3.3: Business Plans

Where Does One Start in Building a Business Plan?

Creating a business plan²⁸ will help you achieve your entrepreneurial goals. A clear and compelling business plan provides you with a guide for building a successful enterprise focused on achieving your personal and financial goals. It can also help persuade others, including banks, to invest in what you are creating.

Define your company. A business plan won't be useful until you're certain what your company exists for. What will you accomplish for others? What products and services will you produce or provide? Write down all the specific needs your company will satisfy. Potential investors need to know that your business will be meaningful and marketable to people who can use your product or service. Concentrate on the external needs your company will meet.

Choose a winning strategy. Once you’ve established the competitive advantage your business offers, you will be able to select the best strategy to reach your goal. How will you distinguish your product or service from others? Although there are millions of types of businesses, there are actually only a few basic strategies that can be applied to make any enterprise successful. The first step in selecting an effective strategy is to identify a competitive advantage for your product or service.

Design your company. Consider how will you hire and organize your workforce. By the time you’ve reached this stage of thinking about your potential business concept, you’ll probably have a good idea of the number of people you’ll need and the skills they’ll require to get your enterprise up and running.

Consider the practical issues of running a business. Think about your role as leader or boss of the business. As you think about hiring personnel and organizing your workforce, you must also confront your desire and ability to be a good boss. Decide how you will handle your employees' entitlements. For example, salaries and wages, their insurance and retirement benefits, as well as analyzing the extent of your knowledge of tax related issues.

THINGS TO CONSIDER:

• Analyze the potential markets for your business. Consider the following areas of inquiry:
  • Is there a viable market for the product or service you want to sell?
  • How old are your potential customers?
  • What do they do for a living?
  • Is your product or service attractive to a particular ethnic or economic population?
  • Will only wealthy people be able to afford it?
  • Does your ideal customer live in a certain type of neighborhood or area?
• Establish the size of your potential market. From there, you can analyze demographic information more specifically:
  • How many car mechanics are in need of soap in any given community?
  • How many children in the United States are currently under the age of eight?
  • How much soap will they use in a month or a year?
  • How many other soap manufacturers already have a share of the market?
  • How big are your potential competitors?
• Identify your company’s initial needs. What will you require to get started? Whether you want to buy an existing company with 300 employees or start your own by adding an extra phone line to your home office desk, you need to make a list of the materials you’ll need. Some may be tangible, such as five hundred file folders and a large cabinet in which to store them all. Other requirements may be intangible, such as time to create a product design or to do market research on potential customers.
• Prepare product samples. Do you need to hire an engineer to draw up accurate manufacturing designs? Should you patent your invention? Will you need to investigate federal safety standards for the product?
• Research possible locations for your business. Call a real estate broker and look at actual retail spaces in the neighborhood where you’d like to open your restaurant. Make a chart of the most expensive and least expensive sites by location and square footage. Then estimate how much space you require and how much money you’ll need to allow for rent.
• Determine your start-up cost. Make a list of all the tangible and intangible resources you need to get your business going. The total estimated price of all of these items will become your start-up cost whether you’re buying highly sophisticated computers or simply installing a new telephone line on your desk. If there’s any item in your estimates that seems unreasonably high, research other alternatives. But keep in mind that it’s better to include every element you truly need along with a reasonable estimate of the cost of each item, so you don’t run out of money or default on your loans. Be honest and conservative in your estimates, but also be optimistic.

TIPS:

• Don't aim for the best of everything at the beginning. You can forgo the expensive trimmings of an office of a more well-established company and stick to the basics at the beginning. Get what is affordable, works and is actually needed and don't buy frills.
• Put yourself in the shoes of potential investors. Ask yourself, “If I were going to invest X amount of dollars into a concept or idea, or even a product, what would I want to know?” Gather as much helpful and credible information as you can. Depending on your product, you may need to search long and hard for relevant information.
• Identify potential investors.

Don't lose heart if you discover some, or even all, of your ideas have been adequately covered by the market. Don't ignore this reality; instead, work with it. Can you still do a better job or provide a better widget than your competitors? In many cases, it's likely that you can provided you know the market well and how to add value in ways your competitors are not doing. In other cases, it may be a case of focusing more narrowly or more broadly than your competitors are doing.

Steps to Writing the Business Plan

Organize all the relevant information about your business. Begin creating section headings and putting the appropriate information under the appropriate headings. Effectively separating your business' unique approach to each of these headings will organize your plan in a way investors find useful:

• Title Page and Table of Contents
• Executive Summary*, in which you summarize your vision for the company
• General Company Description, in which you provide an overview of your company and the service it provides to its market
• Products and Services, in which you describe, in detail, your unique product or service
• Marketing Plan, in which you describe how you'll bring your product to its consumers
• Operational Plan, in which you describe how the business will be operated on a day-to-day basis
• Management and Organization, in which you describe the structure of your organization and the philosophy that governs it
• Financial Plan, in which you illustrate your working model for finances and your need from investors

*The executive summary is basically your big appeal to investors, or really anyone who reads your business plan, that should summarize and articulate what it is that's great about your business model and product. It should be less about the nitty-gritty details of operations and more about your grand vision for the company and where it is headed.

APPENDIX & FINANCIAL DATA

Your resume will be included in the separate appendix of exhibits at the end of the plan, so this is not the place to list every job you’ve ever had or the fact that you were an art history major in college. But don’t overlook the impact of some part of your background that might even seem unrelated to your new venture. Focus on group experiences, leadership opportunities, and successes at all levels.

Present and explain your financial data. How will you convince others to invest in your endeavor? By having clear, transparent and realistic financial information that shows you know what you're talking about and that you're not hiding anything.

EXAMPLE: “KITCHEN GRABS.”

EXECUTIVE SUMMARY

The need for fast, easy, fuss-free and delicious meals continue. Kitchen Grabs is a healthy alternative to fast meals.

PRODUCT AND SERVICE

Kitchen Grabs are pre-packed meals prepared daily made available in restaurants and online. The meal selection will vary per day designed by a dedicated nutritionist working with our passionate cooks to ensure that each meal approximates the dietary nutritional requirements of the average adult. The meals come in fixed sizes and portions, that is to say, no supersizing!

The meal selection will be made available online only on the previous day. Fresh ingredients go into each delectable dish. Upon posting, customers can pre-order for meals to be consumed the following day.

Kitchen Grabs’ restaurant, a chic and homey diner-style setup, charmingly sits on the corner of Delaney Ave. and 2nd East St., nestled in the ever-active business district of Houston. Walk-ins are welcome. Residents and workers from the surrounding buildings can order online (www.kitchengrabs.com) or through phone (4-KGRABS or 454-7227) and their meals will be delivered hot and surely delicious.

MARKET ANALYSIS

Business advisers say that the food industry is saturated, and any new entrant faces huge obstacles. For us at Kitchen Grabs, these obstacles are giants – the established fast food chains and the vending machines. Yet we cower not. We sincerely believe in our meals. Further, we strongly believe that healthy and delicious meals will never run out of patrons. In fact, customer satisfaction concerns us way more.

Our target market are adults, male and female, from 16 years old and above, residing and/or working within a radius of 8 blocks from the restaurant. They are generally subject to rigorous activities (physical and mental) and need sustenance to properly perform their tasks. Their activities take up most of their waking hours, more like, working hours. A quick meal will always be a welcome help.

SALES AND MARKETING STRATEGY

Prior to the setup of the restaurant, Kitchen Grabs was an online cafeteria. We initially served the hungry workers of several companies in Houston’s business district and they wanted more. Whenever we participated in trade fairs, the top question was whether we have a ‘real’ store; a funny question but an incessant one eventually urging us to construct our first restaurant. We will continue to attend bazaars and trade fairs spreading the word on health and available options, particularly our meals. For the next year, we intend to harness social media further.

In the next coming month, we shall be launching a new project: Toque Tours. Every week, our team will serve an international-inspired meal. Leading the project are Greek, Vietnamese and Mediterranean cuisines, touted as the world’s healthiest cuisines.

OPERATIONS AND MANAGEMENT

The company was founded by a brother and sister tandem, Neil and Collette Viola. She studied nutrition while he trained yuppie clients. His random advice requests turned into serious discussions on health, fitness, and the inconvenience of healthy options. These became the foundation of Kitchen Grabs. Four years later, the Viola siblings still discuss how to make choosing health easier, though this time with more minds involved. Part of the team now is Dr. Linda McKann a health and nutrition consultant, George Willis with sales and operations, and Millie Dawson in finance. There is also Mama Edna Viola for taste and overall quality testing.

FINANCE

Two years into operations, Kitchen Grabs has broken even. However, as expansion was necessitated particularly the construction of the restaurant, the company secured bank loans to augment revenue. As business continues to grow, the company will be needing additional delivery riders and equipment for better service in the amount of $25,000. Appendix A computes the return of investment given the projections. Business projections predict a larger demand, an exciting new chapter for the owners and staff alike.

Assignments or Questions to Consider

Create a Business Plan based on a company you’d like to own in the future. At a minimum, include the following criteria:

• Executive Summary, in which you summarize your vision for the company
• General Company Description, in which you provide an overview of your company and the service it provides to its market
• Products and Services, in which you describe, in detail, your unique product or service
• Marketing Plan, in which you describe how you’ll bring your product to its consumers
• Operational Plan, in which you describe how the business will be operated on a day-to-day basis
• Management and Organization, in which you describe the structure of your organization and the philosophy that governs it
• Financial Plan, in which you illustrate your working model for finances and your need from investors

28 “How to Write a Business Plan” was co-authored by wikiHow Staff. 29 March 2019. https://www.wikihow.com/Write-a-Business-Plan. CC-BYNC-SA.