Lester Bahr CPA, LLC
(484) 707-5934
Allentown, Pennsylvania
Enlightened solutions within your grasp
Why should your write a business plan?
Writing a business plan can seem like a rather overwhelming task. It involves forcing you to organize your thoughts and ideas and express them in written form. This may prove difficult when you don't quite have all the answers. Therefore, the plan process forces you to do the appropriate research and flesh out your ideas. Then, you must clearly convey your position and convince your reader of those things that may seem intuitive to you. The importance of a good business plan should not be underestimated; as it may well determine your success in getting investor or lender funding for your endeavor. Writing a good business plan is not the kind of thing you will likely finish in one evening. Rather, expect it to take you at least a couple of weeks to pull together all the information and properly organize it.
Starting the business plan writing process
One question often asked is: How long should my business plan be? There is no single best length. It is going to depend on the complexity of the business. However, as a general rule of thumb it should probably be at least eight to ten pages in length if your idea is relatively simple and perhaps as long as 25 or 30 pages for a complex or technical plan.
The presentation effect of the business plan is important. With current software and inexpensive color printers it is not difficult to insert color images, pictures, graphs and so on to present your ideas in the best possible manner. As the saying goes: a picture is worth a thousand words. Of course make sure that it looks professional and is free of grammatical and spelling errors. Finally, you should bind the finished document in an attractive cover. It is also a good idea to give each copy a distinctive number and carefully control distribution of the plan.
A typical business plan outline may look something like this:
Name of the Business
This should be something distinctive that reflects the major thrust of the business.
If you have a logo, tagline or other distinctive characteristic to be used in the branding process be sure to include it.
Executive Summary
This should be an overview of the business plan that captures the essence of what the plan is all about in a compelling way such that it draws the reader in to read the details of the plan.
Table of Contents
This will allow the reader to quickly see an overview of the plan and find relevant sections quickly
Company Description
Think of this as your thesis. It is the place in which to tell the reader what the business is all about, your primary services or products, markets you will serve, and the specific things that distinguish your service or product which will lead to your success.
Market Analysis and Sales Strategy
(1) Industry - what is the potential size, the number of customers and your target market. Are there regulatory issues? What is the expected changes in your market over the next five years.
(2) Competition - How do you stack up against the existing competition? What is your customer's perception?
(3) Marketing activities - What image will you try to create and how will you focus on a specific market segment? How will you determine pricing levels?
(4) Selling activities - Specifically, how will you find your prospective customers and once identified, how long do you expect the sales cycle will take to turn the prospect into a paying customer?
Research and Development
Describe the technology to be used as well as recent developments that may affect how you do business. Describe new technologies, patents etc. that will make your work practical in the next few years.
Business Operations or Manufacturing
Describe how your operations will work and what advantages you have over the competition.
Ownership and Management
Provide the names of your key personnel and describe their special skills and experience. Give the names and backgrounds of each person who will make up your Board of Directors. Also, provide information as to how you expect to attract key people to your company.
Human Resources
Describe how many employees you expect to need and what compensation methods will be used. You may also want to include an expected organization chart.
Financing Plans
Provide projections as to how much money you expect will be needed to launch your business and where you expect to acquire this capital. Also, you should prepare a cash flow report extending out at least three years to determine how much and when the various financing will be needed.
Financial Data
Prepare financial projections of profit and loss by month until the expected break even point. Beyond that point, annual statements should be sufficient. It is important to cross-reference each line of the statements with a page that states what assumptions have been made and why those assumptions are valid.
Appendices
This is the place to include resumes of key individuals, professional references, market studies, and articles from respected sources that support your claims about the potential success of this type of business and so on.
Other considerations and suggestions
Writing a good business plan will probably take you longer than you expect. But, it forces you to clarify your strengths while it points out your weaknesses. As a result, it forces you to do more research which ultimately will either strengthen your arguments or isolate weaknesses in your convictions.
Remember, a business plan not only gives prospective investors and lenders the facts about your ideas, but it also demonstrates how you think through a problem. This is important to the reader especially if they don't know you. For this reason, it is important to always consider your audience as you write the document and make sure to get facts to support your ideas. Generally, an investor will require proof over promises before writing you a check.
You may want different versions of your business plan for bankers, venture capitalists or individual investors as well as any companies that may want to do business with you as opposed to providing capital.
It is important to provide proof to back up any claims you make. If you expect to be a leader in your field or say your product will be popular in the market you must support your statements with facts.
Generally, you should try to be as conservative as possible in all of your financial estimates and projections. Even if you think you will capture 25% of the market share in the first year you should still keep your financial projections more conservative. Perhaps 10% market share seems more reliable. Then, go on to discuss why you think this is a very conservative estimate based on what you think will actually happen.
Be realistic in projecting the time and resources that will be necessary. When you get caught up in all the daily details you may find that things just take longer to do than expected. Underestimating the required time and resources is a common error entrepreneurs often make. Obviously, the more realistic your business plan is will determine how much credibility it holds.
Put yourself in the shoes of the banker or investor as you write the business plan. What would they want to see? Make it easy for them to find this information.
Tell the reader why your idea will work. Has it been done before successfully? Why or why not. If not, explain why the idea did not work before and how your situation will be different. If you have a prototype, describe it.
Describe the facilities and location(s) that will be required for performing the tasks.
Discuss what role your investors will play. Is it just to put up capital or will they also be on your Board of Directors. Some investors will also expect to know how long you expect it will take for them to get their money back.
Your business plan needs to convey as much information as possible in the shortest space. If it is too long you will likely loose the reader's interest. Also, keep in mind that two column documents are easier to read than full pages of text. Use charts, tables, graphics or illustrations to break up long bodies of text. Add color where possible. Studies suggest that adding color increases retention of information.
Now some things to avoid when writing a business plan:
Don't make empty claims. If you make a claim in one sentence be sure to back it up in the next sentence with a statistic, fact or quote from a reputable source that supports your claim. Do not engage in rumors about your competition. Stay with the facts.
Avoid using superlatives and strong adjectives such as: amazing, incredible, outstanding, terrific, unbelievable and so on.
Avoid overly optimistic time frames. Situations generally take longer and cost more to complete than originally expected.
Don't use gimmicks. Serious investors want facts, not hype. If you resort to gimmicks it will detract from your credibility which will harm rather than help your cause.
Make sure the final business plan is free of typing errors and misspelled words. All word-processing or publishing software contains a spell checker. If writing is not your strong suit, you should hire an editor to read the entire document. Nothing will damage your credibility faster than grammatical or spelling errors.
Don't assemble sloppy projections. Remember, your business plan will be read by bankers and investors who are likely quite knowledgeable in reading financial statements and they will have certain expectations for these statements. If you are not an expert in accounting matters, have the financial projections professional prepared by an accountant. The accountant will be able to assemble the standard format financial statements. Also, the accountant will be able to guide your thinking in the financial aspect of your business plan and will be able to point out situations that you may have overlooked.
