On my previous post I talked about my interest in starting a video production house. I outlined various steps that I thought one should take in order to start such a business and promised that I would elaborate, as best as I could, on the specifics of those steps. The first point I made, was the need of a business plan, “for the sake of comprehension and organization.”

A business plan is nothing more than a written description of the future of one’s business; whether it is a start up or an established business. It includes business goals and how they will be accomplished; possible problems to be faced and how to solve them; and a description of business structure ranging from what goes where, to who does what. Also how much funding it will require to take off and keep going, until it breaks even and subsequently makes a profit. And, why it will succeed in its industry and under current market conditions.

A business plan has many uses that will allow you to run your business, or plan for a new business in an organized and efficient manner. It is very useful when looking for financing, whether from investors or lenders because it expresses your visions and intentions; to determine whether or not you can afford to rent space, hire help and buy equipment; or start slow in your home, with rented equipment, juggling all the work yourself. Also, when in the quest for partners, new hires or management teams because it highlights your business objectives and future projections as well as information about compensation and advancement. To develop relationships and alliances in the future based on where the business is projected to go; to valuate the business for tax, inheritance or divorce purposes and to expand by branching out into other markets or even industries.

Originally I thought that as long as all the objectives where covered, it did not matter how a plan could be written; professionalism notwithstanding. However there seems to be a standard or format when it comes to writing a one. There are three primary parts that a business plan must contain; Business Concept, in which you discuss your product or service, talk about the industry and market, your business outlook and plan to succeed. Marketplace Section, in which you point out your target audience or potential customers, explain who they are and why them, in particular. Also, discuss the competition and how you plan to raise above it. Finally, the Financial Section, where income, cash flow, profit projections and when, approximately, the business will break even, take center stage. These three parts can be broken down into seven key components, which will help to further organize the facts. These are:

• Executive Summary: a half page to full page statement that details your hopes and desires. It explains: Business Concept, which describes the product or service, its target market as well as point out who the competition is and how to be and remain competitive. Financial Features, points out the numbers; sales, revenues, profit, cash flow, etc… Financial Requirements, details the funds needed to start the business as well as how those funds will be used. Current Business Position, gives background information about the company. Explains about those involved; from heads to employees, as well as the company’s day to day operations. Major Achievements, explain achievements that are crucial to the success of the business. These include contracts, operation facilities, prototype, patents, etc… Do not beat around the bush, get right to the point. It is important that you come off as secure and decisive.
• Business Description: describes the industry, markets within that industry and anything significant that affect the business. Use current reliable data and cite your sources. In order for investors to risk their money, they will need to know that the information they are reading comes from reliable sources. Describe whether the business will offer products (Wholesale? Retail? Manufacturing?) Or services. Mention whether it is an established business or a new business and whether it is a partnership, corporation, LLC, etc… Mention who the personnel at its core are, and how they will be of benefit to the company. Then mention who your target audience is and how you plan to distribute to them. Finally, get specific about the product or service and explain how you will do things differently than your competitors and why it will work.
• Market Strategies: based on market conditions, the business has to be strategically positioned within that market so that it can garner as many sales as possible. This requires deep understanding of the target market, which, is obtained by conducting a market analysis. This analysis will provide all the needed information (Pricing, Growth Potential, etc…) to introduce the business to the market and allow it to be successful within all the competition.
• Competitive Analysis: analyze the competition to determine their strengths and weaknesses and based on that information, develop a plan of attack.
• Design and Development Plan: describes the product, its design, its development and its production as well as the budget that will be needed.
• Operations and Management Plan: explains how the business works day in and day out. Outlines the delegated responsibilities and the required capital and expense in order to keep things running like clockwork.
• Financial Factors: provide financial statements that show the company is afloat, can remain that way in the mean time and prosper as time passes. The statements are: Cash flow statement, Income statement and Balance sheet.

Also, a well prepared business plan must have a cover page and a table of contents.

A typical business plan is about fifteen to twenty pages in length, but it depends on the complexity of the business or whether a new kind of business or industry is planned. Also, the nature of the business and what kind of plan is being written determines its length. I myself do not have a preference, sometimes short and sweet can serve the same purpose as a drag out detailed plan. As long as all the information is included, then all is good. But there are four types of business plans that can be written; to me, they do not seem to be part of any specific rule that must be followed, although you would have to focus on a particular type depending on the circumstances.

• The Mini Plan: up to ten pages with the key basics such as business concept, financing needs, marketing plan, cash flow information and income projections. This type of plan serves as practice for a full length plan in the future, and works just fine for small scale proposals like bringing a partner on board or dealing with a small investor.
• The Working Plan: usually and regularly used as a reference guide to run a business. It must be well detailed but can be lacking in presentation. It does not include information and details an outside party, like a financial institution, might require; such as, illustrations and business terms.
• The Presentation Plan: a “Working Plan” with high class looks, for when dealing with third parties. Has standard business vocabulary, charts, graphs, illustrations and none of the slang or shorthand that is common at the workplace. Outside investors and potential business partners are not familiar with the operation you have got happening, so it has to be clear and detailed. It also has to include information required by that, whom you’re looking to be in business with as well as information about potential risks and the competition. It should be printed on high quality, maybe even glossy paper, in color and bound into an easy to handle booklet. Finally, the information presented must be exact; any error could be misinterpreted by one not directly involved in the business. This also goes for all other kinds of business plans.
• The Electronic Plan: all plans are made on computers, and then printed. An electronic plan remains in digital form; I would say, it is a “Presentation Plan” without the printing and binding. Since in digital form, The Electronic Plan can be used for presentations and to send to those who prefer to carry a digital file rather than a large booklet.

Since a business plan is part of a business from its conception to its implementation to its daily workings, it is important to keep it up to date. Updates to the plan, and in certain occasion changes, can be brought on by unexpected changes in the industry and/ or market, if the business reaches a major milestone, if there is new and innovative competition, changes in regulation or new management. You learn more and more every day, and after gaining some experience you may decide that you are able to write a better plan. Also, if looking for further financing, the figures have to be updated; although that is also necessary in order run the business day in and day out.

You may have to emphasize specific parts of the plan, depending on what you are looking to accomplish. If you want to requisition funding, then the financial aspects ranging from funds requested to projected growth rate, to ability to generate cash to service loans in the mean time, to how the business is going to make money, have to be addressed in great detail. If it is being used for hiring purposes, then among other things, compensation and opportunities for advancement have to take center stage. And so on; basically be really elaborate on the sections that relate directly to whom you are looking to do business with.

Before writing the plan, think about what you would like your business to be and what you want it to eventually become. As you think about those things, note the hurdles to be jumped and obstacles to be faced when it comes to accomplishing those goals. Nothing is insignificant enough to ignore or even set aside for later. Think of everything from starting out in your basement to expanding nationally or even globally. From the amount of work you’ll have to juggle on your own to the amount of employees you’ll need to delegate to. It is important to anticipate the size of your monetary needs, because the more financing you need, the more control or power you will have to relinquish. Some investors may want equal control or may want to have some input by placing someone on the board of directors. On the other hand, entities like banks keep away, as long as payments are made on a timely manner. Finally, never forget that obstacles are disguised opportunities.

In the next post in this series, I will focus on “Find & Secure Funding”. And I reiterate that this is a learning experience for me; I need all the help I can get. If anyone out there sees any inconsistencies or can offer information that I failed to mention, by all means step in, it will do nothing but help. I have started a thread about this in the forum, feel free to comment and offer your insights there, as well as on the comments section of this post.

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