Why have a Business Plan
�	It�s the prudent thing to do and rational and reasonable people do create plans when undertaking projects that involve risk. Would you attempt to build a house or a building without a plan? Probably not, but you could and some people still do. However, the prudent thing is to have a plan to minimize errors and to estimate the resources and timing required to complete the project of building a house      The venture�s big picture is the strategic portion of the plan and includes the mission, vision, strength, weaknesses, opportunities, and threats. Other essential elements of the plan include the marketing analysis and strategy and the operations and financial analysis and strategy. A good plan should identify the market size, identify market characteristics, or have a realistic assessment of competitors. The company�s marketplace is one of the most important issues. Understanding the market goes a long way toward developing a cogent strategy and comprehensive tactical plan. Without �a critical mass� of customers, a for-profit business has no reason for existing!      A business plan�s importance is NOT based on whether your venture is self-funded or funded from external sources such as banks, financial institutions or venture capitalist. The business plan is important because it provides whoever is involved in the venture with an agreed upon description of the venture�s strengths and weaknesses, along with a course of action to capitalize on the strengths and correct or compensate for any weaknesses.
�	A sounding board for assessing the viability of the venture. A plan lets you explore the feasibility of a new business without actually having to start it and run it. It�s like a computer game, it simulates reality without incurring the cost. A good plan can help you see serious flaws in your business concept. You may uncover tough competition while researching the market segment, or you may find that your financial projections simply aren�t realistic. On the other hand, a careful business plan that doesn�t predict failure can be a rare comfort and motivator to proceed.
�	A valuable tool to be used to convey the mission and prospects of the business to customers, suppliers, investors, and others. Ronald Peterson, president of Three Arrows Capital in Bethesda Maryland, thinks that the business plan is the vehicle to communicate with not only financing sources but also with partners, shareholders, and employees. �the business plan has become an indispensable part of growing a modern business. Not only does it help to rationalize the process from production to sales, but it can become a living document that helps you make intelligent and balanced decisions on a day to day basis.�
�	A basic requirement to obtain financing.
	Types of Plans:
	Business plans can be divided roughly into four separate types. These are (1) very short or miniplans, (2) working plans, (3) presentation plans, and (4) electronic plans.
		The Miniplan: It�s safe to say that almost every business idea starts out as a miniplan of some sort. A miniplan may consist of one to ten pages and should include at least cursory attention to such key matters as business concept, financing needs, marketing plan, and financial statements, especially cash flow, income projections, and balance sheets. It�s a great way to quickly test a business concept or measure the interest of a potential partner or minor investor. It can also serve as a valuable prelude to a full length plan later on. Be careful about misusing a miniplan. It�s not intended to substitute for a full length plan. If you send a miniplan to an investor who�s looking for a comprehensive one, you�re going to look foolish.
		The Working Plan: A working plan is a tool to be used to operate your business. It has to be long on detail but may be short on presentation. As with a miniplan, you probably can afford a somewhat higher degree of candor and informality
		The Presentation Plan: If you take a working plan, with its low stress on cosmetics and impression, and twist the knob to boost the amount of attention paid to its looks, you�ll wind up with a presentation plan. This plan is suitable for showing to bankers, investors, and others outside the company. Almost all the information in a presentation plan is going to be the same as your working plan, although it may be styled somewhat differently. For instance, you should use standard business vocabulary, omitting the informal jargon, slang, and shorthand that�s so useful in the workplace and is appropriate in a working plan. You�ll also have to include some added elements. Among investor�s requirements for due diligence is information on all competitive threat and risks The big difference between the presentation and working plans is in the details of appearance and polish. A presentation plan will be printed by a high quality printer probably using color. It will be bound expertly into a booklet that is durable and easy to read. It will include graphics such as charts, graphs, tables, and illustrations. It�s also essential that a presentation plan be accurate and internally consistent. A mistake here could be construed as a misrepresentation by an unsympathetic outsider.
		The Electronic Plan: More and more business information that once was transferred between parties only on paper is now being sent electronically. You may find it appropriate to have an electronic version of your plan available. An electronic plan may consist of a file on a floppy disk or one sent by email. It may be a document in a word processing format or a slideshow type presentation format. On of the nice thing about an electronic plan is the speed with which you can transmit it. Another advantage is that it lets a reader, with the appropriate software, delve into the internal workings of the document. For example, they will be able to review the formulas and calculations used in a spreadsheet and tell what�s going on behind the scene. It�s worth noting that an electronic plan is cheaper than a printed one. There are some problems, however, with electronic plans. The fact that they�re easier to copy and disseminate makes it harder to control who sees your plan. The person you�re sending it to has to have access to an appropriate computer and software to see it at all. And finally, many people are not willing to look at electronic plans, preferring the convenience and familiarity of a paper plan.
How long should the plan be? Or What should it contain?
A plan should cover all the important matters that will contribute to making your business a success. It provides a description of the venture�s strengths and weaknesses, along with a course of action to capitalize on the strengths and correct any weaknesses. Generally, a business plan includes:
�	Your basic business concept. This is where you discuss the industry, your business structure, your particular product or service, and how you plan to make your business a success.
�	Your strategy and the specific actions you plan to take to implement it. Describe and analyze potential customers: who and where they are, what makes them buy, and so on�
�	Your products and services and their competitive advantages. Here is your chance to �dazzle� them with good, solid information about your products and services and why customers will want to purchase ours and not your competitors. Competitive advantage is what makes you different from and better than the companies you are competing with. Lower prices, higher quality, and better name recognition are examples of competitive advantage. Plans should define the market size, identify characteristics of the marketplace, and have a realistic assessment of competitors. Understanding the marketplace goes a long way toward developing a cogent strategy and tactics for addressing the marketing issues. Donna Marie Coles Johnson, founder and president of Handmade Toiletries Network in Bowie, Maryland says �If you think there�s a market for your product, for example, and you fail to conduct market research or participate in the business planning activity, you could be in for a rude awakening when you try to sell your product. She believes that a business plan can prepare you to do battle with your competitors because it forces you to determine how you will compete with them in advance.�
�	The markets you�ll pursue. Now you have to lay out what your market plan is. Keep it simple, short, and to the point. Unless you have a product or service or at least plans to develop one you don�t have a business. Describe your product in terms of several characteristics, including cost, features, distribution, target market, competition, and production concerns. Unique Selling Proposition Worksheet: Look at the list and ask yourself what your product has to offer buyers in each category.
	1.	Features: If your product is faster, bigger, or smaller or comes in more colors and configurations than others on the market, you have a powerful selling strength. In fact, if you can�t offer some combination of features that sets you apart, you�ll have difficulty selling your product.
	2.	Price: Everybody want to pay less for a product. Conversely, high priced products may appeal to many markets for their sheer snob or exclusivity value.
	3.	Availability: Wide spread distribution is a selling proposition. Many people look not for the best value or even the best product, but simply the one they can buy with the least hassle.
	4.	Service: Excellent service is perhaps the most important trait you can add to a plain vanilla product. Many people look not for the best value or even the best product, but simply the one they can buy with the least hassle.
	5.	Financing: Whether you �tote the note� and guarantee credit to anyone, offer innovative leasing, do buybacks, or have other financing arrangements, you�ll find that giving people different, more convenient ways to pay can lend your product convincing strength.
	6.	Delivery: Nobody wants to wait for anything anymore. If you can offer overnight shipping, on site service, or 24/7 availability, it can turn an otherwise unremarkable product or service into a very attractive one
	7.	Reputation: Why do people pay $10K for a Rolex watch that keeps worst time than a $10 Timex? At its most extreme, reputation can literally keep you in business.
	8.	Training: Training is a component of service that is becoming increasingly important in an era of high tech products and services.
	9.	Knowledge: Your knowledge and the means you have of imparting that to customers is an important part of your total offering.
	10.	Experience: Nothing could be more soothing to a skeptical sales prospect than to learn that the seller has vast experience at what he�s doing. If you have ample experience, make it part of your selling proposition.
	11.	Customers: If you have prestigious customers, mention it in your marketing materials.
	12.	Other: There are many wild cards unique to particular products, or perhaps simply little used in particular industries with which you can make your product stand out. For instance, consider a guarantee. When consumers know they can return a faulty product for a refund or repair, they often are more likely to buy it over otherwise superior competitors offering less powerful warranties. The business world is always looking for a new idea that will influence buying behavior, especially if it adds value without costing a lot. So put your imagination and knowledge of a market and your own business workings to the problem and you may be able to come up with an innovative world beater too. Who�s Going to Buy It and Why? The world�s not going to beat a path to the door of the inventor of a passenger pigeon trap because there are no passenger pigeons anymore. The point is, even the best product must meet a need in the marketplace or it�s a curio, and not the foundation for a product. Market definition include its characteristics, its needs, and if possible its numbers. When you�ve explained the selling propositions associated with your product in each of these categories, give each one a score from 1 to 10 based on your evaluation of how convincing a case you can make for that being a unique selling proposition. The one or two strengths with the highest scores will be your candidates for inclusion in your business plan. Note: Many of the common unique selling strengths are seemingly contradictory. How can that be? The explanation is that it depends on your market and what its buyers want.
�	The background of your management and key employees. Having information about key personnel is an important but often overlooked portion of a good business plan.
�	Your financing needs. Spell it out in simple terms that everyone can understand. Don�t cut corners hoping you�ll be able to get other financing at the last minute from other sources. Ask for what you will need to be successful.
�	An executive summary. It�s supposed to be a brief look at the key elements of the whole plan. Five minutes. This is how long an average reader will spend with your plan. If you can�t convey the basics of your business in that time, your plan is in trouble. The actual executive summary may be only a page or two. In it you may include your mission and vision statements, a brief of your plans and goals, a quick look at your company and its organization, an outline of your strategy, and highlights of your financial status and need.
	Strategies: conventional strategic thinking pigeonholes virtually all strategies into one of three categories. Companies try to become (1)the low-cost producer, (2) to differentiate themselves somehow, or (3) to become niche players.
		Low-Cost: Low-cost producers try to make a product or service at a lower cost than any competitor. It may then sell the product at the lowest price and thereby gain a large share of the market. Or if quality is high enough, it may charge a higher price and enjoy the resulting robust profit margins. Most markets are somewhat price sensitive, but the low-cost producer strategy works best in markets where customers are highly price sensitive. Low-cost strategies are often difficult for small businesses to follow because of the economies of scale possessed by larger companies automatically put small firms at a handicap
		Product Differentiation: Differentiate you product from everything else�become the biggest, best, bluest, oldest, or newest�and you may be able to charge more, have more loyal customers and discourage competitors all at the same time. You can differentiate by adding features or by cleverly promoting your product so that it merely seems somehow different. Take care to differentiate important features that will sway customers, however, or your efforts to follow a strategy of differentiation may be in vain.
		Niche Marketing: �Nichemanship� is the realm of small companies. Surviving and prospering in markets too small to attract competitors is the one thing entrepreneurs can do far better than any big company. You can focus your company by crating a product or service that closely fits the needs of a small group of customers. The beauty of nichemanship is that you can find plenty to satisfy you without ever attracting the attention of bigger rivals. The ugly side is that, should your market ever grow big enough, you may get clobbered.
Most of the plan will be words�the plainer the better. Table and graphs, drawing, and photographs are common�the old adage �A picture is worth a thousand words� speaks loudly here. Note: What else is in a good business plan? Hopes, certainly, are there. Dreams, probably. Quite possibly there is passion. But none of these are essential motivators will have a high profile in you business plan. They have to be there for you to succeed in business, to be sure, but few if any of the people who are likely to read your plan are interested in you private emotions about your business How long should it be? A useful business plan can be any length, from that scrawled on the back of an envelope to more than a hundred pages. A typical plan runs fifteen to twenty pages but there is room for a wide variation from that norm. The purpose of your plan is the principal determinate of your plans length. If you want to use your plan to seek millions of dollars in seed capital to start a risky venture, you may have to do a lot of explaining and convincing. If you�re just going to use your plan for internal purposes to manage an ongoing business, a much more abbreviated version may do fine. While having a business plan is a good thing, it�s important to remember what even the best plans can NOT do. Business plans can not:
�	Predict the future. No projection or forecast is really a hard and fast prediction of the future. It�s simply an attempt to show what will happen if a particular scenario occurs. That scenario has been determined by your research and analysis to be the most likely one of many that may occur. In the end, it�s still just a probability, not a guarantee.
�	Guarantee Funding. There are all kinds of reasons why a venture capitalist, banker, or other investor may refuse to fund your company. The quality of your plan may have little or nothing to do with your prospects for getting funded by a particular investor. It may be that there�s no money to give out at the moment. It may be that the investor just backed a company very similar to your own and now wants something different. Perhaps the investor has just promised to back her brother-in-law�s firm or is merely having a bad day and saying no to every thing that crosses her desk. Investors are like everyone else they are subject to fads, biases, and perceptions of the future. Your idea may simply be ahead of its time.
�	Raise All the Money You�ll Need. Your plan is the opening bid for negotiating the amount of funding. There may be a big difference in what you have to give up for the funding such as part of the ownership rights or control. The best tactic is to probably ask for a little more than you think you can live with plus slightly better terms than you prefer. That will recognize the fact that you aren�t likely to get everything you want while maintaining your credibility and giving you some negotiating room.
�	Fool People. In short, most financiers are expert plan analyzer. Most financiers have backed some percentage of plans like yours and have seen how events have turned out, they have become very good at rooting out inconsistence, deflating overblown projections, and zeroing in on weaknesses, including some you�d probably rather not see highlighted. That doesn�t mean you shouldn�t make the best case you honestly can for your proposed business venture.
When should I write the plan?
�	A good time is when you are picking a new venture to pursue.
�	You are also likely to need a business plan when you are seeking financing from other than personal friends and family even though they certainly deserve one. Bankers, venture capitalist, angels, and other financiers rarely provide money without seeing a plan.
�	When you�re contemplating a major expansion of an exist venture regardless of whether you financing it internally through growth or will be seek external financing.
�	Just to assist you plan the future of your existing business i.e. is it going to grow, shrink or stay the same.
	Note: It also a good idea to understand that writing a business plan is NOT a one time activity. A business plan should be rewritten or revised regularly to get maximum benefit from it. Commonly, business plans are reviewed and revised annually.
Who Needs A Business Plan?
�	Anyone thinking about starting a business. i.e. Start-ups
�	Managers of large established organizations such as corporations. It�s part of prudent management concepts to ensure that everything is being done to operate the organization successfully and profitably.
�	Established firms, i.e. middle size organization, seeking help to grow and stay focused so that they grow into larger organizations.
Resource for help with writing business plans
	Books, Manuals, and How-to's
		A search of the Multnomah County Library resulted in over 60 items. Here is a very abridged selection from that listing.
		•	Business Plans Made Easy It's Not As Hard As You Think! Mark Henricks and John Riddle 2nd ed. 2002 Entrepreneur Press ISBN 1-89198443-8
		•	Online Business Planning: How to create a Better Business Planb Using the Internet Includes a complete up-to-date resource guide. Robert T. Gorman, Career Press, c1999
		•	The Business Planning Guide: Creating a Plan for Success in Your Own Business David H. Bangs, Upstart Publishing Company, 1998
		•	The Successful Business Plan: Secrets & Strategies Rhonda M. Abrams, thePlanningShop, c2003
		•	Your First Business Plan: A Simple Question and Answer Format Designed to Help You Write a Plan Joseph A. Covello, c2002
		•	The Everything Business Planning Book How to Plan for Success in a New or Growing Business Marlene Jensen, Adams Media, 2001
		•	Launching Your Home-based Business: How to Successfully Plan, Finance, and Grow Your Venture David H. Bangs, Upsart Publishing Company, c1998
		•	How to Write a Business Plan Mike P. McKeever, Nolo, 2002
		•	Your Business Plan: A Workbook for Owners of Small Businesses Dennis J. Sargent, Simon & schuster Custom Publications, c1998
		•	Your Marketing Plan: A workbook for effective business promotion Chris Pryor Oregon Small Business Development Center Network, 1996
		•	Streetwise Marketing Plan: Winning Strategies for Every Small Business Don Debelak, Adams Media c2000
		•	The Market Planning Guide: Creating a Plan to Successfully Market Your Business, Product, or Service David H. Bangs, Dearborn Trade Publication, c2002
		•	Your International Business Plan: a Workbook for Your International Business Plan John W. Otis, Oregon Small Business Development Center Network, c1989
		•	Burn Your Business Plan!: What Investors Really Want from Entrepreneurs David E. Gumpert, Lauson Publishing, c2002
	On-line/Internet
		SBA Gopher Business Development Business Initiatives Education Training 15Apr2004
	Organizations/Consultants
		Small Business Administration (SBA)
		American Express Small Business Plan Resources
		Center for Business Planning Business Plan Software, Samples, Strategy, and Web resources for Business Planning
		Bplans.com Business Plan Software and Free Sample Business Plans
		Business Plan Software Small business books and stand alone business plan software.

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