William G. Owen,
Gregory R. Passewitz
The success of your business depends largely upon the decisions you make. A cross-country traveler wouldn't start a trip without a map, and a business owner shouldn't start a business without a sound business plan. Just as the map shows the traveler which routes to take, the business plan shows business owners where they are going and the progress made toward their projected business goal. A business plan allocates resources and measures the results of your actions. The plan helps you to create realistic goals and make logical decisions.
The business plan will serve as your guide. It will:
On the next page is a summary of the information provided in a business plan. The sections examine the topics and raise key questions vital to your business success.
Stop when you have worked out your outline and rough draft. Take time to re-examine your plan before you back it with time and money. If the plan is not workable, better to learn it now than to realize it six months down the road. Show your plan to someone who has not been involved in working out the details with you. Get an impartial, knowledgeable second opinion. Your banker or other advisor may be of some assistance.
When your plan is as thorough and accurate as possible, you are ready to put it into action. Keep in mind that action is the difference between a plan and a dream. If a plan is not acted upon, it is of no more value than a wishful dream. Make a list of things that must be done to put your plan into action. Give each item a date so that it can be done at the appropriate time. To put my plan into action, I must:
Once you put your plan into action, look out for changes. Stay on top of changing conditions and adjust your plan accordingly. Sometimes the change is within your business. Sometimes the change is with customers whose desires and tastes shift. Sometimes the change is technological as when products are created and marketed. The method you use to keep your plan current is up to you. Read trade and business papers and magazines and review your plan periodically. Once each month or every other month, go over your plan to see whether or not it needs adjusting. You must be constantly updating and improving. A good business plan must evolve from experience and the best current information.
Planning the Business, Jerry Gorman, U.S. Small Business Administration.
Preparing a Business Plan-A Guide for the Emerging Company, Ernst & Whinney, 1983.
Guidebook for Doing Business in Vermont, SBAC, Vermont Inc.
Business Plan for Small Manufacturers, SBA.
The purpose of the cover letter is to inform the reader of the plan what business goals you have and how you plan to achieve them.
This section gives you a place to answer the following questions.
In answering these questions you will be defining your business. It is probably the most important part of your plan. A narrow definition may limit growth. At the same time, a broad definition may leave you overextended.
The difference between a hobby and a business is PROFIT. Can you make a profit? This may well depend on the analysis of your market, competition and your location for your type of business. A market analysis begins with the question, "Is there a need for my product or service?" To answer this, you must describe the market and your potential customers. Who are your potential customers? Where do they live, what is their age, sex, etc? What are their financial characteristics? What is the size of your market? Is it all of the people in the United States, in Ohio, or perhaps residents in your own neighborhood? A very important question is: What percentage of that market is mine? Will your market increase or decrease? If it grows, will your share grow too? What competition can you expect? Why will customers buy from you instead of the competition? How will you service your market? Will you strive to provide better service, better products or cheaper prices? What are your plans for satisfying your market? Describe how you plan to promote your product/service. What type of promotion will you utilize-word-of-mouth, advertising, direct mail, personal contacts, through sponsoring events, or other means? If you plan to advertise, state what media you will use: radio, television, newspaper, magazines, telephone book yellow pages, or other. Discuss why you believe this method to be the most effective and what segment of your market you expect to be able to reach.
As accurately as possible, list all your start-up costs including fixed assets such as buildings, equipment, car/truck, and fixtures. Also, list initial operating expenses. Be sure to include inventory, supplies, advertising and promotion costs. In addition, describe your projected statement of operations including cash flow projections (monthly income and expenses), balance sheet, break-even analysis, and contingency fund. Lastly, list the name of the financial institution where your accounts are handled.
How will your business be organized? Will it be a sole proprietorship, corporation, or partnership? Each structure has advantages and disadvantages depending on your personal and business criteria. Outline the duties of all principal personnel in your business: who will do what? Do you have an operating plan or schedule for upcoming work for one to two years? Have you considered your insurance needs?
Once the business plan has been completed, it is important that it be reviewed and updated at regular intervals. Keep in mind that the plan is a working tool-use it to help make wise business decisions and evaluate the successes or failures you have.
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Keith L. Smith, Associate Vice President for Ag. Adm. and Director, OSU Extension.
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