PREPARING A BUSINESS PLAN

The Business Plan

In general, a business plan should have six sections:

 Executive Summary
 Company Overview
 Market Analysis
 Products or Services
 Marketing and Sales Approach
 Financial Projections

Let's take a closer look at each section:

The executive summary is the first -- and most important -- section of your business plan. It's a
snapshot of your business as a whole. It tells the reader where your company is, where you want
to take it, and why it will be successful.

In the company overview, you provide a high-level review of the different elements of your
business. This section will include your company's mission statement, location, key employees,
and competitive advantages. Think of this section as an extended "elevator pitch."

The market analysis should describe your industry, including its current size and historic and
projected growth rates, as well as information about your target market, an assessment of your
competitors, and any legal requirements that impact your business and/or the industry.

The products or services section is self-explanatory. What are you selling? How will it meet the
needs of your customers? What are its benefits compared to competitors' products? Be sure to
include the current development stage your product is in, and where it is in its life cycle.

In the marketing and sales approach section you explain how you'll identify potential customers
and describe your marketing approach. You should also address your overall sales strategy.

In the financial projections section, you'll explain how your business will meet its financial
obligations and maintain positive cash flow. Investors will want to see what your company will
do over the next 5 years, including forecasted income statements, balance sheets, cash flow
statements, and capital expenditure budgets.
Pros & Cons of Business Types
 An existing business has an established relationship with lenders and suppliers, as well as
other stakeholders. Moreover, lending institutions are more likely to help finance the
purchase of an existing business because the risks are better understood.

 An existing business is likely local and does not provide national advertising and
marketing support for the business. That's one of the advantages of purchasing a
franchise versus starting a business from scratch or buying an existing business.

 An existing business has already proven its ability to attract customers and generate
profit. Moreover, an existing track record gives potential buyers a much clearer picture of
what to expect than any estimate of a start-up's prospects.

 The seller of an existing business generally just wants to collect the check and turn over
the keys, not provide training and ongoing support. That's one of the advantages of
purchasing a franchise versus starting a business from scratch or buying an existing
business.

 An existing business has an existing track record. This gives not only buyers, but also
lenders a much clearer picture of what to expect than any estimate of a start-up's
prospects. Moreover, the existing business may also have established relationships with
lenders.

Types of Investors
Small business investment companies (SBICs) are privately managed investment funds that use
privately raised capital and guaranteed Small Business Administration (SBA) loans to provide
long-term loans and equity investments to qualifying small businesses. The SBA also offers a
variety of loan programs.

Venture capital companies are groups of small investors seeking to make profits on companies
with solid track records and rapid growth potential of 20% or more per year. In return for
supplying capital, these firms typically want managerial input in the form of seats on the board
of directors or executive positions.

Angel investors are wealthy individuals who seek investments that provide them with better
returns than traditional investments. Like venture capital companies, they usually expect an
ownership stake in the company.

Finally, the Internet has opened doors to new financing options, such as crowdfunding -- asking
a large number of individuals to invest a small amount of money in a new business venture.
 HIGHLIGHTS
¥ A general partnership is a business with two or more owners who share in the operations of
the firm. Partners may invest equal or unequal sums of money in the business and share the
profits of the business in an agreed-upon way.
¥ The five basic ways that entrepreneurs find opportunities to create new business according to
Schumpeter are the following: (1) using a new technology to produce a new product; (2)
using an existing technology to produce a new product; (3) using an existing technology to
produce an old product in a new way; (4) finding a new supply of resources; and (5)
developing a new market from an existing product.
¥ The five roots of opportunity? that entrepreneurs can exploit are as follows: (1) problems
your business can solve; (2) changes in laws, situations, or trends; (3) inventions of new
products or services; (4) competitive advantages in attributes of importance to customers;
and (5) technological advances that entrepreneurs take from the laboratory to the
marketplace.
¥ A microenterprise is a business with five or fewer employees, initial capitalization
requirements of less than $50,000, and habitual operational involvement of the owner.
¥ Receiving payment is an activity that falls under the production and delivery capability
element of a solid business definition. Other activities that comprise this element include
the following- buying, developing, or manufacturing the product; identifying the product's
potential qualified customers and selling the product to them; and producing and delivering
the product or service.
¥ The mission statement should address the following topics: target customers; products
and services; markets served; use of technology; importance of public issues and employees;
and focus on survival, profitability, and growth.
¥ The six factors of competitive advantage are as follows: quality, price, location, selection, service,
and speed/turnaround.
¥ A company's unique selling proposition refers to the distinctive features and benefits that set the
company apart from the competition.
¥ Adjusted book value is a method of asset valuation that often excludes intangible assets.