
Competition
Business Location
Management
Current Financial Records
Explanation of Plans For Growth
Projected Profit & Loss/Operating Figures
Explanation of Financing for Growth Documentation
Summary of Business & Outlook for The Future
Listing of Business & Personal References
This is a logical organization of the information every
business plan should cover. I'll explain each of these chapter
titles in greater detail, but first, let me elaborate upon the
reasons for proper organization of your business plan.
Having a set of "questions to answer" about your business
forces you to take an objective and critical look at your ideas.
Putting it all down on paper allows you to change, erase and
refine everything to function in the manner of a smoothly oiled
machine. You'll be able to spot weaknesses and strengthen them
before they develop into major problems. Overall, you'll be
developing an operating manual for your business - a valuable tool
which will keep your business on track, and guide you in the
profitable management of your business.
Because it's your idea, and your business, it's very important
that YOU do the planning. This is YOUR business plan, so YOU
develop it, and put it all down on paper just the way YOU want it
to read. Seek out the advice of other people; talk with, listen
to, and observe, other people running similar businesses; enlist
the advice of your accountant and attorney - but at the bottom
line, don't ever forget that it has to be YOUR BUSINESS PLAN!
Remember too, that statistics show the greatest causes of
business failure to be poor management and lack of planning -
without a plan by which to operate, no one can manage; and
without a direction in which to aim its efforts, no business can
attain any real success. WHEN YOU FAIL TO PLAN, YOU PLAN TO FAIL!
On the very first page, which is the title page, put down the
name of your business - ABC ACTION - with your business address
underneath. Now, slip a couple of lines, and write in all capital
letters: PRINCIPAL OWNER - followed by your name if you're the
principal owner. On your finished report, you would want to
center this information on the page, with the words "principal
owner" offset to the left about five spaces.
Example: ABC ACTION
1234 SW 5th Ave. Anywhere, USA 00000
PRINCIPAL OWNER: Your Name
That's all you'll have on that page, except the page number
-1-...
Following your title page is the page for your statement of
purpose. This should be a simple statement of your primary
business function, such as: We are a service business engaged in
the business of selling business success manuals and other
information by mail.
The title of the page should be in all capital letters across
the top of the page, centered on your final draft - skip a few
lines and write the statement of purpose. This should be direct,
clear and short - never more than two (2) sentences in length.
Then you should skip a few lines, and from the left hand
margin of the paper, write out a subheading in all capital
letters, such as: EXPLANATION OF PURPOSE.
From, and within this subheading, you can briefly explain your
statement of purpose, such as: Our surveys have found most
entrepreneurs to be "sadly" lacking in basic information that will
enable them to achieve success. This market is estimated at more
than 100 million persons, with at least half of these people
actively "searching" for sources that provide the kind of
information they want, and need.
With our business, advertising and publishing experience, it
is our goal to capture at least half of this market of information
seekers, with our publication, MONEY MAKING MAGIC! Our market
research indicates we can achieve this goal, and realize a profit
of $1,000,000 per year within the next 5 years...
The above example is generally the way you should write your
"explanation of purpose," and in subtle definition, why you need
such an explanation. Point to remember: Keep it short. Very few
business purpose explanations are justifiably more than a half
page long.
Next comes your table of contents page. Don't really worry
about this one until you've got the entire plan completed and
ready for final typing. It's a good idea though, to list the
subjects (chapter titles) as I have, and then check off each one
as you complete that part of your plan. By having a list of the
points you want to cover, you'll also be able to skip around and
work on each phase of your business plan as the idea or the
interest in organizing that particular phase, stimulates you. In
other words, you won't have to make your thinking or your planning
conform to the chronological order of the "chapters" of your
business plan - another reason for the loose leaf notebook...
In describing your business, it's best to begin where your
statement of purpose leaves off. Describe your product, the
production process, who has responsibility for what, and most
importantly, what makes you product or service unique - what gives
it an edge in your market. You can briefly summarize your
business beginnings, present position and potential for future
success, as well.
Next, describe the buyers you're trying to reach - why they
need and want (or will buy) your product - and the results of any
tests or surveys you may have conducted. Once you've defined your
market, go on to explain how you intend to reach that market - how
you'll alert these prospects to your product or service and induce
them to buy. You might want to break this chapter down into
sections such as... publicity and promotions, advertising plans,
direct sales force, and dealer/distributor programs. Each section
would then be an outline of your plans and policies.
Moving into the chapter on competition, identify who your
competitors are, their weaknesses and strong points - explain how
you intend to capitalize on those weaknesses and match or better
the strong points. Talk to as many of your "indirect" competitors
as possible - those operating in different cities and states.
One of the easiest ways of gathering a lot of useful
information about your competitors is by developing a series of
survey questions and sending these questionnaires out to each of
them. Later on, you might want to compile the answers to these
questionnaires into some form of directory or report on this type
of business.
It's also advisable to contact the trade associations and
publications serving your proposed type of, business. For
information on trade associations and specific trade publications,
visit your public library, and after explaining what you want, ask
for the librarian's help.
The chapter on management should be an elaboration on the
people operating the business. Those people that actually run the
business - their job titles, duties, responsibilities and
backfilled resume's. It's important that you "paint" a strong
picture of your top management people because the people coming to
work for you or investing in your business, will be "investing in
these people" as much as your product ideas. Individual tenacity,
mature judgment under fire, and innovative problem-solving have
"won over" more people than all the AAA Credit Ratings and
astronomical sales figures put together.
People becoming involved with any new venture want to know
that the person in charge - the guy running the business knows
what he's doing, will not lose his cool when problems arise, and
has what it takes to make money for all of them. After showing
the "muscle" of this person, go on to outline the other key
positions within your business; who the persons are you've
selected to handle those jobs and the sources as well as
availability of any other help you might need.
If you've been in business on any kind of scale, the next
chapter is a picture of your financial status - a review of your
operating costs and income from the business to date. Generally,
this is a listing of your profit & loss statements for the past
six months, plus copies of your business income tax: records for
each of the previous three years the business has been an entity.
The chapter on the explanation of your plans for the future
growth of your business is just that - an explanation of how you
plan to keep your business growing - a detailed guide of what
you're going to do, and how you're going to increase your profits.
These plans should show your goals for the coming year, two years,
and three years. By breaking your objectives down into annual
milestones, your plans will be accepted as more realistic and, be
more understandable as a part of your ultimate success.
Following this explanation, you'll need to itemize the
projected cost and income figures of your three year plan. It'll
take a lot of research, and undoubtedly a good deal of erasing,
but it's very important that you list these figures based upon
thorough investigation. You may have to adjust some of your plans
downward, but once you've got these two chapters on paper, your
whole business plan will fall into line and begin to make sense.
You'll have a precise "map" of where you're headed, how much it's
going to cost, when you can expect to start making money, and how
much.
Now that you know where you're going, how much it's going to
cost and how long it's going to be before you begin to recoup your
investment, you're ready to talk about how and where you're going
to get the money to finance your journey. Unless you're
independently wealthy, you'll want to use this chapter to list the
possibilities and alternatives.
Make a list of friends you can approach, and perhaps induce to
put up some money as silent partners. Make a list of those people
you might be able to sell as stockholders in your company - in
many cases you can sell up to $300,000 worth of stock on a
"private issue" basis without filing papers with the Securities
and Exchange Commission. Check with a corporate or tax attorney
in your area for more details. Make a list of relatives and
friends that might help you with an outright loan to furnish money
for the development of your business.
Then search out and make a list of venture capital
organizations. Visit the Small Business Administration office in
your area - pick up the loan application papers they have - read
them, study them, and even fill them out on a preliminary basis -
and finally, check the costs, determine which business
publications would be best to advertise in, if you were to
advertise for a partner or investor, and write an ad you'd want to
use if you did decide to advertise for monetary help.
With a listing of all the options available to your needs, all
that's left is the arranging of these options in the order you
would want to use them when the time comes to ask for money. When
you're researching these money sources, you'll save time by noting
the "contact" to deal with when you want money, and whenever
possible, by developing a working relationship with these people.
In your documentation section, you should have a credit report
on yourself. Use the yellow pages or check at the credit
department in your bank for the nearest credit reporting office.
When, you get your credit report, look it over and take whatever
steps are necessary to eliminate any negative comments. Once
these have been taken care of, ask for a revised copy of your
report and include a copy of that in your business plan.
If you own any patents or copyrights, include copies of
these. Any licenses to use someone else's patent or copyright
should also be included. If you own the distribution, wholesale
or exclusive sales rights to a product, include copies of this
documentation. You should also include copies of any leases,
special agreements or other legal papers that might be pertinent
to your business.
In conclusion, write out a brief, overall summary of your
business - when the business was started, the purpose of the
business, what makes your business different, how you're going to
gain a profitable share of the market, and your expected success
during the coming 5-years...
The last page of your business plan is a "courtesy page"
listing the names, addresses and phone numbers of personal and
business references - persons who have known you closely for the
past five years or longer - and companies or firms you've had
business or credit dealings with during the past five years.
And, that's it - your complete business plan. Before you send
it out for formal typing, read it over once a day for a week or
ten days. Take care of any changes or corrections, and then have
it reviewed by an attorney and then, an accountant. It would also
be a good idea to have it reviewed by a business consultant
serving the business community to which your business will be
related. After these reviews, and any last-minute changes you
want to make, it'll be ready for formal typing.
Hire a professional typist to type the entire plan on ordinary
white bond paper. Make sure you proof read (or is it "proofread")
it against the original. Check for and correct any typographical
errors then one more time - read it through for clarity and the
perfection you want of it.
Now you're ready to have it printed and published for whatever
use you have planned for it - distribution amongst your partners
or stockholders, as the business plan for putting together a
winning financial proposal, or as a business operating manual.
Take it to a quality printer in your area, and have three
copies printed. Don't settle for photocopying... Have it
printed! Photocopying leaves a slight film on the paper, and will
detract from the overall professionalism of your business plan,
when presented to someone you're trying to impress. So, after
going to all this work to put it together properly, go all the way
and have it duplicated properly.
Next, stop by a stationery store, variety store or even a
dimestore, and pick up an ordinary, inexpensive bind-in theme
cover for each copy of your business plan. Have the holes punched
in the pages of your business report to fit these binders and then
slip each copy into a binder of its own.
Now you can relax, take a break and feel good about
yourself... You have a complete and detailed business plan with
which to operate a successful business of your own... A plan you
can use as a basis for any financing proposal you may want to
submit... And a precise road-map for the attainment of real
success...
Congratulations, and my best wishes for the complete
fulfillment of all your dreams of success!!!
_________________________________________________________________
End of Report.