Business Plan Basics

This eBook is intended to condense and present to the reader a practical guide to formulating and writing a business plan.

Your company’s business plan is the single most important business proposal you will ever write. There are many aspects of a business plan that will gauge your success. If you have any reservations about your plan do not be afraid to get guidance from plan writing manuals or consultants. It will pay off in the end.

The bottom line is that finding and asking the right investors take effort and expense, therefore, do not throw your efforts away by sending lenders a poorly devised business plan. Lastly, finding money takes time and energy. Be diligent, and above all be patient.

1  ​​Pre-Incorporation Agreements

IF YOU ARE JUST STARTING your business, I recommend you take a moment to peruse the following elements and issues that need to be considered before you move forward.  Failure to consider the ramifications of these issues can adversely affect future operations.  It is understood that having the entire founding team on the same sheet of music with respect to these issues will greatly simplify the startup process.  Notice also that the development of the business plan comes after these issues have been decided.

1.1.1  ​​Company Structure

Corporation, Partnership, Limited Partnership, Sole Proprietor, S-Corp, LLC, LLP

Name, Affiliated Companies

Company Purpose and Mission

Long Range Goal, Exit Strategy

1.2  ​​Organization and Management

Corporate By Laws, Officers, Directors, Meetings

Compensation and Incentives

Organizational Structure and Personnel

1.3  ​​Founders Stock Ownership

Authorized and Issued

Buy/Sell Agreements

Transfer Restrictions

Key Person Provisions and Insurance

1.4  ​​Accounting and Finance

Initial Capitalization, tax considerations

Owner Asset Assignments

Loans, Application, Conditions & Sources

1.5  ​​Selection of Professional Team

Partners/Founders Team

Legal and Accounting

Banking and Finance

Advertising and Marketing

Key Consultants

Board of Directors

1.6  ​​Business Plan

Purpose and Executive Summary

Business Description

Market Studies and Marketing Plan

Financial Pro-Forma’s and Break Even Analysis

2  Potential Business problems

EVERY DAY WE RECEIVE calls from entrepreneurs seeking venture capital for business expansion. All too often, the perceived need for additional funding is really a need to become more efficient, using resources already available and increasing marketing efforts. The Business and Financial Fitness Quiz at the end of this paper will provide an in-depth analysis of your business.

The following are problems directly attributable to management that cause businesses (and governments) to get into financial trouble according to Corporate Economist Philip B. Nelson:

2.1  ​​​​​​Errors of omission

Lack of planning to cover increasing debt or interest rates [23.3%]

Changes in the market place (nothing stays the same) [66.6%]

Technological changes to the market that bypass your company [13.3%]

Changes in the physical environment (often occurs slowly) [3.3%]

Disruption of key relationships (loss of key clients, financing, etc.) [36.6%]

2.2  ​​​​​​Errors of Commission

Over expansion (too many employees, offices, products) [66.6%]

Over leverage (works great during expansions, remember the bubble) [53.3%]

Over diversification (what business are you really in and what makes the money?) [40.4%]

Over dependence on one customer, supplier, product, etc. who suddenly disappears or changes the relationship [13.3%]

Inadequate control systems (does your accounting, manufacturing, etc. system give you the answers you need right now?) [80.0%]

Dissension among the management team (it is a team isn't it?) [40.0%]

Has the business reached its level of incompetence? [46.7%]

Lack of leadership by the chief executive. [83.3%]

3  ​​​​​​Solutions and Control Systems

NOW THAT YOU HAVE IDENTIFIED the potential or actual problem, what can be done to avoid or correct them.

It is vitally important to avoid denial of the problems.

Early recognition of the symptoms of a sick company, and willingness to act is the best hope for an early and successful recovery.

Not letting yourself fall for escape hatches and last minute saviors.

Being willing to put the survival of the business above personal agendas and competing issues.

Getting professional help early and often. Have you done everything possible to control all costs? Can you automate, use part-time help,