Business Plan Formation Part 9

Business Plan Formation Part 9

After this long 9 part series, you should now have knowledge of the basic, essential business plan documents. The final step is to put everything together into a cohesive, easily understood plan. Sections you should include are: (1) all the sections discussed in this blog, as they apply; (2) a title page; (3) a table of contents; and (4) any ancillary documents that may be specific to your product/idea/concept.

In order to easily explain certain formatting issues, the following represent some frequently asked questions:

How long should the business plan be?

The length of your business plan depends on your product/idea/concept. The more complex your product/idea/concept, the longer your plan may have to be in order to fully explain everything to your potential investor. However, I do caution that you not make the plan too long. What constitutes too long? If you find yourself repeating the same thing over and over, you may want to consider a revision. Always keep in mind the “if I were an investor” question. For example, “If I were the investor, would I want to read X amount of pages on this idea?” BE HONEST with your answer!

Should I include drawings or renderings?

Once again, this depends on your product/idea/concept. However, as a general rule, I would say yes. Be aware that this could cost you some money. If you happen to know an artist or architect (depending on your product/idea/concept) you may be able to get these for free. For most of us though, this will probably cost some money.

If I do include drawings or renderings, what show they depict?

Once again, this depends on your product/idea/concept. The best way to answer this is with the “if I were an investor” question. For example, “If I were the investor, what images/pictures/renderings would I want to see regarding this product/idea/concept?”

Should I bind my business plan?

Without out question, YES! You want your plan to look as professional as possible. Just go to Kinkos, OfficeMax, Office Depot, or wherever else does binding. It is relatively inexpensive and can usually be done in a couple of hours.

Should I have somebody read my plan before I pitch it?

Once again, absolutely YES! In fact, have somebody read your plan before you bind it. This way, if any changes need to be made, you can easily make them without paying for binding twice. Be sure that you get an UNBIASED opinion. This means that you should not (unless they are an expert of some kind) give your plan to your parents, siblings, friends, or significant other. Find a disinterested third party to read your plan and give you some real constructive criticism.

Can I add other documents to my plan?

Yes, you can add other documents. Just make sure that they will help you present or explain your product/idea/concept. My blog posts have been about documents that I feel are essential to a business plan. I did not cover all possible areas or sections of a business plan. If you feel your plan needs more financial documents, marketing documents, sales documents, etc., add them as you will. However, make sure that the additional documentation is relevant, necessary, and informative/explanatory.

In what order should I put my documents?

General order of business plans is up to you. Take into consideration the audience you will be presenting to (idea orientated vs. numbers orientated) and the purpose of your plan. A couple of pointers to keep in mind: (1) title page goes first, followed by the table of contents; (2) the ES should be the first page of your actual plan; and (3) your contingency plan should always come last. Everything else is up to you. Consider the story you want to tell and to who you want to tell the story. Whatever you decide, make sure your plan has a logical flow and does not randomly jump from section to section.

Should I include confidential information in the plan?

Confidential information is the information that you may be afraid of sharing. For example, let’s say you created a new computer program. Should you include the complete programming code for the program? My answer is no. Instead, I would suggest that you bring something to prove that your code works. For example, bring in a computer that is running your program.

Another example would be for a restaurant. Should you bring in the entire menu and recipes? Once again, my answer is no. Maybe bring in three recipes (one appetizer, one entrée, and one desert) to show the potential investors. This way you prove that you know what you are talking about, and the investors have an idea on what you want to accomplish.

This may sound cynical, but not all potential investors want to help. Some are out for themselves and will look for an opportunity to take advantage of you. Therefore, you should only give away enough confidential information to prove you know what you are doing, but not enough that a dishonest potential investor could take advantage of you.

Should I include a confidentiality agreement for potential investors to sign?

No. You can try, but for the most part, no potential investor will sign it. Remember, you are there to try to advance your situation. You are looking for financing and maybe a little expertise. You want your product/idea/concept to be mutually beneficial to all parties, but at the end of the day, you are pitching your product/idea/concept to make your life better, not theirs. Potential investors already have money and resources, why should they sign an agreement when ultimately they may not need your business?

If a group of us worked on the plan together and a disagreement exists about what sections to include, how do we resolve the dispute?

In this situation I believe that the person that created the idea should make the ultimate decision. If both are all members of the group came up with the idea, the person who is the expert on the product/idea/concept should make the ultimate decision. If more than one person is an expert on the product/idea/concept than a compromise needs to reached. For example, if one person wants the section in the plan and the other wants it out, a possible solution is to include the section but have the person that does not want to include the section decide where in the plan the section should go.

Bottom line, if a big dispute occurs over the formatting of your business plan, your business group has bigger problems than the plan. If you people cannot work together on a business plan, who are you supposed to execute a product/idea/concept?

If anybody has any other questions, please feel free to leave a comment, or e-mail me at cashspeak@yahoo.com.

Finally, as Anna Quindlen said, “If your success is not on your own terms, if it looks good to the world but does not feel good in your heart, it is not success at all.”

Business Plan Formation Part 8

The third and final vital document to have in your financial plan is the Break Even Analysis. The Break Even Analysis is the document that shows your potential investors the minimum amount of sales necessary to have your company break even. Therefore, this “break even amount” will create no profit, but will mean you have no losses either. The point of this document is to help the potential investor analyze the viability of your Pro-Forma and your Start-Up costs. Remember, reaching the break-even point is NOT your goal! The break-even point should be your floor.

The following is an example of a very basic Break-Even Analysis. This document is ONLY an EXAMPLE!

As I mentioned, this document will be used to determine the viability of your other financial documents. You will also want to analyze this document. You may be surprised by the results. This document could help you adjust your product’s price, your business costs, and/or your ideal revenue per available seat hour (for restaurants). It is important to remember to keep your Marketing Plan and Market Analysis in mind if you decide to adjust your product price. It is very easy to increase your product price on paper; however, your market has to be able to tolerate your increase. Do NOT arbitrarily raise the price of your product to make your break-even point “easier” to reach!

On a side note, I was asked whether to include a Sales Forecast in a business plan. A Sales Forecast is a document that shows the amount of sales you speculate you will make during a given time period. If you want to include this document in your business plan, that is a format issue that is yours to make. Note that the Pro-Forma and Market Analysis will include all the information that the Sales Forecast will. The Pro-Forma is a speculation of your monthly/weekly profit and therefore will include your sales. The Market Analysis will include your research about the market you are trying to penetrate and will therefore be the basis for determining your Pro-Forma amounts. A Sales Forecast may be able to more easily tie these two documents together, but it not absolutely vital in your business plan construction. In my opinion, I would include a Sales Forecast in the Market Analysis section. This way you can create a logical progression between the market statistics and you sales projections. However, as I stated before, I am giving you a general formation plan. You can absolutely include additional documents that you feel will make your plan more clear or easier to understand. I have but one caveat to give you; do NOT consistently include documents that create redundancies in your business plan. Saying the same thing five different ways has the possibility of upsetting the potential investor and of chipping away your credibility.

BUSINESS PLAN FORMATION PART 7

One thing to keep in mind with your Financial Plan, all of your numbers are speculation. Doing research is vitally important so that everything is accurate, but until you actual purchase something or make a sale, all of your numbers are, for lack of a better word, guesses. However, this does not mean that you should arbitrarily pick a number to include in your Financial Plan. The purpose of me telling you this is to remind you not to second guess yourself too much. You should recheck all of your numbers, and you should do hours of research to find accurate, credible numbers. However, do not beat yourself up if the numbers “do not feel right.” For example, when members of my business family where working on the start-up projection for our Financial Plan, we felt that these numbers were too high. As such, we did more research and more than halved our original amounts. At the pitch, we were told that our original amounts were more accurate and that they in fact were still a little low!

After that brief digression, back to the point. The Pro Forma is a financial document that speculates what your idea/product/concept will make for a set time period. The example below is based on a monthly formula. However, some Financial Plans use a weekly formula, a quarterly formula, or even a yearly formula. The formula you use depends of your idea/product/concept. A word of caution, be careful if you use a yearly formula. The larger the amount of time your Pro Forma encompasses, the harder it is to accurately speculate.

Here is the example. Once again this example is for a restaurant. This example is based on a monthly formula and is for EXAMPLE ONLY! I am only giving you a general format. Do NOT copy and paste this document and expect to have a sound Pro Forma:

As I stated above, your Pro Forma is a time-based document that speculates you much money your idea/product/concept is going to make. In other words, this document shows how profitable your idea/product/concept could be. A couple of points to remember: (1) make the numbers realistic. Do NOT state an amount you know you cannot make; (2) think of all possible expenses associated with your idea/product/concept. The last thing you want is a surprise cost eating away your profits; (3) make sure your Pro Forma has a logical progression. Start with gross revenue and work your way down; and (4) make sure your gross revenue is set on a logical formula.

Do NOT make up a number for gross revenue, create a formula. For example, if you have a product and want to sell it for $5.00, multiply that amount by the number of units you speculated you will sell for your set time period. Gross Revenue = Product Price x Amount Sold During Time Period. Therefore, if you want a monthly formula and believe that you will sell 1,000 units per month, your formula will be: Gross Revenue = $5.00 x 1,000. Therefore, your gross revenue will be $5,000. Keep in mind, “gross” means that no expenses have been deducted from this amount. Therefore, this amount is NOT profit!

If you have a logical progression to your Pro Forma and have done research that supports your speculation, you should have a presentable Pro Forma. Also, learn from my story above. If the numbers do not “feel right,” do not second guess yourself too much. Lastly, make sure your Pro Forma compensates for your Start-Up Projection. If your Start-Up Projection is $1.5 million and your Pro Forma states that you will have profit of $5,000 a month, you may want to rethink your business plan. I doubt your investors and yourself will be happy making less than $60,000 a year each after having invested over a million dollars!

BUSINESS PLAN FORMATION PART 6

The Financial Plan is the part of your business plan that shows all the costs and possible revenues. Three main financial documents need to be in your Financial Plan, (1) the Start-Up Projection; (2) the Pro-Forma; and (3) the Break Even Analysis. Preparing each document is a labor intensive task. Therefore, I will discuss each document in separate posts.

First, I will discuss the Start-Up Projection. This spreadsheet shows all of the costs associated with beginning your business or initiating your idea/product/concept. In preparing this document, you must account for all the possible costs associated with starting your business. Make sure you find support for your numbers. In other words, do not blindly state that it will cost $1,000,000 to start your business. You need to break this number down into its individual parts.

In a previous post I wrote about the two types of potential investors. The two types pf potential investors are “idea orientated” investors and “numbers orientated” investors. Even though idea orientated investors will allow you more “wiggle room” in your financial information, they will not accept an unsupported plan. Whichever type of investor you happen to be pitching to, your financial information must be concise and accurate.

Here is an example spreadsheet. I will use this to help me explain the elements of the Start-Up Projection. This example spreadsheet is VERY BASIC and is for a restaurant.

You can decide the format you want to use. Let me caution you to use this spreadsheet only as an EXAMPLE!

As you can see, each section needs to be itemized. For example, under the Equipment Section, you have to list out the equipment that needs to be purchased. Do NOT put only a “total.” If you where a potential investor, would you wonder how the entrepreneur arrived at the total for the section? I sure would. The point is, do not leave any question unanswered. If the potential investor asks you how you arrived at your numbers, have research, quotes, comparables, etc. to support your projections.

Do not lie on your projections. I know what you are all thinking because I thought the same thing, “If these numbers are lower, I will have a better chance of getting financing.” Although this can be true, this idea is most definitely false if it creates inaccurate costs. State your costs accurately and financing will come. Another caveat, do not overstate your costs. A delicate balance needs to be achieved on your spreadsheet. Some information you obtain may state a particular cost on the high end and another piece of information may state a cost on the low end. For example, one contractor may quote you at $400 per square foot and another may quote you at $300 per square foot. Which number do you state on your Start-Up Projection? I recommend the average of $350 be used. By using this average you give a more accurate number to the potential investor. Although you found somebody that quoted your project for $300 per square foot, that quote may increase by the time your project is ready to be constructed. Also, the price given to you was only a quote. Think about every time you got your car repaired. How many times have you seen a difference in the quoted price and the actual price? Isn’t the actual price always higher than the quoted price? The point is, do not use the lowest number just because it is the lowest number.

One final tip; remember that this is a Start-Up Projection. As such, only list the costs that are going to be a factor at start-up. Your regularly occurring expenses will be reflected on your Pro Forma. The point is, costs that affect you eight months from now should not be show on your Start-Up Projection. If you accurately and completely itemize your costs need for start-up, your Start-Up Projection will be fine.

Next time, the Pro Forma...

BUSINESS PLAN FORMATION PART 5

The Organizational Plan is not a long section in your business plan. The basic purpose of the Organizational Plan is to show the potential investor the hierarchy of your business. This section is NOT one of the main sections in your plan, but this does not mean that you should slop something together at the last minute. A basic Organizational Plan will have a chart that looks something like this:

Your Organizational Plan will probably not include this many positions. All I am trying to show is the hierarchy of your company so that when a potential investor asks, “Who is in charge of X,” you will be able to answer the question effectively.

In addition to showing some type of visual chart, you should write a brief summary of what each job position will involve. You should have already written some of this information in your Management team section. Even if you have explained these positions in a different section of your plan, you should still give a descriptive narrative of each position’s duties. Do NOT ramble on for a ten paragraphs, but do make sure you thoroughly, but concisely, describe each position.

One other suggestion, if you have something like forty (40) “ store workers” in your Organizational Plan, do NOT put forty (40) different squares for “store workers.” Instead, put one (1) “store worker” square and put a (40) under the “store worker” title. It will look something like this:

Think of the Organizational Plan as a visual Management Team section with ALL of the job titles described. If you have completed your Management Team section before you do your Organizational Plan, half of your work will be done. However, the same is true vice versa. Depending on what type of “thinker” you are, the section you should complete first is up to you. If you like to see the whole picture before describing the individual parts, doing the Organizational Plan first may be more beneficial to you. If you like to build the individual parts and put the whole together at the end, doing the Management Team section first may be more beneficial to you. Either way, make sure all the elements are in each respective section.

The Contingency Plan is more commonly known as “Plan B.” This is the section of your business plan that explains how additional sales, covers, etc. can be achieved if one of three scenarios occurs: (1) your idea/concept/product is producing revenue that is NOT achieving the “beak-even point” (explained later); (2) your idea/concept/product is producing revenue that is achieving only the “break-even point;” or (3) your idea/concept/product is producing revenue barely above the “break-even point.” In these three scenarios, your idea/concept/product is either losing money, or making just enough to stay afloat. Either way, your investors and you are not making enough money to be “happy.”

The purpose of this section is to show the potential investor that in the rare case that your idea/concept/product does not produce as much revenue as initially speculated, an additional step can be initiated in order to create more revenue. You may be asking, “If this Contingency Plan can produce more revenue, then why not initiate it in the beginning?” The reason you do not want to include this as part of the main plan is that a Contingency Plan usually deviates from your initial business plan and creates additional costs. For example, if your main business plan is for a restaurant, your Contingency Plan may be to turn the restaurant into a night club after your restaurant closes for the day. Another idea may be to deliver food from your restaurant or to double as a catering service. Whatever your Contingency Plan may be, note that additional costs will result. As such, do not take this section lightly. Whatever you do, do NOT come up with a last minute idea, throw it into the plan, and then expect a potential investor to take you seriously.

Your Contingency Plan should be well though out, but should not be overly descriptive. This is your secondary idea and should not take away from the main plan. Also, make sure that your plan is realistic. For example, if your product is not selling as well, do not have a new product line as your Contingency Plan. A Contingency Plan is not a “start over” plan. It is a plan that salvages the profitability of your current product. Think about it; why would an investor invest in a second product from you if your first product is failing?

Lastly, your Contingency Plan needs to show the additional costs that will result from your contingency. Make sure that these new costs do not overshadow the purpose of the Contingency Plan. The contingency has to be as cost-effective as possible. Remember, if you have to initiate this section of your plan, your idea/concept/product is not performing well. Therefore, cost effectiveness is key to a successful contingency.

Next time, the financials…

BUSINESS PLAN FORMATION PART 4

First, I would like to apologize for the long delay between posts. Second, I hope everybody had a great holiday season and a wonderful new year! A new year is a time for new beginnings. I know everybody has a New Year’s resolution, but always remember to stay motivated and strive to accomplish the goals that you have set for yourself and your loved ones.

And now, back to business! The Management Team section of your business plan consists of the information and experience of the persons who will be managing your idea/product/concept. The first aspect of forming this section is recognizing the various areas of your idea/product/concept that require management. This does not mean that you pick apart every single possible area of your idea/product/concept and assign a different manager for each. Remember, efficiency and effectiveness are key! A new small business does NOT require five different vice presidents. I know some of you may be laughing, but you would be surprised at the condition of some of the business plans I have read.

Second, once you have deciphered which parts of your idea/product/concept require management, you need to figure out the level of experience or education a manager needs to possess to successfully manage that area of your idea/product/concept. For example, a restaurant needs a chef that can execute the menu provided and can run the kitchen created; a front-of-the-house manager that can run the dining room and all the employees that work in the front; and a general manager that can create and regulate the communications and operations between the kitchen and the front. These position are critical is starting a new restaurant, and a potential investor will want to see some very solid credentials from these three people before he/she/it agrees to invest.

Third, do not over do it! I have read many plans that state three attorneys, two accountants, a financial advisor, and a stock broker as the management team. Although I understand that the entrepreneur is trying to convey the image and professionalism and strength, the image is flawed! If you were a potential investor and you read a business plan, for a new business, that stated all of those professionals as making up the management team, what would you think? My first question to the entrepreneur would be, “how are you going to pay those people?” Last I checked, professionals charge a lot of money. If I am investing in a new business, I do not want my investment dollars to pay the salaries of a management team that may not be necessary at your business’s current stage of development. This does not mean that all professionals should be excluded from a business plan. Sometimes, professionals are necessary based on your idea/product/concept. All I am suggesting is that you think critically and, if a professional is on your management team, that you specifically define his/her role and contribution to your idea/product/concept.

Fourth, you need to find these managers. There are many different ways to accomplish this task. First, use your connections. Some of us went to college and incurred debt in the form of student loans. While incurring this debt, I am sure that some of us made friends and created contacts. Now is the time to put your student loan dollars to work! Your diploma is important, but the connections you made in school will pay dividends here. My only note of caution is to be weary of who you pick. Choose people that will HELP manage your business! I know that sounds simple, but some people have a tendency to include random buddies just because. DO NOT DO THIS!

If you did not go to college or did not make many new contacts in college, life experiences will give you some contacts.

Second, if you do not have any contacts, you can create them. MySpace, Face Book, and other similar internet sites are a great place to meet people. You can probably develop some contacts using these services.

Third, think of yourself! Most people start a new business in a field in which they have experience. Ask yourself, “can I be a manager?” If the answer is no, you should re-evaluate your role in the business; because if you are not managing and not investing money, what use are you? A potential investor will ask you these tough questions. Make sure you are able to answer them.

Make sure that however you find your managers, you are honest with them. Do not guarantee a job when one is not currently available. Let them know that all you have is an idea/product/concept and, after reading my posts, a business plan. If they want to take the chance and join the team with no pay until the business begins, wonderful! If not, see if they WOULD join your team IF your idea/product/concept started. A commitment to manage could help.

Last, some closing thoughts. Make sure your managers and their positions are clearly defined. A manager can do more than one task, and thus increase your efficiency. Do not provide more managers then are needed or else the managers’ salaries will become an issue. Do not try to show strength by pumping your management team full of “professional power.” Professionals are highly expensive and may deter some potential investors from investing. Always remember to keep the plan neat, concise, and specific.

Next time, organizational plan and contingency plan...

BUSINESS PLAN FORMATION PART 3

Now that your creativity has been tested and applied to the first two (or three if you have a tangible product) sections of your business plan, it is time for the hard work to begin!

If you think about this logically, a business plan has a very natural progression. First, in the ES, you grab the investor’s attention. You make him/her/it want to know more about your product. As such, in your Product Presentation section, you describe, in detail, your product from beginning to end. Next, the investor thinks to himself/herself, “How are we going to sell this product?” In response to this question, you wrote your Marketing Plan. Your Marketing Plan illustrates your plan to sell your product/idea/concept. Next, the investor is going to wonder, “Will this product/idea/concept sell?” In response to this query, you present your Market Analysis section.

The Market Analysis section of your business plan presents data, figures, and market trends that prove that your product/idea/concept will sell. Does this mean that you leave out any negative data/figures/trends that appear to “hurt” your product/idea/concept’s marketability? There is no simple answer. Two schools of thought exist on this dilemma. First, some believe that you should leave out any adverse information and try to paint the best picture possible for the investor. In my opinion, this option leaves you open for attack. An educated investor might ask you about this negative data and how it will affect marketability. If you have not addressed this issue, you may be left speaking on the fly or worse, saying nothing. Second, others, including myself, believe that you should recognize the existence of these possible “problems” and address how they are distinguishable or how you can work around the negative effects of any of these “problems.” By doing this, you look better. It shows the investor that your have done your homework, that you thought of all potential problems, and know how to work through them.

This section of your plan is not easy. You have to do TONS of research for this section. If at the end of writing this section you think you have found everything, research some more. Also, make sure your sources are CREDIBLE! This means, do not go to some random website and start gathering information for use in your plan. Use recognized sources from state and government agencies. For example, if you want to market you product/idea/concept in you city, you local chamber of commerce may have some useful information. If your product/idea/concept is so new that no current data would be helpful, use data from market trends that support your product. For example, if your idea is a new electronic toy aimed at 5-10 year olds, find data that shows how the electronic toy market is expanding, any increases in sales, and how your toy will benefit from this trend.

Also, make sure your statistics are current. Do not use 1999 statistics as a representation of current market trends. Also, use graphs and charts as applicable. If you are trying to show that the market you are trying to penetrate has grown over the last five years, then show a graph. However, if you are trying to show the sales of a product for a certain year, DO NOT show a graph. (Too many graphs and charts can begin to jumble your points and ruin the flow of your plan. Also, too many of these illustrations can be confusing.) *NOTE* - Everything that is underlined is a personal opinion. Know your audience when presenting, because some investors love picture representations. Use your judgment when constructing this section and you should be fine.

Lastly, make the statistics relevant and specific. The biggest problem I see with draft business plans is that they are too vague. Most read like a summary and provide no evidentiary support for their assertions. Your plan MUST be specific. Remember, you are trying to get somebody to invest money into your product/idea/concept. Wouldn’t you want to know every detail of something before you invest money? Think about it like buying a car. Presenting a vague, non-detailed, unsupported business plan to an investor is like asking him/her to buy a car by just looking at the color. I would rather see an ugly plan full of applicable substance than a “pretty” plan full of vagueness and summaries.

When writing this section, put your self in the investor’s shoes. If you were potentially investing thousands of dollars, what would you want to know? Think of all the questions a potential investor would ask. Once you have addressed all possible scenarios and found all applicable data, you should feel comfortable in this section. The only thing left to do is to compile all of this information into a cohesive format.

Next time, the Management Team...

BUSINESS PLAN FORMATION PART 2

After your ES, there are two different places you can take your plan. If you are pitching an idea, concept, or something intangible, then your next section should be your Marketing Plan. However, if you are pitching a product, clothing line, or something tangible, then your next section should be your Product Presentation. (NOTE: You can get creative with your section titles, but I caution you not to stray too far from the norm. For example, instead of “Marketing Plan,” you can title your section “Marketing Campaign,” “Customer Marketing,” etc...)

I will discuss the Marketing Plan first. The Marketing Plan is the section of your business plan that discusses how you are going to make the public aware of your idea/concept/product in order to accomplish your objective. Your objective can be whatever you want, as long as it pertains to the Marketing Plan. For example, if you are pitching a restaurant idea, your objective may be to achieve 100% occupancy every night with a 3.5 time turnover rate. Once you have defined your objective, you can then formulate a plan to accomplish that objective.

As you write the Marketing Plan section, be aware that financial figures are not needed for this section. The Marketing Plan is just discussion on what you plan to do to create sales, revenue, and money! For example, let’s say you are pitching a clothing line. Your idea may be “time-frame” orientated, meaning that you plan is broken down by dates. So, you might write something like:

This plan will be broken down into a three year effort to raise both local and national awareness of X clothing line. During the first year, X clothing line will be introduced to the public through BRAND Y store. At first, X clothing line will only be in 5 BRAND Y stores to test the public response. Throughout the year, approximately every two months, X clothing line will be introduced into 5 more BRAND Y stores. By the end of year one, X clothing line will be available for sale in 35 BRAND Y stores. During year two, X clothing line will continue its expansion. BRAND W and BRAND Z stores will be the next targets of X clothing line. However, because X clothing line will have already been introduced to the public, year two expansion will be far more aggressive. Instead of starting in only five stores, X clothing line will be introduced into 15 stores each of BRAND W and BRAND Z. 15 new stores will be added at the same rate of approximately 15 stores every two months for the rest of the year....

You get the idea. Make your plan easy to read and easy to follow, but make it creative and feasible enough to be attainable. For example, do not state that you are going to expand to different stores without having reached such an agreement with the stores you plan to expand in. Instead, you may want to start small with a Marketing Plan that incorporates the internet, direct marketing, and print media advertising. Remember, you do not have to worry about putting actual financial figures in this section, so be creative with you plan. However, also remember that the cost of marketing will be incorporated in your plan later on, so do not go crazy with you advertising/marketing ideas.

I will now discuss the Product Presentation section. For people who want to pitch an actual, tangible product, this section is necessary. Please note that a Marketing Plan is still necessary for you people that have a tangible product to pitch. The only difference is that the Product Presentation section is also needed in addition to the Marketing Plan. Getting back to the point, like I stated before, your ES should be something dramatic that captures the attention of the investor and therefore, little is said about your product. The Product Presentation section is where you get to lay it all out. Just as the title of this section suggests, this section is where you present your product to your investor. Writing styles vary, so I will not try to tell you how to write this section, but just make sure that this section includes:

1. What the product is. You would be very surprised how many times people describe their product without specifically stating what it is. Make sure you write, “This product is a _____.”;

2. The description of your product, including size, dimensions, weight, etc...(if applicable); and
3. Materials used in making your product. This does not mean that you state that you used a sewing machine to make your clothing line. This means that you say that your clothing is made of cotton, rayon, nylon, etc., and that you point out specific “quality points,” such as hand stitching or expensive fabrics.

At the end of this section, the investor should know what the product is and everything relevant about the product. Some people add pictures to this section. I feel that this is okay, but if I were an investor, I would much rather have an actual prototype in my hands to explore. Once again, this comes down to a matter of style, so I leave that decision up to you.

Look for more to come in the next installment when I discuss the Market Analysis section...

BUSINESS PLAN FORMATION PART 1

Many people in our community have asked me to talk about business plans. I decided that it was the next logical step and am proud to present the business plan series! Over the next couple of weeks I will discuss a different portion of a typical business plan. KEEP IN MIND, there are many different ways to organize a business plan and that sections have many different names. However, for the most part, each section in a business plan, regardless of name used, accomplishes a specific task. The importance of each section depends on the product/idea/situation you are pitching and to who you are pitching. I am only going to give you a general layout of a business plan. Could you use the layout I give you for a business plan? Absolutely, I have used this very format in some of my business plans. However, as I mentioned above, there are many formats. If you do not feel comfortable with my format, do some research and find a format you are comfortable with.

With all of this in mind, we begin with the first section of a business plan, the EXECUTIVE SUMMARY (hereafter “ES”). The ES is the first page, with the exception of the cover, that your potential investor will see. The ES is where you grab the investor’s attention. Think about an ES like this. The ES is the equivalent to the first paragraph in a novel. You have only a few sentences to impress the investor. DO SOMETHING STUNNING! The ES is the part of the plan that allows for the most creativity. My advice, GET CREATIVE!

Your ES should include your pitch. Do not write, “I am going to present you with X!” For example, in the business plan that my business partners and me wrote for our restaurant concept, our first paragraph read:

“The world has never before experienced a restaurant of this nature. For too long have generations fantasized about this taboo subject; for too long has it sit idly by and watched; and for too long has it waited to come to fruition. The mood is about to change. A new concept will revolutionize this industry and break down the barriers of old. The threshold of tradition is about to be challenged. Dining has a new experience, and that experience is (our restaurant name.)”

Do you see what is going on here? This may grab some people’s attention and it may not others, but no matter who you are, I know this paragraph instills, at least, a small amount of curiosity. In fact it instills just enough curiosity to read on. If this happens when investors read your ES, mission accomplished!

There is another component to your ES. Once you have grabbed the reader/investor’s attention, talk a little about your idea/product/situation. Tell the investor what “it” is. Do not go on for pages, but in a few CONCISE paragraphs, tell the investor about your idea/product/situation.

Lastly, an ES should also have a brief paragraph about your potential customer base and why your idea/product/situation will be successful with the customer base you have identified. Your ES should encompass your entire business plan in only a page or two. You have a pitch, information about the idea/product/situation, potential customers, and why the customers will buy your idea/product/situation. These are important aspects of an ES and are necessary to ensure that you potential investor does not become a lost opportunity.

Keep working on it and e-mail me if you have any questions: cashspeak@yahoo.com. Also, no quote today because I want to wait until the end of this series, but I will say that success only comes to those who want it. So ask yourself this question, “Do I want success?”