The Successful Business Plan:

Secrets & Strategies

by Rhonda Abrams
Fourth Edition

Published by

The Planning Shop

Palo Alto, California

Getting Your Plan Started

Business Plan Process

Lay out concept

Gather data
Refine concept based on data gathered
Outline specifics of the business
(e.g., the sections of your business plan)

Put your plan in compelling form

Making Your Plan Compelling

Questions most likely to be

asked by readers of your plan:
Is the idea solid?
Is the market large enough?
Are the financial projections realistic and
positive?
Is management experienced and capable?
How will I get my money back?

The Executive Summary

Executive Summary
The most important part of your plan
People read this section first and then go
to the Financials
You may be asked to send just the
Summary and Financials to some
investors
Write it last when youve done the work

Company Description

Company Overview

Objectives/mission statement
Legal issues
Products/services
Management
Location
Development stage/milestones
Financial status

Industry Analysis
& Trends

Health of Economic Sector

Broad general categories
(two-digit NAICS codes)

Includes areas such as:

Retail
Manufacturing
Wholesale trade
Construction
Information

Industry Analysis

Which industry (industries) are you in?

What is its size and growth rate?
How mature is the industry?
How sensitive is it to economic cycles?
How affected is it by seasonal factors?
How affected is it by technological
change?

Factors to Consider to
Assess Industry Growth
Total revenue
Total number of units/volume sold
Total employment

Maturity Level & Characteristics

New Industry
Expanding Industry
Stable Industry
Declining Industry

Very high growth, no

market leaders
High growth, emerging
market leaders
Low growth, fixed
market leaders
Little or no growth,
decreasing
competition

Target Market

Understanding the Market

Define the market

Gather market data
Evaluate the market
Determine market readiness

What kinds of changes

to anticipate?
Technological changes
new methods of production, distribution

Sociological change
-- market changes due to demographic,
lifestyle, or trend changes

Competitive changes
-- competitive landscape changes due to new
entrants, lower prices, more aggressive
marketing

Target Market Must Be:

Definable specific characteristics that
define what customers have in common
Meaningful characteristics must
meaningfully relate to buying decisions
Sizable market must be large enough to
sustain the business
Reachable methods (e.g., media outlets
or sales channels) must exist to effectively
reach market

Characteristics:

Demographic
Geographic
Lifestyle/business-style
Psychographic/company culture
Purchasing patterns
Buying sensitivities

Market Size
Too small: possible lack of sufficient
customers or unsustainable demand
Too big: market is very expensive to
market to, probably lots of competition

10

Market Trends
Is your market growing or shrinking in size?
Are customers changing their need/use of your
product/service?
Is the market changing in demographic or
lifestyle make-up?
Are social values (e.g., the environment, health
concerns) changing market values/demand?
Is technology changing market behavior?

The Competition

11

Questions:

Who are your competitors?

On what basis do you compete?
How do you compare?
Who are potential future competitors?
What barriers to entry make it difficult for
new competitors?

Barriers to Entry

Intellectual property/patents
High start-up costs
Substantial expertise
Licensing, regulation

12

Strategic Positioning
& Risk Assessment

Strategic Position:
What unique role will your
company hold in the marketplace,
giving it a defensible competitive
position?

13

Some Strategic
Positions/Differentiators:

Customer perception factors

Market segment
Market share
Operational/technological advantages
Proprietary products
Sales channels

Customer Perception
Factors that make customers
choose your products/services
over competitors:
Better, faster, cheaper

14

Market Segment

Geography/location
Age
Income level
Gender
Specific needs

Types of Risk

Market risk
Competitive risk
Technology risk
Product risk
Execution risk
Capitalization risk

15

SWOT Chart
Illustrates balance between companys:

Strengths
Weaknesses
Opportunities
Threats

Marketing Plan
& Sales Strategy

16

Marketing Plan Defines:

How you make customers aware of you
The message youre trying to convey
The specific methods you use to deliver
your message
How you make actual sales

Marketing vs. Sales

Marketing increases customers
awareness and delivers a message
Sales direct actions to solicit and
procure orders

17

Four Ps of Marketing

Product
Price
Place
Promotion

Operations

18

Operations Include:

Facilities
Production planning
Inventory management
Supply
Distribution
Order fulfillment
Research & development
Financial control

As part of a Business Plan, this

section is not intended to be
an operations manual!

19

Management &
Organization

Management Team

Principals
Key employees
Board of Directors
Advisory Committee
Consultants

20

Development, Milestones
& Exit Plan

Company Development

Goals
Strategies
Priorities
Milestones

21

Milestones
examples:
Incorporation
Product design completed
Trademarks/patents secured
Product shipped
Partnerships/distribution secured
Sales level reached
Profit levels reached
Financing secured

Why an Exit Plan?

Lets investors know how theyll get their
money back
Clarifies growth strategy
Guides expansion decisions
Reduces friction among principals

22

The Financials

Numbers are merely

the reflection of
decisions you make

23

Key Financial Documents

Income statement (profit & loss)
Cash-flow projection
Balance sheet

Some Key Terms:

Gross sales total sales before any costs
Net sales sales after commissions and returns
Cost of goods (COG) cost of inventory,
materials
Gross profit -- income before operating
expenses
G & A operating & administrative expenses
Net Income/Net Profit income/profit after all
expenses/costs

24

GROSS SALES
(Commissions)
Net Sales
(Cost of Goods)
GROSS PROFIT
(Expenses)
Net Income Before Taxes
(Provision for Taxes)
NET PROFIT

$100,000
($12,000)
$88,000
($23,000)
$65,000
($35,000)
$30,000
($5,000)
$25,000

Looking for Money

25

Debt vs. Equity

Debt: loans, must be paid back, often
requires personal guarantee
Equity: investment, must share profits and
ownership
Convertible debt: loans that can be
converted to equity at lenders option

Funding Sources

Venture capitalists
Angel investors (private investors)
Government (SBIC/SBA)
Friends and family
Yourself
Sales

26

The Plans Appendix

General Considerations
An Appendix is not necessary
Use the Appendix to keep the size of the
Business Plan itself from getting too large
Put informative but not essential
details in Appendix
Bind the Appendix separately if very
lengthy

27

What to Put In an Appendix?

Letters of intent/key contracts

Endorsements
Photos
Location list
Market research results
Managers resumes
Technical/operational information
Marketing material

28