Business Planning Guide

Business Planning Guide
Using the Business Planning Guide

Robert C. Hill, Ph.D.
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INTRODUCTION: Writing an Effective Business Plan
The Business Plan
The Planning Guide
A business plan can serve many purposes. It is frequently used as the document to raise
funding for new businesses. As such the plan is a selling document. A business plan is also a
useful roadmap that can help you to get where you want to go. When you use the team
approach to the planning process, the plan can be an excellent management tool that aids you
in motivating employees, obtaining better information for decision-making, and improves
communication within your company. In many cases, the business plan becomes a reality
check for business owners. Thus, the business plan and the process of producing it can help
you to establish direction, set goals, and begin the process of accomplishing those goals.
The following guide is written for use in developing plans for new as well as existing
businesses. The modular approach was developed through field and classroom use. The
modules follow a logical progression of steps important to any business but particularly for
the early planning of a new venture or growth plans for an existing one. Each module begins
with relevant sample questions that provide an information base for development of an
effective business plan. These questions are followed by a format and presentation
suggestions for the use of that information.
Who Writes the Plan?

An effective business plan should not be done by a consultant or one of your employees. YOU
should direct the process and involved as many people from your organization (or nascent
organization) as possible. It comes from your goals, vision, philosophies, experiences,
thoughts, and finally, your research into the business opportunity you are pursuing. This
planning guide outlines the fundamentals of creating your own workable business plan.
Why Plan?
People frequently start businesses to gain more control over their professional destinies.
Unfortunately, the reverse is frequently occurs. Business owners often find that they spend
most of their time putting out fires and spend very little time on direction setting and
planning. As a result, business owners often report that they are frustrated by their lack of
control over their businesses. The business plan is a means of gaining additional control over
where your business is headed. As described above, the mere process of planning can help
you establish direction and movement in that direction.
What is a "Good" Plan?

A good business plan is a dynamic document. You don't just set it and forget it. You should
refer to frequently in decision-making, evaluating, and future planning. Your business plan
should change as the environment in which you work changes. It may contain some gospel,
but the plan itself is not sacred. In fact, pretty much all business plans are WRONG from the
day they are written. The world changes and so must you. You must be prepared to
significantly change or even scrap ideas from your plan occasionally. Using milestones
developed in the planning process will help you to determine if and when this may be
necessary. Writing and maintaining an effective, dynamic, and flexible plan will be one of the
most difficult tasks you will encounter in developing, growing and maintaining your business.
BUSINESS PLAN OUTLINE

PHASE 1.
THE COMPANY MISSION STATEMENT
I. The Company
A. Background
B. Current Status
C. Future Plans
II. The Industry
A. Chief Characteristics
B. The Participants
C. Trends
III. Product/Service
A. Description of Product/Service
B. Proprietary Features
C. Future Development Plans
D. Product Liabilities
IV. Technology: Research and Development
A. Concept Development
B. Research, Testing, and Evaluation
C. Milestones
D. Current Status
PHASE 2.
V. Market Analysis
A. Target Market and Characteristics
B. Current Market
C. Market Trends and Growth Potential
VI. Competitive Analysis
A. Competitors Profile
B. Product/Service Comparisons
C. Market Niche and Share
D. Comparison of Strengths and Weaknesses
VII. Marketing Strategy
A. Market Penetration Goals
B. Pricing and Packaging
C. Sales and Distribution
D. Service and Warranty Policies
E. Advertising, Public Relations, and Promotions
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PHASE 3.
VIII. Manufacturing/Operations
A. Location
B. Facilities and Equipment
C. Operations
D. Labor Considerations
E. Environmental and Economic Impact
IX. Management and Ownership
A. Management
B. Board of Directors
C. Ownership
D. Professional Support
X. Administration, Organization, and Personnel
A. Management Philosophy
B. Organization Plan
C. Administrative Procedures and Controls
D. Staffing and Training
XI. Milestones, Schedule and Plan
A. Milestones
B. Schedule
XII. Critical Risks and Problems
A. Inevitable Risks and Problems and Planned Response
B. Potential Risks and Problems and Planned Response
C. Worst Case Scenarios
PHASE 4.
XIII. Financial Data and Projections
A. Funding Needs
B. Terms of Investment
C. Financial Projections
D. Assumptions
XIV. Supporting Documentation
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"The Executive Summary"
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The Executive Summary
Suggested Length 1-2 pages
Objective
The executive summary should highlight the key points raised in each
module of the business plan. It forces you to boil down your business plan
to the essentials that make your company what it is. It should create interest
in your business and make the reader want to read more.
Relevant Questions
What type of business is this? What products/services will it offer? Why are they
unique?
Do they solve a significant unmet need or unsolved problem? Do they address a

major opportunity?
What is the current status of your business status? What is your stage of
development?
What is the legal form of organization?
Where is your location strategy? What are the advantages of your location
strategy?
Who and what is the target market?
What percent of the total available market do you expect to obtain?
What is your plan and strategy for penetrating the market?
Who is your competition? What are their strengths and weaknesses? What is their
market share?
Who is going to manage the business? What qualifications are needed to manage
the business? What is the experience, education, and background of your key
people?
What are you major near-term objectives? What is your schedule for accomplishing
these objectives?
What are your long range growth and development goals? What is the time frame
for accomplishing these objectives?
What are your financing needs to accomplish your goals? What type of financing
are you seeking? debt? equity? return?
What are your key strengths in this business? What will make it successful? What
are your limitations?
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The Executive Summary (continued)
What to Accomplish
The entire summary should be clear and to the point. The language should
be simple and demonstrate clarity of management objectives. Above all,
the summary should show opportunity and a plan to meet the opportunity!
Presentation
Concept
Recommendations
The opening statement should grab attention! Start with a key
differentiating feature of your company, its products and/or services.
Describe the nature of the business, its type, form, and status. Profile the
trade area in which you will operate. Show how you are positioned within
your competitive space.
Product/Service
Describe your product/service. Discuss specialization, significant, or unique
features. Discuss where you will be located and why it is advantageous.
Discuss your distribution plans. Describe any relationships you have with
manufacturers or suppliers that enhance development and introduction of
your product or service.
Market
Describe your target market, your projected share, and overall potential.
Discuss the competition and what advantages you have over them. Discuss
your plans for introducing your product/service and your strategy for
gaining market acceptance and loyalty.
Manufacturing/Operations
Discuss the processes involved in producing your product and getting it to
market. Highlight the areas of specialization and technology that you have
pioneered in the making of your products. If you plan to subcontract or
license production, describe the arrangements and why they are
advantageous.
Management
Discuss the people involved in your company, their management expertise
and experience. Highlight their distinctive competencies. Discuss the
support personnel that will be needed as the company grows. Show that the
people involved are qualified and committed.
Funding and Investment
State the amount of funding needed and its intended use. Discuss what you
will offer in return for the money. Include the payback period and potential
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return on investment. State what the earnings projections are for the next
three years.
Milestones and Time frames
Describe the milestones enroute to accomplishing the goals of your
business. Specify the phases and time frames along the way.
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PHASE 1
"Defining the Business"
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PHASE 1:
The Company and the Industry
Suggested Length 2-3 Pages

Objective
To provide a general description of your business. To outline your competitive
environment (trading area) and describe how your business fits into it.
Relevant Questions
What is your mission or vision for the company?
When and where was your company started?
What is the form of organization?
Where is(are) your business(es) located?
What proprietary rights do have? What advantages do they create?
Who are the owners and other key people?
What is your market?
How do you plan to penetrate the market?
What are your overall strengths & weaknesses?
What are your goals and strategies for achieving them?
How will economic, social, technological, environmental or regulatory trends affect

your business?
What, specifically, is your industry and competitive environment? What are its
characteristics?
What is the current state of the industry?
How big is it? Where is it expected to be in 5 years? 10 years?
Total sales? profits? margins?
Who are the major industry participants (competitors, suppliers, major customers,
distributors, etc.)?
How have your competitors performed? What are their market shares?
What competitive advantages do you have over them?
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PHASE 1:
Subheadings to
Include
The Company and the Industry (continued)

THE COMPANY MISSION STATEMENT
I. The Company
A. Background
B. Current Status
C. Future Plans
II. The Industry
A. Chief Characteristics
B. The Participants
C. Trends
What to Accomplish
Translate the vision for your business into words. Describe how your
business is positioned relative to the competition. Discuss where you want
to be positioned in the next 3-5 years.
Presentation
Recommendations THE COMPANY MISSION STATEMENT
Your company mission statement should be a short paragraph (typically 50
to 100 words) and precede the body of your plan. It is typically indented
and bold faced over the opening paragraphs of the plan. It must clearly
answer the following three questions: Who are we? What do we do?
and; Where are we headed? These are the three most critical questions
for your business and should be the drivers for the entire plan that follows.
Among the purposes of the mission statement, the most critical is to
establish direction. Exactly what is it that you want to accomplish with your
business? A good mission statement makes it clear to all what you are all
about and should serve as a motivator for all members of your organization.
Finally, while the mission statement must be narrow enough to provide
direction, you must also be careful not to be so narrow as to limit flexibility
and stifle creativity and ingenuity.
THE COMPANY
Background
Note the form of organization chosen, who is involved, and what their
contributions have been to date. Discuss any patents, copyrights,
trademarks or other proprietary rights you may have.
Current Status
Describe where you are now. Discuss your strengths and weaknesses. What
are the major internal issues for your business and what are their
implications?
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Future Plans
Discuss 3-5 year goals for your business. Overview how you plan to achieve
them. Discuss the future development and expansion plans for your
business.
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PHASE 1:
The Company and the Industry (continued)

THE INDUSTRY
Chief Characteristics
Provide an overview of your businesss current competitive environment
(trading area). Profile it, including information on: size, dispersion, market,
history, status, sales, profits, etc.
The Participants
List your direct competitors and other important participants (such as
substitutes) within your competitive environment. Briefly describe your
direct competitors in terms of positioning, their strengths and weaknesses,
and market strategies.
Industry Trends
Where is the industry headed? What opportunities and threats do you see in
the industry? Describe trends in terms of any significant events or factors
that may affect the industry profitability and/or market size positively or
negatively.
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PHASE 1:
Products/Services

Objective
To describe your product or service, special features, benefits, and future
development plans.
Relevant Questions
What is the purpose of your product/service?
What need does it serve or what opportunities does your product address?
What are the product/service's unique features? benefits?
What is its life cycle? technological? market?
How does it compare to "state-of-the-art"?
Does the product/service's success depend on someone else? who?
What future products/services do you plan to develop to meet a changing market?
What regulatory or approval requirements affect your product/service?
What liabilities will the product/service expose you to?
What are the insurance requirements?
What testing has the product/service undergone?
Is there more than one product/service involved? How will they effect one another?
How does the product/service compare to similar products of competitors?
Are there any special production or delivery considerations?
What related services will you provide?
How will these services enhance the product/service?
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PHASE 1:
Subheadings to
Include
Products/Services (continued)
III. Product/Service
A. Description of Product/Service
B. Proprietary Features
C. Future Development Plans
D. Product Liabilities
What to Accomplish
Explain your product/services, what they do that's special or different, and
who they serve. Highlight future development plans.
Presentation
Recommendations Product/Service Description
Describe your product/service and its purpose (i.e., the need it serves for
the customer/client) in detail. Discuss features, benefits and capabilities.
Discuss other related product or services. Note the stage of development of
the any new products or services.
Proprietary Features
Detail any patents, copyrights, trademarks, servicemarks or other binding
agreements that protect your product or service. In general, discuss how
you plan to protect your product and your competitive advantages. Brief
any approvals required to produce and distribute your product or service.
Future Development Plans
Discuss future development plans for improvements and expansion of your
product or service lines. Note the present and future markets targeted as
well as the time frame for development.
Product Liability
Detail liability and insurance considerations associated with the making and
distribution of your product/service. How will you limit your exposure?
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PHASE 1
Technology: Research and Development (Optional)

Objective
outline the
To provide an overview of your product and its unique characteristics. To

product's past, present and future development.
Relevant Questions
How much of the product is developed? development costs to date?
What technical tests has the product undergone? market tests?
Have you applied for, or received, patent or other protection?
How does the product compare to similar products? Its relative advantages?
When will the product be ready for mass production and distribution? Who will
produce it?
What spin-off products do you plan to develop in the future?
What are the major risks or problems associated with the product's development?
Subheading to
Include
IV. Technology: Research and Development

A. Concept Development
B. Research, Testing, and Evaluation
C. Milestones
D. Current Status
What to Accomplish
business opportunity.
Describe how your idea was/will be developed from concept to viable
Presentation
Concept Development
Recommendations
Detail how the product came about, its development time and cost. Detail
your targeted applications or market opportunities. Describe ownership
issues relative to the product.
Research, Testing, and Evaluation
Detail all research, testing, and evaluation activities related to your
product's development. Present supporting factual data in an appendix to
the plan.
Major Milestones
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Discuss milestones and achievements during R&D. Detail how the product is
different or superior to similar product. Note risks and problems need to be
overcome.
Current Status
Where does your R&D effort stand now. What still needs to be done and by
whom?
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PHASE 2
"Assessing the Market"
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PHASE 2:
Market Analysis

Objective
To demonstrate that you understand the market, that you can penetrate it,
and that you are in control of the critical success factors which will enable
your company to reach its sales goals. Above all, to prove there is a demand
for your product or service and a place in the market for your business.
Relevant Questions
Who or what is your target market?
What is the size of your target market?
Can this market be segmented? How?
What is the profile of your targeted customers?
What are the major uses of your product or service? In other words, what function
does it provide for the customer? For example, the McDonalds product offering is
pretty much the same everywhere, but the functions they serve may change. Is it
just quick food? Or is it a party? A study hall? A friendly meeting place?
Everybody eats at McDonalds. Thus, an important means of segmentation is
based on use, not on demographics.
For each major application, what are the requirements by customers?
What are the requirements of regulatory agencies? How are they fulfilled?
What are the buying habits of the potential customers?
What will be the impact on the customers who use your product or service?
Economic benefits? Will it change the way they do things? Will they need to
purchase other goods or services to utilize yours? Will they have to change their
work or living habits to use yours? Overall, how will you satisfy their needs or
wants better?
What share of the served available market (SAM) do you hope to capture?
What are your market share objectives for the total available market (TAM)?
What is the growth (historical and potential) of your market?
What are the market trends? What factors affect it?
Why do you think you can attain the given level of market penetration?
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How will the segments and applications of your market change over the next 3-5
years?
Have you gotten reactions from current and prospective customers? What were the
reactions?
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PHASE 2:
Subheadings to
Include
Market Analysis (continued)

V. Market Analysis
A. Target Market and Characteristics
B. Current Market
C. Market Trends, and Growth Potential
What to Accomplish
Citing facts from your market research, show why and how your company
will be successful. Most importantly, prove there is a sustained market for
your product/service and that your potential share and resulting profit
projections are realistic.
Presentation
Target Market and Characteristics
Recommendations
Describe your target market and profile your customer. Discuss how your
product/service meets the needs/wants of this market. Discuss the "buying"
record and habits of your potential customers. State the pertinent facts
concerning the size, age, location/area, profession, income, and other
demographic information about the market. Detail any research, studies, or
surveys conducted. Include a list of these in a bibliography in an appendix.
Current Market
Describe the broader market as it now stands ( The served available market
or SAM). What are customers buying and why? Discuss overall market size
and approximate sizes of individual segments. Discuss the profitability of
each segment.
Market Trends, and Growth Potential
Discuss the trends of the market at the industry, regional, and local level.
How large could the market become (The total available market or TAM)?
Discuss any cyclical or seasonal market trends and the approximate time
frames. Propose, briefly, how you will adjust or compensate during any "offseason" periods. Discuss how the market will change over the next 3-5
years. Discuss the growth potential of the entire market and your specific
target market. State the rationale and assumptions on which you base your
expectations for the market. Discuss fully the opportunities and threats
associated with possible market trends and fluctuations.
Appendix Information
Analyst Summaries
Provide quotes and detailed discussion summarizing significant facts,

figures, and trends about the market (and the market potential) from
various reputable sources. Make sure you properly credit the source. The
objective is to pinpoint specific opportunities that exist within the industry,
and how your products and services capitalize on these opportunities. The
information should make it clear what problems and needs exist in your
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market. It should be evident that your products/services can solve these
problems and/or meet the needs better than existing solutions or
alternatives.
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PHASE 2:
Competitive Analysis

Objective
To fully describe the competitive forces at work in your marketplace. To
explain your strengths over the competition, how you will counteract their
advantages and overcome or compensate for your weaknesses.
Relevant Questions
Who are your nearest and largest major competitors?
Is their business steady, increasing, or decreasing? Why?
How does your planned business compare to your competitors' (strengths and
weaknesses of each)?
What are the similarities/dissimilarities between your business and your

competitors' business?
On what bases do you compete with them? Product? Price? Marketing/Promotion?

Technology/Innovation? Other?
In what respects is your business better? What is your distinctive competence?

Operations? Management? Product? Price? Service? Distribution? Other?
What direct (industry incumbents) and indirect (substitutes) competition will you
meet in each product/service line?
How does your product/service compare with the competition in the eyes of the
consumer?
What do you know about other potential competitors (new entrants) not yet in the
marketplace?
If you see no competition, what kind might you create if you're successful?
Do you threaten the major strategic objectives or self image of the competition? If
so, how will they respond? How will you respond?
What do you know about how the competition operates? Their strategies?
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PHASE 2:
Subheadings to
Include
Competitive Analysis (continued)

VI. Competitive Analysis
A. Competitors Profile
B. Product/Service Comparisons
C. Market Niche and Share
D. Comparison of Strengths and Weaknesses
What to Accomplish
Give a brief run-down on the other industry participants. Highlight your
particular competitive edge.
Presentation
Competitors' Profile
Recommendations
Discuss the competition: size, age, location(s), sales, management, mode of
operation, and other characteristics that you think relevant. What are the
strategies and philosophies of business of your competition? How do they
make decisions? Also discuss the potential for new entries in the market.
Product/Service Comparisons
Discuss the similarities and differences between your product/service and
that of the competition. Compare your operations and management
approach with your various competitors. Highlight whatever it is that makes
your product/service and company more attractive in the marketplace.
Market Niche and Share
State the approximate percentages each of your competitors' holds in the
market. Discuss those that hold the largest percentages and why they have
an edge. Discuss the competitors who are coming on strong and are making
(or expected to make) bigger gains in the market. Discuss the particular
segments of the market that each of your competitors addresses. Discuss
your niche in relation to these and what percent of the total market it makes
up. Describe where the market is headed and how each competitor's niche
and share may change over the next 3-5 years.
Comparison of Strengths and Weaknesses
Discuss your strengths and weaknesses in relation to your major
competitors. You should summarize: product superiority, price advantages,
market advantages (contracts, proximity to market, proximity to labor
supply, raw materials, energy, transportation, etc.) and finally, management
strengths and weaknesses.
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PHASE 2:
Market Strategy

Objective
To explain specifically how you will enter and/or penetrate the market,
obtain a niche, maintain a market share, and achieve the stated market
objectives.
Relevant Questions
What geographic market area do you now cover? What markets do you intend to
cover in the future?
What is the sales appeal of your product/service? i.e., why do people buy it?
What is special or unique about your product/service "package"?
On what basis will you attract and maintain your market? How will you expand it?
What are your marketing priorities among segments and applications?
Who makes the purchasing decision, an how will you reach them?
What intensity of selling effort will be required?
How will you sell? In-house salesmen? Manufacturer representatives? Other?
What advertising approaches will you use?
What promotional strategies will you use? e.g. trade shows, demos, etc.?
On what basis will you evaluate the effectiveness of your advertising/promotions?
How large will your customer's average order be? Dollars? Units?
How frequently might your customers buy from you? How often could they be
enticed to buy from you?
What do you expect as the sales "cycle" for your products/services?
What are your yearly sales milestones for the next 3-5 years?
What is your pricing strategy? Your margins? On what basis are prices set?
How will your pricing policies change over time?
What will your discount policy be? Your dealer pricing program?
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How might your competition respond to your strategies? Marketing? Pricing?
How will your packaging and labeling enhance name identification? Brand loyalty?
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PHASE 2:
Subheadings to
Include
Marketing Strategy (continued)

VII. Marketing Strategy
A. Market Penetration Goals
B. Pricing and Packaging
C. Sales and Distribution
D. Service and Warranty Policies
E. Advertising, Public Relations, and Promotions
What to Accomplish
Describe your plan of action for being successful in the market. Discuss how
your internal policies and your utilization of the media will contribute to that
success.
Presentation
Market Penetration Goals
Recommendations
Describe your plans for penetrating the market. State what your estimated
sales and share will be. Discuss the sales appeal among specific segments
of the market. Discuss how you will identify prospective customers within
each segment, how you will prioritize them, and how you will reach them.
State your timetable for achieving these penetration goals and how your
strategy may be affected by the reactions of competitors and market trends.
Pricing and Packaging
Describe your pricing policies and how they are determined. Discuss the
influences of the competition, discounts, cost of goods, market forces and
other factors that affect pricing. Justify your prices, particularly if they are
substantially above or below the prices of similar products/services in the
marketplace. Above all, demonstrate that your pricing decision is based on
the market and that it will allow your company to make a profit.
Sales and Distribution
Discuss any special relationships that you may have with distributors.
Mention any distribution or licensing agreements that are in force or that
you are seeking. Describe how your product/service will be distributed and
over what geographical area. Discuss the method(s) of sales and retailing,
direct sales and other methods.
Service and Warranty Policies
Describe your service arrangements, product support, warranty terms and
customer orientation of these programs. Discuss how these policies help
make you competitive and how they will affect profits. Discuss the
procedures for implementing these policies.
Advertising, Public Relations and Promotions
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Describe your advertising, public relations and promotional programs and
campaigns. Discuss the media you will use and professional services you
will require to implement your plans. Describe your overall approach and
strategy for introducing your product/service and gaining market familiarity
and acceptance. Discuss how the company's name, or the product/service
name may contribute to market identity.
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PHASE 3
"Operations & Organization"
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PHASE 3:
Operations

Objective
To explain how you will produce your product in a cost efficient way and
make it ready for the market.
Relevant Questions
How will you produce your product/service?
How much of the production will be done internally? through subcontracts?
What are the sources of supply for components of your product? Are there backup
or alternative suppliers? lead times?
What are your facility plans? dollars? units? expansion capacity?
How will you acquire the necessary facilities? lease/purchase? other?
What are your direct costs of production? indirect costs? How will you track and
control these costs?
What are your quality control plans? How will you define quality for your
product/service? How will you measure it? What systems will you (or do you) have
in place to ensure delivery of quality?
How will you (do you) control inventories?
What are your productivity goals?
What is the potential environmental impact of your processes?
What are the advantages or disadvantages of your location? facilities? How will you
(do you) compensate for the disadvantages?
What are your short and long-term plans for facilities and locations?
Overall, what production or operating advantages do you have?
What economic impact will your business have on the community in which you will
be located? job creation? spurring economic development?
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PHASE 3:
Subheadings to
Include
Manufacturing/Operations (continued)
VIII. Manufacturing/Operations
A. Location
B. Facilities and Equipment
C. Operations
D. Labor Considerations
E. Environmental and Economic Impact
What to Accomplish
Describe how you will make your products, how you will minimize costs and
manage the problems inherent in producing your product/service.
Presentation
Recommendations Location
Describe your location and the surrounding area. Discuss the advantages
and disadvantages of your location in terms of closeness to customers;
availability of labor, suppliers, and capital; access to transportation, energy,
utilities and other resources, and the relevant state and local laws and
regulations. How will/does your location affect your production and
operating costs. Propose your long range location plans, including full
analysis of the above.
Facilities and Equipment
Describe the characteristics of your planned facilities. Highlight how the
facilities and equipment give you better production or operating advantages
over similar businesses. Discuss the long-range needs and plans for your
facilities and equipment.
Operations
Describe how you will produce your product and/or conduct service
operations. Discuss the methods and processes involved. State how much
will be done internally and how much will be subcontracted. Detail your raw
material needs and how they will be supplied (and what backup suppliers
you have). State your initial and planned production capacity in dollars and
units. Break down production into fixed and variable, direct and indirect,
costs. In general terms, discuss your the control systems and tracking
systems you will establish to ensure that cost and quality goals will be met.
More detailed information should be provided in an appendix.
Labor Considerations
Discuss your labor requirements. How many people will you need to hire
and when? What training will be necessary for new and current employees.
Environmental and Economic Impact
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Describe how your company and its production operations will impact the
environment and the community. Highlight the economic benefits that will
result from your business operating in the community.
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37
" Organization"
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PHASE 3:
Management and Ownership

Objective
Describe how your management team operates. Ensure that the leadership
is in place to move your company toward the fulfillment of its goals. Show
how ownership will be distributed.
Relevant Questions
Who are your key managers?
What is the history of each principal? education? experience? skills and abilities?
What does each principal bring to the venture?
What are the positions and roles of the principals? Their responsibilities? Their
duties?
What will be the compensation package of each principal?
What is the ownership interest of each principal?
Do you have or will you eventually add a board of directors? Who is on your board?
What will its function be?
What are the primary goals of the owners and managers? Growth? Sellout? Income
Substitution?
How will you attract and compensate additional key people as you grow?
What agreements will you use to direct your relationship with key employees?
How much stock (or ownership shares) will you issue? distribution?
How about you? what are your motives for going into business?
Are you suited for the role you plan to play in your company?
Who is on your professional team of outside advisors? How are they used?
39
PHASE 3:
Subheadings to
Include
Management and Ownership (continued)

IX. Management and Ownership
A. Management
B. Board of Directors
C. Ownership
D. Professional Support
What to Accomplish
Assess your companys management balance. Do you have adequate
expertise in the areas of the business? Will you in the future? How will you
manage this issue? How have you (or will you) cover management skill
areas in which you are weak? Be sure to differentiate between ownership
and management roles.
Presentation
Management
Recommendations
Discuss your management team. Give a brief background of the. Describe
each principal's special skills and what they bring to the company. Discuss
education, experience, knowledge of the industry, special talents, training,
skills, and abilities.
Discuss each principal's position, duties, and responsibilities. Discuss each
principal's compensation package and terms of employment. State what
each principal's goals are for the company (i.e., what they want to get out of
their involvement with the company). Discuss any legal employment
contracts that each may execute with the company.
Describe the qualifications that will be needed to fill key management
positions in your company. State how you will recruit and compensate key
people. Describe how your management program will change as your
company grows.
Attach personal resumes and personal references of each principal and key
management as an appendix. (This is a must for business plans used to
obtain capital. But is less important for plans used as management tools
only.)
Board of Directors
Discuss who is on your board and their value to the business. List their fields
of expertise and their other relevant affiliations. Describe any special
contributions they have made or are expected to make. How does the board
function? How are they compensated? How much power do they have?
Ownership
Detail the ownership interest of all parties involved and the form of
ownership. Discuss how ownership may change over time, including: plans
pertaining to buyouts, dissolution of the company, owners leaving the
40
company and other possible developments. Discuss the rights and
privileges of all current and future owners.
Professional Support
Describe your support team and how it will assist in the development of
your company.
41
PHASE 3:
Administration, Organization, and Personnel

Objective
To outline how your company is organized to accomplish your goals. Explain how
you deal with the issues of authority, and responsibility. Provide a description of
your approach to staffing.
Relevant Questions
What is your organizational structure (with chart)?
What are the lines of authority and responsibility? communication?
What are your administrative policies, procedures, and controls (by function)?
What are your management philosophies and style?
How will you motivate your employees?
How will you create a positive (conducive) work environment?
How will you manage for goal attainment?
How will you encourage creativity and entrepreneurship?
How will you foster commitment and loyalty in your employees?
What is your planned personnel make-up? number? skills? hiring?
What are your short and long-term staffing needs?
How will you attract and compensate employees?
How will you communicate your expectations to your employees?
How will you evaluate your employees? On what basis can they advance?
What are the costs (in dollars) of your administration and staffing?
42
PHASE 3:
Subheading to
Include
Administration, Organization, and Personnel (continued)

X. Administration, Organization, and Personnel
A. Management Philosophy
B. Organization Plan
C. Administrative Procedures and Controls
D. Staffing and Training
What to Accomplish
Describe how your company will be managed. Discuss your personnel
needs and how you will ensure that these positions are filled. Include an
organizational chart that illustrates the company's structure, lines of
authority, and responsibility. Provide a summary of your management
philosophy and style.
Presentation
Management Philosophy
Recommendations
Summarize your management philosophy and style. Tie those into how you
will go about getting the most out of your people. Describe your plans to
encourage group goals over individual goals. Discuss how you will keep
your team involved and growing in abilities and interests. Discuss how you
will keep communication lines open, encourage creativity and commitment
to company goals; remain flexible and action oriented.
Organizational Plan
Describe how you are organized. How do you address issues of
responsibility and authority and ensure that the work of the organization is
accomplished? As best you can, draw an organizational chart. A militarylike hierarchy is not necessary, but it is useful both as a conceptual tool and
for communication to attempt to sketch out how your organization fits
together. How will your organization look in 3-5 years? Why?
Administrative Procedures and Controls
Describe your administrative systems, procedures and controls for all critical
functions. Discuss your compensation plans, productivity and quality
incentive programs, and employee benefits. Detail company policies that
relate to labor and how you will communicate them to your employees.
Discuss any employment contracts you use or plan to use and enforce.
Staffing and Training
Discuss your current and future personnel needs. Describe how you identify,
attract, hire, and compensate employees. Provide job descriptions for all
current and planned positions in an appendix. Include in these descriptions
a discussion of what is expected of the job holder and the expected
qualifications for that position.
43
Assess your training needs. What will training be needed and when. How
will you fill this need?
44
45
Establishing Yardsticks
46
PHASE 3:
Milestones, Schedule, and Strategic Plan

Objective
To outline major company objectives and explain how and when they will be
achieved and measured.
Relevant Questions
For Start-up Planning
What needs to be done to launch your venture?
What needs to be done to raise capital?
What needs to be done to identify and enter the market?
What needs to be done to identify, recruit, place and train people?
What needs to be done to locate the company? line up suppliers?
What needs to be done to go operational?
Who is going to be responsible for getting 1-6 done? When will they be completed?
For All Business Planning
What are your strategic goals for the company? How do they fit with your mission?
What are the measurable objectives that can be used to determine if you have
accomplished or are making progress toward your goals?
Do your goals (and the corresponding objectives) reflect a "real world" view" or just
hopeful thinking? Most importantly, are they challenging yet realistic within the
context of your timeline?
How do you develop your goals and objectives? Who is involved in the process?
What are the critical milestones that must be reached for you to accomplish your
goals? Include a timeline chart showing your milestones by month/year.
What contingency plans to you have if you do not reach key milestones within your
expected time frame? What if it appears that reaching these milestones is not
likely to occur?
Do you have a consistent and coordinated plan toward the attainment of these
goals?
47
PHASE 3:
Subheadings to
Include
Milestones, Schedule, and Strategic Plan (continued)

XI. Milestones, Schedule and Plan
A. Milestones
B. Schedule
What to Accomplish
Describe what must be done enroute to accomplishing your goals and how
you will pursue these goals in a realistic way, within a reasonable time
frame. Identify the critical milestones towards goal attainment. Summarize
the implications of not reaching them and your alternative action plans.
Presentation
Recommendations Milestones
List the significant goals for the company. Describe how you will attain them
and when. Plot out the milestones enroute to accomplishing your goals.
Develop a timeline to depict when you expect to achieve each step in your
plan. Show who is responsible for seeing that development plans are
implemented. Describe why your goals and time frames are realistic.
Specifics for measurement should be detailed in the appendix on control
systems.
Schedule
Include a timeline chart showing significant milestones and their priority
(time or importance) for completion.
48
PHASE 3:
Critical Risks and Problems

Objective
To identify the potential problems and risks associated with your business.
Most importantly you must demonstrate your understanding of these risks
and describe your plans to deal with them should they occur. Realistic
completion of this section requires a team effort. Input from disinterested
third parties with a working knowledge of your business is frequently
needed.
Relevant Questions
What are the inherent risks and potential problems associated your business?
There are three generic risks generally associated with practically all businesses.
The risks are technological change, regulatory change and legal liability. What is
the likelihood that your company will encounter any of these risks. Are there any
other potential problems risks?
Can you avoid these problems or manage them such as to minimize their impact?
How?
Unexpected change and other problems can sometimes be sources of opportunity.
Can you take advantage of any of the potential problems turn them into
opportunities?
Subheading to
Include
XII. Critical Risks and Problems

A. Inevitable Risks and Problems and Planned Response
B. Potential Risks and Problems and Planned Response
C. Worst Case Scenarios
What to Accomplish
Address the negatives that exist or may develop. Readers will appreciate
your integrity by you giving them the full story. Counteract the downside by
describing how you plan to avoid, minimize, or turn around the major
problems and risks.
Presentation
Inevitable Risks and Problems
Recommendations
Describe the nature of the problems and risks that your venture will be
faced with. Discuss how you will avoid or minimize their impact. Discuss any
liability or insurance problems you might have.
Potential Risks and Problems
Describe and discuss in the same manner as above the problems and risks
that may present themselves. Discuss the circumstances or situations that
would prompt these to happen and how you will deal with them if they did.
49
Worst Case Scenario
Give a worst case scenario of all inherent and potential risks that the
company may suffer. Summarize the downside and what, if anything, could
be done if these risks materialized.
50

PHASE 4
"Financing, Financial Projections & Supporting Information"
51
PHASE 4:
Financial Data and Projections
Suggested Length As Needed

Objective
To illustrate current financial status and projections. To describe the type of
financing planned; the amount required; payback terms and potential return
on investment(s). In as much as possible, you should draw upon data based
on your own past performance and/or on financial data drawn from
comparable businesses. Be sure to take a look at publications from Robert
Morris Associates.
Relevant Questions
For Start-up Planning
What are your start-up and research and development costs? Provide as detailed a
list as possible rather than simply guestimating overall figures for categories of
items.
Are your market entry plans justified by the projected sales, profits, and, most
importantly, cash flow?
What provisions are made for investor liquidity? What is the payback period?
What's the potential return to investors? How does it compare to other

investments?
What are the types of funding available to you? What is or will be the makeup of
your capital structure? debt? equity? What are the terms of investment?
For all Business Planning
What are the financial projections for your business for the next three years? For
start-ups, this should be by month for the first year and by quarter for the second
and third years. You should provide an optimistic, a realistic, and a worst case
scenario for your projections. These are tremendously valuable for planning
purposes. They also prove to potential sources of capital that you have fully
considered the possible outcomes of your plan their implications for the future of
your business.
How do your projections compare to industry norms? Have you explained the
rationale for any substantial deviations from industry averages?
What assumptions are necessary to support your projections? List them and
provide explanations.
What are the costs to produce your product(s) or offer your services?
52
Do a full activity chain analysis of your operation. Where are your most significant
costs? How volatile are they? Could you make them more controllable?
53
PHASE 4:
Financial Data and Projections (continued)
Have you fully differentiated between fixed and variable costs? What is your breakeven in units and dollars? When do you break-even under each of your sales
scenarios? How many months before you reach positive cash flow?
What systems do/will you use to monitor costs and manage cash?
What are your margins? gross? operating? after fixed costs? after financing? net?
Have you analyzed your capitalization scheme? How will it affect issues such as
cash flow , flexibility, control, and so on?
Have you analyzed cost alternatives? subcontracting? shared services?
Have you translated your forecasts into physical goods requirements?
How much investment capital and working capital will you need? When will you
need it?
How much equity is or will be invested? In what form? What is the ownership
distribution?
What are your future financing plans? Do you plan an eventual public offering?
Are the end results of financing in line with your stated goals and objectives? Does
it allow for control and flexibility? Does it provide the needed resources?
54
PHASE 4:
Subheadings to
Include
Financial Data and Projections (continued)

XIII. Financial Data and Projections
A. Funding Needs
B. Terms of Investment
C. Financial Projections
D. Assumptions
What to Accomplish
This section is generally closely scrutinized by people outside your company
such as bankers, investors, etc. It must be thorough and convincing.
Document everything. If you are using the plan in pursuit of funding, detail
how you will use the funds and how they will help ensure your success.
Show that your projections are realistic, based on sound economics,
comparables and revenue data developed in Phase2 and cost data from
Phase 3. Support your projections with reasonable assumptions.
Presentation
Funding Needs
Recommendations
State the amount and type of funding being sought. Describe the intended
use of the funds. Give a breakdown of how the money will be applied.
Discuss what effect the capital will have on the business in terms of growth
and profitability. Specify when the money will be needed. Include a graph,
table or other figure showing the amount and timing of the funds. Discuss
the amount of stock or ownership that will be made available. Discuss your
future funding expectations and when it will be needed.
Terms of Investment
Describe the terms of investment. Detail ownership distribution and
rationale for it. Discuss the payback period and potential return on
investment. Describe why investment in your venture is attractive and how
it compares to other investments. Discuss provisions for owner liquidity and
when and how investors can expect to recover their initial investment.
Financial Projections
Your projections must be based on realistic expectations. Be prepared to
support all data for at least a 3 year period. You should provide projections
for the following:
1. Projected income: pessimistic, realistic, optimistic, by month (first
year)
2. Projected income: realistic, by quarter (years two and three)
3. Projected cash flows: by month (first year)
4. Projected balance sheet: three year (year-end)
5. Break-even analysis: first year
Assumptions
55
Assumptions are the basis for predicting the future, especially when it
applies to economics, markets, and financial projections. Your projections
are only as good as the assumptions on which they are based. Your
challenge is to offer reasonable assumptions that the reader will see as
valid. Discuss why you think they are valid and what alternatives you will
pursue if they don't materialize.
56
PHASE 4:
Supporting Documentation
Suggested Length As needed

Objective
To provide more comprehensive documentation that supports the
information and claims made in the various sections of the business plan.
Relevant Questions
Do you have photos of the products, facilities, equipment?
What contracts have you signed?
Do you hold a patent, trade, service mark or copyright?
Have you developed a bibliography of all self-produced and professional research,

studies or surveys conducted or used to plan the venture?
Have you charted the venture's sales, profits and break-even by products?
markets?
Do you have a chart that details competitors' share and sales over a 3-5 year
period?
Have you done a competitive comparison chart of your strengths and weaknesses?
Do you have samples of your planned advertising materials?
Do you have resumes and personal references from potential customers, suppliers,
bankers, former employers, etc. on each of the principals?
Do you have personal financials for each principal?
Do you have "role" descriptions for major positions and support personnel?
Do you have an organizational chart?
Do you have a timeline chart depicting significant milestones and priorities?
Have you listed your equipment and other capital expenditures, with a description
and the cost of each?
Have you graphed the amount of money and timing of the funds to be infused?
Do you have detailed financial projections?
Have you developed budgets for key products? markets?
57
58
PHASE 4:
Supporting Documentation (continued)
Subheadings to
XIV. Supporting Documentation (Appendices) May Include
A. Company and Product(s)/Services Support Materials

1. Photos of the product(s), equipment, facilities
2. Patents, trademarks, service marks, or copyright documents
3. Bibliography of research, testing, and studies
B. Legal Support Materials
1. Ownership agreements and/or contracts
2. Marketing agreements and/or contracts
3. Employment agreements and/or contracts
4. Financial agreements and/or contracts
C. Market Support Materials
1. Magazine, newspaper, trade journal articles
2. Brochures, drawings, mailings, and materials
3. Market share chart
4. Competitive comparison of strengths and weaknesses
5. Customer contacts and status
6. Letters of interest or intent
D. Management/Ownership support Materials
1. Resumes of key people, references, recommendations
2. Management philosophy and style outline
3. Significant milestones and time frames
E. Administrative and Personnel Support
1. Organizational chart
2. Staff/training outlines
3. Role descriptions for key personnel
4. Systems descriptions
F. Financial/Investment Support
1. Break-even analysis
2. Principal's financial statements
3. Equipment and capital expenditure listing
4. Additional financial statements
What to Accomplish
When using the plan as a management tool, the appendices provide you
with an excellent source of stored information for all to see and use.
Moreover, for the potential investor, they demonstrate that you have done
59
your homework in all areas of the venture. Make sure the supporting
documents can be easily read and understood.

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