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Steve Windhaus Ask the Small Biz Adviser

Business plan basics

Dear Small Biz Adviser:
I am in need of a business plan. I am opening a tea/coffee shop and bar, and I have everything but a plan. Any who-what-where ideas?

Dear Lisa:
Good business plans are hard to find. It isn't a matter of ability, software, available market data or a lack of business planners. It is a lack of knowledge or desire on the part of the entrepreneur to diligently devote the time and resources to insure a quality document.

A business plan is not simply a collection of sheets of paper with words that you need to qualify for a business loan. It contains tools designed to:

  • Determine, first and foremost, if the venture is feasible. (Is there definitely a market in which to sell your products or services and make a profit?)
  • Determine the size of your market and how much revenue you can generate.
  • Develop an operational plan that will insure providing the best of product or service and customer service to your intended clients. (Don't buy too much equipment or hire too many people. On the other hand, don't be without the equipment and staff sufficient to be competitive and profitable.)
  • Develop a set of financial projections that serve as tools to measure if you are meeting sales goals, controlling expenses and reaching acceptable profit margins.

All of these goals will be met if you conduct thorough research and are realistic in your projections.

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Do not underestimate expenses and do not overestimate sales simply to make the financial projections look attractive. Rather, overestimated expenses and underestimated sales equal more cash on hand and a greater likelihood of profitability.

Business plan basics
Your business plan should include:

  • Executive summary: Describes the nature of your business and gives a brief account of your products or services, mission, goals, objectives and any financial goals (borrowing and projected profits).
  • Product or service offering: Provides detailed description of the products or services you provide. Consider all characteristics, properties, cost to produce and sell, and any other outstanding issue that would encourage the potential customer to buy what you offer over that of the competition.
  • Market research: Addresses the details of target customers, target geographic market, pricing and competition.
  • Advertising and promotional strategies: Deliver the message of who you are and what you offer. Don't spend time, money or any other valuable resources promoting yourself where your target client is not found.
  • Operational assessment: Addresses the operating needs to adequately service your market. These include tangible assets such as office equipment, machinery, staffing, supplies, product inventory, vehicles, utilities, rent and any other expenses required to operate the business.
  • Financial projections: Represent the most critical tool to operating the business -- your financial oversight. Such projections are often the most challenging sections to develop. They include, at the very least, balance sheets, income and cash flow statements, ratio analysis, costs of goods sold and break-even analysis.

Now what do you use to develop a business plan? Assuming some degree of computer skills, choose from a menu of business planning software that is easily available online and in software outlets. Some popular ones are Automate Your Business Plan, BizPlan Builder, Planware and PlanMagic. You can view some of the sample business plans at these Web sites to get an idea of what type of information the programs generate.

Alternatively, you could hire a consultant or seek hands-on assistance at the nearest office of a Small Business Development Center, a SCORE chapter or a Women's Business Center.

This should provide you the basics from which to begin. Books are written about what I have conveyed in this column, and there is much more to learn before you design the map to guide a successful business venture.

I wish you well.

-- Updated: Oct. 18, 2004

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10 keys for startup success
Never underestimate the cost of starting a business
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