A complete and thorough business plan is the foundation for any successful business, according to the Tennessee Small Business Development Center, located on the Cleveland State Community College campus.
Both Part III and this segment, Part IV, are all about these important steps, taken from an outline provided by the TSBDC. It continues the rest of the instructions on how to complete a business plan.
Every potential entrepreneur has to complete all of the various and sometimes intricate steps first before being able to take the next step, Step V, to turning your specific business idea into a reality.
Part III covered taking the initial course in how to start your own business through the TSBDC where students received a copy of the outline on how to start your own business. Specifically, Part III covered naming your business, branding your business in the market place, the specific products and/or services, mission statements, hours and days of operation, your income streams, operating costs, marketing, accounting procedures and personnel, inventory and supplies, and, perhaps the most important of all, market analysis of your customers, as well as making that all important first appointment with a business counselor to help refine and define what you have put together yourself.
The rest of the outline for a business plan starts with asking you to write down a more detailed definition of your product and services, as well as who your competitors might be. Figure out who your competitionn is going to be and compare your product with them. Point out how your product is uniquely different and why customers will buy your product or service rather than your competitor’s. In other words, how are you going to sell your product and why will customers buy it.
“ ‘Me too’ businesses do not, as a rule, do well,” according directly from the TSBDC business plan.
Next on the business plan list is your marketing strategy, which is divided into three sections — the promotion strategy, the pricing policy and the sales strategy.
“Promotion strategy. This is an area where many new business firms suffer,” according to the TSBDC business plan. Most businesses don’t have one. Not understanding how important advertising is to a business is the chief reason businesses fail in this area. Now, remember your marketing analysis — who your customers are, what share of the market you are aiming for (limited but high-end or greater number of smaller sales volume, for example), when your peak sales periods will be and if you will stay local or expand across the world online, etc. You will have to decide advertising campaigns based on the answers and goals of your marketing analysis.
As part of your promotion strategy, you also will have to figure out how much you are going to spend on advertising. Decide if you will rent a billboard, advertise on the radio or television, or buy an ad in the local newspaper to get the most bang for your buck. And specifically show how much your advertising budget will be and how you were able to come up with those cost figures.
“Don’t guess,” the TSBDC business plan advises.
Now for the profit. Figure out what you are going to sell your product or services for. Figure out your markup on your product or do a cost analysis of your services to come up with the proper price point. Also include how you came up with your pricing figures.
Next and the third part of your marketing strategy is your selling strategy. How are you going to sell your product or service? Will you have a sales team? What sort of sales presentation will you use? How will you train them?
The next major part of the business plan is the management structure. Put together an organizational chart listing the key people and their duties and responsibilities. Include resumes of the key managers and employees showing their expertise and knowledge and how they are important to your organization. This step will help you in the next step when you are trying to get financial backing from bankers and other investors. Also include information of other employees you need immediately or plan on down the road as your business expands. Planning for the next three to five years is a good time frame. Go so far as to be specific about pay rates and benefits.
A business plan is to form a secure foundation for your business, but also to provide a solid plan to present to bankers and other potential backers. The last section of this business plan specifically is geared toward what else is needed to present to the “money” people.
For existing businesses, three years of prepared financial statements and the most recent interim statement needs to be presented. If your are just starting out or don’t have these formally prepared financial statements by a CPA, you’ll need your federal tax returns from the previous three years. Personal financial statements from the last 90 days should also be included.
Next, you’ll have to present financial projections should not only be complete, but also realistic. Don’t make your financial projections overly optimistic. Base what you think you can earn on facts, not hopes and wishes.
“No pie in the sky numbers here,” the TSBDC business plans cautions.
Record your income projections per month for at least a year, including total anticipated sales, expenses, profit, and supported with documentation, if possible. Expenses can include a variety of items, from business cards and ads to furniture and filing cabinets, tools and buildings, insurance and licenses, office supplies and computers.
“Again, do not guess. Find out what is is going to cost you to go into business and plan how you are going to use your money,” according to the TSBDC business plan.
In fact, it is recommended that you put together two different business plans — one for a realistic assessment of your product and/or services, the market, and your costs and profit analysis. The other for a worst-case scenario.
With all this ground work successfully laid, you may be ready to take the next step into opening your own business.