Creating a Business Plan

Business Plans

I have often been asked by aspiring entrepreneurs:
– Should I write a business plan?
– If so, where do I find information on how to write a business plan?
– What should be included in a business plan or how detailed should it be?

These are good questions. Let me begin by saying that there are several preliminary steps that should be completed BEFORE embarking on the arduous task of compiling and organizing data into a comprehensive business plan.

Typically, after a process of determining whether a business idea is worth pursuing, entrepreneurs immediately launch into a process. For some entrepreneurs, the process of validating the idea is relatively quick, while for others it is exhaustive in scope. However, over the years, I have observed there are some preliminary steps to be completed before starting to develop the business plan. These preliminary steps are a three step process I refer as the Gut Check Mirror (GCM) Test:

1. Figure out if you really have an entrepreneurial personality profile. Many people assume because they have been successful in the world of traditional employment that they will automatically succeed as an entrepreneur. Wrong! Wrong! Wrong! I am so passionate about preventing entrepreneurs from making this mistake, that I wrote a book on this specific topic called Transitioning from Employee to Entrepreneur – A Roadmap for Aspiring Entrepreneurs.

The premise of this thesis is that success is not guaranteed based on past successes in the employment environment. These are three simple steps to take before making the decision to invest a substantial part of your net worth, commit 3-7 years of your life, and put your future on the line in an attempt to become your own boss. One of the first things you need to do is evaluate your personality profile by taking an entrepreneurial profile test. This beginning step helps to make the determination if you have what it takes to be an entrepreneur.

2. After validating your entrepreneurial profile, the next step is to determine what type of entrepreneur you are. This is another critical step many ignore – at their peril. There are four business models for an entrepreneur to consider making the decision to become his or her own "boss":

A. Starting a business from scratch
B. Buying an existing business
C. Becoming a franchisee in a franchise system
D. Becoming a consultant in your area of ​​expertise

Each of these business models has advantages and disadvantages, as well as commonalities. How do you decide which business model is right for you?

– If entrepreneurship is core to your personality, you should probably start your own business.
– If your risk profile is middle of the road, then buying an existing business may be a better fit for you.
– If you like the idea of ​​starting your own business, BUT you do not want to risk starting a business from scratch and you do not needlessly need to buy someone else's business, franchising is probably your best path.
– If you have limited funds But you possess a high degree of technical expertise in your field, becoming a consultant may be the best choice.

You need to decide which business format suits you best before deciding on the business you want to either start or buy, or sign on as a franchisee or consultant.

3. After you complete the first two steps, a specific business can be selected and then you can begin the process of developing a business plan.

Business Plan Development

There are five steps to writing a business plan.
1. Format. Determine what type of process or format to use. There are three:

A. Write a business plan from scratch
B. Use business planning software or a template
C. Engage a consultant to assist you in writing the business plan

Each of these alternatives or formats has its own advantages and disadvantages:

Business plan from scratch

The advantages of crafting a business plan from scratch is two fold. First, it is the least expensive way to go; Second, although it requires a lot of work on your part, you become familiar with the data because you are the one doing all of the research and compilation all the data.

The disadvantages are, first of all, it is time consuming; Secondly, if your business plan is going to be used to secure business financing, it may not be in a format with which lenders are familiar. Do not underestimate this factor. Lenders are lazy. They want facts presented in a format that makes everything easy to see and understand.

Business planning software or template

If you decide to use a template or business planning software, this will streamline the business plan development process. One of the most comprehensive template software programs is from Palo Software: . Their software costs $ 99.95 for the Standard Version and $ 199.95 for the Pro Version. This platform is especially powerful and can be used for a range of business models, from very simple to the most sophisticated plans imaginable.

There are free versions of business plans provided by and on the Internet for basic business planning. Simply go to and search "Free Business Plans." You should beware that some of the templates you will find listed on this search may be qualify for your needs, especially if you are trying to secure financing.

Consultant services

Finally, if you decide to engage a consultant, there are three alternatives to consider.

O Non-profit organizations such as local Chambers of Commerce mentoring programs, and community colleges
O Paid professionals such as your CPA or financial advisor
O Business plan consultants who make their living writing business plans. These consultants vary in price from less than a thousand, to as high as five to ten thousands, depending on the sophistication of the plan.

2. Research. After deciding on the methodology you are going to use to develop your business plan, the next step is to begin the research. This research will encompass the following factors:

A. Competition. It is important that you conduct a thorough study on the depth and scope of the competition, the strength of each competitor, chinks in the armor and how you intend to exploit these weaknesses.
B. Pricing model. What the margins are and what your margins need to be.
C. Real Estate. In many businesses, location is the main determinate of success (Location, Location, Location). If there is a significant relationship between success and real estate, you must research this area extensively.
D. Equipment. If the business requires specialty equipment, then separate financing options may need to be considered, as well as delivery and installation times.
E. Staffing. If the business requires technical expertise, what is the market price for this expertise and what is the recruitment strategy? Inadequate research and understanding in this area can bring a new business to its knees very quickly.

3. Revenue and Expense Models. Depending on the sophistication of your financial model and your familiarity with Microsoft Office Excel and the creation of financial projections, this component may need to be outsourced to a financial professional. The template business plans have preformatted cash flow spreadsheets, income statements, and balance sheets, all integrated into a smooth presentation format in the business plan. However, depending on the complexity of your financial mode, a great deal of financial acumen may be needed to properly compile these details in a meaningfulful fashion.

4. Financing Plan. The most useful tool for obtaining financing is a well-crafted business plan with thoroughly developed assumptions and research references. There are four major choices for financing, with a less common fifth option:

A. Personal funds; Ie, savings, retirement funds and investments
B. Personal borrowing; Ie, home equity, family and friends, credit cards, unsecured bank loans
C. Equity, personal or third part angel investors
D. Business loans from institutional lenders
E. Venture capital (usually reserved for high tech businesses and concepts)

5. Exit Plan. All too often, this is not considered in the initial planning process. Yet, it is arguably one of the most important elements of a business plan, because without a successful exit, most of the effort in starting and managing a business is for not.

Writing a business plan need not be an overwhelming task if it is approached systematically and methodically, following a time tested process.

Source by Marvin Storm

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