Bizbound.com BUSINESS PLAN DESCRIPTION BY SUBHEADINGS The Company Background Describe the start-up and history of your company from the time of inception. State where and when it was organized. State what form of business it is and where it is located. Discuss significant milestones, such as obtaining a patent, building a prototype, or signing a major contract. Discuss the people involved and the roles they have played. Mention any trademarks on the company's name or logo. Current Status Discuss where you are now. Talk about the reputation you have built, your strengths, and what limitations are being experienced. Describe how your product is performing in the marketplace. State the amount of money that has been invested to date, by whom, and how it has been used. Give an overview of your sales and services record, if any. Discuss the kind and amount of funding the business needs to begin operations or improve operations. Future Plans Discuss your goals for the next three to five years. Describe how you plan to achieve them and what resources will be needed. Allude to improvements and expansion of your existing product line as well as your hopes for increasing your market share and sales. The Industry Chief Characteristics Describe the industry your company is in. Discuss the industry's profile, including size, geographical dispersion, market, history summation, current status, and total sales and profits for each of the last three years. The Participants Discuss the competition and other players (suppliers, wholesalers, distributors, etc.) within your industry. Summarize each participant along a spectrum of weakest to strongest. Briefly discuss more thoroughly the participants with whom you will have direct involvement or competition. Analyst Summaries Provide a series of quotes and statements that summarize significant facts, figures, and trends about the industry from various reputable sources. Make sure you properly credit the source and provide the date of publication. Use quotes and statements from diverse sources i.e., industry magazines and newspaper articles. Quotes from personal interviews can also have a powerful impact. These statements should clarify where the industry is headed and the various markets to be served within the industry. Trends Discuss where your industry is headed. State whether it is declining, improving, or holding steady and what opportunities there may be. Discuss where it might be in five to 10 years and your relative position within it. Discuss the future of the industry in terms of market need and/or acceptance and profit potential. Describe significant events or changes within the industry that will affect your business positively or negatively. Product and Related Services Description of Product/Service Describe exactly what your product/service is and for what it was designed. Discuss how it works, special features, capabilities, and resulting benefits (economic, social, environmental, leisure, etc.). If more than one service or product line is involved, discuss them and how they function together and/or affect each other. State what stage of development the product/service is in. Description of the Facilities If the facilities are a focus and part of the product or service (such as a hotel would be), describe them in this section. If the facilities are an adjunct, rather than interrelated with the product or service (such as a machine manufacturing and assembly plant), it would be best to describe them along with the Operations Description later. Describe the facilities and why they are unique or better, i.e., none other like them, more attractive, better proximity to customer base, offer more, etc. Discuss location and why it is advantageous. State services, operations, storage, etc. Proprietary Features Discuss any patents, copyrights, trademarks, service marks, or other legally binding agreements that protect your product or service. State if a patent is pending. Overall, discuss how you intend to protect the integrity, confidentiality, and competitive nature of your product and services. Briefly mention any regulatory or approval requirements your product or service must meet. State who has jurisdiction and how you will satisfy these requirements. Future Development Plans Describe the nature and application of future development plans. Discuss whether these plans are improvements, an extension of the current product/service line, or plans for other products/services. State whether these plans will address your current market or other markets. Discuss the time frames for these plans. Justify why these plans are important by showing increased or newly generated profits. Product Liability Discuss the liability and insurance considerations that are inherent in manufacturing and/or marketing the product. Describe how you plan to limit the company's liability. Provide an estimate of the percent cost of the product that will be applied toward liability coverage. Technology: Research and Development Concept Development Describe how the product came about. Discuss how long it has been in development and the related cost factors. Describe the initial concept and how it has changed and improved through the development process. Discuss any new applications or opportunities that have resulted. State who owns what portions of the concept and/or product and give the percentages of each. Describe the technology employed in development. Research, Testing, and Evaluation Describe all related research, testing, and evaluation activities. Mention any surveys, articles, or studies that may have been published as a result of these activities. Present your findings as factual conclusions and document them as supporting materials in your appendix. State what makes the product reliable. Discuss the results of your research in terms of production needs, cost factors, time requirements, documentation, maintenance, and updating requirements. Describe the facilities, conditions, instrumentation, and supervision with which the research was conducted. Major Milestones and Breakthroughs Discuss the significant milestones and accomplishments that were achieved during R&D. State when and under what circumstances the breakthroughs happened. Describe what impact they had or will have on the venture. Discuss how the technology or process is different from or superior to similar products. Describe what risks and problems were overcome to reach these milestones. Current Status and Continuing R&D Discuss where the project stands now. Describe how much of the product has been developed and what still needs to be done to protect, manufacture, license, market, and/or distribute it. Discuss how much of this you will be involved in or who may take over the development of these things. State when R&D will be completed. Discuss what contacts you have made regarding the product and the results of the contacts. Market Analysis Target Market and Characteristics Describe your target market and who or what it includes; give a profile. Discuss how your product/service meets the needs/wants of this market. Discuss the buying record and habits of your customers. State pertinent facts concerning the size, age, location/area, profession, income, and other demographic information about the market. Allude to any self-performed or professional research, studies, or surveys conducted. Include a list of these in a bibliography in your Appendixes. Analyst Summaries Provide a series of quotes and statements that summarize significant facts, figures, and trends about the market (and market potential) from various reputable sources. Make sure you properly credit the source and provide the date of publication. The objective is to pinpoint specific market opportunities that exist within the industry and how your product/service capitalizes on these opportunities. The quotes and statements should make it clear what problems and needs exist in your market. It should become evident to the reader that your product/service can solve these problems and/or meet these needs better than existing methods. Market Share, Trends, and Growth Potential State the percent share of the market you now have or hope to gain. Discuss the trends of the market - industrywide, regional, and local. State if the market is seasonal, delineate the time frames, and discuss how you will adjust and compensate during the off-season. Discuss how the market may change over the next three to five years. Discuss the growth potential of the entire market and your increased share. State on what assumptions you base these growth patterns (i.e., technology development, changing customer needs, costs, etc.). Discuss your rationale and the costs and risks associated with achieving higher levels of penetration. Sales, Distribution, and Profits by Product/Service Discuss your projected sales record by product/service. State what each product/service costs you to produce, distribute, and sell. Discuss how your product/service will be distributed and sold. Describe any unique features of your sales and distribution network. Discuss the implications of transportation, tariffs, duties, foreign exchange, and other government regulations. Service and Warranty Policies Are they needed? Will they help you to sell your product(s)? What is normal practice in your industry? Competitive Analysis Competitors' Profile Discuss the competition: size, age, locations, sales volume, management, mode of operation, and other characteristics. Discuss potential competitors who may enter your market. Product/Service Comparison Discuss the similarities and differences between your product/service and that of the competition. Compare your operations and management style with those of your various competitors. Highlight whatever it is that makes your product/service and company more attractive in the marketplace. Market Niche and Share State the approximate percentage each of your competitors holds in the market. Discuss those that hold the large percentages and why they have an edge. Discuss the competitors who have come or are coming on strong and are making (or expected to make) bigger gains in the market. Discuss the particular segments of the market that each of your competitors addresses. Discuss your niche in relation to these and what percent of the total market it makes up. Describe where the market is headed and how each competitor's niche and share may change over the next three to five years. Comparison of Strengths and Weaknesses Discuss your strengths and weaknesses in relation to your major competitors. It is helpful to list the variables down the left-hand column and the competition and your company along the top of the page. The reader can quickly summarize the characteristics, as well as the strengths and weaknesses, of all participants at a glance. The major strengths and weaknesses you should summarize are product superiority, price advantages, market advantages (large contracts with customers or suppliers, proximity to a larger market, proximity of labor supplies, raw materials, energy, transportation, land or other resources), and management strengths and weaknesses (experience and track record, skills, etc.). Marketing Strategy Market Penetration Goals Describe your plans for entering the market. State what your estimated sales and share will be. Discuss the sales appeal among specific segments of the market. Discuss how you will identify prospective customers within each segment, how you will prioritize them, and how you will reach them. State your timetables for achieving these penetration goals and how your strategy may be affected by the reactions of competitors. Discuss any major customers whom you have precommitted and how they may help you to further penetrate the market. Pricing and Packaging Describe your pricing policies and how they are determined. Discuss the influences of the competition, discounts, cost of goods, market forces, and other factors that will affect pricing. Justify your prices, particularly if they are substantially above or below the prices of similar products/services in the marketplace. Above all, demonstrate that your pricing decision is based on your company's ability to make a profit. Discuss your packaging and labeling design plans. Describe how the brand name, colors, logo, and overall packaging appeal will entice customers to buy. Discuss the directions or instructions that accompany the product and how you make the product easy to use. Sales and Distribution Discuss any relationships you have with suppliers and/or distributors. Mention any distribution or licensing agreements that are in force or that you are seeking. Describe how your product/service will be distributed and over what geographical area. Discuss the method(s) of sales and retailing, direct sales, and other methods. Discuss how these will be attracted, compensated, and controlled. Discuss your selling arrangements in terms of cash sales, financing, leasing, credit, and payment terms. If you will be employing salespeople, discuss their quotas and incentives. (Remember that sales volume will be directly proportional to the number of effective sales calls made. Prospective investors will want to see you knocking on doors.) Discuss briefly your hiring, training, and promotion program. Service and Warranty Policies Describe your service arrangements, product support, warranty terms, and customer orientation of these things. Discuss how these policies make you competitive and how they may affect profits. Discuss the procedures for implementing these policies. State how they are reviewed by management and how they may change or be improved on as you gain experience. Describe how you will handle customer complaints and other problems with the product/service. Advertising, Public Relations, and Promotions Describe your advertising, public relations, and promotional programs and campaigns. Discuss the media you will use and any professional ad agencies you may retain. Describe your overall approach and strategy for introducing your product/service and gaining it market familiarity and acceptance. Discuss how the company's name or the product/service name may contribute to market identity. Discuss your attendance at conventions and trade shows within the industry. Manufacturing Process / Operations Location Describe your company's location or proposed location. State if the land will be purchased, leased, or rented. Describe the surrounding area and other types of businesses in the neighborhood. Discuss the advantages and disadvantages of your location in terms of proximity to customers or markets; availability of labor, suppliers, and capital; access to transportation, energy, utilities, and other resources. Discuss the state and local laws such as zoning, licenses, and other regulations that may affect your company. Highlight the favorable climate that affects your operating costs. Finally, state whether your long-range plans and needs call for you to remain where you are or move to establish a new location. Facilities and Equipment Describe the characteristics of the facilities in terms of size, structure, and condition. Describe the kind of equipment used in your manufacturing operations and its condition. State whether the facilities and equipment are purchased, leased, or rented. Discuss any special parts or needs that must accompany the facilities and equipment. Discuss the maintenance and replacement requirements of the facilities and equipment. Highlight how and why the facilities and equipment give you better production or operating advantages over similar businesses. Finally, discuss the long-range needs and plans for your facilities and equipment. Manufacturing Process and Operations Describe how you will manufacture and produce your product and/or conduct service operations. Discuss the methods and processes involved. State how much of this will be done internally and how much will be subcontracted. Discuss how internal operations or subcontracting relationships may change over the next few years. Describe the raw materials and/or components used in producing your product. Discuss how these are supplied and what your backup system is should your primary suppliers become unavailable. State your current or initial projected capacity for level of production or operations in dollars and in units. Discuss how this may be expanded or changed in any other way. Break down the fixed and variable costs of production and operations at different volume levels. Describe the costs to produce each unit by material and labor. Include the indirect costs (utilities, taxes, insurance, etc.) and show the breakeven point. Describe the product/operations layout (see Sample). Discuss work flow and production control procedures. Discuss your safety program, quality control system, and inventory control system. Show how they are conducive to a positive and productive work environment and are cost-effective as well. Labor Considerations Discuss what labor requirements you will have and how you will hire and train personnel. Discuss how you will handle the possibility of strikes and other labor union activities. Discuss how you will minimize turnovers and structure compensation, productivity quotas, and employee benefits. Discuss how you will handle discipline cases and how you will communicate company policies as they relate to infractions and expectations. Environmental and Economic Impact Describe how your company and its manufacturing operations will affect the environment and the community. Discuss how you will dispose of waste, apply for applicable licenses, and be affected by other restrictions, such as pollution and noise control. Highlight the economic benefits that will result from your business's operating in the community. Discuss the "trickle down" effect of your business boosting others, creating jobs, etc. Management and Ownership Management Discuss your management team. Give a brief background of the principals (decision-makers). Describe each principal's distinctive competence and what each brings to the company. Discuss education, experience, knowledge of industry, special talents, training, skills, and abilities. Discuss the principal's position, duties, and responsibilities. State how long they have been with the project and any significant accomplishments with the company; Discuss each principal's compensation package, i.e., salary, profit sharing, bonuses and incentives, fringe benefits, and other term of employment. State what the principals' objectives with the company are, i.e., what they want to get out of their involvement, short-term or long-range. Discuss any noncompete agreements or other legal contracts that each has executed with the company. If all the management positions have not yet been filled, describe the qualifications that a person will need to fill these positions. State how and when you expect to recruit additional key people. Discuss how you intend to attract and compensate them. Along these lines, describe any positions that may be created as your company grows. Describe what options or alternatives you may pursue if you lose a key person. State what your own personal plans are for grooming a successor. Discuss how you will minimize the negative impacts of losing or having to fire key managers. Allude to the resumes and personal references from customers, suppliers, bankers, former employers, etc., on each of your key people that are included as supporting documents in your plan's Appendix. Board of Directors Discuss who is on your board of directors and why they are valuable to the business. State what their field of expertise is and their other corporate affiliations. Describe any special contributions they have already made or are expected to make. State how the board members are compensated for their time and advice, how often they meet, and how much control or influence they wield. If you have not yet recruited a board of directors, describe the kind of individuals you would like to place and how and when you expect to recruit them. Ownership Give a breakdown of the ownership interest of all parties - who owns what and how much. Describe the form of ownership, i.e., stock, partnership percentages, notes, etc. State the type of ownership, i.e., preferred stock, common stock, straight debt, debt with warrants, convertible debentures, etc. Discuss the amount and kind of ownership in reserve (not yet issued). Discuss how the ownership breakdown may change by taking on additional managers and/or capital from investors. Describe the proposed distribution of ownership if not yet firm. Discuss any plans or agreements you have pertaining to buyouts, dissolution of company, managers/owners leaving the company, and other possible developments. Discuss the warrants, privileges, rights, and options of all current and future owners. If you are seeking financing through this business plan, allude to personal financial statements included in your Appendix. Professional Support Resources Describe your support team and how each member has assisted or will assist in the development and ongoing management of your company. A partial list may include lawyer, accountant, banker, tax specialist, trade association affiliation, public relations consultant, marketing/advertising consultant, technical/systems consultant, etc. If you have not yet used consultants, show the reader you are aware of the support services your company may need. Discuss which professional you may use and when he or she would come into play. Administration, Organization, and Personnel Organizational Chart Illustrate the lines of authority, responsibility, and delegation with a chart. Make it clear who answers to whom. Do not make these areas of accountability look too authoritarian or rigid. Allow for flexibility and overlap of duties if appropriate for your situation. The reader should be able to glance at the chart and get a clear understanding of the management and personnel structure of the company (see Sample). Administrative Procedures and Controls Describe your administrative systems, procedures, and controls. Mention specifically how you will handle the accounting and bookkeeping functions. Discuss how you will monitor and audit customer payments, bills incurred by the company, and accounts receivable. State how you will track and control internal expenses and operating costs. Discuss any other major administrative systems that are a necessary function of your venture, such as ordering, collecting, receiving, organizing, filing, storing, disseminating, and disposing of goods, services, and/or information. Staffing and Training Discuss your current or needed personnel and their functions. State how they complement one another. Describe the nature, length, and cost of training needed for employees. Discuss any present or planned employment contracts you expect to utilize and enforce. Describe how personnel are identified, attracted, hired, and compensated. State your current or planned number of employees and future provisions for growth. Describe the learning and experience curve for different positions and the amount of time before personnel can function independently and productively in these positions. Sample job descriptions may be included in your plan's Appendix. Management Control Systems Briefly summarize your management philosophies and style. Tie these in with how you will go about getting the most out of your people. Describe your plans to encourage group goals over individual goals. Discuss how you will prevent your team from stagnating or becoming too bogged down in the routine and predictable decisions. In general, discuss how you will keep the lines of communication open, encourage creativity and commitment to company goals, and remain lean, flexible, and action-oriented. Milestones, Schedule, and Strategic Planning Major Milestones Summarize the significant goals that you and your venture have already reached. Describe how you attained them and what you learned in the process. Discuss what needs to be done and what must happen for you to be successful with the company. State who is in charge of seeing that these things are accomplished. Refer the reader to the time line schedule for when these things are expected to be completed. Describe why these goals and time frames are realistic. Finally, give an example of the teamwork and unified commitment toward the attainment of these goals. Schedule Include a time line chart. This chart is a schedule of significant milestones and their priority for completion. The far-left-hand column indicates the day, month, and year for completion. The second column from the left states the milestone or goal to be completed. The third column from the left states who is charged with the task of overseeing or completing the goal. The last column states what options or alternatives may be pursued if the goal is not attained (see Sample). There are several ways to present the milestones within the chart. You may list them in order of priority or in order of importance. (The two are not necessarily the same.) You may also list them in logical order for completion. In order words, one must happen before the other can be considered or reached. Strategic Planning This is normally a very difficult issue for an owner/manager to tackle. It takes quite a bit of foresight and expertise, combining academic techniques with past experience in the company/industry. As with all other issues in your plan, do not try to bluff or be afraid to admit that you don't have all the answers. Your best bet is to consult professionals in the field. Lacking the resources to get professional help, get together with your partners, managers, staff, friends, and other people involved and conduct a brainstorming session. In a brainstorming session no idea or comment is too farfetched. Creativity and openness are to be encouraged, without criticism or qualification. Have your team throw out ideas on all major aspects of your product/service and operations. After all ideas are exhausted, prioritize, assign, and begin putting some direction toward their exploration. You should strategize according to:
The biggest factor in formulating effective strategies, while avoiding ones with inherent risks and failure, is to have an honest assessment of your strengths and weaknesses and to ask the right questions. In writing this section of your business plan, make it clear to the reader that you are indeed addressing the right questions. The Critical Risks and Problems Summary of Major Problems Overcome Start by summarizing the major problems you have already had to deal with. Give examples of how you attacked and resolved these. Highlight especially innovative and creative approaches you have used to solve problems in your start-up and what was learned from addressing these problems. Inevitable Risks and Problems Describe the nature of the problems and risks that your venture will be faced with. Discuss when these problems and risks are expected to present themselves. Discuss how you may avoid or minimize their impact. Describe how you will deal with them. Discuss any threatened or pending litigation or disciplinary action the company or principals may be involved in. Discuss any other legal liability or insurance problems. Potential Risks and Problems Describe and discuss, in the same manner as above, the problems and risks that may present themselves. Discuss what circumstances or situations would prompt these to happen and how you would deal with them if they did. Worst-Case Scenarios Give a worst-case scenario of all inherent and potential risks that the company may suffer. Summarize the downside and what, if anything, could be salvaged or recovered if these risks did materialize. Financial Data and Projections Funding Request/Terms of Investment State the amount and type (debt or equity) of funding being sought. Describe the intended use of the funds. Give a breakdown of how the money will be applied, i.e., capital equipment, property, facilities, inventory, and operating costs. Discuss what effect the capital will have on the business in terms of growth and profitability. State when the money will be needed. Include a graph showing the amount and timing of the funds. Discuss the level of investment already made in the venture. State whether it is funded internally or externally. Discuss the amount of stock or ownership that will be made available but not issued in the current offering. Discuss future funding expectations and the stages at which it will be needed. Describe how the unissued ownership may be used at future stages and how, if at all, this future fund-raising will affect the current offering. Describe the terms of investment. State the minimum amount to participate. Describe how this offering will dilute the ownership of the initial and subsequent investors. Discuss the rationale for the proposed distribution. Discuss the payback period and potential return on investment. Describe why the investment is attractive and how it compares to other deals within the industry. Discuss any provisions for investor liquidity and the earliest date the investor can recover the initial investment. State any collateral being offered. Discuss whom you have already approached about investing and the results of the contact. Discuss any access you have to additional investors or funding sources. Discuss what the total exposure of the investor is if the deal goes bad. State what percent, if any, of the investment could be recouped via tax benefits, liquidation, or other means. Finally, describe how this package fits in with the venture objectives and why the ownership structure being proposed is the most suitable for the business. |
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