TEAMFLY Team-Fly ® hours 24 Business Plans in Alpha Teach Yourself Michael Miller A Pearson Education Company Alpha Teach Yourself Business Plans in 24 Hours Copyright © 2002 by Michael Miller All rights reserved. No part of this book shall be reproduced, stored in a retrieval system, or transmitted by any means, elec- tronic, mechanical, photocopying, recording, or otherwise, with- out written permission from the publisher. No patent liability is assumed with respect to the use of the information contained herein. Although every precaution has been taken in the prepara- tion of this book, the publisher and author assume no responsibil- ity for errors or omissions. Neither is any liability assumed for damages resulting from the use of information contained herein. For information, address Alpha Books, 201 West 103rd Street, Indianapolis, IN 46290. International Standard Book Number: Bookz 0-02-864216-3 Library of Congress Catalog Card Number: 2001092335 Printed in the United States of America First printing: 2001 03 02 01 4321 Note: This publication contains the opinions and ideas of its author. It is intended to provide helpful and informative material on the subject matter covered. It is sold with the understanding that the author and publisher are not engaged in rendering profes- sional services in the book. If the reader requires personal assis- tance or advice, a competent professional should be consulted. The author and publisher specifically disclaim any responsibility for any liability, loss or risk, personal or otherwise, which is incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this book. Trademarks All terms mentioned in this book that are known to be or are sus- pected of being trademarks or service marks have been appropri- ately capitalized. Alpha Books and Pearson Education, Inc. cannot attest to the accuracy of this information. Use of a term in this book should not be regarded as affecting the validity of any trademark or service mark SENIOR ACQUISITIONS EDITOR Renee Wilmeth DEVELOPMENT EDITOR Nancy D. Warner PRODUCTION EDITOR Katherin Bidwell COPY EDITOR Amy Lepore INDEXER Tonya Heard PRODUCTION Mary Hunt COVER DESIGNER Alan Clements BOOK DESIGNER Gary Adair MANAGING EDITOR Jennifer Chisholm PRODUCT MANAGER Phil Kitchel PUBLISHER Marie Butler-Knight Overview Introduction xvii PART I: Plan for Research 1 HOUR 1 Analyze Your Objectives 3 H OUR 2 Analyze Your Audience 15 H OUR 3 Analyze Your Market 31 H OUR 4 Analyze Your Strengths 45 H OUR 5 Analyze Your Strategy 61 H OUR 6 Analyze Your Options 75 PART II: Plan the Plan 99 HOUR 7 Create Your Outline 101 H OUR 8 Marshal Your Resources 113 H OUR 9 Build Your Numbers 125 PART III: Plan to Write 143 HOUR 10 Executive Summary 145 H OUR 11 Vision and Mission 165 H OUR 12 Opportunity 173 H OUR 13 Market Strategy 193 H OUR 14 Business Strategy 205 HOUR 15 Organization and Operations 219 H OUR 16 Management 231 H OUR 17 Core Competencies and Challenges 239 H OUR 18 Financials 251 PART IV: Plan the Package 267 HOUR 19 Appendixes and Attachments 269 H OUR 20 Table of Contents and Index 281 H OUR 21 Format and Print 291 PART V: Plan for Success 311 HOUR 22 Present the Plan 313 H OUR 23 Use the Plan 329 H OUR 24 Create a Private Placement Memorandum (PPM) 345 Appendixes APPENDIX A 20-Minute Recap 359 A PPENDIX B Glossary 365 A PPENDIX C Outline 371 A PPENDIX D Financial Formulas 375 Index 377 Contents PART I Plan for Research 1 HOUR 1 Analyze Your Objectives 3 Business Plans: Facts and Fiction 4 Articulating the Strategic Direction 4 Communicating with Potential Investors 5 Who the Target Audience Really Is for Your Business Plan 6 Business Plans and Customers 6 Business Plans and Employees 7 Business Plans and Investors 7 Why Your Business Needs a Business Plan 8 The Components of a Successful Business Plan 9 Who Writes Your Business Plan? 11 How to Move from Idea to Reality 11 How to Define Success 12 Homework 13 HOUR 2 Analyze Your Audience 15 Determining the Audience for Your Business Plan 16 Writing for Your Audience 17 You Are Not the Audience 18 Your Employees Aren’t the Audience 19 Your Customers Aren’t the Audience 20 Your Audience Is the Audience 21 Understanding Specific Audiences 23 Bankers and Loan Officers 23 Small Investors 24 Strategic Investors 25 Venture Capitalists 26 Researching What Others Have Done 27 Picking a Plan 27 Finding a Plan 28 Studying a Plan 29 Homework 29 HOUR 3 Analyze Your Market 31 Why Market Analysis Is Important 32 The Market Drives Everything 32 How to Keep in Touch 33 Defining Your Market 34 Your Competitors’ Market Is Your Market 34 Broad or Narrow? 35 Your Market—As Others See It 35 Quantifying Your Market 36 Finding the Data 36 Creating Your Own Data 37 Detailing the Market 39 Projecting the Future 40 Considering the Pundits 41 Extrapolating Current Trends 42 Anticipating Future Developments 43 Putting It All Together 43 Key Market Information 44 Homework 44 HOUR 4 Analyze Your Strengths 45 Identifying What You Do Well 46 Different Kinds of Strengths 46 Product Strengths 46 Brand Strengths 47 Marketing and Advertising Strengths 48 Sales and Distribution Strengths 48 Operational Strengths 49 Other Strengths 50 Determining Your Strengths 50 Learning from Your Strengths 51 Broadcasting Your Strengths 52 Figuring Out Where You’re Weak 53 Understanding Different Kinds of Weaknesses 53 Determining Your Weaknesses 55 Fixing What’s Wrong—Or Minimizing Its Impact 55 Acknowledging Your Weaknesses 56 Completing the Strengths and Weaknesses Checklist 57 Homework 59 vi Teach Yourself Business Plans in 24 Hours Contents vii HOUR 5 Analyze Your Strategy 61 What You Are—And What You Want to Be 62 Vision 63 Mission 64 Goals 64 Strategy 65 Tactics 66 Figuring Out Where You Want to Be in the Future 66 Forging a Path to Your Future Business 68 Growth Strategy 69 Product Strategy 69 Pricing Strategy 70 Marketing Strategy 70 Sales Strategy 71 Distribution Strategy 71 Internal Operations Strategy 72 Management Strategy 72 Funding Strategy 73 Elements of a Sound Business Strategy 73 Homework 74 HOUR 6 Analyze Your Options 75 Determining How Much Money You Need—And Why 75 Why Do You Need This Money? 76 How Much Money Do You Need? 77 Now What? 79 Nonequity Funding 80 Banks and Lenders: Borrowing the Money You Need 80 Self-Financing: Going It Alone 83 Equity Funding 83 Small Investors: Friends and Family Funding 85 Strategic Investors: Big Money from Big Business 87 Venture Capital: Betting on Growth 90 Which Is the Right Option for Your Business? 93 Comparing the Options 93 The Best Options for Small Businesses 94 The Best Options for Fast-Track Startups 95 The Best Options for Growing Existing Businesses 96 The Best Options for Cash-Strapped Businesses 97 Homework 97 viii Teach Yourself Business Plans in 24 Hours PART II Plan the Plan 99 HOUR 7 Create Your Outline 101 Telling the Story 101 The Elements of a Typical Business Plan 103 The Basic Outline 103 Mapping the Story to the Plan 105 Determining the Length 106 Variations 106 Making Your Business and Your Plan Fit Together 109 Matching Your Organization to the Outline 109 Fine-Tuning Your Outline 110 Adding Other Elements 111 Homework 111 HOUR 8 Marshal Your Resources 113 Getting Organized 114 Splitting the Project into Parts 114 Assigning a Project Manager 115 Determining What You Need—Before You Start 115 Setting the Schedule 116 What Kind of Help Do You Need? 117 Someone Who Knows Your Business 118 Someone to Manage the Pieces and Parts 118 Someone Who Can Write—And Sell 118 Someone Who Can Make It Look Professional 119 Who Can You Use? 120 You 120 Your Staff 121 Outside Resources 121 Who Does What? 122 Homework 123 HOUR 9 Build Your Numbers 125 A Quick Financial Refresher Course 125 Revenues, Expenses, and Profits 126 Assets and Liabilities 127 The Difference Between Profits and Cash 128 Essential Financial Statements 128 Contents ix The Income Statement 131 The Balance Sheet 134 The Cash Flow Projection 136 Other Financial Statements 137 Assumptions 138 Margins and Ratios 139 Gross Margin 139 EBITDA Margin 140 Net Margin 140 Return on Investment (ROI) 140 Current Ratio 141 Quick Assets Ratio 142 Debt-to-Equity Ratio 142 Homework 142 PART III Plan to Write 143 HOUR 10 Executive Summary 145 Why You Need an Executive Summary 146 How to Summarize Your Plan 146 Different Styles of Summaries 147 Straight Narrative 148 Narrative with Subheadings 149 Narrative with a Financial Table 149 Bulleted Outline 152 Narrative/Bulleted Blend 152 What to Include in the Executive Summary 152 Vision 152 Mission 152 Opportunity 155 Market Strategy 155 Business Strategy 156 Financial Goals 156 What Not to Include in the Executive Summary 158 Organization and Operations 158 Management 158 Core Competencies and Challenges 159 Detailed Financials 159 Charts and Graphs 160 [...]... successful business plan for your specific business, you’ve taken a good first step Teach Yourself Business Plans in 24 Hours will teach you everything you need to know about how to write the perfect business plan for your business in 24 easy-to-grasp, one-hour lessons An effective business plan is essential to both guide and obtain financing for a growing company; read on to learn how to build the kind of... How in the world can you create a business plan that will do what it needs to do? If you need help creating a plan for your business, you’ve come to the right place Teach Yourself Business Plans in 24 Hours will lead you step by step through the entire business planning process, from the initial research to the final printing and presentations You’ll learn the essential elements of an effective business. .. experience in creating business plans They don’t know what to include in the plan, where to obtain important information, or how to put the plan together More important, most businesspeople don’t know exactly why they’re creating a business plan or for whom the plan is really being written And, of course, if you don’t know the why or the whom, you’re going to have trouble creating a convincing plan that... 284 Assigning Headings 284 Building a Table of Contents 285 Incorporating an Index 287 Using Footnotes and Endnotes 287 Navigation Elements Checklist 289 Homework 290 xiii xiv Teach Yourself Business Plans in 24 Hours HOUR 21 Format and Print 291 Design for Success 292 Formatting Your Document 293 Choosing a Program 293 Doing the Work... PLAN: In this hour, you will learn about … • What a business plan is • Why your business needs a plan • What results to expect • The plan’s real audience Every business needs a business plan—especially new businesses and businesses expecting significant change or growth in the near future You obviously recognize this need, which is why you’re reading this book Good for you! Unfortunately, most businesspeople... Presenting Your Strengths and Weaknesses 239 One Section or Two? 240 Alternate Titles 240 Text, Bullets, or Table 241 The Question of Challenges 242 Presenting Core Competencies 244 Choosing Your Strengths 244 Writing About Your Strengths 245 Presenting Challenges 246 Choosing Your Challenges 246 Turning Challenges into Strengths 247 ... lessons, each of which you can complete in an hour or less It’s an easy way to put together a business plan that will drive your company for years to come—and earn you the funding you deserve! xviii Teach Yourself Business Plans in 24 Hours WHAT YOU’LL FIND IN THIS BOOK Part I, “Plan for Research,” presents a variety of business basics that you need to prepare for the business plan process You’ll learn how... simple as following a few step-by-step instructions, we’d all be running our own billion-dollar businesses—and we’re not Building a successful business is an art, not a science, and there are no convenient substitutions for hard work, smart thinking, good instincts, and a lot of luck No business plan in the world can deliver these resources; you have to provide them yourself What good is a business plan,... two main reasons to create a business plan: • To formally articulate the strategic direction for your business • To communicate that strategic direction to people or firms that will provide funding for your business Let’s examine each of these points separately ARTICULATING THE STRATEGIC DIRECTION A business plan does not create your business s strategic direction—it records it, sets it in writing,... create a business plan Analyze Your Objectives BUSINESS PLANS AND 7 EMPLOYEES In some first-year business school courses, you might be told how important a business plan is to drive the strategic direction of a business Every employee should receive a copy of the business plan, the courses say, so that everyone knows where the company is going and how you’re going to get there This is all very nice in theory, . 229 xii Teach Yourself Business Plans in 24 Hours HOUR 16 Management 231 Providing a Strong Lead -In 231 Writing a Compelling Bio 232 Making the List 234 Defining Key Management 234 Including the. Team-Fly ® hours 24 Business Plans in Alpha Teach Yourself Michael Miller A Pearson Education Company Alpha Teach Yourself Business Plans in 24 Hours Copyright © 2002 by Michael. Growing Existing Businesses 96 The Best Options for Cash-Strapped Businesses 97 Homework 97 viii Teach Yourself Business Plans in 24 Hours PART II Plan the Plan 99 HOUR 7 Create Your Outline