Business Plan Tutorial
Business Plan Tutorial

Business Plan Tutorial

Other useful resources (including business plans)

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Why do you need to formally write a Business Plan?      

Tips to writing the plan:

Presenting the Business Plan: Also see books in the library and the page of helpful things and other resources available to you. 

Guy Kawasaki's blog is a must read.  "The 10/20/30 Rule of PowerPoint" will give you great parameters to use as a guide for presentations to Venture Capitalists.

 

Understand who your audience is (investors; angels, venture capitalists, loan officers), and what they are looking for:
Return on Investment- How will they get their money back? (This is also part of the exit strategy.) 

High Return on Investment

1.  Read this guide, as well as the Resource Page, Business Plan Template and Other Useful Resources, to see  the type of information needed and possible sources to use.  If you read the tutorial and are proactive with the research, it will help you to keep track of the data you will need later and save you time.  

Research Tips:  Sources for information you will need has been divided into three color coded categories as shown below. The actual sources can be accessed on the Resource Page where links will be provided. 

  • Printed Sources  (i.e., library books that can be found in most libraries).

  • Free Websites Resources (i.e., free online at the time this guide was developed).

  • UW restricted (i.e., online sources that are free if affiliated with the UW).

Some of the same sources are throughout the Business Template, so going to that source once and getting all of the data on the first visit could save you a lot of time.  Under the resources are questions in green font, these are questions that should be answered in your business plan. (Not all of them will be applicable to your company.)

 

The sources we mention here are by no means the only ones you should use.  For example, you can use the Libraries catalogue  to search for more targeted information on your product or company.

2.   If you do not yet have a concept, brainstorm.

Brainstorm about the business idea, map out all of the following:

Customer types

Distribution channels

Costs

Product types

Customer service

Possible consultants

Prices

Customer experience

Concepts

Competitors

Promotional ideas

Shareholders to bring in

Branding

 

 

Write down all of your preconceived notions about your business to see if you can confirm them.   You can do this by beginning to  research what you believe is true and showing how these ideas and theories will work.  Then if they are not true, decide if your plan can work with the facts that you have uncovered.  This is a precursor to the full research you will do below for the actual Business Plan.    

Also consider the following questions:

  • If you have a company that is cutting edge, will it be too challenging to research and project financials?
  • Do you want an oversaturated industry, where you are one of many? What innovation do you offer?
  • Make sure you can communicate your idea to people outside of the industry; you are writing for potential investors, lending officers and venture capitalists.  Know your audience.   

3.   Set up a document you can work on. 

Use the  Business Template page or go online and find a template for your industry.   These are merely tools to help you remember all of the important sections for your plan.  You should write the final version as a cohesive explanation that is not repetitive.

 

1. Copy and Paste the template into a new blank document.

2. Provide enough space to include information, footnotes and citations. 

3. Include your assumptions; (however if you cannot support them up with facts, you will need to remove them). 

4. Cite your sources. 

Note: It helps to cite your sources as you go so readers both your and you can locate them later.
4.   Research the Customer and their needs- determine your niche

5.   Research the Industry- verify the need for the niche you want to go into and understand your competition

6.   Write your business plan in order to explain who your customer base is (Target Market) and industry analysis to show how you will fit in (Industry Overview).

7.   Solidify your understanding of the customer by researching and writing about your Marketing Plan and the STP.

8.   Explain the ways you will meet your customer's needs with the Organization Plan.

9.   The Financial Plan- plan your cash flow, because it is king.  

10.  Financial Terms - the terms of financing your company, i.e., the loan from your parents and your partner's parents; you may also want to include expectations of work loads for the partners and contractual understandings. 
11.  Exit Strategy (There is some debate about how important this is, so research your audience and act accordingly.)   

13.  Compile Appendices

14.  Write your Business Description (or summary).  This is very similar to the Executive Summary in that it should be written after all of the research is completed and it is an overview of your plan. The difference is that the Business Description can be longer and more in depth than the Executive Summary.

15. Write your Executive Summary. Writing this synopsis last will allow you to understand what is important to highlight.   Your reader can get a quick idea of what your plan entails and it should be brief--about one or two pages. 

Research Guide: 

 

I.  Executive Summary – One Page Summary of Business Plan
Step 15.

A short summary of the overall plan gets the reader interested and allows you to mention the important aspects of your plan and then go into more depth in the body of the Business Plan.   

Typically this is written last as it is a summary of the important data you will gather below.

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II.  Business Description – What Will the Business Do

Step 14.

This section is a lead in to the full plan.  

Things to consider while researching: 

  1. What is the product or service you are offering?
  2. What is your Mission statement?
  3. What is your Company vision?
  4. Who will you be to your customers?
  5. What makes your company better?  Can you keep others from duplicating that?
  6. How will it affect your Stakeholders?
  7. What are the barriers to you entering this market? 

Note:  Rewriting this section as you refine your plan is to be expected. As you continue to research, the information you find will cross into different areas of the plan.  

Questions you should answer within your business plan:

    1. What is your product or service?
    2. What needs in your industry are not being met?
    3. What methods can you use to meet these needs? 
    4. What will your market niches be?
    5. Who will your key customers be?
    6. Will customers buy the product or service more than once?  What is the life cycle of the product or service?
    7. What are your company's future goals?  5 years?  10 years? 
    8. Who are the owners?
    9. Is the firm a sole proprietorship, partnership, or corporation?

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III.  Market Overview (Opportunity)

Step 4.

1.      Demographics

1.      Education

2.      Geographic Area

3.      Income

4.      Age

5.      Gender

Printed Sources

Free Websites Resources

Online Databases UW restricted

2.      Psychographic Trends

      1.   What type of media do they consume?

      2.   What are their beliefs?

      3.   Why do you believe they are the type to buy your product?  Can you prove it? 

Printed Sources

Free Websites Resources

Online Databases UW restricted

3.      Phase of life.  Is your product limited to certain time periods in customer's lives?  (e.g., single, child rearing,  retired, empty nest, college age)

 

 

Questions you should answer within your business plan:

1.                  Who is your customer – provide a specific description (summarize the information above that describes your ideal customer)

2.                  How many potential customers are there in your target area?

3.                  How are these customers currently being served?

a.      What is the unmet need and how will you meet it?

b.      Think about how you will win the customers currently being served by others?

 

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IV. Industry Overview
Step 5.

A description of all aspects of the industry you plan to go into.  

 

1.  How are the other companies in this Industry set up?

  • How Many Companies?
  • How big are they? Do they have resources to overtake you?
  • What are their Distribution Channels (e.g., horizontal, vertical)?
  • How do they transport their product?
  • What are the barriers to enter this market?
  • How is their Hierarchy set up?
    •

 

2.     Competition – Who, How Many, How Big

  1. Research how they advertise
  2. What are their markets
  3. What is their market share
  4. Learn their products
  5. Product features
  6. Prices  

 

3.     Stage of Industry (Startup, Growth, Maturity and Declining) 

 

 

 

4.    What are the Trends?

  • What is the Growth within this industry?
  • Technology- is technology changing (quickly, slowly)?
  • Buying patterns- is this a one time purchase item or many purchases in a lifetime?

 

5.  What are the Government Regulations for this industry? (remember, it is best to error on the side of caution) 

  1. Licensing-

  2. Insurance-

  3. Taxes-

  4. Pollution-Toxins proper waste disposal

 

6.      What Promotions are other companies utilizing?

Printed Sources

Free Websites Resources

Online Databases UW restricted

7.      What Pricing mechanisms are being used by other companies?

Printed Sources

Free Websites Resources

Online Databases UW restricted

Questions you should answer within your business plan:

1.      Description of the current industry

a.      How can you take advantage of the current industry trends?

b.      How much growth can you expect?

c.      Is this a market you want to go into?

2.      What ideas can you borrow from the competition?  (I.E. Supply chains, distribution channels, points of sales)

3.      What can you do that your competition can’t?

a.      Can you keep them from doing that?

4.   What can you improve upon?  Make more profitable, simplify, streamline, just-in-time, reduce waste?

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V.  The Marketing Plan (Four P's)
Step 7.

Describe each of the following.  Now that you have done the above research, the written statements will solidify all of the ideas that you have and help you to see what ideas are the best options.   

1. Product- What is the product?  Describe all of the attributes of the product or service.  Is it a service or tangible good? What is the product life cycle?

Map out your consumption pattern

  • How do people become aware of the item?

  • How does the consumer become aware of the need for the item?

  • Where do consumers find the item?

  • How does the consumer select the item?

  • How is it ordered or purchased?

  • How is it delivered?

  • How is it installed?

  • How is the product used?

  • When is the product done?

  • How does the consumer get rid of it, (e.g., sold, garbage, loan or gifted)?

2. Price- How will you determine price?  What options will work best for your product?  How will your consumers & competitors react to your pricing? Will you have price promotions? (see promotions)  

3. Place- What are the locations you will use to make your product available? 

  • Distribution channels  or  directly?

  • Specialty stores, Big Box stores, online, or vending machines?

4. Promotion- How are you going to promote your product or service?  What promotional ideas work with the market you have selected?   This is the reason for the whole report. 

Promotional Ideas:

Newspaper Write articles for the local paper Write a newsletter Join Trade Services
Contests Mailing list for customers Radio Mass Mailings
Cold calling Sponsor little league teams Magazine Talk to people
Website Yellow Pages advertising Trade fairs Booths at Fairs
Television Donate to local causes Word of Mouth Back of receipt
Grand Openings Giveaways- tee shirts, hats, buttons, pens Pricing Promotion such as Coupons Give samples or trial version
Parties Sandwich board Business Cards  Write a book
Partnerships Join Chamber of Commerce Temporary Tattoos  

Use the four P's (product, price, place, & promotion) and other tactical or environmental variables to show how your plan can succeed.   

 

 

Questions you should answer within your business plan:

1.     What is your product or service?  (If you have explained it fully before, don’t repeat it. Just make sure it is fully explained.)

2.     What is the price?  How did you determine this price?  Show support of price using; cost of materials, time to produce, cost of transport, competitor's prices and your profit.   

3.    Where do you plan to locate your business?  Where will you obtain the components necessary for your product or service? Where will you sell your product or service?  How will it get there?  

4.    What promotional ideas will you use?  When and how?  What image will that give to your product?

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VI. Segment, Target & Position

(STP)

 

Note: Use the research that you have completed above for this section. 

1.  Segment- who are potential buyers of this product? 

2.  Target- who will you pursue? 

  • This should be decided by which segment your product would appeal to the most, and if they have the means to buy your product.   

  • Describe your target market segment in detail by using demographics, psychographics, geography, lifestyle, or whatever segmentation is appropriate.

  • Why is this your target market?

  • How large is it?

3.  Position- What is the position that you want in the customers mind and how will you achieve that?  

  • Positioning is designing a product or service that the targeted market sees as distinct and valuable when compared to competitors' products.  (4 P's above) 

Three ways to position a product:

  • Unique -  this is the only one of its kind

  • Difference - e.g., More than twice the speed, or more attachments, etc.

  • Similarities - e.g., Same as ______ but at a lower price. 

What is this telling your targeted segments?  Should you rethink anything?

A.        How will you communicate with the market?

B.        What is your value proposition - why is it better than your competition?

C.        What is the evidence that it will be successful?

 

Questions you should answer within your business plan:

1.     How do you promote your product in the market?  To whom?

2.     What is the position you will go after in the market?

3.    What is your value proposition - why is it better?

4.     What is the evidence that it will be successful?

 

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VII.  The Organization Plan

Step 8.

Organizational structures-

A.  What type of a company will be needed, (e.g., Sole Proprietorship, General Partnership, Limited Partnership, Limited Liability Partnership (LLP), Corporation, & Limited Liability Company (LLC))?

 

B.  What does management look like?  How will management be structured?  How will conflicts be resolved?

 

C.  Will you have any consultants for the business?  Who and Why?

 

 

What questions you should answer within your business plan:

1.     How will this Company structure benefit the company and owners?

2.    What special skills or experience does the key management have for this industry?

3.    What other resources will you be bringing into the company (i.e. consultants, employees)?

 

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VIII.  The Financial Plan

Step 9.

What are the required resources you will need for your company? 

Project out monthly financials for 3 years to give a realistic overall picture of each of the following:  

A.     Income Statement

B.     Balance Sheet

C.    Cash Flow

D.    Capital equipment and supply list

E.     Breakeven analysis

F.     Assumptions upon which projections were based

G.   Projected range of sales (Bygrave, William D.. (1994). The Portable MBA in Entrepreneurship. John Wiley and Sons. page 154)

 

 

Questions you should answer within your business plan:

1.   How much money do you need?

A.  When will you need money?

B. How many customers do you need to break even? What percentage of your target market is that?

2.    When will you break even?  

3.   When can you expect to start to pay off investors?

 

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IX.  Financial Terms
Step 10.

What are the types of financing you are hoping to get for your company?

 

 

Questions you should answer within your business plan:

1.     How much money do you need?

2.     Where do you plan to obtain it?

3.     What will the investor/lender get out of this deal?

4.    What are the actual terms of the deal?  (i.e., interest, dividends, payouts, stock, expected work loads for partners)

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X.   Exit Strategy
Step 11.

How do you plan to pay off the investors if the company does not succeed?  Just in case, show the scenario the other way as well (i.e., if the company succeeds).  

 

 

Questions you should answer within your business plan:

1.  Is your company separate  from you?  Is it a legal entity?

2.  What is the value of the company at the time of the exiting?  How will you pay off the investors?             

3.  If you sell?

4.  If the company does not make it and closes? 

5.  In a partnership make a plan for who retains the company, who gets bought out and how the price could be determined.

 

  Page 23 Rogoff, Edward G.. (2004).  Bankable business plans. Thomson Texere.

 

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XI.  Appendices
Step 13.

All supporting information you that you used to write your report.  Such as:  

Perception map

Management's resumes

Ansoff’s matrix

Purchase process

SWOT analysis

Surveys with results

Statistical data, time line

Cost analysis

Any charts or comparison tables that you created 

Diagrams of the product, packaging and screen shots of possible websites.   

Management resumes

Competitive analysis

Projection of Sales by Market Line

Product Line Profit Analysis

Confidentiality Agreement

Tax returns of principals for last three years Personal Financial Statement

Copy of proposed lease or purchase agreement for building space               

Copy of licenses and other legal documents

Copies of letters of intent from suppliers, etc.

Loan applications

Partnership Agreements

Letters from perspective buyers

 

 

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REFERENCES

The following sources were primarily used to create the template in this tutorial

  1. Handley, Stephan. (Sept. 2006). Business Plan Format. Retrieved Sept. 2006. from http://bb.uwb.edu/webapps/portal/frameset.jsp?tab=courses&url=/bin/common/course.pl?course_id=_246_1
  2. Rogoff, Edward G.. (2004).  Bankable business plans. Thomson Texere.
  3. Zimmerer, Thomas. (2005) Essentials of entrepreneurship and small business management. Pearson Prentice Hall.  New Jersey. 

 The following sources were used to create the tutorial

  1. Cross, Wilbur  and Richey, Alice M.. (1998).  The Prentice Hall encyclopedia of model business plans. Prentice Hall  (also has disk of PDF's for templates) 
  2. Bygrave, William D.. (1994). The Portable MBA in Entrepreneurship. John Wiley and Sons. 
  3. Debelak, Don. (2006) Perfect phrases for business proposals and business plans.  McGraw-Hill.
  4. Jacksack, Susan (Ed.). (1998). Business plans that work: for your small business. Riverwoods, Illinois: CCH Incorporated.
  5. Gumpert. David E..  (1990).   Inc. Magazine Presents How to Really Create a Successful Business Plan.  Inc. Publishing.  Boston, MA. 
  6. Handley, Stephan. (2006). Business Plan Format. Retrieved Sept. 2006. from http://bb.uwb.edu/webapps/portal/frameset.jsp?tab=courses&url=/bin/common/course.pl?course_id=_246_1
  7. Harmer, Wm. & Peck, Terrance.   (1999, 2002-2004). Business Plans Handbook: a Compilation of Actual Business Plans Developed by Small Businesses Throughout North America.  Gale Research, Inc.
  8. Kawasaki, Guy (January 21, 2006). The Zen of Business Plans. Retrieved December 8, 2006, from How to Change the World Web site: http://blog.guykawasaki.com/2006/01/the_zen_of_busi.html 
  9. Kerin, Hartley, Berkowitz, Rudelius. (2006).  Marketing. Eighth Edition. McGraw-Hill Irwin.
  10. Leong, Alan. Personal Communication.  (Jan-March. 2007). Senior Lecturer. University of Washington Bothell in Bothell Washington. 
  11. Malburg, Christopher R.. (1994).  All-In-One Business Planning Guide. Bob Adams, Inc. MA.   
  12. Miller, David. Personal Communication.  (Jan-March. 2007)  President, Biotech Stock Research. University of Washington Bothell in Bothell Washington. 
  13. Porter, Christopher. Personal Communication.  (Oct. 2006)
  14. Rich, Stanley R.  and Gumpert, David E. (1985). Business plans that win: lessons from the MIT Enterprise Forum. Harper & Row Publishers Inc. New York. 
  15. Rogoff, Edward G.. (2004).  Bankable business plans. Thomson Texere.
  16. Rule, Roger C.. (2004). Rule's Book Of Business Plans For Startups: Creating A Winning Plan That You Can Take To The Bank. Entrepreneur Press.
  17. Siegel, Eric S., Ford, Brian R. &, Bornstein, Jay M.. (1993). The Ernst & Young business plan guide. New York. John Wiley & Sons, Inc.
  18. US Small Business Association. Retrieved October 29, 2006, from Writing the Plan Web site: http://www.sba.gov/starting_business/planning/writingplan.html 
  19. Vaughn, Donald E.. (1997). Financial Planning for the Entrepreneur. New Jersey. Prentice Hall.
  20. Wickham, Phillip A.. (1998).  Strategic Entrepreneurship. Britain. Pitman Publishing.    
  21. Zimmerer, Thomas. (2005) Essentials of entrepreneurship and small business management. New Jersey. Pearson Prentice Hall.  

 

Guide Created by
Charlene McCormack, UWB Business Student,
in collaboration with
 Doreen Harwood, Business Librarian,
UWB/CCC Campus Library
email: dharwood@uwb.edu

 

 

A huge thanks to Doreen Harwood for the opportunity to work on this project
(and for all of the sources I referred to on her Guide for Business Research
 for the Business Department). 
- Charlene McCormack

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