Who needs a business plan? Isn't it enough just to have a great idea? Your winning idea is a good place to start, but it's probably not enough to sustain your business over the long haul.
Dana Philen found this out while completing a class project with the Entrepreneur Invention Society (EIS) in which she had to not only come up with an original invention, but write a business plan as well. The Atlanta teen invented the Walk 'N Train dog collar, which combines a choke chain with a regular collar. According to Philen's plan, her invention could be more than a class project--it could be the start of a successful business.
Today, it is. Philen's unique dog collar is available at www.walkntrain.com. She says her participation in the EIS program, as well as writing her business plan, really opened her eyes to the opportunities the world has to offer. Although Philen's business started as a great idea, she needed a concrete plan to put that idea into action.
Writing a business plan is time-consuming, but it is also one of the most important things an entrepreneur can do. A business plan may be only one page or many pages long. Whatever the length, most plans are made up of three basic sections.
Part 1: Getting
One of Philen's first orders of business was to give her invention a name. "My Mom and I were talking about the collar and thinking of names when, between us, we got the name 'Walk And Train,' which I shortened to 'Walk 'N Train'," says Philen, 13. She also needed to legally protect her idea-- Philen's dad helped her file for trademark protection on the name, and that was granted in 2000.
In the first section of your business plan, you should:
- Describe the business concept, including: your business name, your goods or services, who owns the business, your location and hours, and your company's purpose or mission.
- Describe your current assets, including: the owner's talent and experience, business associates and advisors, tools and equipment, materials and supplies, and cash on hand to operate the company.
- Outline any legal requirements, including: permits, licenses or registrations; tax requirements; and patents, trademarks or copyrights.
Part 2: Getting
Philen's next order of business was figuring out how she would spread the word about the collars. She found her answer as she was completing this section of her plan. "As part of the business plan research, I found out that the easiest way to get my collar on the market was on the Internet," Philen says. "My mom signed up for a free Web page and asked my dad to figure out how to make it work. He still mumbles something about HTML."
For the second part of your plan, you need to:
- Describe your target customers, including: their age, gender, occupation, etc.; the locations of these customer groups; results of customer service surveys; and market trends and conditions.
- Identify your competitors, including: a list of your three to five top competitors, their strengths, what you can learn from them and how you plan to serve customers better.
- Describe your marketing plans, including: your advertising slogan, an outline of your sales presentation, your top advertising methods, samples of sales literature (fliers, etc.) and a marketing timetable.
Part 3: Managing
To make her prototype collar, Philen and her mom took a trip to the local pet store, where they bought a regular nylon collar and a choke chain, plus some other parts. "We tried different ways to put it together, and then used my dad's soldering iron to fuse the nylon parts together," Philen explains. "The first collar looked OK, but it cost a lot to make."
Philen needed to find a way to lower the costs of her supplies. After some phone calls, she found a manufacturer in Taiwan who could make the collars for less. "This was just what I had written in my business plan--find an offshore manufacturer to cut the cost of each collar!" she says. "I sent the drawings to Taiwan, and they sent back samples and prices. The prices were better than I could do, and the quality was terrific."
This was just one of the steps Philen recorded in this section of her plan. You should also:
- Describe your record-keeping system--explain how the system works, provide sample forms and supplies, and provide bank account information.
- Estimate your expenses, including: operating expenses (rent, phone, etc.), costs to produce your product and necessary start-up money.
- Estimate your income, including: sources for start-up money, a sample price list, and your sales goals and cash-flow projections.
- Create a budget that covers saving (short term and long term) and paying bills.
Writing a business plan not only helps you see if your business idea is feasible, but also provides a clear statement of what you intend to accomplish by starting your business. As you are writing it, keep in mind that you are mapping out your road to success!