Last month in this column, we showed you how to plan a budget for your new venture. With the preliminary business decisions made and your budget information firmly in hand, your next move is to assemble all of your thoughts and numbers into a formal, written business plan.
A solid business plan is your road map for success. It charts where you're planning to go with your business and how you expect to get there. Sure, there may be an occasional detour along the way, but by focusing on every aspect of a venture's operations before getting started, you'll be better prepared to avoid making costly mistakes.
Many new business owners view business-plan writing as a task designed to attract investors, but more importantly, it provides a guidebook for your business so you know what you should be doing, and how well you're doing it, along the way. Experts agree that bypassing the business-plan stage is a recipe for disaster.
As our Starting Smart entrepreneurs have learned, composing a business plan requires significant amounts of time, patience, research, writing, editing and re-editing. But the benefits far outweigh the short-lived pressure and pain. Having risen to the challenge, they are back this month to share their insights about preparing a winning plan.
Vic & Suzette Brounsuzian, Meg-A-Nut Inc.
"The hardest part about preparing a business plan is getting everything set in your mind about what you're going to do, then organizing and capturing it on paper," says Vic Brounsuzian, 44, who, with his wife, Suzette, operates a small shop in Streamwood, Illinois, selling dry-roasted nuts, seeds, fine chocolates and other items.
"For me, a lot of time was spent jotting down notes describing my business, what I needed to do to get started, and all the supplies I would need," Vic explains. "Trying to come up with all of the required financial information was the most challenging aspect of the process."
For guidance, Vic turned to the Small Business Administration's (SBA) Small Business Development Center (SBDC). "The gentleman I was working with gave me plenty of input, and I followed it to a `t.' I just kept rewriting until I came up with a business plan that was satisfactory in the eyes of the SBDC," Vic states.
Vic says he is pleased with the accuracy of the projections contained in his plan. "After my first quarter, I opened my business plan and compared my projections with what actually happened. I was very close to my projections. Even my accountant was surprised."
Judy Proudfoot, Proudfoot Wearable Art
"The business plan was the most difficult thing I've had to do while preparing to begin my business, but I was less stressed by the time I got it done," explains Judy Proudfoot, 45, who, from her home in Alexandria, Minnesota, designs and sells handpainted clothing using a unique watercolor painting technique with acrylic paints.
"Composing a business plan makes you really focus on your goals and to think six months or more ahead. It's a challenging thing to do when you're first starting out," Proudfoot says, "but it gives you a clearer picture of what it's going to take in order to accomplish what you want to accomplish."
Proudfoot became involved with the Foundation for International Community Assistance (FINCA) before launching her business, so help in preparing her business plan was always just a phone call away. Based in Washington D.C. (202-682-1510), with regional offices nationwide, the national foundation provides start-up capital, instructional training and ongoing support to entrepreneurs.
"The people at FINCA gave us a four-page worksheet to help us organize our financial information, and they provided a couple of charts regarding money matters," she says. "Then they turned us loose to prepare our business plans on our own, with the understanding that we could always call whenever we had questions or needed additional support."
Proudfoot also uses the business plan as a touchstone. "I refer back to it monthly. It lets me compare projections to reality and discover what works well, and what needs to be changed."
Lets Go Party
"I was so confused, I didn't know what I was doing at first," says Marian Fletcher, 55, who has been running a profitable party-planning and catering service in and around Baltimore since early last year. "I had to go everywhere for information. The library provided me with different books about what information goes into a business plan. I wrote to my congressman; he told me about a booklet, available through the Department of Economics' Division of Business Development, that provided useful demographic information."
While preparing her business plan, Fletcher happened to be enrolled in Women Entrepreneurs of Baltimore City (WEB), a local entrepreneurial education program where she received invaluable feedback on early business-plan drafts. "We composed the business plan piece by piece. The instructors would take each piece, mark it up, and explain why it was not yet quite what they were looking for," she explains. "The wording had to be just so. At the time I didn't think it was an easy process at all, but I'm glad they did it that way. I certainly learned a lot from it."
Fletcher says she referred to her plan extensively during the first few months of business, and has since taken the time to revise it. "I found I could get my products cheaper and more easily," she says, "and I learned that it was going to take me twice as long to train new employees than I initially thought it would. I updated my business plan to reflect these realities so it would remain a valuable document."
Key Components of A Business Plan
As the saying goes, an entrepreneur who fails to plan plans to fail. A winning business plan helps you put every aspect of your business into focus, and avoid costly mistakes. Although no two business plans are exactly the same, all should include at least the following five essential sections:
1. Executive Summary, identifying the legal structure of your new venture, your needs (in terms of inventory, equipment, working capital and other resources), the amount and purpose of any requested loans, and projected timetables for repaying investors;
2. Business Description, providing a succinct overview of the kind of business you will start, its mission, financial projections, and how you intend to go about making your business a success;
3. Marketing Plan, identifying the target market for your offerings and the strategies you will use to generate customers. Includes market analysis, with demographic information about your customer base;
4. Competitive Analysis, focusing on the strengths and weaknesses of important competitors, and why your unique business will work where others have failed;
5. Financial Overview, specifying what income you have, the expenses you will accrue, and how much start-up capital you will need. Should also include a five-year financial forecast, consisting of a monthly forecast for the first year of operations, a quarterly forecast for the next two years, and annual forecasts for the two years thereafter.
Additional sections you may wish to consider, depending on your needs, include a Summary of Business Management, spelling out who will do what; expanded Product and Service Descriptions, especially if providing new or unfamiliar offerings; and a thorough plan detailing how you will design and develop new products.
Quality of presentation is key. Word processing is a must, and user-friendly charts, graphs and indexes are generally quite helpful. In addition, be sure to identify (and provide solutions for) your weaker areas, along with stressing your strong points. This shows potential investors and others that you have really thought things through.
Art Printing Co., R.D. 3, Box 447, Rte. 64, Mill Hall, PA 17751, (717) 726-4470.
Just Cruises & Tours, (800) 547-7327.
Something Else by Peterene, (617) 293-6413.
Sterling Name Tape Co., P.O. Box 939, Winsted, CT 06098, (203) 379-5142.