Write a Bankable Business Plan - Ten Action Steps

Action Step # 1free coupons inside those same kid-oriented
Define Your Company: What will you accomplishcereal boxes? Where can you locate lists of the
for others?greatest concentrations of children under the age
Write down all the specific needs your companyof eight or whatever group constitutes your
will satisfy. Potential investors need to know thatmarket?
your business will be meaningful and marketableIn planning your sales activities, you will also need
to people who can use your product or service.to answer questions such as: Is it ethical to
So concentrate on the external needs yourcontact your colleagues and clients from your
company will meet. What will your product orformer job as a door-to-door soap salesperson to
service enable people to do better, more cheaply,tell them about your new business. Will you be the
more safely, or more efficiently? Will youronly salesperson in the beginning stages of your
restaurant make people's palates delirious withcompany? When will you know it's time to hire
new taste sensations? Will your new mouse trapmore sales staff? How do you convince your
help people capture mice without feeling sick toclients that your sales staff will take care of them
their stomachs? Will your new bubble gumas well as you did? What will your basic sales
scented bubble bath revolutionize the way childrenphilosophy be - building long-term relationships with
agree to take nightly baths?a few major clients or developing a clientele of
Think of all the positive benefits your companymany short-term customers?
will provide. Write them down. Admire them.You will also need to consider how you will
Absorb them into your consciousness. Believe incompensate your sales staff - with a base salary
them. These are the primary motivators thatplus a commission? Will you hire full time staff
readers of your business plan will respect andwith full benefits, or part time staff without
value.benefits. How will you motivate your staff to do
Action Step # 2the best sales job possible?
Identify Your Company's Initial Needs: What willKnowledge of your competitive advantage is just
you require to get started?as important in designing a dynamic sales effort
Whether you want to buy an existing companyas it is in developing an effective marketing
with 300 employees or you can start yourcampaign. You'll need to think about what product
business by only adding an extra phone line toor service qualities will be the most compelling to
your home office desk, you need to make a listyour prospective customers. Then you'll have to
of the materials you'll need. Some may bedevise convincing language that clearly
tangible, such as five hundred file folders and acommunicates this competitive advantage to your
large cabinet in which to store them all. Othersales staff who will in turn use it when talking to
requirements may be intangible, such as time toyour customers. In my experience, the most
create a product design or to do market researchimportant element of an effective sales effort is
on potential customers. You may need to hire anhaving a sales staff that thoroughly understands
assistant to develop a retrievable filing system foryour business and the needs or your potential
the five hundred folders, or hire a consultant tocustomers. Therefore, your sales plan must
set up a computer system that's beyond youraddress the issue of how you will create a sales
technical skills.staff that is as knowledgeable about your
If you're going to build a better mousetrap, youbusiness as it is about your potential customers.
may have constructed a prototype out of usedAction Step # 7
toothpaste tubes and bent paperclips at home,Design Your Company: How will you hire and
but you'll need a sturdier, more attractive modelorganize your workforce?
to show potential investors. What exactly will yourBy the time you've reached this stage of thinking
mousetrap look like? What materials will youabout your potential business concept, you'll
need? Do you require money for research andprobably have a good idea of the number of
development to improve on your originalpeople you'll need and the skills they'll require to
toothpaste tube and paper clip construction? Doget your enterprise up and running. Keep in mind
you need to hire an engineer to draw up accuratethat your initial plans will undoubtedly change as
manufacturing designs? Should you patent youryour business grows. You may need to hire more
invention? Will you need to investigate federalmanagers to supervise your expanding staff or to
safety standards for mousetraps?set up new departments to meet new customer
Next, do your homework. Call a real estatedemands. Projected growth and expansion for
broker and look at actual retail spaces in theyour company should be mentioned in your
neighborhood where you'd like to open yourbusiness plan, but it's not the primary focus. For
restaurant. Make a chart of the most expensivenow you want to secure help in getting started
and least expensive sites by location and squareand convince your funding sources that you will
footage. Then estimate how much space youbecome profitable.
require and how much money you'll need to allowInvestors will want to know if you're capable of
for rent.running the business. Do you need to bring in
Make a list of all the tangible and intangibleexperienced managers right away? Will you keep
resources you need to get your business going.some of the existing employees or hire all new
The total estimated price of all of these items willpeople? And where do you find these potential
become your start-up cost whether you're buyingemployees?
highly sophisticated computers or simply installing aFunding sources will also want to know if any of
new telephone line on your desk. If there's anyyour partners expect to work along side of you
item in your estimates that seems unreasonablyor if their obligations are only financial.
high, research other alternatives. But keep in mindYour plan will need to specify the key
that it's better to include every element you trulymanagement jobs and roles. Positions such as
need along with a reasonable estimate of the costpresident, vice presidents, chief financial officer,
of each item, so you don't run out of money orand managers of departments will need to be
default on your loans. Be honest and conservativedefined along with stating who reports to whom.
in your estimates, but also be optimistic.You may hope to run your company as one big
Action Step # 3happy family - and it may work out that way -
Choose A Winning Strategy: How will youbut organizations require formal structure and
distinguish your product or service from others?investors will expect to see these issues
Although there are millions of types of businesses,addressed in your plan.
there are actually only a few basic strategies thatAnd as soon as you have employees, you need
can be applied to make any enterprise successful.to consider how you will handle their salaries and
The first step in selecting an effective strategy iswages, their insurance and retirement benefits, as
to identify a competitive advantage for yourwell as analyzing the extent of your knowledge of
product or service. How will you establish thattax related issues. As you think about hiring
your product or service is better, cheaper, morepersonnel and organizing your workforce, you
delicious, or more convenient? How can you makemust also confront your desire and ability to be a
your company more noticeable than yourgood boss. If you haven't contemplated this
competitors? What restraints in your business oraspect of your commitment to owning your own
its industry might determine which strategy youbusiness, now is the time to give it serious
choose?consideration.
Your competitive advantage may include designingAction Step # 8
special features not found in rival products. It mayTarget Your Funding Sources: Where will you find
entail superior service characteristics such asyour financing?
speedier delivery, a lower price, or more attentiveAs your business concept begins to take shape,
sales people. Perhaps you're establishing an imageyou can begin to home in on the most likely
or brand of exceptional quality or reputation. Doesfinancing sources. Issues such as the size of your
your product or service bestow a certain statusbusiness, the industry it is in, whether you are
on its users? Does it create more profits or otherstarting a new business or buying an existing one,
benefits for your customers' own endeavors?and whether you can provide collateral to a lender
Perhaps you want to position your mousetrap forare among the issues that must be considered in
a primarily upscale market because the bestcreating a target list of funding sources. Banks
design requires titanium and manufacturing costsand other funding sources don't lend money
will be so expensive only rich people will be able tobecause people with interesting business ideas are
afford your product. But maybe the mousetrap isnice. They follow specific guidelines, such as the
so fantastically effective that wealthy people willRMA database, which are designed to insure that
want hundreds of them around their vast countrythey will make money by investing in or lending to
homes and polo pony barns.your business.
You must have a reason why your business willFor the vast majority of entrepreneurs, the
succeed. This is the competitive advantage yourwell-known, high profile means of raising money,
product or service will deliver. Once you'vesuch as through venture capital companies or by
established the competitive advantage, you will begoing public, are not viable options. Your own
able to select the best strategy to reach yourcredit, credit rating, and business history are key
goal.factors in obtaining financing for your venture
Action Step # 4through Small Business Administration (SBA)
Analyze Your Potential Markets: Who will wantguaranteed loans and other bank credit. Your
your product or service?ability to tap into your personal network of
To determine your targeted market, write downfriends, family, and professional contacts is crucial
the demographics of the people who will use yourto raising money beyond what your own personal
product or service. How old are they? What dofunds or credit can provide. In all of these cases,
they do for a living? Will mostly women use yourthere are important considerations such as the
service? Is your product or service attractive topotential impact on relationships when family and
a particular ethnic or economic group of people?friends become investors.
Will only wealthy people be able to afford it? DoesWhen you have completed this process of
your ideal customer live in a certain type ofidentifying the likely potential funding sources and
neighborhood, such as a suburb with grass lawns,writing a bankable business plan that addresses
in order to use your lawn mower? Answeringtheir needs and answers their questions (even
these questions about the demographics of yourbefore they ask them!), you will have greatly
prime market will help you establish the clearincreased the likelihood of obtaining the financing
characteristics of the people you need to reach.you need.
If you're selling soap, you may believe that everyAction Step # 9
dirty body needs your product, but you can'tExplain Your Financial Data: How will you convince
start with the entire world as your initial market.others to invest in your endeavor?
Even if you've developed such a ubiquitous itemThe accuracy of your financial figures and
as soap, you need to identify a smaller, moreprojections is absolutely critical in convincing
targeted customer group first, such as childreninvestors, loan sources and partners that your
under eight for the bubble gum scented bubblebusiness concept is worthy of support. The data
bath. If your soap only works with pumped wellmust also be scrupulously honest and extremely
water without fluoride, you must acknowledgeclear. Since banks and many other funding
that your intended market has geographical limitssources will compare your projections to industry
as well.averages in the Risk Management Association
Establishing the size of your potential market is(RMA) data, I've stressed throughout my book
important, too. This will be easier once you'vehow you can use the RMA figures to test your
completed the demographic analysis. Then you'llprojections before the bank does. Your numbers
be able to research the numbers: How many carwill be more credible if they compare reasonably
mechanics, house painters or bathroomto the industry averages.
contractors are there in any given community?The actual number crunching portion of your
How many children in the United States arebusiness plan is the place to discuss how and why
currently under the age of eight? How much soapyou need certain equipment, time or talent, how
will they use in a month or a year? How manymuch these items will cost, when you expect to
other soap manufacturers already have a shareturn a profit, and how much return and other
of the market? How big are your potentialbenefits your investors will receive.
competitors? And where do you find the answersMore new businesses fail because they simply run
to all of these questions?out of cash reserves than for any other reason.
Identifying your market is one of the greatInvestors lose confidence in the entrepreneur and
satisfactions of starting your own business. You'rethe business and become reluctant to invest
thinking about the actual people who will use yourmore when projections are not met. Had the
product or service and how pleased they will beprojections been less optimistic and the investors
buying it as you are selling it.asked to invest more in the beginning, they
Action Step # 5probably would have done so. In most cases,
Develop a Strong Marketing Campaign: How willproper planning and more accurate projections
you reach your customers and what will you say?could have avoided this problem completely.
Entrepreneurs, especially inventors, often believeYour business plan should clearly state the amount
that their business concept is so spectacular thatof funds you need, how soon you require them,
promoting their product or service won't beand how long before you start repaying investors.
necessary. Sort of a "build it and they will come"You should also explain what type of financing
attitude, especially if what you're building is theyou hope to acquire, either equity (such as
proverbial better mousetrap. One of the mostthrough the sale of ownership shares in your
common flaws I see in plans is the entrepreneur'scompany) or debt (such as loans to the
failure to describe exactly how customers will becompany).
reached and how products will be presented toIf you're planning to buy an existing business or
them. Potential investors, staff, and partnersalready own a business you would like to improve
won't be convinced that your idea can succeedor expand, you will also need to provide a detailed
until you've established well-researched andhistorical financial summary of how well - or poorly
effective methods of contacting your customers- the business has done in the past. This analysis
- and the assurance that once you've reachedshould also include a comparison of this venture's
them, you can convince them to buy yourfinancial performance compared to the industry
product or service.standards.
Marketing describes the way you will position yourAction Step # 10
product or service within your target market andPresent Yourself in the Best Light: What are your
how you will let your potential customers knowqualifications for bringing your plan to fruition?
about your company. Positioning your companyThe talents, experience and enthusiasm you bring
means concentrating on the competitiveto your enterprise are unique. They provide some
advantages you have identified: will your productof the most compelling reasons for others to
or service distinguish itself by its superior quality,finance your concept. Keep in mind that investors
its revolutionary features or its ability to makeinvest in people more than ideas. Even if your
your customers happier than they've ever been inpotential business has many competitors or is not
their lives? Marketing helps you focus onon the cutting edge of an industry, the
identifying your competitive advantage so youqualifications and commitment you demonstrate in
can position your product or service. It alsoyour plan can convince others to proffer their
establishes the best ways to reach your potentialsupport.
customers and what to say to them.Your resume will be included in the separate
When you have the right marketing campaign inappendix of exhibits at the end of the plan, so
place, you have an operating plan to gain marketthis is not the place to list every job you've ever
share, generate revenue, and bring your financialhad or the fact that you were an art history
projections into reality.major in college, especially if these experiences
Action Step # 6have no direct bearing on your ability to start
Build A Dynamic Sales Effort: How will you attractyour own business. But it is the place to
customers?emphasize qualifying skills that may not be readily
The word "sales" covers all the issues related toapparent from your resume.
making contact with your actual customers onceBut don't overlook the impact being some part of
you've established how to reach them throughyour background that might even seem unrelated
your marketing campaign. How will you train yourto your new venture. For example, having been a
sales staff to approach potential customers? Willpilot may demonstrate that you know how to
you divide up your sales staff so some becomesupervise a crew of people working together to
experts in selling your bubble gum scented bubblemake a group experience if not comfortable, at
bath to small, independent retail toy stores? Willleast safe. You have undoubtedly handled
other salespeople concentrate on developingdissatisfied or enraged customers. Even that BA
relationships with major manufacturers so yourdegree in art history may enable you to make
product could be sold in tandem through theiryour products or store more appealing to the
national distribution outlets? Will you have a saleseye.
force expert in buying television slots on SaturdayYour unique qualifications will separate you from all
morning cartoon shows or placing ads on thethe other people who have sought venture capital
backs of kid-oriented cereal boxes?for similar ideas. Boasting about these skills is not
What advertising and promotional efforts will youhubris; it indicates that you have a highly honed
employ - two for the price of one specials orbusiness savvy.