Successful Business Plan: Secrets & Strategies

Successful Business Plan: Secrets & Strategies 29
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Dr.JesperHunt,United States,Researcher
Published Date:16-07-2017
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Successful Business Plan, 6th Edition © Rhonda Abrams. DO NOT REPRODUCE.4 Succe SSf ul Bu Sine SS Plan s e c r e ts & s t r at e g i e s It is not enough merely to survive; the goal is to succeed. Factors of a successful Business The ultimate purpose of developing a business plan is to have a successful business. In the long run, it is fruitless to write a business plan that can raise even if you have all the the funds you seek if your enterprise is so poorly conceived it is bound to money you need, you still need a fail. So, as you create your plan, be certain to address the long-term needs business plan. a plan shows how of your business and devise strategies that enhance both the overall perfor- you’ll run your business. Without a mance of your company and your personal satisfaction. plan, you don’t know where you’re The following factors, discussed in detail in this chapter, contribute most going, and you can’t measure your to business success and should guide your planning process: progress. Sometimes, after writing ■ The Business Concept a business plan, you may change your approach, or even decide not ■ Understanding the Market to go into a certain business at ■ Industry Health and Trends this time.” ■ Clear Strategic Position and Consistent Business Focus Eugene Kleiner Venture Capitalist ■ Capable Management ■ Ability to Attract, Motivate, and Retain Employees ■ Financial Control ■ Anticipating Change and Adaptability ■ Company’s Values and Integrity ■ Responding to Global Opportunities and Trends in judging a business concept, by far the easiest and The Business concept first place to start is, ‘Do i want Meeting needs is the basis of all business. You can devise a wonderful new to use this myself?’ if i’m not sold machine, but if it doesn’t address some real and important need or desire, that i would want to use it — if i people won’t buy it, and your business will fail. Even Thomas Edison can’t look at my partners and say, recognized this fact when he said, “Anything that won’t sell, I don’t want to ‘i know this fills a need because i invent.” know no one else does this; i would Typically, entrepreneurs get their original business inspiration from use it myself’ — it’s not going to one of four sources: 1) previous work experience; 2) education or training; go anywhere.” 3) hobbies, talents, or other personal interests; or 4) recognition of an unan- Andrew Anker swered need or market opportunity. Occasionally, the impetus comes from Venture Capitalist the business experience of a relative or friend. As you refine your business concept, keep in mind that successful busi- nesses incorporate at least one of these elements: something new, some- thing better, underserved or new market, new delivery or distribution, and increased integration. Successful Business Plan, 6th Edition © Rhonda Abrams. DO NOT REPRODUCE. 003-016_SBP6_Ch01.indd 4 4/21/14 9:49 AM c h a p t e r 1: The Su cce SSf ul Bu Sine SS 5 SUCCESSFUL BUSINESS ELEMENTS Include at least one of these as you rene your business concept. Something Something Underserved or New Delivery or Increased New Better New Market Distribution Integration Create a new product, Improve on existing Find a market with Provide products Both manufacture service, feature, or product or service: greater demand than or services less and sell your technology. more features, lower competitors can expensively, to a product, or o‚er price, greater satisfy, an unexploited wider geographic more services and reliability, faster niche market, or an area, or with greater products in one speed, or increased unserved location. choice. location. convenience. Your business should incorporate at least one of these factors — more than one if possible. Ideally, you can bring a new or better product or service to an identifiable but underserved market, perhaps using a more efficient distribution channel. Evaluate the ways your business concept addresses the elements described above. Your concept should be strong in at least one area. If not, you should ask yourself how your company will be truly competitive. The Basic Business Concept worksheet on page 6 helps you evaluate the strengths and weaknesses of your basic business idea. understanding the Market It is not enough to have a great idea or new invention as the basis of your key business; you must also have a market that is sufficiently large, accessible, and responsive. If your market isn’t large enough, you can’t reach it efficiently, or it Success terms isn’t ready for you. Your business will fail, no matter how good your business Barriers to Entry concept. Consider the automatic teller machine (ATM) seen on virtually every t hose conditions that make street corner. It was invented more than 10 years before it became popular, it difficult or impossible for but the company that initially marketed the ATM was unsuccessful — people new competitors to enter the weren’t yet willing to trust their banking to machines. market: t wo barriers to entry are patents and high start-up First, evaluate whether market demand is adequate to support your costs. company. For instance, if you are opening a flower shop in a neighborhood where none currently exists, what indications are there that the neighbor- Cash Flow t he movement of money into hood residents are interested in buying flowers? Do they currently purchase and out of a company; actual flowers at a nearby supermarket? Does national data on the demographics of income received and actual flower purchasers coincide with neighborhood demographics? Perhaps you payments made out. should conduct a survey of the neighborhood’s residents, asking about their flower-buying habits and preferences. Strategic Position a company’s distinct identity Next, if you are creating a new product or service, what indications are that separates it from the com- there that the market will be receptive to you? Market readiness is one of petition and helps it focus on the most difficult and most unpredictable aspects to measure. That is why its activities. Successful Business Plan, 6th Edition © Rhonda Abrams. DO NOT REPRODUCE. 003-016_SBP6_Ch01.indd 5 4/21/14 9:49 AM6 Succe SSf ul Bu Sine SS Plan s e c r e ts & s t r at e g i e s Basic Business Concept Using this worksheet as a guide, outline your business concept as you presently conceive it. Is yours a retail, service, manufacturing, distribution, or online business? ____________________________________ What industry does it belong to? ____________________________________________________________________ What products or services do you sell? ______________________________________________________________ Who do you see as your potential customers? _________________________________________________________ Describe your basic overall marketing and sales strategy: ________________________________________________ Which companies and types of companies do you consider to be your competition? ___________________________ List your competitive advantages, if any, in each area listed below. New Products/Services: __________________________________________________________________________ Improved Features/Services and Added Value: ________________________________________________________ New or Underserved Markets Reached: ______________________________________________________________ New/Improved Delivery or Distribution Method: ________________________________________________________ Methods of Increased Integration: __________________________________________________________________ Successful Business Plan, 6th Edition © Rhonda Abrams. DO NOT REPRODUCE. 003-016_SBP6_Ch01.indd 6 4/21/14 9:49 AM c h a p t e r 1: The Su cce SSf ul Bu Sine SS 7 companies spend substantial amounts of money on market research before launching a new product. You may not have the funds to undertake extensive market research, The main thing is to but even a small amount of analysis can help you gauge the receptivity of a keep going back and talking to the particular market to your idea. Methods of conducting market research and people who actually use what evaluation in a practical, economical fashion are discussed in Chapter 2. When you’re making. See if what you’re gathering information for your business plan, spend considerable time learning making is truly helpful to your about your market. The more you understand the various factors that affect customers.” your market, the more likely you are to succeed. Larry Leigon industry health and Trends Founder, Ariel Vineyards Your business does not operate in a vacuum; generally, your company is subject to the same conditions that affect your overall industry. If consumer spending declines nationally, there’s a good chance your retail business — whether a neighborhood boutique or an online shopping mall — will also experience poor sales. As you develop your plan, you need to respond to the industry-wide factors affecting your own company’s performance. While it is certainly pos- sible to make money in an industry that is experiencing hard times, you can only do so if you make a conscious effort to position your company appro- priately. For example, if you are in the construction business and the number of new-home starts is down, you may want to target the remodeling market or the commercial real estate market rather than the new-home construction market. Investors and lenders are particularly sensitive to issues of industry health. It is much harder to raise money to start or expand businesses in troubled industries. Even though opportunities exist in such fields, investors and bankers are concerned about the increased risks an enterprise faces in an unhealthy industry. Conversely, if your business is in a healthy and expand- ing industry, investors are likely to be more receptive. What direction is your industry going? It is important to look at the major trends that will influence industry health in the future as well as exam- ining its current condition. Is the industry consolidating as big companies merge into huge businesses? What is happening with pricing pressures, con- sumer demand, availability of parts and supplies, and global competition? Several worksheets included in Chapter 6 help you identify and antici- pate trends in your industry. If you are seeking outside funds, your business plan must reassure inves- tors or bankers that you understand the industry factors affecting your com- pany’s health and that you have taken those factors into consideration when developing your business strategy. clear Strategic Position and consistent Business f ocus A crucial factor for a successful business is the development of a clear strategic position that differentiates you from your competition — and then maintaining focus on that position. All too often businesses fail because management loses sight of the central character of the enterprise. Successful Business Plan, 6th Edition © Rhonda Abrams. DO NOT REPRODUCE. 003-016_SBP6_Ch01.indd 7 4/21/14 9:49 AM8 Succe SSf ul Bu Sine SS Plan s e c r e ts & s t r at e g i e s Defining a clear strategic position enables you to capture a particular place in the market and distinguish yourself from your competitors. Differ- ent companies may sell a similar product, but each may have a very different sense of what its business is really all about. For example, suppose four companies are making jeans. Company A defines itself as selling work clothes; Company B sees itself as a sports- wear manufacturer; and Company C defines itself as being in the business of selling youth and sex appeal. But Company D has never clarified its mission — it just sells jeans. What tips me off that a These different positions affect the way each company markets itself, business will be successful is that how it designs its jeans, what subsequent products it produces, and even the they have a narrow focus of what employees it hires. The first three companies may all succeed and rarely be they want to do, and they plan a in competition with one another. But Company D, which misses the big picture, is almost certain to fail over time as it flounders in its attempts to sufficient amount of effort and compete with all of the other, more-focused companies. money to do it. f ocus is essential; there can be the possibility of A second aspect of positioning your company and maintaining focus the business branching out later, is the development of a company style or corporate culture. By creating but the first phase of a company a consistent style that permeates every aspect of your enterprise, from the design of your stationery to personnel policies, you give your customers and should be quite narrowly defined.” employees a sense of trust in your company. Eugene Kleiner Imagine two different restaurants on the same street, both with basically Venture Capitalist the same business mission: providing good, fast food, priced at only a few dollars a meal. The first restaurant is a national burger chain. Its style is characterized by consistency, cleanliness, and impersonal friendliness. A strong corporate image is important, which is reinforced through the restaurant’s decor, the food’s packaging, and the employees’ uniforms. The meals are prepared by standardized routines, and every customer is given the same greeting. The second restaurant is a diner. Management characterizes its corporate culture as that of a friendly neighbor. To help make sure that employees know customers’ names and food preferences, management aims to retain employees for many years. A bulletin board features notices of local events. This restaurant’s target market is the neighborhood regulars who know they will feel at home there. With a strong company style, each restaurant clearly distinguishes itself from its competitors and gives its target customers a precise understanding of what to expect. Every business needs to consider its style as it relates to the company’s overall mission, and then infuse that style into virtually all its undertakings. To help clarify your company’s position and focus as part of the busi- ness plan process, you should define a Statement of Mission. This Mission Statement should guide your company’s short-term activities and long-term strategy, position your marketing, and influence your internal policies. A Statement of Mission worksheet is in Chapter 5. Successful Business Plan, 6th Edition © Rhonda Abrams. DO NOT REPRODUCE. 003-016_SBP6_Ch01.indd 8 4/21/14 9:49 AM c h a p t e r 1: The Su cce SSf ul Bu Sine SS 9 capable Management Perhaps more than any other factor, competent management stands out as the most important ingredient in business success. The people in key posi- tions are crucial in determining the health and viability of your business. Moreover, because of the importance of capable management to business success, many investors and venture capital firms place the single greatest emphasis on this factor when evaluating business plans and deciding on loans or investments. They’ll review the management section of a business plan with special scrutiny. Your business plan must inspire confidence in the capabilities of your management, and you should put your management team together carefully. Before submitting your business plan to investors, conduct your own analysis of your management team. Evaluate each individual (and yourself) to see if he or she fits the profile of a successful manager. Some of the traits The most successful shared by successful managers are: entrepreneurs tell you they have ■ Experience. They have a long work history in their company’s industry a great team, but lots of small and/or they have a solid management background that translates well to business owners let ego get in the the specifics of any business in which they become involved. way. Many people helped me along ■ Realism. They understand the many needs and challenges of their busi- the path. You’ve got to remember ness and honestly assess their own limitations. They recognize the need the people who were loyal to for careful planning and hard work. you. Don’t forget them when you ■ Flexibility. They know things go wrong or change over time, and they become successful.” are able to adapt without losing focus. Bill Rancic ■ Ability to Work Well with People. They are leaders and motivators Serial Entrepreneur with the patience necessary to deal with a variety of people. They may be demanding, but they are fair. In developing your business plan, determine whether key members of your management team possess these characteristics. If not, perhaps you can increase training, add staff, or take other measures to enhance your manage- ment’s effectiveness. For instance, if you have little or no experience in your chosen field, perhaps you should first take a job with an existing company in that field before opening your own business. In addition to evaluating the traits of each individual, look at the overall balance of your management team. Do you have people who are capable and experienced in the various aspects of your business — marketing, operations, technology, finance, and so on? Are some managers better at dealing with internal issues and others at handling external relations? Or do the talents and traits of your managers duplicate each other? ability to attract, Motivate, and Retain employees A company is only as good as its people. The ability to find, attract, and keep outstanding employees and managers is crucial to a company’s long- term viability and competitiveness. Demographic trends indicate a tight labor market in the United States well through the early part of the 21st century. Companies will have a dif- ficult time competing for the relatively limited number of outstanding job Successful Business Plan, 6th Edition © Rhonda Abrams. DO NOT REPRODUCE. 003-016_SBP6_Ch01.indd 9 4/21/14 9:49 AM10 Succe SSf ul Bu Sine SS Plan s e c r e ts & s t r at e g i e s applicants. Your company’s reputation for treating employees well directly enhances both the number and the quality of job applicants and your com- pany’s ability to retain employees once hired. We don’t just want to Employee morale also has a significant impact on a company’s productiv- make secure loans; we want to ity, the quality of its products or services, and its ability to provide outstand- make good loans. a good loan is ing customer service. Unhappy employees are less motivated to do excellent a loan with a high probability of work. Satisfied employees are far more likely to want to see their company being repaid from the primary succeed, and they can dramatically alter a company’s bottom line. source, such as the business, Examine your management style and policies as part of your overall busi- without interrupting the lifestyle ness planning process. Develop management practices that treat employees of the borrower. c ollateral makes fairly, offer opportunities for advancement, afford reasonable job security, a loan ‘safe,’ not necessarily good. and provide fair pay and benefits. it's not fair to make a loan if the collateral is good BuT the business f inancial control plan is shaky. We’re not interested Key to any business is how it handles money. Not fully anticipating start-up in getting people’s homes; we’re costs can immediately place impossible pressures on a new business. Poor interested in successful businesses.” cash flow management can bring down even a seemingly thriving busi- ness. One of “Rhonda’s Rules” is “Things take longer and cost more than Robert Mahoney anticipated.” Build financial cushions in your plan to allow for unanticipated Corporate Banker expenses and delays. As you develop your business plan, make sure you have the informa- tion to understand your financial picture on an ongoing basis. What does it take to open your doors each month? Where is your real profit center? How much expansion do you need to maintain growth? What are the hidden costs of marketing your company? What are the consequences of your credit policies? Build in mechanisms to keep you continually informed as your business develops. It is easier to establish good financial procedures right from the start than to wait until you face a financial crisis. How frequently will you do your billing? What kinds of credit policies will your business follow? How will you keep informed on inventory? Make certain you receive detailed financial statements at least monthly and that you understand them thoroughly. Examine financial reports for any deviations from your plan or any indications of impending cash flow problems. Controlling and understanding your finances makes decisions easier. And you’ll sleep better at night. anticipating change and adaptability Change is inevitable, and the rate of change gets ever faster. In today’s world, your company needs to anticipate and respond to change quickly and train its employees to be adaptable. Nimble companies that can quickly evaluate and respond to changing conditions are most likely to be successful. Successful Business Plan, 6th Edition © Rhonda Abrams. DO NOT REPRODUCE. 003-016_SBP6_Ch01.indd 10 4/21/14 9:49 AM c h a p t e r 1: The Su cce SSf ul Bu Sine SS 11 In planning for change, keep in mind the kinds of conditions that will affect your business’ future. They include: ■ Technological Changes. It’s impossible to predict the exact technologi- cal developments that will affect your industry, but you can be sure that you will be faced with such changes. Even if you make old-fashioned chocolate chip cookies, you’ll find that advancements in oven design, food storage, or inventory control software will place competitive pres- You need to be able sures on your business. Competitors’ technological advances may cause to fail fast and fail forward. at significant downward pricing pressures on you. PayPal, our business started out ■ Sociological Changes. Evaluate demographic and lifestyle trends in light as sending money between Palm of their potential influence on your business. In the cookie business, for Pilots, then we had the idea of example, consumer interest in natural foods or the number of school- sending money over email. We saw age children in the population may influence the number and kinds of the need for electronic payments, cookies you sell. What sociological factors have the greatest impact on but we weren’t wedded to the idea your company? Keep your eye on trends that represent true change; be of something that wasn’t working.” careful not to build a business on passing fads. Premal Shah ■ Competitive Changes. New businesses start every day. How hard is it President, Kiva for a new competitor to enter the market, and what are the barriers to entry? The Internet makes it possible for companies all over the world to compete against each other, increasing the number and type of competi- tors you may face. When developing your business plan, consider how your company deals with these outside changes. Also anticipate major internal changes, such as growth, the arrival or departure of key personnel, and new products or services. No business is static. Planning a company responsive to change will make the inevitable changes easier. See Chapter 6, for more on anticipating change. a company’s Values and integrity Every company must make money. You can’t stay in business unless you even- tually earn a profit. However, studies of business success over time have shown that companies that emphasize goals in addition to making money succeed Passion is a prereq- better and survive longer than companies whose sole motivation is monetary. uisite. if you don’t have passion, you’re not going to be successful. As you develop your business plan, keep in mind those values you wish to have characterize the company you are creating or expanding. These entrepreneurship is not purely values can be aimed externally (at achieving some business, social, or envi- a numbers game. But you can’t be ronmental goal) or they can be aimed internally (at achieving a certain type stupidly passionate, you have to do of workplace or quality of product or service) or both. your homework.” Articulating your company’s values to employees, suppliers, and even Damon Doe your customers can strengthen their commitment to your business. Values- Managing Partner driven companies often have greater success in attracting and retaining good Montage Capital employees, and they can usually better weather short-term financial setbacks because employees and management share a commitment to goals in addi- tion to financial rewards. Successful Business Plan, 6th Edition © Rhonda Abrams. DO NOT REPRODUCE. 003-016_SBP6_Ch01.indd 11 4/21/14 9:49 AM12 Succe SSf ul Bu Sine SS Plan s e c r e ts & s t r at e g i e s A company is likewise strengthened by maintaining integrity in all aspects of its dealings — with employees, customers, suppliers, and the com- munity. Certainly, you will face situations where it appears that you will be at a disadvantage if you are more honest than your competitors or more fair than other employers. However, the long-term benefits of earning and keeping a reputation for integrity outweigh the perceived immediate disad- vantages. A clear policy of honesty and fairness makes decision-making in difficult situations easier, inspires customer and employee loyalty, and helps avoid costly lawsuits and regulatory fines. It’s also the right thing to do. r esponding to global Opportunities and trends Today’s business world is a global world. In all aspects of your business, you may find it possible to be working internationally. Even a small company with an online presence may be selling its products internationally. Certainly, your raw materials or inventory may come from global sources. You may have competitors, suppliers, employees, contractors, and partners worldwide. A successful business in this environment must at least evaluate international opportunities and consider international threats when constructing a busi- ness plan. Some of the global considerations to keep in mind as you develop your business plan are: ■ Target market. Because of the electronically connected world, it’s pos- sible to target a market even halfway around the globe, and that can be a way to significantly expand your market opportunities. If you have a highly niche product, your customers may be widely scattered interna- tionally, and you may need to or want to serve a wide geographic area. Even if you plan to concentrate on a local or domestic market, you must Getting sufficient address how you’ll serve international customers who find you online. supplies can be challenging. Successful companies today at least evaluate international market oppor- When we launched our honest tunities when choosing which markets to target. Kids organic drink pouch, we had ■ Competitors. It’s far easier than ever for global competition to enter to buy half the world’s supply of local markets. Certainly, if you are selling a product — even a fairly organic, kosher grape juice.” mundane one — you may find yourself competing with online interna- Seth Goldman tional companies. Cofounder, Honest Tea ■ Suppliers. Whether for raw materials for production/manufacturing or inventory for sale, it is likely that at least some of your supplies will come from countries other than your own. You should certainly be considering sourcing material and inventory globally as you grow your company. ■ Labor. It is no longer necessary for your employees or contractors to be located in the same office, same city, or even same country as you. Finding workers — especially technology or manufacturing labor — in other countries may offer significant labor cost reduction. It is now typical for companies to “offshore” many tasks, and flexible companies evaluate some of those opportunities. Of course, managing a far-distant Successful Business Plan, 6th Edition © Rhonda Abrams. DO NOT REPRODUCE. 003-016_SBP6_Ch01.indd 12 4/21/14 9:49 AM c h a p t e r 1: The Su cce SSf ul Bu Sine SS 13 labor supply has significant challenges, and you must think those through as you plan the global aspects of your business. ■ Legal issues. Whether protecting your intellectual property, ensuring that you are following all necessary laws and regulations, or dealing with f irst and foremost you international tax or finance issues, you will certainly need to understand have to have passion. You’ve got the legal issues affecting you as you work globally. to understand why you’re in the ■ Partners. As you think about expanding your business internationally, business, you have to understand one approach is to find existing companies “on the ground” in those why you’re going to be wildly markets to partner with. This can make your entry far easier, help you successful, and you have to be understand local business customs and practices, and better serve your able to sell it to people. it’s very market. easy to write a business plan with ■ Social responsibility. The best international companies are good global lots of pretty charts and graphs citizens. As you work globally, make certain that you are always acting and research quotes, and if you in a socially responsible manner — whether dealing with labor issues, can’t present it to coworkers, human rights, the environment, bribery, or corruption. employees, investors, and ulti- mately to the customer, you’re not What Motivates You? going anywhere. You always have to have the passionate person who personal s atisfaction: t he Four cs lives and breathes, eats and sleeps For smaller enterprises, sole proprietorships, or businesses in which one or the idea.” two key members of management have primary control, issues of personal Andrew Anker satisfaction can be a central element in determining long-term success. Some Venture Capitalist businesses fail, and others flounder, because their founders, owners, or key managers are uncertain what they really want to achieve or because they did not structure the company and their responsibilities in ways that satisfy their personal needs and ambitions. It is useful to evaluate and consider your personal goals when deciding on the nature of your business development. For most entrepreneurs, these goals can be summed up by the Four Cs: Control, Challenge, Creativity, and Cash. control How much control you need to exercise on a day-to-day basis influences how large your company can be. If you prefer to be involved in every busi- ness decision or are uncomfortable delegating or sharing authority, your business should be designed to stay small. Likewise, if you need a great deal of control over your time (because of family or personal demands), a smaller business without rapid expansion is more appropriate. In a large company, you will have less immediate control over many deci- sions, and others will share in decision-making. Structure your management reporting systems to ensure that as the company grows, you continue to have sufficient information about and direction over developments to give you personal satisfaction. If you are seeking outside funding, understand the nature of control your funders will have and be certain you are comfortable with these arrangements. Successful Business Plan, 6th Edition © Rhonda Abrams. DO NOT REPRODUCE. 003-016_SBP6_Ch01.indd 13 4/21/14 9:49 AM14 Succe SSf ul Bu Sine SS Plan s e c r e ts & s t r at e g i e s challenge If you are starting or expanding a business, you are likely to be a problem- solver and risk-taker, enjoying the task of figuring out solutions to problems Writing a business plan or devising new undertakings. forces you into disciplined thinking It is important to recognize the extent of your need for new challenges if you do an intellectually honest and develop positive means to meet this need, especially once your company job. an idea may sound great in is established and the initial challenge of starting a company is met. Oth- your own mind, but when you put erwise, you may find yourself continually starting new projects that divert down the details and numbers, it attention from your company’s overall goals. As you plan your company, may fall apart.” establish personal goals that provide you with sufficient stimulation, while Eugene Kleiner also advancing the growth of your business. Venture Capitalist creativity Entrepreneurs want to leave their mark. Their companies are not only a means of making a living, but a way of creating something that bears their stamp. That’s why many businesses carry the founder’s name. Creativity comes in many forms. For some, it is the creativity involved with designing or making a new “thing” — a fashion designer creating a line of clothes, a software developer writing a new program, a real estate devel- oper erecting a new building. For others, it may be the creativity of coming up with a new business process. Creativity also comes into play in finding new ways to make sales, handle customers, or reward employees. If you have a high need for creativity, make certain you remain involved in the creative process as your company develops. You’ll want to shape your business so it is not just an instrument for earning an income but also a mechanism for maintaining creative stimulation and making a larger con- tribution to society. But don’t overpersonalize your company, especially if it is large. Allow room for others, particularly partners and key personnel, to share in the creative process. cash Understand how your personal financial goals have an impact on your busi- ness plan. For instance, if you require substantial current income, you may need investors so you have sufficient cash to carry you through the lean start-up time. This means you will share ownership interest with others, and the business must be devised for substantial profit potential to reward those investors appropriately. Likewise, if your aim is to build a very large company and accumulate substantial income or wealth quickly, you will need outside investors to finance such rapid development or expansion. Once again, this means giving up more control over your company. If, on the other hand, your current income needs are less demanding or your overall financial goals more modest, you may be able to forego giving up a piece of your company to investors and instead expand your business more slowly through sales or through loans or credit lines. Keep in mind there is sometimes a trade-off between personal goals: Wanting more cash often means having less control. Successful Business Plan, 6th Edition © Rhonda Abrams. DO NOT REPRODUCE. 003-016_SBP6_Ch01.indd 14 4/21/14 9:49 AM c h a p t e r 1: The Su cce SSf ul Bu Sine SS 15 Examine your personal goals and those of key personnel using The Four Cs worksheet on page 16. chapter summary A successful business plan not only ensures that you achieve your short-term objectives, it also helps secure the long-term viability of your business. When developing your plan, keep in mind the underlying factors affecting business success and personal satisfaction. Make sure your business concept is clear and focused and your market is well-defined. Understand the key trends in your industry, both nationally and globally, and develop responsive, disci- plined management procedures. Successful Business Plan, 6th Edition © Rhonda Abrams. DO NOT REPRODUCE. 003-016_SBP6_Ch01.indd 15 4/21/14 9:49 AM16 Succe SSf ul Bu Sine SS Plan s e c r e ts & s t r at e g i e s The Four Cs Each founder or key employee in small or new companies should complete their own copy of this worksheet. Check the level of importance to you in each area. Extremely Somewhat Somewhat Not Important Important Unimportant Important CoNTr ol Over own work responsibilities     Over own time, work hours, etc.     Over company decisions and directions     Over products/services     Over other employees     Over work environment     Over social/environmental impact of products/services     Over own future and business’ future     Other:____________________________________________ Chall ENg E Long-term problem solving     Critical problem solving (putting out r fi es)     Handling many issues at one time     Continually dealing with new issues     Perfecting solutions, products, or services     Organizing diverse projects & keeping the group goal-focused     Other: ____________________________________________ Cr EaTIv ITy Determining the design or look of products/packaging     Creating new products or services     Devising new business procedures/policies     Identifying new company opportunities     Creating new business materials     Devising new ways of doing “old” things     Other: ____________________________________________ CaSh List approximate dollar ranges for each of the following. Measure wealth as the value of stocks or the company. Income needed currently_________________________ Wealth desired in 2–5 years_________________ Income desired within 12–24 months________________ Wealth desired in 6–10 years________________ Income desired in 2–5 years ______________________ Wealth desired in 10+ years_________________ Successful Business Plan, 6th Edition © Rhonda Abrams. DO NOT REPRODUCE. 003-016_SBP6_Ch01.indd 16 4/21/14 9:49 AMChapter Getting Your 2 Plan Started The Business Plan Process 18 Gathering Information 19 Sources of Information 22 Online 23 Oi ffl ne Research Resources 30 SBDCs and Other Support Organizations 31 Trade and Industry Associations 31 Paid Research Services 32 Historical Performance of Your Company 32 How to Conduct Your Own Market Research 33 Accessible Sources for Market Research 34 Getting Help 35 Evaluating the Data You’ve Collected 36 A Quick Feasibility Analysis 36 Business Model Canvas 38 Chapter Summary 38 17 Successful Business Plan, 6th Edition © Rhonda Abrams. DO NOT REPRODUCE. 017-040_SBP6_Ch02.indd 17 4/21/14 9:51 AMSucce SSf ul Bu Sine SS Plan s e c r e ts & s t r at e g i e s 18 You find easy answers only by asking tough questions. t he Business Plan Process You must have ongoing Once you determine that a business plan is a necessary tool for your company, contingency plans to allow for you may wonder, “Where do I start?” Because a plan requires detailed infor- miscalculations, disappointments, mation on almost every aspect of your business, including industry, market, and bad luck. it’s assumed that if operations, and personnel, the process can seem overwhelming. you’re a leader, you don’t make The business plan process entails five fundamental steps: mistakes. But it’s not so; if you’re decisive, you’ll sometimes miscal- 1. Laying out your basic business concept. culate, and sometimes just be 2. Gathering data on the feasibility and specifics of your concept. unlucky. You need to openly discuss 3. Focusing and refining the concept based on the data you compile. the possibility of mistakes, so people are prepared and aren’t 4. Outlining the specifics of your business. crestfallen when they occur. You 5. Putting your plan in compelling form. need to rehearse your contingency The first step is to lay out your basic business concept. In the previous plans.” chapter, you were provided a worksheet on which to delineate the various Bill Walsh components of your business. With an existing operation, it may be tempt- Former Coach and President ing to skip over this step, but if you wish to develop strategies for future San Francisco 49ers success, you must first examine the assumptions underlying your current efforts. The focus of this chapter is on steps 2 and 3: gathering and interpreting the data you need. Solid information gives you a realistic picture of what happens in businesses similar to yours, as well as a better understanding of your own company. You can then evaluate and refocus your concept in light of your newly acquired information; a worksheet provided on pages 39–40 will help you with this evaluation. Once you have compiled sufficient information and reevaluated your business concept, you can begin to actually write your plan. By following the chapters of this book and completing the Plan Preparation Forms, you can shape your plan into a compelling document. Developing a business plan is much more a business project than a writing assignment. The process itself — not just the document pro- duced — can positively affect the success of your business. During the every- day operation of your business, you seldom have time to think through the kinds of issues you’ll examine while putting together your business plan; the planning process gives you a rare opportunity to enhance your knowl- edge of how your company, market, and industry work. Successful Business Plan, 6th Edition © Rhonda Abrams. DO NOT REPRODUCE. 017-040_SBP6_Ch02.indd 18 4/21/14 9:51 AM c h a P t e r 2: getting Yo ur Pl an St arted 19 gathering information key Knowledge is power. With accurate information at your fingertips, you Success terms make better business decisions as well as a more persuasive presentation Business Model Canvas of your plan when meeting with a banker, potential investor, or divisional a tool for describing some president. Savvy investors use a business plan not merely to learn about a elements of a new business in new business concept but as a means to judge whether an entrepreneur has a one-page, visual format. It the knowledge and exercises the due diligence necessary to run a business. was originally created by Swiss So take time to do your homework. Sufficient research prevents you from management consultant a lex- placing inaccurate information in your plan — a mistake that can keep you ander Osterwalder. from getting funded — and enables you to make informed decisions. Distributor If you’re new to an industry or to business management, allow your- Company or individual that arranges for the sale of prod- self more time on your research efforts and start with general background ucts from manufacturer to information. Use the research project as an opportunity to educate yourself retail outlets; the proverbial on the key issues of your industry, not merely as a way to find the specific “middleman.” details you need for your particular company. Due Diligence To begin your information-gathering efforts, start by checking the t he process undertaken by resources listed later in this chapter and in the References & Resources chap- venture capitalists, investment ters at the back of the book. First, seek general information about each of bankers, or others to thor- the areas you’ve identified in your Basic Business Concept worksheet from oughly investigate a company Chapter 1. As you progress, focus your research on more-specific issues, com- before financing; required by piling the details necessary to make operational and financial decisions. Chap- law before offering securities ters 4 through 17 outline the data you need to complete each section of your for sale. business plan, and in some cases include suggestions of possible sources of such Milestone information. a particular business achieve- ment by which a company can How Much information is enough? be judged. It is relatively easy to get a great deal of information online; it is likewise easy Profit Margin to feel overwhelmed with so much of it. Conversely, you will also feel frus- t he amount of money earned trated because some critical data is proprietary and unavailable. The difficult after the cost of goods (gross challenge is determining which information is important and how much profit margin) or all operat- information is enough to put in your plan, especially if you are seeking ing expenses (net profit mar- funding. gin) are deducted; usually expressed in percentage terms. Don’t try to be exhaustive in your research efforts; it’s not necessary or possible. You are merely looking for information that will answer the key Proprietary Technology questions about your business. At the same time, your research must be or Information thorough enough to give you, and those reading your plan, confidence that t echnology or information the answers are accurate and from reliable sources. belonging to a company; private information not to For example, if you are manufacturing dolls, you might identify your be disseminated to others. target market as girls between the ages of 4 and 10. One of the questions Receipts you need to address in your plan is, “How large is the market?” For this, you Funds coming in to the com- may have to consult only one source, the U.S. Census Bureau, to find a pany; the actual money paid reliable answer. However, other questions that arise, such as, “What are the to the company for its products trends in doll-buying habits?” may require consulting three or four industry or services; not necessarily sources or undertaking your own market research to compile information the same as a company’s real you can trust. revenues. Successful Business Plan, 6th Edition © Rhonda Abrams. DO NOT REPRODUCE. 017-040_SBP6_Ch02.indd 19 4/21/14 9:51 AMSucce SSf ul Bu Sine SS Plan s e c r e ts & s t r at e g i e s 20 Start Your r esearch by asking Questions Start your research by making a general statement that is the basis of your business (or a portion of your business). For example, if you are a lot of entrepreneurs planning to open a sporting goods store in Chandler, Arizona, your don’t pay attention to the financial statement might be: “There is a substantial need for a sporting goods side of the house, and that’s where store to serve the city of Chandler.” we see a lot of them fail. t hey Next, make a list of questions that logically follow from and challenge that relegate finance and accounting statement. Here are some questions you might then ask: to the back seat.” n How many sporting goods stores now serve the area? Damon Doe n How profitable are the current sporting goods stores in the area? Managing Partner Montage Capital n Are residents generally satisfied with the current sporting goods stores? n Is there more business than current sporting goods stores can handle? n What are the trends in the sporting goods industry nationally? n What are the demographic trends in Chandler? n How do Chandler demographics relate to national sporting goods trends and statistics? As another example, your statement might be: “There is a profitable way to provide psychological counseling online.” The questions following from and challenging that statement could include: n What companies are already providing such a service? n What is the size of the market for psychological counseling now? n What indications are there that consumers would be willing to get coun- seling online? n What portion of the existing psychological counseling market is it reasonable to expect would transfer to online counseling? n How many consumers who do not currently get counseling could reasonably be expected to be attracted to online counseling? n What are the key technology issues necessary to conduct such counsel- ing, securely, online? n What laws or regulations would affect the ability to offer such services? After formulating your list of questions, look for answers. You will find some of your answers by searching government and trade associations’ web- sites. Others you’ll find by consulting reference material through a library or business development center or by contacting industry associations or hiring paid research services. To get some answers, you will have to conduct your own market research by talking to potential customers, meeting with other business owners, or observing foot traffic at similar or nearby establishments. As you start the business plan process, use the Research Questions worksheet on page 21 to record the general questions you have at this point and the issues you will investigate. Look not only for specific current details but also for trends and patterns. Successful Business Plan, 6th Edition © Rhonda Abrams. DO NOT REPRODUCE. 017-040_SBP6_Ch02.indd 20 4/21/14 9:51 AM c h a P t e r 2: getting Yo ur Pl an St arted 21 Research Questions List the questions you will examine in each area of your business, using the categories below as guidelines. Industry/Sector:_ ________________________________________________________________________________ _ _ Products/Services:_______________________________________________________________________________ Target_ Market:___________________________________________________________________________________ _ Competition:____________________________________________________________________________________ _ Marketing_ and_ Sales_ Strategy:______________________________________________________________________ _ Operations/Technology:___________________________________________________________________________ Long-Term_ Considerations:_________________________________________________________________________ Successful Business Plan, 6th Edition © Rhonda Abrams. DO NOT REPRODUCE. 017-040_SBP6_Ch02.indd 21 4/21/14 9:51 AMSucce SSf ul Bu Sine SS Plan s e c r e ts & s t r at e g i e s 22 How much information you gather will be, to a large extent, a result of your resources, of both time and money. If you are working on a business plan for a one-person business while holding down a full-time job, you don’t need to compile the same amount of information appropriate for a large cor- poration with a market research budget and staff. Staying on top of Your Material During the course of your planning process, you will accumulate a great deal of information and many documents. Set up a way to organize the material you gather, such as your notes, ideas, and contact information, right as you begin. Make individual files, either on your computer or in paper files, of the different topic areas corresponding to the chapters of this book. Add infor- t he first thing i did mation to the files as you go along. Otherwise, you may find yourself unable when i got serious about starting to locate specific details you need when you are actually preparing your a business was delete the solitaire written document. As you gather data, write down the source and date of program on my computer. i had to information; otherwise you may later find yourself with data and no way to get to work.” verify or attribute it. Seth Goldman The planning process also enables you to meet many people who can be Cofounder, Honest Tea very helpful to you later, when you run your business. It is likely that you will interview potential customers, suppliers, competitors, and strategic part- ners, as well as other industry sources. Keep a file of all these contacts as you do your research, so you easily know how to reach them. s ources of information If this is your first time conducting business research, you may be surprised at just how much information exists. Mountains of statistics and bookshelves of studies are available concerning virtually every endeavor and activity of American life. Without difficulty, you can find data revealing the average purchase in a fast-food restaurant, how many laptops and tablets were sold last year, and the likely number of new housing units that will be built in your community in the coming year. You can locate most of the general information you require from govern- ment sources, business publications, and trade associations. To find more specific information relative to your particular business or industry, you may have to undertake some market research. In a limited number of cases, when you either lack the time to do the research yourself or are involved in a new industry or one in which data is mostly proprietary, you may have to utilize paid sources of information. Sources of general information are listed in this chapter and in the Refer- ences & Resources chapters at the end of the book. Sources of more particu- lar information relating to costs, equipment, or other specific areas of your business are listed in the appropriate chapters of this book. Keep in mind that contact information, particularly website addresses, changes frequently. Successful Business Plan, 6th Edition © Rhonda Abrams. DO NOT REPRODUCE. 017-040_SBP6_Ch02.indd 22 4/21/14 9:51 AM

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