Business Plan – Key to a Successful Business

Understanding the structure of the business plan is essential to writing a successful business proposal. Every section of the business outline has a definite place and function, which needs to be maintained if the overall document is to be successful. Read through several business proposal samples and templates before starting to draft your own plan.Before Drafting Your Business PlanSpend some time examining your basic business vision from all angles before starting to draft your business proposal. Share your ideas with one or two industry insiders or colleagues and get their input as well. Look for potential negatives and hidden flaws that may affect your business success in the future.The Basic Structure of a Business PlanEvery business proposal follows a basic outline which is as follows:

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• The executive summary – the executive summary is where you sell your idea. It is always written at the end of the drafting process, so that it incorporates all the key points you wish to underline in your business outline, better. Pay special attention to this section of your business pitch while drafting. Use simple, ‘can-do’ language and dynamic, positive words that encourage readers to share in your business vision. Keep the executive summary short; it should never exceed more than two pages.The executive summary should address questions like, what is the need for such a business venture. Who will be the customers? What can the project offer them that pre-existing businesses cannot? It should focus on four or five core strengths that set your retail or service business plan apart.• The industry analysis – give a short introduction to your current industry environment. Talk a little bit about its growth potential and possible challenges. Include details of the kind of precautions and plans you have in place for coping with any tough times and making the most of high growth periods.• The market analysis – talk about your potential customers. What are their lifestyles and financial circumstances? Do they currently use the kind of products or services you are offering? If so, where are they getting them from and how can you compete with the current providers? If, on the other hand, they are not purchasing such products or services, how can you convince them of the need for the same?• The financial plan – include a comprehensive financial analysis and strategy. This includes a break-even analysis that takes into account the amount of sales you need to cover costs and the major startup expenses for your business, including rental charges, payroll expenses, advertising costs, overheads, insurance charges etc. Also include a detailed listing of your business assets and liabilities and the kind of funding you need and plan to get.

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These are just the core sections that need to be covered in every business proposal, regardless of whether it is a small service business plan or one for a large retail outlet. Fortunately there are several professional services that can help you in your project.Consult a professional business proposal writing service if you have any doubts about the structure of the business plan.

Business Financial Success Comes With Proper Planning

Unless you happen to be planning to establish a charitable, non-profit organization of some type, the main reason why you may be interested in starting a business is to make a living or build wealth from the endeavor. For many people, the desire to “be your own boss” and escape from the shackles of traditional employment is part of the motivation, but the bottom line usually comes down to wanting some form of business financial success so that you are not living from paycheck to paycheck.One of the most important things that you will do in your quest to enjoy business related financial success is to have a clear, detailed, and realistic business plan that will lay out a map for your progress in your new business. A well-done business plan will include financial projections, working capital management objectives, cash flows analysis, industry and competition analysis, a profile to target customers or a specific audience, and an outline of organizational and asset management ideas.

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One of the common errors that a lot of new business people make, which contributes greatly to the high failure rate of new businesses, is not having a clear and complete picture of the marketplace in which they plan to compete. Spending some advance time in analyzing the industry and collecting enough pertinent information will give the entrepreneur a much better idea of what is needed in order to forge business financial success in a given field.In most cases, when someone is looking to start a new business, they will need some type of start up, working capital to see them through until the business starts to make enough money to be self-sustaining, as well as to be able to pay out salaries. Because a new business has no track record of any kind and no net assets or financial statements to submit for a loan, the only business financial information that the lenders will be able to evaluate is the entrepreneur’s personal credit and total assets.Even if you have excellent credit and current assets that you can borrow against in order to take out a loan to get your business started, a loan officer will still require a detailed business plan from you. Without a thorough business plan, your aspirations are nothing more than wishful thinking and your loan application won’t get very far in the process.

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The lenders will want you to prove to them that you have a knowledgeable understanding of the industry you wish to enter, as well as sufficient management knowledge to be able to successfully take your business from inception, through the growth phases and into stability.When an entrepreneur is heavily engaged in establishing and growing their own business, there is no doubt that it becomes a very personal endeavor. But often this perspective is just “too close” to be able to make important decisions that can lead to business financial success. However, when someone has taken the time to research and map out a clear and detailed business plan, this can help to overcome the challenges.

Are Your Financial Projections Pro Forma or Bull Sheeta?

I highly recommend Berkshire-Hathaway’s annual report for your pleasure, amusement and education, even for those of you who don’t enjoy reading business publications. More specifically, I recommend chairman Warren Buffet’s annual message to shareholders.Buffet always educates and illuminates. He doesn’t offer excuses for performance shortfalls. There is only the brutal truth – good, bad, and in-between. If you have ever read his complete message, you’ve been impressed by his simplicity, straight talk and logic; no convoluted explanations of lofty concepts and abstract philosophies.After re-reading last year’s message, I thought about two incidents in my own past business life:Several years ago, I considered pursuing a “roll-up” of small financial services firms. I had procured the help of an investment banker and spent about six months soliciting interest from potential sellers and combing through financial documents for many of those firms to assess the value of each.One specific firm was particularly enticing. The principal and I hit it off immediately. He had built a company, completely organically, from zero to about $5 million in commission revenue in a very short time. The business was no longer dependent on him for survival or success. Because of a health situation, he wanted to throttle back. It couldn’t have been a better scenario.

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After our initial two meetings, he crafted a profile of the business for my review. That included three years of retrospective financial information and a two-year financial projection – a pro forma.For the next two weeks, I spent every free moment combing through his financials. I concluded that his pro forma document was really a bull sheeta document. Here’s why:His projections depicted rosy scenarios across the board. Although his past growth had been impressive, his future growth projections were stratospheric: almost 100% in the following 24 months. When I questioned him, his reasoning was at best, flawed and at worst, delusional.His expense projections were similarly “optimistic.” I’m overly simplifying here, but it looked as if all of the expenses he incurred to grow the business to its (then) present day size would discontinue or very significantly diminish during the following 24 months. He evaded my pointed questions.When all was said and done, my estimate of free cash flow during the 24 months to follow was about half that of his “bull sheeta” projection. Accordingly, I pegged the value of his business to be about half of his asking price. We never did the deal.Did he really believe that I would succumb to his asking price? Did he think that I wouldn’t do the appropriate amount of due diligence on his “story?” Did he believe that I would even consider doing business with a person who would stretch the limits of credulity with an outrageous set of numbers? Apparently so!A year later, I was helping a $1 billion (revenue) financial services company craft its strategy. During my first one-on-one meeting with the CEO, I asked to review their current document. He handed it to me with some apparent unease. It consisted of some very lofty philosophical statements about being “the best they could be.” As I scanned it, the president leaned over my shoulder and flipped the pages until he arrived at the pro-forma financial document. “This,” he proclaimed, “is the meat of the document.” I inquired, politely, if I could ask him some questions about the plan, and the process that produced it. He looked at me suspiciously, but said OK.The bottom line: There was no evidence that they had considered how they would achieve the numbers they projected. So, their plan was a “credenza ornament,” and the pro forma was really bull sheeta.Here are some lessons, first from the initial example:1. Don’t assume that others will do business with you on the same (above board) basis upon which you will do business with them. Don’t become cynical; do become discerning.

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2. Don’t conclude, when you’ve learned a tough lesson, that you should adjust your future approach because some others might cut ethical corners.3. Conduct your transactions as if the other party is your clergyman. Be the example for others! Your reputation depends upon your credibility.And, from the second example:Business plans must:provide the linkages necessary between lofty and philosophical, on the one hand, and specific and quantifiable, on the other.
result in specific people doing specific things, culminating in specific results, consuming specific resources, within specific periods of time. If they don’t, you are wasting your time.
create the focal point for an organization’s reward systems. What gets rewarded, gets done. Reward systems must drive the achievement of planned results, not the number of Suzie’s sick days or Fred’s adherence to the dress code.
create buyer value in measurable ways.
be sufficiently creative and challenging so as to undermine the status quo.
never merely extrapolate the past into the future.Copyright 2014 Rand Golletz. All rights reserved.

A Successful Business Financial Projection Can Be the Key to Securing Financing

A business seeking capital can’t afford to underestimate the importance of business financial projections. A business financial projection is simply forecasting your sales and revenue to the lender. This information is important because it is a key indicator to your ability to repay a loan.If you are unsure about financial forecasting and how it relates to your business it is best to hire someone who does know. Most lenders will want to see a three or five year projection. There are 14 different items to include and fully support in your financial projections. With these different items it is best to give a month-by-month breakdown for the first year, a quarterly breakdown for the next two years, and an annual breakdown for the final two years you are projecting.The different items to include in your projections are; sales revenue estimates, administrative costs, production costs, sales costs, capital expenditures, gross margin by product line, sales increase by product line, interest rates on debts, income tax rate, accounts receivable collection plan, accounts payable schedule, inventory turnover, depreciation schedules, and the usefulness or depreciation of assets.

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The income projection enables the owner/manager to develop a preview of the amount of income generated each month and for the business year, based on industry supportable predictions of monthly levels of sales, costs, and expenses. When determining the total net sales you will be finding out how many units of products and services you expect to sell at the prices you are projecting. Make sure to think of what returns, allowances, and markdowns can be expected. The sales costs needs to be calculated for all products and services used. Ensure that when determining the costs of sale that you don’t forget anything such as commission paid to sales representatives, transportation costs, or any direct labor costs.For the gross profit you would subtract the total cost of sale from the total net sales. To get your gross profit margin you will divide the gross profits from the total net sales. This will be expressed as a percentage of total sales or revenues.When formulating your business financial projections there are five items that will ruin the accuracy of your projections, and hurt your chances of being approved for business financing. The first one is wishful thinking or being over-optimistic about your sales potential. Ask yourself: “Is it possible to achieve the sales levels you’re forecasting?”. A good example is that a sales team can only visit a certain number of customers each week or a factory can only manufacture a given amount of products on each shift. Make sure to keep your projections realistic and even more important to be based on supportable evidence. It is imperative to also make sure that your sales assumptions are linked directly to your sales forecast or your information will contradict itself. Most lenders are “by the numbers”, so if your numbers don’t add up, you will get declined. A good example of this is to say that you expect increased sales in a market that is declining. That just does not add up.

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Another thing not to do when projecting your business finances is to spend a lot of time refining the forecast. Try to avoid tinkering with the target numbers once they are set. Many business owners neglect to ask the opinions of the sales people who know the buyer’s intentions about what they think the projected sales should be. It is important to make sure your sales team agrees on any sales targets that will be set. One other fatal mistake made by business owners when working on financial projections is not getting feedback on the projections from an accountant.

7 Tips for a Successful Business Plan

Do you keep putting off writing your Business Plan? It’s so easy to say ‘there’s no point in doing it until the start of the financial year,’ or ‘if I just wait a bit and start it at the beginning of the January…’ If you need to approach banks for finance you will have to have a good Business Plan and even if you don’t require additional finance to get started, the only way to get a successful business up and running is to begin with a sound Business Plan and you, the person behind the venture, are the only person capable of writing it. Sound daunting? Just think of it as a planning document which sets out your business venture in both words and figures. You are really only transferring your thoughts to paper in a concise format showing how you plan to raise the finance and monitor the project.The following should help to get you started:
How will your business be set up? – will you be a sole trader, partnership or limited company? You must look into this in detail. Look at the legalities of the different forms and decide which is best for you. Think about how many people you might employ, the insurances you will require, do you need a license for your business, what are the tax issues? Have you got a lawyer, accountant, tax advisor, business coach, for example?
Do your market research- This is without a doubt the number 1 must do! You need to know if there really is a market for your product/service and whether or not it is big enough to support you and your business. Break down your research into 3 parts: analysis of the market; analysis of competitors; and test the market before you commit. Is the market expanding or contracting? What are the trends? What are the needs of your customers and what benefit will they get from buying from you? Observe your competitors, check out their products/services and speak to potential buyers.
Marketing Plan- This is essential a summary of your market research and forms an important part of the Business Plan. It should also describe how you plan to promote, advertise, distribute and sell your product/service and be sure to include what makes you unique.
Financial Requirements- You need to be able to clearly state exactly how much money the project needs, how much you are putting in and if any loans are required they must be clearly detailed and state what the borrowed money will be used for. You will have to include a detailed Cashflow Forecast showing all monies going into and out of the business on a monthly basis for at least the first year. Always overestimate your overheads and underestimate your initial income from sales.
Take risks and expect the unexpected- If you want to set up in business, you have to be prepared to take risks. Agood business plan will show that you are capable of taking calculated risks without being reckless. You will need to anticipate possible challenges and detail solutions for meeting those challenges.
Accountability – no matter how good you are it is always easy to miss something. Get an independent person (friend, partner, business coach) to take an object review of your business plan and be open to their ideas and suggestions. Ask them if you can touch base with them regularly to hold you accountable and to make sure you are meeting your targets.
Review – Your Business Plan is not a document that should sit on a shelf unopened once it’s completed. You should read it regularly and be prepared to revise and adapt it as required. Use it to monitor your progress and be sure to reward yourself and your employees when you meet your targets.

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“Nothing will ever be attempted if all possible objections must first be overcome”.Samuel Johnson