Successful Business Plans

Lesson 1: Setting the Foundation

In this lesson, we will cover the three foundational topics of your business plan. Once you have developed this section, you will set yourself up to ask the appropriate questions during your research for marketing, product development, and the management needs your company has to reach the goals and objectives you set for yourself.

General Company Description

The Context of Your Business
This statement will provide a "big picture" perspective of the industry to which your business belongs and prepare the reader to better understand how your business fits into the total picture. It should include:

• Industry background -- How complex is your industry? What's its history? What are the different industry segments? What are some recent industry trends?
• Growth potential -- In view of the trends described above, provide a statement (in dollars) of the future growth potential of the industry in which you are competing.
• New products and developments -- What new developments have arisen in the recent past that will make your product or service more attractive to the consumer?
• Industry outlook and forecasts -- What is the future of the industry according to industry leaders, experts, economists, government forecasters, and other authoritative sources?

A Profile of Your Business
It is important to remember that throughout your business plan, you must inform the reader of all major factors, positive and negative, that may have an effect on the outcome of your organization. This section should provide the reader with the concept of how your business works and why it has a unique chance to shine in the marketplace. Make sure to ask yourself the following:

• What is the precise nature of your business?
• How have you developed your products and services? Give a brief history?
• What are the economic trends? Give evidence that spending trends are favorable toward the industry.
• What is the organizational detail of your business? How is your business organized in terms of management team, production, fulfillment, etc.?
• What are the factors that influence your business? Be sure to include local economic factors, seasonality, dependence on special vendors or suppliers, customer spending patterns, etc.
• What are your plans for research and development? Include the nature of your test-marketing procedures, the results achieved, the product development that ensues, and the legal control of your process and/or product.
• Do you have contracts and agreements? Identify here and include copies in the Appendix; for example, resale agreements, service contracts, leases.
• What are your operational procedures? For ventures involving manufacturing a product, you want to keep in mind the following:
  1. physical space requirements
  2. machinery and equipment
  3. raw materials
  4. inventory and supplies
  5. personnel requirements
  6. capital estimates
  For ventures involving wholesale and/or retail, you want to keep in mind the following:
  1. physical space requirements
  2. purchasing procedures and plans
  3. inventory system
  4. staff and equipment
  5. training
  6. credentials

Profile of Your Specific Market
Accurately defining your target market requires much time and effort. In structuring your market profile, make sure you have done your homework and research with great care and due diligence. Don’t assume that your target exists or that it can be created in a relatively short period of time. When developing a profile of your target market, it is important to remember that your research will determine the strength of your analysis. The time you spend on this section should be spent wisely. Your local library, your internet connection and your telephone will be your strongest allies. Use them to their fullest. Take advantage of the information and statistics already available in books, directories, and case studies. Thorough research will impress potential investors more than you can believe.
So how do you define your specific market?

• State precisely who the consumers of your products or services are.
• Note the geographical scope of your market, including size and population.
• Consider the growth potential of your target market.
• Evaluate your ability to satisfy the market’s demands.
• Know how your business plan will enable you to attract new customers while keeping the customers you have.

Anticipated Challenges and Planned Responses
This section of the business plan sets forth your contingency strategies for dealing with anticipated barriers and challenges.

Competition: First, make sure you list your major competitors by name. And then you want to establish, for each of your key competitors:

1. The similarities and differences when compared with your business
2. Their strengths and weaknesses
3. Your “competitive edge”, your Unique Selling Point, enabling you to prevail and stay on course
4. Your insight into how the competition will try to block your market entry, and how you will respond. In other words, what’s your Plan B, C, and D?

Your Vulnerability Factor You want to consider here issues and challenges that might leave you vulnerable to changes in your industry or specific business, such as:

1. Product obsolescence: How quickly will the products you offer become obsolete? How will you make sure your product line stays current and viable?
2. Cheaper products on the horizon
3. Cyclical trends in the marketplace.
4. Possible economic downturns in the future
5. Turnover of key employees
6. Seasonality of your products and services
7. Compensation benefits package to employees

Legal Factors:

1. License requirements
2. Restrictions and regulations you must operate under given the nature of your business
3. Future changes in legal or government policies that may affect your business and how you intend to respond
4. Any governmental agencies with whom you must register
5. Patents, copyrights, trademarks and other protection procedures: If you are a start up business or even an established business with new products, ideas and technology that will improve someone's standard of living, and you want to place your products on the marketplace, they should be patented or trademarked, and all your written material copyrighted.
6. Steps to assure business secrets are preserved

Key Management Contingency

1. The depth of your management team
2. Management procedures are in place to ensure continuity of leadership
3. Plans for responding to the loss of important personnel

Staffing

1. Anticipated staffing needs overtime, including head count requirements, training, benefits, expansion, and how these needs will be met
2. Policies on diversity issues
3. Policies on temporary versus permanent staff
4. Policies on harrassment, racism or prejudices of any kind

The information covered in this section will show you have thought about problem issues and carefully crafted contingency plans. It will provide depth AND credibility to your business plan. So show that you have really done your homework by staying practical, reasonable, and aware.

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