Docstoc

10 Preliminary Steps Before Writing a Business Plan

Document Sample
10 Preliminary Steps Before Writing a Business Plan Powered By Docstoc
					INTERNET: http://www.allbusiness.com/articles/BusinessPlans/1730-1746-1767.html

10 Preliminary Steps Before Writing a Business Plan
1. Writing a business plan can sound like a daunting task. Therefore, it is advantageous to take time to prepare by following 10 preliminary steps: 1. Ask yourself why you are writing a business plan. Is it to raise capital or as a guide for running the business? 2. List your goals for starting the business and where you see the business in three to five years. 3. Clearly define your target audience. 4. Write a table of contents so you’ll know exactly which sections you will need to research and find data to support. 5. Make a list of the data you will need to research. For example, you will need statistics on your demographic audience, your competition, the market, and so on. 6. List research sources that will be most helpful, such as Hoovers, Dun & Bradstreet, or AllBusiness.com. 7. List your management team. If you are unsure of someone’s availability, this is the time to determine whether or not they are on board. Gather biographical data on each person. 8. Start compiling all of your key financial documents. You can determine later which ones you will use in the business plan. 9. Read sample business plans. Since countless business plans have preceded yours, there is no need to reinvent the wheel. Look for business plans for businesses most similar to yours as a prototype to guide you. You can also talk to other business owners who have written plans before and seek out their expertise. 10. Determine which software program you will use to write your plan. You can use anything from a basic word-processing program to business plan software. You need to use that which best suits your needs and level of comfort. Once you are ready, begin your business plan with the understanding that it is a work in progress and there will be several drafts to follow as well as ongoing changes as your business progresses.

1

10 Reasons Why You Need a Strong Business Plan
A business plan is the cornerstone of starting a business as well as a significant tool for monitoring the progress and growth of your company. Below are ten key reasons why you should have a business plan. 1. To Attract Investors: Before investors can decide whether or not to back your business financially, they will need to know as much as possible about how the business will operate and how their investment will be spent. 2. To See if Your Business Ideas Will Work: By writing a business plan and outlining each aspect of your business, you can determine if your idea is actually viable. 3. To Outline Each Area of the Business: A business plan will provide an overview of all aspects of the business. You will be able to detail the who, what, where, when, and why of your day-to-day business operations, costs, and projected profitability. 4. To Set Up Milestones: By forecasting where your business will be in six months, one year, or five years, you are not only letting potential investors know your plans, but also setting up realistic milestones for yourself and your employees. 5. To Learn About The Market: Researching, analyzing, and writing about the market not only provides you with an overview for the business plan, but gives you greater insight into the overall market. 6. To Secure Additional Funding or Loans: Your business plan can demonstrate that you have met goals and illustrate the company’s growth and need for additional funding. 7. To Determine Your Financial Needs: The process of writing your business plan will force you to analyze your financial picture. 8. To Attract Top-Level People: Your business plan will give talented people an overview of your business. 9. To Monitor Your Business: A business plan should serve as an ongoing business tool that you can use to monitor your progress. 10. To Devise Contingency Plans: While business plans often include some contingency plans, by virtue of having the document available, you can see how and where you can make such changes relatively quickly if, and when, necessary.

2

Five Fatal Business Planning Mistakes
1. There are many factors that make up a good business plan. It takes time and many revisions to get it right. Unfortunately, too many business plans are sent to potential investors before they are ready to be read. Below are a few of the key mistakes commonly found in business plans for startup companies. 1. Unrealistic financial projections: Investors expect to see a business plan that paints a realistic financial picture of the anticipated growth of the company. If the plan is overly aggressive and not consistent with growth in the industry, it can cause the plan to be shelved. It is best to be realistic with your financial projections. You need to be prepared to defend and explain all important assumptions concerning your projections. 2. Not having a defined target audience: No business will appeal to “everyone.” The market must be clearly defined and you must present a clear picture of who will buy your product and why they need it. 3. Over-Hype: Too much hype and the overuse of superlatives can be the downfall of an otherwise sound business plan. Wow them with the business idea, not hype or buzz words. 4. Poor research: In an effort to get a business plan together hastily, many business owners do not double-check and substantiate their claims. Make sure your research is accurate and up-to-date. 5. No focus on your competition: Some business plans state that there will be “no competition,” while others indicate only what the competition has done wrong. Investors reading a business plan expect to see such competition and how you plan to compete in the market. You cannot ignore competition or paint an inaccurate picture. Other common errors include: dry writing, inconsistencies from section to section, and making the plan way too long. It is very important to take time to carefully review each section of your business plan. When you finish, have several other sets of eyes read it before sending it to investors.

3

Seven Lethal Business Mistakes to Avoid
by Cliff Ennico, Entrepreneur.com When I go on vacation, I take a lot of books with me. I try to make sure that none of them have anything to do with business, but sometimes business lessons come from the strangest places. One of my vacation reads this year was "Famous Last Words" by Jonathan Green. This sometimes funny, frequently poignant compilation of deathbed quotations offers a glimpse at the characters of famous people as revealed by their final words. My favorite (as a business columnist, anyway) comes from showman P.T. Barnum, whose last words reportedly were "How were the receipts today at Madison Square Garden?" Whatever words you may utter if your business collapses (most probably unprintable in this column), the failure can often be traced back to some "famous last words" you once said, if only to yourself. Here are some painful examples: "My customers will be loyal to me." Ask any small town hardware store owner who's had to go one-on-one with WalMart or Home Depot if this is true. While not totally dead, customer and brand loyalties are not as strong as they used to be. People won't buy stuff from you just because they've bought from you for 30 years. If a new competitor is offering a better price to your customers, and the cost of changing vendors isn't all that great (for example, if the cheaper competitor is located in a faraway, hard-to-reach place, people may continue to pay your higher prices for the convenience of a shorter trip), people will switch to the competitor in a heart beat. By all means provide better service than your competitors, but don't count on that to save you--you should also offer the lowest prices around and keep your costs even lower. "If I offer people something they need, they'll buy it." Amazingly, people don't always buy what they need, even if they know they need it, and even if they tell you they need it. Example: Brussels sprouts. Probably one of the healthiest foods on the planet, what with all the vitamins, minerals, and antioxidants they contain. Heck, they probably even prevent cancer if you eat enough of them. People are educated nowadays, and they're saturated with media telling them what foods are healthy for them to eat, so they know they need to eat more green vegetables. Nobody seriously disputes that. But when you're really hungry and you want something quickly, do Brussels sprouts come to mind? Too many entrepreneurs are out there selling Brussels sprouts to people because they need them, and know they need them, but are scarfing down chocolate-covered peanut butter-filled pretzels when nobody's looking. "I really don't have to market, because if I do a good job, the word will get around." People don't talk much about the positive experiences they have with their professionals or service providers (but believe me, they talk long and hard about their negative experiences!). Also, people aren't staying in one place long enough to learn about local reputations. While your reputation is certainly important, it doesn't get new clients or customers in the room. In any business or profession, you have to get in people's faces and constantly communicate what you do, how you do it and why you're better than the competition, in a way that doesn't turn people off. 4

"My business has no competition." If you think this, it's because you gave the marketplace a quick look, and saw nobody doing exactly the same thing as you. Not all competitors are obvious to the naked eye, though. Sometimes your competition isn't a person or a company but rather a "thing." Book publishers, for example, compete not only with other book publishers, but with the Internet. Buggy-whip manufacturers at the turn of the last century had little to fear until the automobile came along and folks didn't have to ride horses to and from work anymore. Sometimes your competitor may be doing something entirely different from you. A pizza parlor in a small town may have a local monopoly on Italian food, but the Chinese restaurant across the street is certainly a competitor for the "quick lunch" or "takeout dinner" customer. Sometimes your competitor hasn't yet decided to compete with you. Back in 1995, Netscape dominated the U.S. market for Internet browser software. There were no significant competitors. But in Redmond, Washington, a guy named Bill Gates was thinking about getting into the browser market . . . and the rest is history. "I don't have partners or employees, so I must do everything myself." Just because you're legally the sole owner of your business doesn't mean you have to do everything yourself. Sooner or later, in any business, you learn that there are a handful of things--five or six at the most--that must be done well in order for a business to succeed. They vary from business to business, and sometimes take a while to figure out, but they are there, and you must learn them. For example, in my consulting business, one of my essential activities is to get written invoices out to my clients promptly at the end of each month. I've learned the hard way that if you don't get your invoices out, your clients don't pay you, and they're more inclined to haggle over your fees once the belated invoice finally arrives. Once you've mastered the five or six essential activities in your business, it's critical that you do them yourself, because no one--not your employees, not your partners, not your spouse-will devote the same level of attention to performing them that you will. Everything else, and I mean everything, should be delegated to outside contractors, and their fees made a cost of your doing business. "If I make enough and sell enough, and there's money in the checking account, I'm successful." You wouldn't believe how many entrepreneurs I meet in my travels who truly believe you can ignore profits if enough people are buying your stuff. Every business owner has to agonize over what his products and services truly cost. It seems sometimes that every day you stumble across a "hidden cost" you didn't know you had. One young lawyer told me how proud he was of how successful his solo law practice was--he had literally hundreds of clients--until I gently pointed out to him that when you factored in the number of hours he was working every day to keep those clients happy, he was making only $10 an hour after taxes! Today he works as a paralegal for a large law firm--a little less money, but a much better return on his investment of time. "I can't really afford a lawyer, so I'm going to do my own contracts." Every business involves some form of legal agreement. They can be as simple as an invoice form or purchase order, or as complex as a 50-page property lease. Sometimes you draft them to be signed by others, sometimes others draft them for your signature. Every one of them, without exception, should be reviewed by an attorney before you use or sign them. 5

Let's face it. Few people truly enjoy dealing with attorneys, and nobody likes to pay legal fees. Yet unlike you, attorneys live with contracts every day of their working lives, which is why you should never trust an attorney who has 20/20 eyesight and a gorgeous suntan. Attorneys know not only what language should be in your contracts, but what language has been left out that needs to be added to protect you and your business. Even if you decide to draft your own contracts, using a legal form book or one of the "pay per download" legal form databases available on the Internet, you should always have an attorney review your work before you start using it. I can honestly say in the 20-plus years I've been drafting contracts for clients, not once have I taken a "standard form," filled in the client's name and handed it to them as a finished product. Every contract, even the simplest letter of understanding, needs to be custom-tailored to your specific needs. As for the legal fees, there are tons of attorneys out there vying for your business. I guarantee it won't take you long to find one who's willing to negotiate his or her fee, especially if you hold out the promise of a long-term relationship. © Copyright 2005 Entrepreneur.com, Inc. All rights reserved.

6


				
DOCUMENT INFO
Shared By:
Stats:
views:77
posted:12/15/2009
language:English
pages:6
Description: 10 Preliminary Steps Before Writing a Business Plan