Alpha Books - Teach Yourself Business Plans in 24 Hours

411 Pages·1999·7.08 MB·English

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Team-Fly
Michael Miller
Alpha
Teach Yourself
Business Plans
24
in
hours
A Pearson Education Company
Alpha Teach Yourself Business Plans SENIORACQUISITIONSEDITOR
Renee Wilmeth
in 24 Hours
DEVELOPMENTEDITOR
Copyright © 2002 by Michael Miller Nancy D. Warner
All rights reserved. No part of this book shall be reproduced,
stored in a retrieval system, or transmitted by any means, elec- PRODUCTIONEDITOR
tronic, mechanical, photocopying, recording, or otherwise, with- Katherin Bidwell
out written permission from the publisher. No patent liability is
assumed with respect to the use of the information contained COPYEDITOR
herein. Although every precaution has been taken in the prepara- Amy Lepore
tion of this book, the publisher and author assume no responsibil- INDEXER
ity for errors or omissions. Neither is any liability assumed for
Tonya Heard
damages resulting from the use of information contained herein.
For information, address Alpha Books, 201 West 103rd Street, PRODUCTION
Indianapolis, IN 46290.
Mary Hunt
International Standard Book Number: Bookz 0-02-864216-3
COVERDESIGNER
Library of Congress Catalog Card Number: 2001092335 Alan Clements
Printed in the United States of America BOOKDESIGNER
First printing: 2001 Gary Adair
03 02 01 4 3 2 1 MANAGINGEDITOR
Jennifer Chisholm
Note:This publication contains the opinions and ideas of its
author. It is intended to provide helpful and informative material PRODUCTMANAGER
on the subject matter covered. It is sold with the understanding
Phil Kitchel
that the author and publisher are not engaged in rendering profes-
sional services in the book. If the reader requires personal assis- PUBLISHER
tance or advice, a competent professional should be consulted. Marie Butler-Knight
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.
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cannot attest to the accuracy of this information. Use of a term in
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Overview
Introduction xvii
PARTI: Plan for Research 1
HOUR1 Analyze Your Objectives 3
HOUR2 Analyze Your Audience 15
HOUR3 Analyze Your Market 31
HOUR4 Analyze Your Strengths 45
HOUR5 Analyze Your Strategy 61
HOUR6 Analyze Your Options 75
PARTII: Plan the Plan 99
HOUR7 Create Your Outline 101
HOUR8 Marshal Your Resources 113
HOUR9 Build Your Numbers 125
PARTIII: Plan to Write 143
HOUR10 Executive Summary 145
HOUR11 Vision and Mission 165
HOUR12 Opportunity 173
HOUR13 Market Strategy 193
HOUR14 Business Strategy 205
HOUR15 Organization and Operations 219
HOUR16 Management 231
HOUR17 Core Competencies and Challenges 239
HOUR18 Financials 251
PARTIV: Plan the Package 267
HOUR19 Appendixes and Attachments 269
HOUR20 Table of Contents and Index 281
HOUR21 Format and Print 291
PARTV: Plan for Success 311
HOUR22 Present the Plan 313
HOUR23 Use the Plan 329
HOUR24 Create a Private Placement Memorandum (PPM) 345
Appendixes
APPENDIXA 20-Minute Recap 359
APPENDIXB Glossary 365
APPENDIXC Outline 371
APPENDIXD Financial Formulas 375
Index 377
Contents
PARTI Plan for Research 1
HOUR1 Analyze Your Objectives 3
Business Plans: Facts and Fiction ......................................................4
Articulating the Strategic Direction ............................................4
Communicating with Potential Investors ....................................5
Who the Target Audience ReallyIs for Your Business Plan ..............6
Business Plans and Customers ......................................................6
Business Plans and Employees ......................................................7
Business Plans and Investors ........................................................7
WhyYourBusiness 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
HOUR2 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
vi Teach Yourself Business Plans in 24 Hours
HOUR3 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
HOUR4 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
Contents vii
HOUR5 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
HOUR6 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
PARTII Plan the Plan 99
HOUR7 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
HOUR8 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
HOUR9 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
PARTIII Plan to Write 143
HOUR10 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
WhatNotto Include in the Executive Summary..........................158
Organization and Operations....................................................158
Management..............................................................................158
Core Competencies and Challenges..........................................159
Detailed Financials....................................................................159
Charts and Graphs ....................................................................160