HOW TO WRITE A PROPER BUSINESS PLAN


The business plan should be written in two sections.  The section 
1 should be exactly ten pages.  Here's what they should cover:

Page 1)  Your mission Statement, carefully and thoughtfully 
prepared.

Page 2)  Concept and a general survey of enterprise.  Include 
monetary  return expected here.

Page 3)  The product description.  Include photos, drawings, all 
necessary data to briefly explain and clearly describe it.

Page 4)  Your management team.  Just a brief description of them, 
their credentials and their position.  You can go into more depth 
later.

Page 5)  Legal description.  How will the company be structured?

Page 6 & 7)  Your marketing plan.  How will you position the 
company and sell the product?

Page 8)  The operations and production plan.  Describe how your 
product will be produced and distributed.

Page 9)  A financial summary of your enterprise.

Page 10)  Your spreadsheet to document the financial summary and 
projections.


PAGES 1 & 2 - THE CONCEPT AND MISSION

PAGE 2 - THE CONCEPT

Forming the concept is the first step in developing the business 
plan.  Your initial concept will change over time as you learn 
about the market and the economics of the situation.  Don't let 
that bother you.  The idea you begin with is not you concept.

The concept is a set of cohesive ideas about how to create and 
deliver value to the market.  "I want to open a restaurant" is an 
idea.  It has no power until it's conceptualized:  "I intend to 
open a restaurant featuring medium-priced Mexican food, with 
specialty dishes and drinks developed only by our establishment.  
I want strolling musicians playing Spanish and Mexican music 
among the diners.  I want this restaurant situated in the El 
Paseo Plaza in Palm Desert."

Before defining your concept, you need to understand the 
"product" of your product.  We call this selling the sizzle and 
not the steak.  People usually aren't motivated to buy your 
product out of simple worth and need.  Many irrational factors 
motivate them - status, sex appeal, aesthetic effect, glitter, 
childhood memories, etc.  Why do people buy Mercedes instead of a 
Hyundia?  Sunlight dishwashing detergent over Cascade?  A borzoi 
instead of a dachshund?  When you realize the essence of what 
sells your product, marketing becomes easier.

A strategy that's often helpful in developing your concept is to 
examine the competition.  Where is it weak?  What are its strong 
points?  Then design your concept while considering them.  This 
isn't necessarily easy; it often takes time and hard work to 
research the information you need about the competition.  But 
it's worth it to work up a detailed profile of them, including 
everything you can find out - sales, volume, profits, marketing 
techniques, and especially any points their customers are dissat
isfied with.

What benefits will the concept and mission statement provide for 
the owner?  The greatest value of this section of the plan to the 
owner/planner himself is that it clearly sets forth how his 
product will be of advantage to the customer.  It carefully 
describes his product and defines the value the customer will get 
for the price.

It needs to describe the company as well.  What business is he 
in?  What type of company is proposed?  Where will it locate?  
How much growth is expected?  What are the goals?  It establishes 
his venture's unique position in the market and explains what 
niche he will occupy.  It also will clearly set the direction of 
his business - in what way will it grow?  What touchstones of 
progress must be met - so that he can proactively meet his own 
goals?


This section of the plan is valuable to his employees and associ
ates in several ways.  First, it is the backbone of the culture 
employees will work in and contribute to, defining the goals and 
means of the work as well as the ethics that govern it.  If a 
culture that nurtures creativity and mutual support isn't set up, 
the company will dissolve into infighting and end up knifing 
itself in the back.  It won't be rewarding to work for.


PAGE 1 - THE MISSION STATEMENT

Secondly, the mission statement defines the value and services to 
be extended to the customer.  It sets forth the business philoso
phy and style of the management.  Employees will not only know 
what to expect from the business, but they will also feel part of 
the team and more motivated to exert themselves.

The third quality it can provide employees is protection.  What 
is the company's commitment to the employees?  What is the pro
gram for promotion and enhancement of growth?  As long as they 
are fulfilling the job they were hired to do, will employees be 
secure in it?  Assuring employees these benefits supports a 
stable, productive work force.

Investors will want to know the management's philosophy and 
style; they will need to know the market count.  Investors will 
want the definition of the product or service; he needs to know 
the value customers will gain for their money.  Another important 
question they'll want answered is the rate of their return - how 
will their investment pay off?  How soon and how much?

The significance of the mission statement can't be overempha
sized.  It's your concept in words.  It's the constitution of 
your company, the base form your company's culture.  When you've 
got it in the right words, your mission statement can inspire and 
sustain you with the importance of what you're doing.

Note immediately for your investors the expected return.  This 
will motivate to read on.  Lay out the deal and return clearly - 
"As an investor in 10% of the company for a $100,000 capital 
investment, you should receive a $10,000 dividend the first year, 
$100,000 by 18 months, and your stock worth excess of 1,000,000."


PAGE 3 - PRODUCT DESCRIPTION

Simply show a sample in a photo.  That's the best.  If it's a 
service, show a photo demonstrating the service if possible.  
Line drawings are okay, but a working model is best.


PAGE 4 - MANAGEMENT AND ORGANIZATION PLAN

Remember, "If the top man is no good, all the people below him 
will be no good in the same way."

All organizations directly reflect the personality of their 
leaders.  The owner's philosophy and style of management needs to 
be expanded in detail - not only for his management team, but 
especially for investors.  It's a vital area.  Any financier 
wants to know who is going to do all these fine things described 
in the plan.  Only a fool invests in a concept; experienced 
businessman invest in the people who will make it a success.

The people behind the enterprise will be either a driving force 
or a major risk.

Two qualities are especially important in the business's manage
ment:

1)  Management must have a sense of urgency.  If prospects are 
going to invest in a business, they want it to be in one whose 
management sees the need to get things done.

2)  Honesty - investors look for people who are honest with 
themselves and with other people.

Communicate this in your business plan by asserting the value of 
your company objectively and honestly without enthusiastic over
statement.

The management and organization plan is necessary also for the 
entrepreneur's own clarification and record.

The objective of this part of the Business Plan is to demonstrate 
that the management is competent and fairly compensated.  You 
must also demonstrate that you know the various roles to be 
filled and that you have a plan for filling them.  Most impor
tantly, show that you have a clear and consistent philosophy for 
dealing with your employees.

Nation's Business claims that of all the parts of a business 
plan, the one most often sold short is management.  "Entrepre
neurs are so wrapped up in getting capital that they have a blind 
spot for the organizational dimension," says Peter B. Lester, 
president of his own executive-recruiting firm in Columbia, MD.

You must persuade the reader that you and your people can do the 
things you say you can do.  Give reasons for the reader to be
lieve in you.  What are the qualifications of the people on you 
management team?  Do you understand what you will be needing down 
the line as your enterprise matures?  Even though you are impor
tant and the success of the venture is largely up to you, you 
won't be doing it alone.  Others will be impressed by the nature 
of the people with whom you associate as well.

Having the management plan for the employees to study benefits 
them as well as the owner.  It helps them understand the overall 
structure of the business, its direction and potential growth.

The manager needs to consider how he will share the firm's values 
and sense of mission.  How will he lead his employees?  How will 
he infuse them with the company's ethics?

The employees need to understand their own autonomy:  where and 
how far their responsibility lies.  Another important result of 
the management plan is that it makes the company's ethical stand
ards very clear to the employees.  Also, the company's human 
resource management will provide training and development oppor
tunities, help with career development, motivation and support.  
Employees need to understand the company's structure as well as 
their own job description.

Include the legal structure you will need as well as the rest of 
the professional support te.  Investors are often impressed by 
people who have worked in large corporations.  Such people often 
have a whole-view perspective of the venture.  They are most 
interested in entrepreneurs with marketing experience, or second
ly, entrepreneurs with operations experience.

As you see, management section is crucial to your enterprise.


PAGE 5 - THE LEGAL PLAN

The legal plan should define issues of ownership:  Who is at risk 
and in what conditions?  It needs to outline the responsibilities 
of the principal associates of the business.

Legal planning is also necessary to clarify and document the type 
of ownership and the structures within which the business oper
ates.

If the owner fails to structure his venture legally, the law 
assumes, first, that the business is a sole proprietorship.  This 
means in the eyes of the law, the business and the owner are 
legally one and the same; second, that the business uses the 
owner's legal name as its own.

There are many reasons why this isn't a healthy for the owner.  
The business's liabilities become the owner's liabilities as 
well.  And in this day and age, he will generally have a lot of 
trouble raising money.

If the owner doesn't get good legal advice for a solid legal 
plan, he is setting himself up for trouble - along with his 
business, investors, and employees.

Employees need to know their future and that the business itself 
is legally protected.  Investors will need to know when and how 
to expect returns on their shares of the profits.


PAGE 6 & 7 - THE MARKETING PLAN

The Marketing section of your business plan will define the 
business's position and rate of growth for the owner.  It will 
answer such questions as these:  Who is my customer?  How many 
are there?  How will I reach them with my product?  Equally 
important is to establish, before you get started, what your 
niche is.  Despite the entrepreneurial truism "Ready, FIRE, aim," 
you want to be aimed before you fire.  Also consider how you're 
going to expand your business operations to provide more line, to 
keep the customers you've gained.

Of course, this section may well grow and change along with 
marketing system, but it provides a blueprint of the system 
planned for the owner and aims your company before starting.

Employees need to know the customer service procedures they will 
be following and the standards they will need to meet - just what 
is expected of them to promote and market the company?

Everyone involved with marketing needs to remember these proce
dures are in place to benefit the customer.  Remember what 
Charles Revlon said, "In the factory we make cosmetics.  In the 
drugstore we sell hope."

This segment of the plan will enable employees to understand the 
underlying rationale of their work.  Being able to see the whole 
of the marketing plan helps them to visualize the owner's busi
ness vision.

For the investors, this section will define the promotion plans, 
sales and pricing system.  Expanding upon the marketing system in 
detail helps them to evaluate the business's success potential 
and determine its competitive advantage.

The marketing plan is critical to prove a market for you concept.  
Your market may be so large and obvious that little needs to be 
done other than to prove its size.  At this stage in the plan, it 
is enough to prove that sufficiently large market exists for the 
concept that further investigation of the opportunity is warrant
ed.

People are often intimidated by the need to prove there's a 
market for their ideas.  Your marketing plan should demonstrate 
that you understand the market, that you can penetrate it, and 
that you are in control of the critical success factors which 
will enable the company to reach its sales goals

Above all, you want to prove customers want your product.  You 
should also explain specifically how you will enter the market, 
obtain a niche, maintain market share, and achieve the stated 
financial projections.

To do this, you must first understand what defines your target 
market.  After all, everyone won't want your product , nice as it 
may be to think they will!  The better you can identify the 
people who do want it, the more profits you'll make.  US Venture 
saw a need for specialized sport shoes.  They invested $740,000 
to develop VS Sport Shoes.  Later, they sold the company to 
Reebok for $180 million.

Suppose you're in the microcomputer software business.  You're 
naturally restricted to the number of computer owners in homes 
and business.  If your programs are developed for IBM and compat
ibles, your market is further limited.  If the type of software 
you are developing is investment programs, your market shrinks 
still further to those who use their home computers for invest
ment purposes.  Since your program is aimed at aggressive traders 
who use their computers frequently, the market is limited to a 
small target market.  Not only this, but 50 other companies are 
writing programs aimed at this same segment of the market.  But 
you need to know this before you begin!

Your overall plan for bringing your goods to market is important 
to your marketing plan.  Consider your market penetration goals.  
These touchstones which help you evaluate your accomplishment in 
the market and whether it's proceeding according to your plan.  
Set your specific marketing goals:  By ________ (date), I plan to 
have ____% of the market.  What are your pricing and packaging 
strategies?  Too often, there's a tendency to either underprice 
or overprice, and underpricing is more common as the seller 
strives to compete.  How much will the market pay for your con
cept?  The profits of your enterprise depend heavily upon the 
price you can get for you output.  Price is the single most 
important factor determining the profitability of you enterprise.

Sales and distribution also need consideration.  How will the 
product be distributed - retail, wholesale outlets, by mail?  
Will you be the sole distributor?  How will you control distribu
tion?

Who is going to sell the output?  Agents or your own sales force?  
Someone must sally forth into the marketplace and bring back some 
orders.  How is this going to happen?

What about promotion?  Advertising, publicity, trade shows, 
literature, and much more must be planned for.  Somehow, the 
market must become aware of you offer and the package of benefits 
you have assembled for you customers.


PAGE 8 - THE PRODUCTION AND OPERATIONS PLAN

The operations plan demonstrates the effectiveness of the owner's 
business sense to both the employees and the investors.  It also 
dissects the effectiveness of the various parts of the company 
for the owner/manager so he can put the parts together for a 
greater whole.

What raw materials do you need and where will you get them?  What 
are your manufacturing and labor requirements?  Depending on the 
exact nature of the owner's proposed business, he should include 
a certain amount of material on the product or service being 
proposed.

Some will want more technical detail, and the owner should pro
vide details of these underlying technical matters in a separate 
document or presentation.  He shouldn't bog down the business 
plan with lots of technical details but rather show that he has 
analyzed the important factors of producing his product suffi
ciently to prove it is feasible and ready to go.  If he does so, 
it will demonstrate both the company's efficiency to the inves
tors and his own effectiveness as a manager.

Investors want to know if the owner is efficient.  They also want 
to know if the company will be cost effective and profitable.

The operations and production plan should outline the social and 
technical design of the workplace.  In doing so, it will give 
employees an idea of the quality of work life they will receive.

The production plan is easier for those who have a concrete 
commodity, a product to sell.  The objective of the production 
plan is to explain how you will produce your product in a cost-
efficient way and ready it for the market.  Depending upon the 
exact nature of your proposed venture, you must include a certain 
amount of material on the product or service being proposed.

Do not inundate the reader with technical gibberish which may be 
a particular hazard among technically oriented entrepreneurs.  
For those who want to know the technical aspects underlying your 
venture, be ready to provide them in a separate presentation.  
But don't bog down your business plan with lots of technical 
details.  Show that you have analyzed the important factors of 
producing your product sufficiently to prove it is feasible and 
ready to go.  It's not easy to know exactly how much detail to 
include.  The important question is "Will the reader need to know 
this to understand the appreciate the venture?"  However, there 
are important factors you need to analyze in the plan:

Identify the difference between fixed and variable costs of 
production.

Evaluate the lead time you'll need for acquiring materials and 
for the actual production process.  Evaluate any regulatory 
restrictions and the product liability you'll need to meet.  
Pharmacists, for example, work with the government right on their 
tail.  You need to anticipate those restrictions.  Insurance 
costs can be a real eye-opener as well!  In a time when ice-
skating rinks are getting sued for having ice that's too slip
pery, you need to be covered.  Some businesses are more vulnera
ble to being sued than others.  What are your needs?

Also, evaluate your labor requirements.  What help will you need?  
How will you hire and train them?  How skilled will they need to 
be, and how long will it take to train them?  What is the average 
turnover of personnel is businesses like yours?  These questions 
are all difficult to pin down but necessary for projecting your 
business clearly.  Consider the equipment your personnel will 
use:  Will you lease, buy or rent?  What are the advantages and 
disadvantages of each?

After you analyze the production factors involved, develop your 
strategy for production.  Explain how you will manufacture your 
product in the most efficient manner.  Will you use subcontrac
tors or will you do it all in-house?  What's the cost of the raw 
materials?  What supply problems - everyone runs into late deliv
eries - can you foresee?


PAGE 9 & 10 - FINANCIAL PLAN

The financial part of the business plan is obviously significant 
to everyone concerned.  Although this portion is critical, we 
place it last.  The investor will spend the most time on it, but 
it only makes sense if he understands the context presented by 
the previous 8 pages.

What are your money needs?  How will they be met - debt or equi
ty?  What is your break-even point, and when will it be reached?  
This outlines the basic profitability and stability of the organ
ization for the employees as well as the investors.  Showing that 
the business is effectively planned increases investment possi
bilities as well as chances of success.

A strategic financial plan reassures employees about stability - 
stability in the growth of the company and the stability of their 
position.  It makes life easier for the owner or manage by en
couraging investment in the company, both credit and cash.  It 
reassures investors by projecting the business's cash flow and 
income and balance sheets.

Detailed and documented financial planning paints an accurate 
picture which is useful to both the owner and the investors in 
many different ways.  It must follow the other segments of the 
plan to have any meaning because the amount of money needed 
depends on what the owner plans to do.

The financial plan should document past financial performance for 
interested investors and provide income statements, balance 
sheets, cash flow, and future projections (proforma statements 
about income and cash flow), as well as a break-even analysis.

Cash flow is crucial.  That's the reason why the central part of 
the financial plan focuses around the development of the cash 
flow plan.  All the cash flowing into and out of the firm should 
be planned.  The net result is an estimate of how much money will 
be needed to start the venture and how much money will be needed 
down the line.  Thin the investor can see a point at which he can 
begin to retrieve his investment and get a return.

The objective of the financial section is to demonstrate that the 
business is sound and profitable.  Also, it can describe the type 
of financing desired, the amount, payback terms, and the poten
tial return on investment.  The writer needs to analyze receipt 
of revenues and payment of costs and to anticipate any cash-
flowing problems.  It's important to show that the owner under
stands the important difference between income statements and 
cash-flow statements.  Cash-flow is important; it will tell you 
just what's happening to your bottom dollar and where it is.

The financial plan should set forth the suppliers' policies on 
collections and payments.  How and when do you plan to pay the 
bills?  Also, explain the cost and availability of funds from 
banks, limited partners, venture capitalists - wherever you are 
planning to get money.  Also, here is the place to consider any 
assets' costs you haven't developed in previous sections.

Analyze your financial strategies:  What is your funding request?  
As a result of - and supported by - the business plan's analysis, 
how much will you need?  Consider the break-even forecast's 
predictions and what must happen to meet this prognosis.  Include 
one, three, and five-year projections, your profit-loss ratio, 
and your balance statement.

Don't forget to include underlying assumptions which will affect 
your projections.  There are always taxes, even without death.  
Your loan repayment schedules need to be included in your analy
sis.  How much cash will you need to cover accounts payable?  
With a new business, people want cash up front.  Credit can come 
later when you've established yourself.

Almost any other mistake in business can be remedied in one way 
or another.  But when you run out of cash, they take you out of 
the game.


 EPILOGUE

No one claims writing a business plan isn't hard work.  But it's 
worth it.  A study of what it is that causes business failure, 
and it's not because the owner couldn't make pizzas or clean 
carpets or whatever, found the problem is he didn't know how to 
run a business.  Only one in a hundred, at best, has a reasonable 
business plan; however, 80 percent of the business failures could 
have been avoided if they had planned properly.


Section 2 of your business plan is just like section 1, but in 
more detail.  If you would like a copy of section 2 please send 
$20.00 to:

Fine Lines
P.O. Box 471
Alameda, CA  94501

Remember, success is "The progressive realization of a worthy 
ideal."