Write Your Business Plan

Foreword by Jesse Draper  Investor and Founding Partner of Halogen Ventures

PLAN. EXECUTE. SUCCEED. Write Your Business Plan, 2nd Edition is the ultimate guide to crafting a powerful roadmap for success. With expert insights and practical strategies, this revised edition equips you with the tools to create a standout plan that attracts investors, sets you apart from competitors, and propels your business forward.

You’ll learn how to:

Embrace the power of planning. Craft your path to business success today!

FREE 1-MONTH ACCESS TO BUSINESS PLANNING SOFTWARE LIVEPLAN PREMIUM! Step-By-Step Instructions

Full Financial Forecast

500+ Sample Plans

As CEO of Butow Communications Group (BCG), a highly successful online marketing ROI improvement firm, Eric Butow is a leading voice in growing and expanding small businesses from scratch. Since 2000, Eric has authored and co-authored numerous business and technology guides.

Entrepreneur Media is where small business goes big. For more than fifty years, millions of entrepreneurs and business owners have trusted Entrepreneur Media to guide them from startup to retirement and everything in between.

WRITE YOUR BUSINESS PLAN

 Learn what makes a successful business plan and how to create one  Define your plan purpose relative to your startup or existing business  Identify what to include in your plan and what to leave out  Tailor your plan to the various needs of bankers, investors, partners, suppliers and customers  Use support tools and included resources to help seal the deal  Update your plan so it grows with your business

WRITE YOUR BUSINESS PLAN YOUR STRATEGIC ROADMAP TO BUSINESS SUCCESS SECOND EDITION

ISBN-13: 978-1-64201-158-6 $24.99 US Small Business / Entrepreneurship Cover design by Andrew Welyczko

entrepreneur.com/books

BY THE STAFF OF ENTREPRENEUR MEDIA AND ERIC BUTOW

Introduction

A

s you start to read this book, you may be starting your own business or already have a business, but in each case you either don’t have a business plan or have such an old one that it needs to be revised. And you may be overwhelmed by all the conflicting advice you find online and maybe in other books. You don’t need a business plan. You need a business plan, but it can be just one page no matter if it’s a printed page or handwritten on a cocktail napkin. You need a tome for a business plan that will last you for the life of your business.

But one size does not fit all businesses, because every business is different. What’s more, you may need more than one business plan to approach different audiences, such as one for

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your employees to refer to and one for venture capitalists as they consider financing your business. No matter what business you have, you need to have a business plan to act as your company’s North Star—and, let’s not forget, get funding from banks and/or investors.

This book helps you determine what type of plan (or plans) you need and how to put one together. And we also tell you how to find resources that will help your new business get off the ground and keep your business thriving.

We start by telling you how to build a strong foundation for your business in Section I. This section covers the basics of what you need for your business plan, and it will get you in the right frame of mind before you move to the following two sections. Section I takes you through the fundamental questions that a business plan needs to answer. Chapter 5, which is the last chapter in Section I, also tells you how to put your business plan to work and the importance of updating your plan to respond to changing business conditions.

Section II talks about the presentation of your business in the plan. You start with an executive summary. Once you summarize your plan, you need to go into greater detail about who’s helping you manage the business and what you sell. Then you can show readers the money not only with financial information, but also with revenue opportunities in your industry, how your marketing will drive revenue, and how your operations will keep up with customer demand.

Section III talks about getting your cover letter ready to present to readers when you deliver your business plan to them. If you still need more support once your business plan is done, we have you covered. Chapter 14 is chockfull of connections to associations, books, websites, and even business plan competitions. Appendix A has a long list of resources for you to check out, too.

Ready to get started? Turn to the next page to understand what you’ll learn in Section I. Remember to redeem your complimentary 30-day access to LivePlan, a business planning and management software trusted by over 1 million small businesses, that will help you get your business off the ground. Flip to page [insert page #] to claim your offer.

Introduction

SECTION 1

Your Foundation Comes First

Section Summary

W

riting a business plan is like the architectural plan for a home or a brick-and-mortar building. You need to know what materials you need, how you’re going to construct the building, and when you need to build each piece of the building. You start by building the foundation, because without it your business can’t stand up.

This section starts by covering the basics and asking you fundamental questions in Chapter 1. Next, Chapter 2 talks about how you need to develop a plan that’s the right fit for your business—and how the right fit could mean you need more than one plan. In Chapter 3, we talk about answering the basic questions that your plan readers will want to know.

One of those questions is about financing, and Chapter 4 goes into greater detail about direct and indirect funding sources.

Finally, Chapter 5 talks about how to put your plan to work in your business.

1

Chapter 1 Summary

A

business plan is a written description of the future of your business.

It is a document that tells the story of what you plan to do and how you plan to do it. If you jot down a paragraph on the back of an envelope describing your business strategy, you’ve written a plan, or at least the germ of a plan.

Business plans are inherently strategic. You start here, today, with certain resources and abilities. You want to get to a “there,” a point in the future (usually three to five years out) at which time your business will have a different set of resources and abilities as well as greater profitability and more assets. Your plan shows how you will get from here to there. In essence it is a road map from where you are now to where you want to be later on.

What you’ll learn from this chapter: What should be in your plan, including your concept, strategy, and your products and/or services The plan that’s right for your business and presents you in the best light What your goals and objectives are The software you need to create your plan The direct and indirect funding sources for your business How to manage your plan as you put it to work

Contents

Foreword by Jesse Draper . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ix Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv SECTION 1

Your Foundation Comes First CHAPTER 1

Building Brick by Brick . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 How Long Should Your Plan Be? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 When Should You Write It? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Who Needs a Business Plan? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 12 Reasons Why You Need a Business Plan . . . . . . . . . . . . . . . . . . . . . . . . 9 Business Planning Risks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 10 Tips to Craft a Successful Business Plan . . . . . . . . . . . . . . . . . . . . . . . 21 iii

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CHAPTER 2

One Plan Does Not Fit All . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Presenting Yourself in the Best Light . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Your Plan Needs to Be Just Your Type . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Why You May Want More Than One Plan . . . . . . . . . . . . . . . . . . . . . . 34 CHAPTER 3

Line Up Your Ducks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Focus on Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 What’s Your Purpose? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Get the Software You Need . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49 CHAPTER 4

Digging for Dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Justification of Your Ideas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Assessing Your Company’s Potential . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55 Direct Funding Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58 Indirect Funding Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 CHAPTER 5

Put Your Plan to Work . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Evaluating a New Venture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 Informing Suppliers and Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Managing with Your Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Monitoring the Performance of Your Business . . . . . . . . . . . . . . . . . . . 88 Attracting Good People . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 Always Update Your Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96 SECTION II

Framing Your Plan CHAPTER 6

Executive Summaries Sell Ideas . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 Purposes of the Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . 103 What’s the Big Idea? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 How Much Cash? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 The Goals of Financiers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106 Contents

WRITE Your Business Plan

v

Who Will Own What? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 Give It a Happy Ending . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108 Company Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 Optional Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 Extract the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 CHAPTER 7

Management Makes Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 All about You . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 Your Managers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 Hiring and Projections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 Adding and Retaining Key Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 123 Board of Directors or Advisors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 Outside Professionals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 Licenses and Certifications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 Consult an Attorney . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 Chapter 8 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 132 CHAPTER 8

What Do You Sell? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 What Is Your Product or Service? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 What Makes It Worthwhile? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137 Cover Your Behind . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 142 What You Need to Know . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 143 CHAPTER 9

Rising Industry Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147 The State of Your Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 Market Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 149 Talking About Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 Barriers to Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 Who Are Your Competitors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 What Makes You Better? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156

Contents

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WRITE Your Business Plan

CHAPTER 10

Marketing: The Plan Within Your Plan . . . . . . . . . . . . . . . . . . . . . 159 Defining Your Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 Defining Your Customer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 160 Setting Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162 Place . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165 Promotion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 172 Follow-Up Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174 CHAPTER 11

How Does Your Business Work? . . . . . . . . . . . . . . . . . . . . . . . . . . . 177 Operations for Retail and Service Firms . . . . . . . . . . . . . . . . . . . . . . . . 180 Operations for Manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183 Information Technology and Operations . . . . . . . . . . . . . . . . . . . . . . . 190 CHAPTER 12

Show Them the Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 Income Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 197 Cash Flow Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200 Personal Financial Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 203 Financial Ratios . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 204 Forecasts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 212 Positive Cash Flow = Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219 SECTION III

Turn On the Lights CHAPTER 13

You Only Make a First Impression Once . . . . . . . . . . . . . . . . . . . 225 Letter of Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 Cover Letters and Cover Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 227 Helpful Layout Tips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 228 CHAPTER 14

Information Grows Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235 Market Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 235 Contents

WRITE Your Business Plan

vii

Trade Associations: Key Source of Targeted Information . . . . . . . . . 236 Communication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237 Financing Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 237 Books and How-To Manuals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238 Websites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 239 Trade Groups and Associations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 240 Business Plan Consultants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 243 Business Plan Competitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244 What Does It All Mean? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 246

LivePlan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 248 About the Author . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 249 About the Contributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251 Appendices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 253 APPENDIX A

Business and Business Plan Resources . . . . . . . . . . . . . . . . . . 255 Websites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 255 Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 256 Online Business Plan Courses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257

Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 259 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 263

Contents

Entrepreneur Press, Publisher Cover Design: Andrew Welyczko Production and Composition: Faith & Family Publications © 2023 by Entrepreneur Media, LLC All rights reserved.

Reproduction or translation of any part of this work beyond that permitted by Section 107 or 108 of the 1976 United States Copyright Act without permission of the copyright owner is unlawful. Requests for permission or further information should be addressed to Entrepreneur Media, Inc. Attn: Legal Department, 2 Executive Cir. #150, Irvine, CA 92614.

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional person should be sought.

Entrepreneur Press® is a registered trademark of Entrepreneur Media, LLC Library of Congress Cataloging-in-Publication Data Names: Butow, Eric, author. | Entrepreneur Press, author. Title: Write your your business plan : a step-by-step guide to build your business / by The Staff of Entrepreneur Media and Eric Butow.

Description: 2nd Edition. | Irvine : Entrepreneur Press, [2023] | Revised edition. | Summary: “Write Your Business Plan, 2nd Edition is the essential guide that leads you through the most critical startup step next to committing to your business vision-writing your business plan”—Provided by publisher.

Identifiers: LCCN 2023015592 (print) | LCCN 2023015593 (ebook) | ISBN 9781642011586 (paperback) | ISBN 9781613084694 (epub) Subjects: LCSH: Business planning. | New business enterprises—Management. | Small business—Management. Classification: LCC HD30.28 .B8688 2023 (print) | LCC HD30.28 (ebook) | DDC 658.4/012—dc23/ eng/20230421 LC record available at https://lccn.loc.gov/2023015592 LC ebook record available at https://lccn.loc.gov/2023015593

Printed in the United States of America 26 25 24 23

10 9 8 7 6 5 4 3 2 1

Foreword by Jesse Draper  Investor and Founding Partner of Halogen Ventures

PLAN. EXECUTE. SUCCEED. Write Your Business Plan, 2nd Edition is the ultimate guide to crafting a powerful roadmap for success. With expert insights and practical strategies, this revised edition equips you with the tools to create a standout plan that attracts investors, sets you apart from competitors, and propels your business forward.

You’ll learn how to:

Embrace the power of planning. Craft your path to business success today!

FREE 1-MONTH ACCESS TO BUSINESS PLANNING SOFTWARE LIVEPLAN PREMIUM! Step-By-Step Instructions

Full Financial Forecast

500+ Sample Plans

As CEO of Butow Communications Group (BCG), a highly successful online marketing ROI improvement firm, Eric Butow is a leading voice in growing and expanding small businesses from scratch. Since 2000, Eric has authored and co-authored numerous business and technology guides.

Entrepreneur Media is where small business goes big. For more than fifty years, millions of entrepreneurs and business owners have trusted Entrepreneur Media to guide them from startup to retirement and everything in between.

WRITE YOUR BUSINESS PLAN

 Learn what makes a successful business plan and how to create one  Define your plan purpose relative to your startup or existing business  Identify what to include in your plan and what to leave out  Tailor your plan to the various needs of bankers, investors, partners, suppliers and customers  Use support tools and included resources to help seal the deal  Update your plan so it grows with your business

WRITE YOUR BUSINESS PLAN YOUR STRATEGIC ROADMAP TO BUSINESS SUCCESS SECOND EDITION

ISBN-13: 978-1-64201-158-6 $24.99 US Small Business / Entrepreneurship Cover design by Andrew Welyczko

entrepreneur.com/books

BY THE STAFF OF ENTREPRENEUR MEDIA AND ERIC BUTOW