ELEMENTS OF A GOOD BUSINESS

PLAN
The plan writers should have an in depth
understanding of financial pro forma statements,
cost and cash flow analysis and revenue
modeling. Investors are typically numbers
people. They know and understand financial
statements and they will know very quickly if
someone has simply pulled numbers out of the
air.

A critical element of a good business plan is the

market analysis. A true leading edge provider of
business plans will subscribe to a numbers of
online market research services such as
Profound and Dialog. These services allow the
plan researcher to access the most current data
available on any market, product or application.
WHAT IS THE PURPOSE OF A BUSINESS
PLAN?
IT IS TO TAKE FOUR MAJOR SECTORS OF A BUSINESS
PLAN TO
FOLLOW AND PRESENT TO WHOM EVER NECESSARY .

SAHLMANS ALIGNMENT MODEL SHOWS IT SIMPLY

PEOPLE
AND BEST

DEAL BUSINESS PLAN RESOURCES

OPPORTUNITY
 DEFINE THE FOUR ELEMENTS

PEOPLEONE MUST CONSIDER THE MANAGERS,

EMPLOYEES, FUNDERS, AND OTHER ORGANIZATIONS
CRITICAL TO THEIR SUCCESS, AND HOW TO CAPTURE
THIS HUMAN TALENT FOR THEIR VENTURES.

DEALIS THE SUBSTANCE OF THE BARGAIN THAT

DEFINES WHO IN A VENTURE GIVES WHAT, WHO
GETS WHAT AND WHEN THOSE DELIVERIES AND
RECEIPTS WILL TAKE PLACE.
 DEFINE THE FOUR ELEMENTS
RESOURCESIT IS THE ENTREPREURS JOB TO
EXPAND CAPACITY WITH LIMITED RESOURCES.
ENTREPRENEURS AND THEIR FUNDERS HAVE A
CENTRAL CONCERN ABOUT THE FINANCIAL
RETURN THEY WILL GAIN FROM THE VENTURE,
AND THUS FOCUS ON THE VALUATION OF THE
COMPANY AND ON THE EQUITY DISTRIBUTION
OF
THE DEAL.

OPPORTUNITYIS DEFINED AS ANY ACTIVITY

REQUIRING THE INVESTMENT OF SCARCE
RESOURCES IN HOPES OF A FUTURE RETURN.
 THE IMPORTANCE OF CASH-
FLOW
CASH IS THE BLOOD OF A SMALL COMPANY WHEN
YOU ARE OUT IT IS OVER. WHAT YOU SPEND THE
MONEY ON IS AN INDICATOR OF WHETHER OR NOT
YOU WILL BE SUCCESSFUL.

INVESTORS WILL BE LOOKING AT YOUR BURN RATE.

THUS AN ENTREPRENEUR SHOULD ALWAYS BE
MONITORING THE FUNDS ON A WEEKLY, MONTHLY,
QUARTERLY AND ANNUAL BASES. THUS THE
QUESTION HOW DOES ONE DO THIS WITHOUT AN
EXPENSIVE IT (INFORMATION TECHNOLOGY)
SOFTWARE?
 CASH-FLOW MONITORING
MICROSCOFT OFFICE HAS NUMEROUS TEMPLATES TO
HELP ANY SMALL BUSINESS MONITOR CASH-FLOW,
CAPITAL BUDGETING, PROFITABILTY, BREAKEVEN
ANALYSIS, INVENTORYCOST OF GOODS SOLD
ANALYSIS AND TURN NUMBERS INTO CONCLUSIONS.

MICROSOFT TEMPLATES:
1. 13-WEEK CASH FLOW MODEL
2. STATEMENT OF CASH FLOWS
3. INCOME STATEMENT 1 YEAR
4. BREAKEVEN ANALYSIS
5. CAPITAL BUDGETING-RETURN-ON-INVESTMENT
 CASH-FLOW MONITORING
6. PROJECTED BALANCE SHEET
7. OPENING DAY BALANCE SHEET
8. BALANCE SHEET WITH FINANCIAL RATIOS
9. FINANCIAL HISTORY AND RATIOS
10. INVENTORY-COST OF GOODS SOLD ANALYSIS
11. NEW PRODUCT SALES AND PROFIT
FORECASTING
12. PRODUCT PROFITABILITY ANALYSIS
13. CUSTOMER PROFITABILITY ANALYSIS
14. FIVE YEAR PLAN
15. RISK ASSESSMENT AND FINANCIAL IMPACT
16. TURN NUMBERS INTO CONCLUSIONS

MICROSOFT ACCESS DATA BASE HAS SIMILAR

TEMPLATES FOR MONITORING PEOPLE AND OTHER
RESOURCES.
 STEP BY STEP PROCESS
THIS IS ALL GOOD INFORMATION BUT WHAT IS THE
STEP BY
STEP PROCESS I COULD FOLLOW?

FIRST DETERMINE THE TYPE OF ENTITY YOU WANT TO

SET-
UP. IN ORDER TO DO THIS YOU MUST KEEP IN MIND
THAT
ONE LAW SUIT COULD PUT A SMALL BUSINESS OUT OF
BUSINESS THE SAME AS RUNNING OUT OF MONEY. THE
FOLLOWING TABLE AVAILABLE ON MY MPC.EDU
WEBSITE
ENTITLED BUSINESS ENTITY COMPARISON TABLE WILL
HELP
YOU MAKE A CHOICE.
 STEP BY STEP PROCESS
NEXT STEP WOULD BE TO DEVELOP A BUSINESS PLAN
OUTLINE AND QUESTIONS THAT NEED ANSWERING. THE
FOLLOWING ARE EXAMPLES OF WHAT I MEAN;
BUSINESS PLAN OUTLINE
1. EXECUTIVE SUMMARY2-3 PAGESThis must be
hard-hitting, concise overview of the business as it is
the first to be read. Thus it must completely captivate
the reader or the rest of the plan will go unread.

2. VISION AND MISSION2-3 PAGESThe key

importance is the mission statement which expresses
the vision as an operational statement that is easily
understood and which forms the basis for achievable
goals. The vision/mission links the daily activities of the
business to the long-term focus of the organization.
 STEP BY STEP PROCESS
3. COMPANY PLAN---45 Pages---The company must be
organized
such that it can complete current business activities and
those anticipated in the future. The organizational chart
should anticipate changes in business size and structure.
Strengths of management and key personnel are described
in such a way that their capabilities to run the business
are evident. Positions are sufficiently described in order to
determine the anticipated salaries required to fill them.
Ownership and outside support are also defined.

4. PRODUCT/SERVICE PLAN45 PagesThis section

presents a complete description of the product/service and
its benefits to customers and other parties. The benefits
and weaknesses of the product/service are described in the
most practical, understandable terms possible.
 STEP BY STEP PROCESS
5. MARKETING ANALYSIS610 PagesThe marketing
analysis
is the detailed description of the available facts and
statistics about the environment in which the organization
will operate. The size of the market and the various market
segments are delineated. Growth trends and demographic
statistics assist in identifying the actual and prospective
markets. This is where market research services such as
Profound and Dialog come in handy and add creditability to
the analysis. Microsofts template for competitive analysis
can be used for comparison.

6. MARKETING PLAN56 PagesThe marketing plan defines

the projected sales in each market segment and the
marketing and sales efforts necessary to achieve sales goals
(Microsofts templates can easily be used for a clear
picture). The details of marketing, advertising, and sales
strategies should convincingly result in the desired sales and
market share. Channels of distribution and methods for
pushing and pulling the product/service
through them must be completely presented.
 STEP BY STEP PROCESS
7. FINANCIAL PLAN45PagesThe financial plan for the
business brings everything together. Typically, investors
read this section right after the Executive Summary,
because the Financial Plan expresses in dollars what all the
other sections of the plan describe in words. The Financial
Plan incorporates the cost of bringing the product/service
to market that are defined in the Product/Service Plan. It
links the acquisition of customers and the resulting sales
with the projected sales from the Marketing Plan.

The Financial Plan projects all aspects of the organizations

financial activity. Microsofts templates mentioned earlier
help clarify the process. Usually the financials are month-
to-month for the first two years and annually for the next
three (total of five years). This detail conveys to investors
that the organization has truly done its home work and
gives them a realistic view of the profitability of the
business. This section addresses the funding needed and
how/when it will be paid back.
 STEP BY STEP PROCESS

SUPPORTING DOCUMENTS AND FINANCIAL

STATEMENTS

ORGANIZATIONAL CHART
RESUMES
FINANCIAL STATEMENTS
PRODUCT/SERVICE INFORMATION
INDUSTRY STATISTICS
DETAILED COMPETITIVE INFORMATION
OTHER RELEVANT INFORMATION
 STEP BY STEP PROCESS
Next step would be to make sure that the Business Plan, Executive
Summary and Cash-flow Analysis answer the following questions;
QUESTIONS A BUSINESS PLAN SHOULD ANSWER
1. Who is in charge and what is their authority?
2. What is the organizations mission?
3. What is the organizations goal (s)?
4. How does those in charge intend to achieve the organizations
goals?
5. How much money is needed to reach the desired goals?
6. Is the required funds feasible to reach the goals?
7. Is a month-to-month cash flow analysis (two year period then
annually for the next three years) included and how feasible is
it?
8. What is the repayment plan for any borrowed or invested
funds?
9. Has any marketing material been prepared for review?
10. How is the success of the plan monitored?
11. Is there a back-up plan to be put in place incase the original
plan falters?
 STEP BY STEP PROCESS
QUESTIONS THE EXECUTIVE SUMMARY AND CASH-
FLOW ANALYSIS SHOULD ANSWER

1. Total dollars required?

2. Start-up cost/breakdown?
3. Overall size of the market?
4. Market penetration means, methods and dollars
required?
5. Company share of the market and timeline?
6. Competitor Analysis?
7. Break-even Point?
8. Investor or Debtor Exit Strategy?
9. Return on Investment for Investors?
10. Management Qualifications?
11. Summation?
 STEP BY STEP PROCESS
Now we are ready to prepare a presentation to an investor. Everyone has
heard the phase 15 minutes of fame. This is true of the time you may
have
in front of an investor with 5 additional minutes for questions and
answers.
Microsofts PowerPoint can fill this need. Its flexibility to be able to add
charts, tables, voice over, music and motion will come in handy. Industry
experts recommend that you keep your slides to 10-15 and never more
than 20.

Once we are ready then one must identify the source of funding such as
VENTURE CAPITALIST, ANGELS OF INDUSTRY, INVESTMENT
BANKERS, PRIVATE MONEY OR A FINANCIAL INSTITUTION.
Directories are available for free or at a small cost on-line that will help
you
target those with the highest potential for you securing the funds.
Funding
sources should be researched as well to make sure of a good fit.
 STEP BY STEP PROCESS
Before you even meet the potential investor you must first file the
necessary papers (based on the entity chosen) with the state you will be
operating. In order to fill them out, you must determine the number of
shares of stock authorized, how many shares will be available to
investors ,
what the price per share is etc. The method used in most industries is a
discount cash-flow basis (DCF). This can be used on past revenues or
future revenue streams to determine the company valuation. An
existing
company (the reason for 3 year operational requirements for many
funding
sources) has an easier time proving its companys value than a start-up.
Thus the reason existing companies have more funding sources
available
to them.

A DCF method is available for use on my MPC.EDU website entitled

jk_nflowtoval_xls. For sample of an industry used month-to-month cash
flow look at monthly cash flow_mcfp2 or information on Venture
Capitalist
look at The Venture Capital Industry topic.
 STEP BY STEP PROCESS
Last of all is to review your oral presentation, executive summary and
business plan with one method used by the industry to score the feasibility
of your venture go to my mpc.edu website to the topic entitled Business
Review. All three areas are scored and the questions should be clear and
precise for any investor to approve your venture.

Once approved you will be asked to fill out what is know as a term sheet
before you receive any funds. This also can be reviewed on my mpc.edu
website entitled Term Sheet. After doing all of this then you are ready to
present your venture to anyone.

The website has much more valuable information for an Entrepreneur. I

would also recommend that you rehearse your presentation and have with
you those that can answer any questions shown in more detail if necessary.
 KNOW WHY MOST NEW BUSINESSES
FAIL
WHY NEW BUSINESSES FAIL ACCORDING TO THE
EXPERTS

1. Managerial Incompetence
2. Lack of Relevant Experience
3. Inadequate Financing
4. Poor cash Management
5. Lack of Strategic Planning
6. Ineffective Marketing
7. Uncontrolled Growth
8. Poor Location
9. Poor Inventory Control
10. Inability to make the transition from Corporate
Employee to Entrepreneur.