The Best Business Plan for Your Business

A well-conceived business plan does much more than merely describe what will become your business.  Your business plan must sell you first and foremost,  along with the products or services you’ll offer,  the business model you will follow,  the marketplace in which you’ll compete,  plus reasonable estimates of start-up and monthly operating expenses.  If outside funding is required,  then the plan must convince lenders or investors that you are prepared and qualified to build a significantly profitable enterprise.  A good business plan will do the following:

• Define the business mission
• Describe the products and services
• Identify target customers
• Identify and evaluate major competitors
• Describe the business environment
• Detail the business model
• Describe the business strategy
• Detail the marketing plan
• Demonstrate how a profit will be made
• Provide an exit strategy

Here are business plan options for three scenarios:

The Executive Summary

An Executive Summary is a condensed version of a full-dress business plan and often runs to about 5-10 pages in length.  When written well,  the Executive Summary nevertheless functions as effectively as a traditional business plan.

It is a useful tool for Freelancers who will open a consultancy and will have relatively modest start-up costs and monthly operating expenses and are savvy enough to appreciate the value of a road map to launch their venture.  It is not a business plan option for those who will approach lending institutions or investors.

The Executive Summary states the business mission,  describes the products/services,  describes the primary clients and competitors and details the business strategy,  business model,  marketing plan and relevant financial data.  To be useful,  the document must fully integrate that information and demonstrate how the business will become profitable.

The Operational Business Plan

An Operational Business Plan is produced by an existing business with several years’ performance history,  usually with a goal to either apply for business expansion capital or prepare for the sale of the company.  Operational Business Plans may also be used to upgrade and streamline how a business runs,  functioning as a guide for the management team.

The Operational Business Plan delves into great detail about production,  customers,  competitors,  the marketplace and business environment,  sales distribution channels,  management and staffing.  Historical data are available and five years of financial statements are typically included,  along with financial projections that forecast the company’s expected performance over the next three years.

The business plan to attract investors

When outside investment is sought,  it goes without saying that the potential for strong profits must be demonstrated.  The more money that is requested,  the bigger the promised profits must be and the more quickly realized.  The break-even statement,  which shows at what point in time the business will go into the black,  along with credible financial assumptions and projections,  are critical in this scenario.

If the business is an existing one,  the financial projections must appear to be attainable,  based on the five year financial history given.  Make sure that your business and personal credit scores are 700+,  or you won’t see a dime from a bank.

Venture capitalists and angel investors may be somewhat more forgiving of a less than perfect credit rating if your business concept and model are extraordinary.  Beta test the product/service and business model with target customers to verify demand for what you intend to sell and your ability to efficiently deliver the goods to the marketplace.

For VCs, the potential for big profits is king.  They are in it for the pot of gold that comes when the company goes public and stock is offered.  Angels are not totally dissimilar to VCs,  but they are drawn to an entrepreneur’s vision and passion in addition to the pay-off.  That’s why they’re called angels!

Thanks for reading,

Kim

The Living is Easy…

And so we are drifting through the summer doldrums.  As heat and humidity rise,  our focus and motivation fall.  Summer is the slowest period for Freelancers and most others,  with the exception of  landscapers, building contractors, wedding planners and those in the tourist industry.

For the majority,  summer means billable hours  that evaporate like the morning dew on roses.  But who can afford 10 weeks of idleness?  Savvy business owners know it is wise to make hay while the hot sun shines and use the summer months to position themselves to create business in the fourth quarter and beyond.  A business slowdown need not mean no business activity.  Summer is the perfect time to pick up the thread of what slipped off the radar screen earlier in the year.

You may start this productive cycle by reviewing your business model.  How efficient is your operation?  How much does it cost to make a sale?  Just how profitable is your business,  anyway? What processes could be streamlined?  What technology could make service delivery,  customer contact and/or administrative functions easier,  faster or less expensive?

By the way,  did you meet your sales projections for the first half of the year?  Might it be time to hire help,  so that productivity can increase,  customer service improved or administrative functions executed in a more timely fashion?

What emerging  priorities and concerns  are on the horizon that may excite or agitate your clients and how might that impact your business? You have the next few weeks to catch up on industry magazines,  websites,  white papers and blogs and find out what you need to know to stay competitive and understand  what may change in your marketing message or service options and delivery.

Summer is also a great time for professional development.  Look for certifications to pick up,  or courses and workshops to attend.  If you can budget it,  use this time to boost your skill set and  make yourself  appear more of an expert to clients and prospects.  Along the way,  you’ll meet a few people you should know.

Summer is a time of more flexible schedules and despite vacations,  it’s a good time to collar people and arrange those meetings that no one had time for between January and June.  So go back through your notes and remind yourself of whom you wanted to meet with and send out a few emails.  What intriguing and mutually beneficial proposal will you present?

Finally,  summer is an excellent time to do the prospecting that you’ve been putting off  for six months.  Ask colleagues for introductions and maybe do some selective cold calling.  Make it a point to make inroads on new business development.  I’ll bet that slippery someone whom you’ve been chasing since last year is more available in July and August.

By taking the initiative,  you will see that  summer is the best time to evaluate, investigate and create business opportunities that will give you a cushion of revenue that will get you through next year’s summer doldrums!

Thanks for reading,

Kim

Starting A Business? Consider Your Marketing Strategy Part III

Even if you will not seek financing for your business and the marketing plan is for your eyes only, you will thank yourself many times over if you take the time to thoroughly research and account for all aspects of marketing, especially sales expectations for your products and/or services.  Make sure that you  understand  exactly how you will  make sales contact with prospective customers.  In your plan, note whether your business will sell primarily  B2B,  B2C  or  B2G.

THE SALES STRATEGY–PROJECTIONS

Sales is the tactical manifestation of marketing.  The theories of marketing are brought down to earth to make contact with the customer and will be validated (or invalidated) by the sales revenue generated.

When planning a new business venture it will be necessary to make sales projections (also called forecasting), ideally for 36 months into the future, to give yourself an idea of the revenue potential of your business.  It’s sort of like fortunetelling, but there are resources available to help you make a reasonable estimate.

Marketresearch.com gives current industry profiles and other data, covering 16,000 lines of business in 300+ markets. You’ll need to become a registered user;  some (but not all) info is free.  Another excellent source for business data is Boston Public Library’s Kirstein Branch. You can access certain info online at bpl.org and most is free.

Example:  in your business, you are the only sales person during the first year.  If sales are promising, you may decide to hire 1-2 sales people in year two and maybe another 1-2 more sales reps in year three.

There is data that gives the average sales revenue per full time sales representative in nearly every industry. That data will allow you to chart your expected gross income for the year, based on the number of people selling for you.

However, bear in mind that a new business is unlikely to achieve the benchmark figures during the first 3-5 years of operation.  Remember also that gross revenue is not net revenue—there are expenses associated with selling like salaries, product brochures and office supplies.

Competitive intelligence data can help confirm the accuracy of your sales projections.  However,  Freelancers and those competing with privately held companies will not be able to ascertain how much revenue is historically generated yearly by those competitors since the data is not public.

What I’ve discussed here is known as the Comparative Method of projecting sales.  It is generally more useful to project for new businesses using this method. There is also the Build-up Method, where the entrepreneur identifies all likely revenue streams and then estimates the dollar volume that can be extracted from each source in a given month (or quarter).  The Build-up Method tends to work best for businesses that have been up and running for a few years and therefore have a sales history and documented revenue streams.

Finally, consider the impact of  sales trends for your industry (meaning consumer demand) and the relative strength of the local and regional economies on your products/services.   Sales projections will never be 100% accurate.  It will be wise to keep your forecasts conservative.

THE SALES STRATEGY–CUSTOMER CONTACT

How the business owner makes contact with prospective customers will be governed by a number of factors, one of the biggest being is this an online business or is it in real time?

If  you expect to sell online, be sure to have a website with a good shopping cart set up and secure credit card processing.  Your website will function like an ambassador and an employee,  so create  it with respect. The site must communicate your brand very well, must download quickly every time and must be user friendly.  A content management system will allow you to keep the site updated yourself.

Driving traffic to the site will be your #1 job and search engine optimization will be critical.  As was suggested in a  comment to last week’s posting, internet discussion groups are a very useful way to connect with customers and create buzz.  They are a great way to drive traffic to your website.

Catalogues do double duty, allowing customers to order by telephone or the website. They are expensive to produce (product photography is costly) and print, but they still catch the customer’s eye and are widely used by the likes of LL Bean and Staples. To the customer a good catalogue is a keeper, so you don’t have to print more than once a year.  Get a toll free phone number for customer convenience.

Next, decide whether the best way to sell to customers will be face to face or by telephone.  What is traditional for your business, meaning what do competitors do? Of course, you can create your own style.  Your sales may occur primarily by telephone, but a visit to prospects to introduce yourself to decision makers and gatekeepers can be a wonderful way to separate yourself from the pack and develop relationships.

Other selling methods include bid submission (e.g. the trades or selling to the government), referral arrangements and inclusion on preferred vendor lists (e.g. caterers and florists  at a function space).  For some businesses, two or more customer contact methods will be used to generate sales.

Next week we’ll start talking about money.

Kim