Writing a business plan for startups

February 1, 2005

For a startup business, creating a business plan is like creating a game plan in sports. You need to scout out all the information to create a winning strategy for the game. While business plans for existing companies may have a special focus, such as setting overall goals, reviewing specific operations, evaluating new products, assessing new technology in the industry, or some other specific purpose, the business plan for a startup company is the blueprint for its formation, its operation, and its success. A business plan exposes a new company’;s strengths and weaknesses. It reveals ways to capitalize on the strengths and minimize the weaknesses, uncovers every facet of the business that can be developed, and points to the best method for that development. It provides a structure for the company’;s pursuit of the winner’;s trophy.

Even though creating a business plan takes time, thought and effort, and may seem like an impediment to getting on with opening or growing your new business, it is imperative in today’;s competitive business climate for you to have all relative information available and evaluated before opening your doors. With a thoughtfully prepared business plan you will enter the business world prepared, ready to run your business and ready to compete.

Although researching and writing your business plan may seem like a monumental task, with preparation it can be quite painless. As you go through the process, you will develop your knowledge and understanding of your business, improve your chances of success, and diminish your risks of failure as a startup owner.

Prior to writing your business plan, there are several issues you must resolve.

It is beyond the scope of this text to cover all of these in depth; however, a basic checklist with a few recommended reference books is provided, so you can explore some of the subjects more thoroughly. As an entrepreneur of a startup company:

• Are you prepared to operate a business?

• Have you already decided upon your product(s) or service(s)?

• Have you investigated other types of businesses? Have you explored the broad economic business sectors: manufacturing, wholesale, retail, service. Have you considered other industries within the sector of your choice? Have you thought about what types of businesses are strongest now and for the future?

• Have you checked out franchises? To check out the possibilities and benefits of becoming a franchise outlet owner or franchisor, read Erwin Keup’;s Franchise Bible and my books, No Money Down: Financing for Franchising and The Franchise Redbook .

• Do you have a location in mind? Have you researched the principles of site selection: physical site needs (address, neighborhood, interior lot, corner lot), cost effectiveness, interior space, exterior space, visibility, traffic volume (which side of the street and times of the day), and accessibility? Are you familiar with the advantages and disadvantages of types of sites, such as freestanding buildings, storefronts, regional malls, and many others? Are you familiar with the principles of lease negotiation? See Luigi Salvaneschi’;s Location, Location, Location .

• Have you located the necessary business consultants–accountant, attorney, banker, and others? One resource is The Small Business Insider’;s Guide to Bankers by Suzanne Caplan and Thomas M. Nunnally.

• Do you know your financial position, your credit rating, your investment costs? The author’;s No Money Down: Financing for Franchising covers these topics in detail for any business, not only franchising.

Before going forward, it is assumed you have done the basic homework for each of the elements above and that:

• You are ready to go into business
• You have your basic business concept
• You have decided on your basic product(s) or service(s)
• You have your location and facility
• You have a business accountant and attorney
• You understand your financial position and your investment costs

While you may have already explored the following business concepts during your startup stage, you will be reconsidering and reevaluating these as you develop your business plan:

• Vesting
• Business objectives
• Mission statement
• Keys to success
• Industry analysis
• Market analysis
• Competitor analysis
• Strategies
• Marketing plan
• Management
• Organizational structure
• Operations
• Financial pro formas
• Break-even analysis
• Financial requirement

Don’;t be concerned if you aren’;t familiar with all of these concepts. Writing a business plan for your new business is a straightforward process that you can move through step by step to completion. The whole process can be accomplished in two to four weeks, depending on your business.

A Professional Presentation

In surveying many successful business plans, you will find that no one format fits them all. Depending upon the nature of the business, certain topics take precedence over others. Often the owners write their business plans, since they know the most about their business operation and management and they have learned what elements to include to make the best impression.

A complete business plan for a startup company is best organized according to the logical development of the business and is comprised of at least 12 basic components.

1. Executive Summary: By definition, to summarize the elements of your business

2. Company Description: For identification, to introduce your readers to your company and your business concept

3. Industry analysis: To provide a picture of your industry and of the position of your business within the larger framework

4. Market and Competition: To evaluate what you are getting into. While some business plan proponents separate market and competition, it takes an examination of both, together, to come to one very important final conclusion: your market share. Consequently, it is best to examine and present them together.

5. Strategies and Goals: To analyze the market and your competition in order to determine how and where your company or products or services fit and to maximize your position with your target market

6. Products or Services: To describe your products or services and how they match your findings of your strategies and goals

7. Marketing and Sales: To market your products or services with the best positioning and to forecast your sales based on the findings of categories four, five, and six, in that order

8. Management and Organization: To present the management and personnel who will run the show. This section can be separated into two sections for more complex companies.

9. Operations: To explain how the business is run

10. Financial Pro Formas: To forecast successful financial performance for all activities

11. Financial Requirement: To present the type and amount of financing needed, based on the previous sections, to accomplish the whole plan

12. Exhibits: By definition, to close the plan and separate any supporting materials that would otherwise interrupt the flow of the story

A professionally written startup business plan has all 12 of these basic sections presented in the order of the outline. Most of the segments listed will also be reflected in the same order of presentation, although there may be slight variances depending on your type of business. When your business plan is written to obtain financing, the financial requirement section may be tailored either as a loan request or as an investment offering proposal, and then titled accordingly.

A Winning First Impression

The saying, There’;s no second chance to make a good first impression, is highly appropriate when it comes to the opening sections of your business plan and its overall appearance. With current desktop publishing, business plans are looking more professional–prospects are competing for neatness and an impressive presentation that sets them apart.

• Format. As to format, the norm is to bind your business plan in booklet form with high-quality materials. Better ones have quality report covers in dark or rich colors and are labeled on the front. The title page serves better than a label if laminated or positioned behind a windowed cover or behind a full clear cover. Most types of binding are available at copy centers: Ibico and GBC presentation bindings, Wire Bind, and Velobinder are a few of the better ones. Some businesses go the extra step to have printed covers or printed binding strips. Three-ring binders have been used for years and are still acceptable, but you improve your odds for making that favorable first impression by using the latest and most professional-looking, high-tech materials available.

• Page layout. Make sure the layout of each page is balanced and artistically pleasing, with a lot of open or negative space–paragraphs, lines, and characters should not be too closely spaced. With desktop publishing, many types of fonts are available. The text is generally easier to read if you use a font with serifs, such as New Times Roman, Charter or Garamond, and the margins are justified. For a professional quality, use a sans-serif font, such as Arial, Modern or Verdana, for titles, sideheads, tables and outlines. Choose one of each and stay consistent throughout the presentation.

Using the latest software printing design tools, such as boxes, borders, shadow lines, and enlarged and bold characters, can add a professional look if correctly done without drawing attention to their use and stealing the show from the material itself. Color printing, judiciously placed, is being used more all the time.

• Tabs and titles. Each subject, with titled heading, should have its own section and be separated with indexed partitions keyed to the table of contents. Tabbed index partitions make it easier to locate information, especially during a personal presentation. Another feature is to use colored partitions, preferably muted or soft colors that coordinate with the color of the cover and with the colors of any charts or graphs inside. Instead of custom tabs, some plans are assembled with printed tab indices with miniature plastic covers, but if you have access to preprinted laminated tabs, they are preferable. Avery has Index Maker dividers for ink-jet and laser printers that you can customize with basic desktop software. A recent innovation is hidden tabs that protrude past the pages but not the cover.

Within each section, set off subsections or segments with crossheads usually set bold in a sans-serif font. When these are justified to the right or left margin, they are referred to as sideheads.

• Color and charts. Charts, graphs, and illustrations are commonly acceptable if appropriate to the text. Color is often better than black and white; however, choose reds and blues, not chartreuses, yellow-oranges, or some other unusual color. In fact, if you are going to use extensive colored charts and graphs, choose a theme of three or four rich colors and use them consistently throughout the work. Reserve photographic prints for the exhibits. Even then, they should be presented in protective sheets or converted to color copies and labeled or captioned in font styles consistent with the rest of the business plan. If needed in the main body of the business plan, pictures look more professional when scanned and merged into the layout.

• Printing. Use laser or ink-jet printers to print on paper of stationery quality. Paper should be the brightest white you can find, laser quality, or one of the muted color r�sum� stocks in soft gray or ivory. Staying consistent by using the same type of paper for text, graphs, charts, and illustrations yields a quality professional look. Using bits and pieces of different paper gives the impression the plan was thrown together.

• Proofreading and copyediting. Have your figures checked by an accountant and the text proofread by an editor or proofreader. An accurate, easy-to-read, and well-organized text will convey professionalism and credibility. Too often this important step is avoided or forgotten: despite all the work that has gone into creating an impressive presentation, typos, missing words, poor sentence construction, and figures that don’;t add up become a significant part of that first impression made on a reviewer.

• An accurate, easy-to-read, and well-organized business plan conveys professionalism and credibility.
• You improve your odds for making a favorable first impression by using the latest and most professional-looking, high-tech materials available.
• Don’;t necessarily try to balance the material from section to section. Place your emphasis in the proper perspective and accent the features that are most important for your business.
• Always include a cover letter with your business plan, because it may get passed on to other staff members who won’;t know about your venture.

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