Linda Ingold, director of the Vermont Women's Business Center
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BY RACHEL FELDMAN
Strictly Business
February 2007
"Making a business plan is like planning a vacation," Linda Ingold, director of the Vermont Women's Business Center, said, explaining that a business plan is created to figure out what your business is going to do and how you're going to do it. A good business plan can be the roadmap to business success.
"First you figure out where you want to go, then how you're going to get there. Are you going to drive or fly, and how are you going to get the money to go there? What are you going to do once you're there?" she said. A strong business plan is the cornerstone of a successful business and is also a crucial component in securing a business loan.
"Putting it down on paper makes all those ideas in your head easier to read," Ingold said. "And if it's all planned out, the risk to your business is much lower."
There are nine basic elements to every business plan. Each should be as detailed as possible do research, visit the competition, look up local statistics for your industry sector. If you think you're spending too much time on it, you're probably spending just about enough.
Number 1: Describe your business
These are the basics, your business pared down to a few key facts. What is the purpose of the business' What kinds of services will it offer and to whom? Go through the nuts and bolts: when it was started, what form of business (sole proprietor, limited liability company, partnership or corporation)it is, and what type of business it is (wholesale, retail, production, service or something else).
Address why you started the business. How has it grown? How will it grow? Where do you see it in three years? This part is your first impression; make it heartfelt, sincere and well-researched. Overly positive, inflated projections are not realistic, and won't help in the long run.
Number 2: Develop a marketing plan
"The hardest thing for new entrepreneurs to do is ID who they're going to sell to and how much they're going to sell," said Emily Kaminsky, fund manager of Community Capital of Vermont. A good business plan is one that seriously considers a business' target customers and how they'll be reached.
"People don't all do the same marketing," Ingold said. "They're looking for a specific type of customer and that customer will be reading and listening to certain things." Consider what publications your target customer reads, how big the market is and where you'll find those customers. Are they married? How much money do they have to spend? Be as specific as possible.
Number 3: Look at the competition
You're either going to want to do things similarly or differently from them, but regardless of which, you want to see your competition in action and know exactly who they are. Visit them, look at how they deal with customers, who comes in to their business. What niche is your business going to fill that others aren't filling? But think carefully: "If someone has an idea that no one else is doing, there may be a very good reason for that," Ingold said.
Number 4: Think about promotion, advertising
"What's unique about a business that would be a good hook for advertising?" Ingold said. Describe how you plan to get the word out and how you plan to pay for it. What methods are you going to use? Newspaper? Radio? Postcard mailing? How will you best reach your target customer?
Number 5: Outline how you'll sell the product
Most simply, how are you going to sell it? What method are you going to use? If you?re making a product, are you going to open a store, sell and distribute to other stores, or put out a catalogue? Then, how much does it actually cost to make your product, resell your product, or offer the service you're providing?
"Be as detailed as possible," Ingold said, "right down to the cost of labels, gas, how many miles one is driving, to give a very clear picture of what this is going to cost." Consider how many customers you need to make a profit.
Number 6: Describe your location
"You could be working from home or a place set up somewhere," Ingold said. Describe how your business benefits from its location, and factor in the cost of rent if you're renting office/business space. "Also, talk about what customers you'll be able to attract by being in that location."
Number seven: Describe the management
This is the part where you get to brag about yourself, list all the reasons that you're qualified to be entering the field you are. What skills are you bringing to the business? What's your background, your education, past jobs? If your business is going to have employees, outline their job descriptions and what qualifications you?ll be looking for. "If a business is going to a lender, this part is to give the lender the picture that this is someone qualified to start a business," Ingold said.
Number 8: Detail how it?s going to run
"These are all the details of daily operations," Ingold said. "What time will they open, what days of the week, how will they pay the bills, who will pay them, who returns phone calls." If you're a sole proprietor, this is the place to sit down and outline the day-to-day mechanics of your company. If you have a partner, now is when you delegate responsibility, to take into account what times of day each of you works best.
Number 9: Include your advisory board
New business owners "shouldn?t be doing this on their own," Ingold said. It helps to have the advice of trained professionals, "a lawyer, an accountant, maybe a marketing person." Any outside help that your business has a college friend who?s helping you put a Web site together, a fellow business owner who's showing you the ropes; it's good to have a list of people who probably have the answers to most questions. A lender will appreciate a support network that can help things run smoothly and troubleshoot when problems come up.
The financial pages
These pages are an attachment to the business plan; they spell out exactly how much money there is, how much is needed, where it's going to go and what it's expected to do. Alender will typically want to see three years worth of month by- month cash flow projections (how much it will cost to run the business versus how much it will bring in). This part will take a lot of research and talking to existing companies to see what they experience on a monthly basis.
"If you're applying for a loan, tell what the money will be used for," Ingold said. "Tell them what you?re starting with. For example, many lenders don't provide the whole amount of the loan someone is requesting, they need to bring their own money to the table."
Tying it all together
Finish it off with a summary of the most important points from your whole plan. Draw ties between the sections, show how profits in one area are used in another and find the best way to describe your business as a unit.
A strong business plan is the first step to building a strong business and making sure it grows.
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