how to write buisness plans

138  |  how to write a business plan

• to quickly reduce or eliminate items odd size clothes, you are very aware of this
that move slowly, and merchandising policy. I wear shirts with
37-inch sleeves because I’m six feet, four
• to keep the overall investment inches tall, and it has only been in the last
in inventory in line with profit 20 years that some department stores carry
expectations. this size. That’s because retailers used to
think that 37-inch-sleeve shirts never sold.
Good retailers keep current with the Then the baby boom generation came of
merchandise customers want now. They age, with many men needing larger sizes,
make it a point to always have the popular and it ­became economical to serve these
items in stock. No self-respecting popular folks.
music store would be caught dead without
the top ten CDs and Blu-Ray discs in Good retail managers accomplish all
stock. Good retailers quickly mark down of these ends and also keep the total
slow-moving items for a quick sale. They dollar investment in line with profit
then use the cash from selling these dead goals by carefully managing ­“inventory
items to buy new and popular ones. For turnover”—how many times per year you
example, there is nothing ­sadder than a completely replace the stock. For example,
small bookstore still trying to sell last year’s if your average cost of sales is 50% and
hardcover bestseller when the drugstore your sales are $300,000 and your inventory
down the street already has the paperback is $40,000, you turn over your inventory
version. 3.75 times per year ($300,000 × 0.50 ÷
$40,000). As before, many retail managers
A good retailer has a wide enough strive for three to four turns per year. Some
selection to appeal to customers. In a businesses, like gasoline stations, may turn
bookstore’s case, this might mean a strong over their inventory every week. Make sure
backlist in several areas of local interest. your plans reflect your industry standard
Good inventory management also means
deciding that some customers just aren’t and good, common sense. ●
worth catering to. For example, if you wear

Write Your Marketing and 8C h a p t e r
Personnel Plans

Introduction............................................................................................................................................................... 140

Marketing Plan..........................................................................................................................................................140
Review Chapter 3 Work.............................................................................................................................140
Competition Analysis .................................................................................................................................141
Differentiate Your Business From the Competition.................................................................. 142
Describe Your Target Customer........................................................................................................... 142
Decide How to Reach Customers........................................................................................................ 143
Create a Marketing Budget...................................................................................................................... 145
Write Your Marketing Plan...................................................................................................................... 147
Discuss the Risks Facing Your Business............................................................................................. 147

Personnel Plan........................................................................................................................................................... 152
Analyze Your Business Personality...................................................................................................... 152
Write Your Staffing Schedule................................................................................................................. 153
Write Job Descriptions............................................................................................................................... 153
Write Your Personnel Plan....................................................................................................................... 155

140  |  how to write a business plan

Introduction assumptions that will influence your
marketing plan:
Decisions you make about marketing and
personnel can spell the difference between • Problem Statement. This identifies the
your future success or failure. This problem you’ll solve for your customer
chapter helps you answer these important and provides the underlying reason
questions about your business: people will frequent your business.

• Who is your competition and how are • Business Description. This states exactly
you different? what your business does for your
customers. After all, if you don’t
• Who are your potential customers and provide a valuable product or service,
how can you contact them? you won’t have many customers.

• Exactly what steps will you take to • Taste, Trends, and Technology: How
reach your sales projections? Will the Future Affect Your Business?
This covers the developments you
• How can you hire the right people for expect for the next few years and
your business? how they will affect your business.
Even a “perfect” business can become
• How can you make sure that your obsolete overnight due to future
employees work effectively? developments.

Marketing Plan • Sales Revenue Forecast. This shows
your ­estimates of future sales revenue
Marketing is a broad term that covers many for your business. To finish your
specific issues. Your marketing plan will marketing plan, you’ll need to spell out
cover areas ranging all the way from deter­ the specific actions you will take to
mining how your business fits into the achieve your forecast sales revenues.
national and local economies to deciding
what color your logo should be. The Take a moment before proceeding
market plan you’ll develop in this section any further and reread your work from
will outline the specific steps you’ll take Chapter 3 to decide if it still represents an
to generate the sales dollars you forecast accurate statement of how you view your
earlier. business. If the statements are not accurate
and complete, stop here and rewrite them.
Review Chapter 3 Work Make sure they correspond to your current
thinking.
In Chapter 3, you were deciding whether
or not you chose the right business. As part
of that work, you made some important

ChApter 8 | WRITE YOUR MARKETING AND PERSONNEL PLANS | 141

Competition Analysis write a short statement of each competitor’s
main strengths and weaknesses. Remember
When customers consider patronizing your to place yourself in the mind of your
business, they first consider whether or customers when you do this exercise.
not you can solve their problem. But they
don’t stop there. They also compare your In the accompanying example, note that
business with other businesses. Antoinette grouped her competitors instead
of treating each store separately, because
It’s helpful for you to make a similar some stores are very similar. You might
comparison so that you understand how choose to group your competition or list
your customers think. This exercise, as any more than three competitors.
exercise in the marketing area, requires
some mental gymnastics. Your job is to Antoinette’s Dress Shop:
place yourself in your customers’ frame Strengths and Weaknesses
of mind and objectively compare your
business to the competition. of Three Competitors

Sometimes business owners let their Department stores. Bagnin’s, Jerry’s,
personal prejudices taint their opinion of Glendale’s.
a competitor. If your competitor provides Principal strengths: Wide selection of
a larger selection of merchandise or better merchandise.
service and lower prices than you, it won’t Principal weaknesses: High prices,
matter much to your customers that you inconvenient hours, no alterations.
don’t like the other business’s television ads
or think it has ugly delivery trucks. Latest fashion stores. Wild Thing, Marian’s,
Golden Frog.
Think for a moment about the decisions Principal strengths: Fashion conscious,
your customers face. What specific frequent new styles, low prices.
methods can they use or places can they Principal weaknesses: Casual wear
go to solve their problem? Incidentally, only, don’t cater to mature women, no
some of these places and methods may not alterations.
involve a competing business. Customers
do things for themselves or get their Specialty stores. Lady Esquire.
needs solved from friends, community, and Principal strengths: Sells our style
government agencies or other sources. merchandise to our type customers.
Principal weaknesses: High prices,
First, identify the most likely three employees have reputation as snobs,
ways your customers are going to solve alterations take a long time.
their needs in addition to your business,
and make a note of each. These are your
principal competitors. To be thorough,

142 | HOW TO WRITE A BUSINESS PLAN

Differentiate Your Business Antoinette’s Dress Shop:
From the Competition How My Business Differs
From the Competition
Your next job is to describe how your
business differs from the competition’s Antoinette’s will offer a wide selection of
strong and weak points. Again, remember merchandise to our target customers, as do
to carefully look at your business from the the department stores and specialty shops.
customer’s perspective. We will offer low prices and convenient
hours for the working woman. Antoinette’s
If you’re not sure how your pricing will take particular pride in more efficient
policies compare to the competition, here services such as special orders and altera-
are some guidelines. Most people associate tions as well as a stable, helpful, and
high prices with high quality and extra knowledgeable sales staff.
service, while they associate low prices
with low or average quality and minimum To summarize, Antoinette’s takes the
service. Make sure you provide extra worry out of clothes shopping by providing
quality and service if your prices are higher a good selection, good prices, good service,
than your competition—or make sure and helpful people who know their field.
that your prices are lower if your quality
is average and your service is minimum. Describe Your Target Customer
Check your assumptions by making a price
survey of the competition. The next step is to describe your target
customer in specific, individual terms. As
Remember that customers may take for you know, business is a very personal
granted that you have the same strong endeavor. When you sell services or
points as the competition; if so, you merchandise, you sell to one person at a
can leave those out of your description. time. As a matter of fact, most people don’t
Customers hope that you do not share the like being treated like members of a group
same weak points as the competition. But instead of individuals. That’s why the
if you do share some weak points, it is most successful restaurants have owners
probably a good idea to mention the ones or maitre d’s who remember your name
you have in common. and ask about your family or your interests
whenever you patronize their business.

Additionally, most of us are more
comfortable talking with one person than
making speeches to a large group. So it

ChApter 8 | WRITE YOUR MARKETING AND PERSONNEL PLANS | 143

makes sense to address your advertising, Antoinette’s Dress Shop:
promotions, and other marketing activities Target Customer
to a single person instead of a group.
Terry is 32 years old and has a college
Of course, no two customers are exactly education; she is married and has a son,
the same. But if you can personalize your Jimmy, in elementary school. She works as
marketing program to a typical customer, a salesperson for a large corporation and
it will be more effective because it will makes about $65,000 per year. Her husband
seem more friendly to your customers. Peter makes a little more than she does, but
The easiest way to do that is to create a the family needs her income to support the
mythical target customer and individualize lifestyle they have chosen.
that target customer so that you consider
her a friend. Be as specific and as personal Terry’s work is not a hobby for her; she
as you can. If you have friends you hope is very serious about it. Her work makes her
will be your customers, describe one travel frequently and she calls home at least
of your friends. Include age, education, twice a day when she’s on the road. Since
occupation, income, hobbies, family status, the business world is very competitive in
reading preferences, favorite television the era of downsizing companies, she must
shows, favorite music, and so forth. present a good image while maintaining a
strict budget.
In the accompanying sample, Antoinette
describes her friend and target customer, Terry keeps current with the latest
Terry Chen. With Terry in mind, it is very movies and enjoys dinner out with Peter
easy for Antoinette to write ads, letters, once or twice a week. She watches mostly
and flyers and to decide how and where children’s programs on television in order
to promote her business. For example, to spend time with Jimmy, whenever the
television ads are unlikely to reach Terry TV is on. She reads business journals and
since she has so little time to watch TV. economic reports and occasionally reads
Radio ads during commute time can be some fashion magazines. Mostly, she gets
effective, but may cost too much. her fashion sense from seeing current styles
in the workplace. Her greatest regret is that
Decide How to Reach Customers she has so little time for Jimmy and Peter.

Once you describe your target customer,
it’s easier to create a list of possible ways
to reach that person. One of your jobs as
a businessperson is to decide which of all
the possible methods of communication
will give you the most exposure for the

144  |  how to write a business plan

least cost in money or time. There are Ways to Reach Your
an infinite number of communication Target Customer
methods. These methods range from
personal visits to each customer to mass Here are some common methods business­
media advertising, with a wide range of people use to reach customers:
possibilities in between. We list some in
“Ways to Reach Your Target Customer,” • Take each prospect to lunch.
below, as a stimulus to your thinking. • Visit or telephone each prospect

There are lots of alternative strategies regularly.
you can use to reach your market. For • Handwrite and send a personal
example, businesses with a few large-
dollar customers will have different choices greeting card to every prospect.
than businesses with many smaller-dollar • Write a technical article in a trade
customers. Technical consulting businesses
tend to fall in the category of having a few journal.
customers with large contracts, whereas • Attend or make presentations
fast food restaurants or retail stores
have many ­customers who make small at trade or industry shows and
purchases. conventions.
• Create and distribute or mail a regular
Above all, remember that the most newsletter.
effective way to reach and keep customers • Appear on radio and television shows
in the long run is by word of mouth. All about your field.
the marketing and ­advertising you do • Write a newspaper or magazine
can only entice your customer to try your column about your field.
business the first time. After that, she will • Write a personalized letter to each
come back to your business if she likes prospect.
what she received, and she’ll tell all her • Mail brochures or flyers to each
friends. But be aware that customers are prospect.
even more likely to let friends know if a • Advertise in print—daily newspapers,
business doesn’t meet their ­expectations. magazines, or weekly papers.
• Advertise on radio and television.
To complete this next exercise, write • Place leaflets on car windshields or
down the five or so methods you think will home doorknobs.
reach most of your customers. Remember • Put notices on supermarket bulletin
to select methods that are appropriate for boards.
the overall number of people in your target • Enter notices in computerized
market. For instance, if your target market networks.
is every married woman in the U.S.A., • Join service clubs and take part in
community affairs.

ChApter 8 | WRITE YOUR MARKETING AND PERSONNEL PLANS | 145

you will probably use mass media as an Antoinette’s Dress Shop:
effective communication method. On the Costs of Reaching My
other hand, if your target market is the Target Customers
presidents of the 100 largest companies in
your trade area, you are more likely to use I have about 20,000 potential customers in
individual contacts than mass media. the greater New City trading area. I don’t
anticipate reaching customers beyond this
Once you’ve chosen the communication area.
methods you like best, figure out how
much it will cost to reach your customers 1. I like direct mail, since I can develop
using each of the five methods. lists of active businesswomen in
the area. I’d like to bulk-mail a f lyer
Note that some of Antoinette’s more announcing our opening for about 30¢
sensible ideas don’t take any money to 50¢ each, for a total cost of $6,000
at all, just some time to convince the to $10,000.
magazines and papers to carry her material
and the time to produce it. Perhaps you 2. Limited ads in the New City Monthly
can develop some similar ideas for your will run about $300 to $500 per month
business. for a few months.

Create a Marketing Budget 3. When anyone comes into the shop, I’ll
ask for her name and address and later
Now that you have a wish list of things I’ll send notices of fashion shows and
you’d like to do, it’s time to decide which fashion tips. The cost will depend on
of the promotional ideas you can afford the size of my list and the frequency of
and which are too costly. In Chapter 7 mailings.
you prepared a Capital Spending Plan and
estimated how much money you’d allow 4. I can place announcements of my
for an opening promotion to let people fashion shows in the two daily papers
know you’re in business. In Chapter 6 you serving the area at no cost.
prepared a Profit and Loss Forecast that
took into account your monthly marketing 5. I’ll see if one of the local papers will
costs. If you allowed enough money to carry a column I’ll write for free on
provide the sort of promotion you want, fashion tips.
you can finish writing your marketing plan
now. 6. I’ll join all the professional women’s
groups in the area and become a visible
However, if you didn’t allow enough spokesperson for my shop.
money, or if you’re not sure how much
money is enough, you’ll want to stop here

146  |  how to write a business plan

for a moment and think about it. Ask quotes for now. Just balance your wish
yourself these questions: list against your b­ udget to develop your
marketing plan.
• How much money do I need for an • Have I allowed enough money in my
opening promotion? I suggest that you monthly expense budget for ongoing
allow enough money to tell all your advertising and promotion? Take a
target customers one time that you are look at the advertising expenses you
open for business. If you tell them all forecast in the Profit and Loss Forecast
once, they can decide when to come in Chapter 6. If that amount needs
see you. And if you have designed changing, you’ll need to change both
your business so that it truly addresses your Profit and Loss Forecast and the
a customer need and is different from Cash Flow Forecast (Chapter 7). If that’s
the competition, your target customers your situation, do it after you complete
will be very alert to your opening. Even this chapter. But, if you’re not sure
if they don’t see your first message, they about how much money to allow for
will hear about you by word of mouth. monthly advertising and promotion, go
If your opening promotion plan back and reread the discussion about
exceeds your budget, you’ll need to go a­ dvertising in Chapter 6, “Complete
back and revise your Capital Spending Your Profit and Loss Forecast” line 4d,
Plan to allow for the promotional “Marketing and Advertising.”
expense. If that’s your situation, To create a marketing plan, start by
complete this chapter, then go back to listing each of the promotional items you
Chapter 7 and revise the cash totals. decided on for your preopening promotion
together with their costs. Then add up the
• Are my methods of promotion cost- preopening promotional costs and fill in the
effective? Once you’ve estimated the total.
cost of reaching all your target customers Next, list each of the promotional items
with the first m­ essage, compare that you plan to use during the first two years
cost with the amount of money in your of your business together with the monthly
budget. Your job is to get the most cost of each.
exposure for the least outlay. Making that Those two groups of specific actions
final decision may mean that you have and costs, preopening promotion and
to refine your promotion cost estimates monthly marketing, advertising, and pro­
from rough guesses into bids and quotes mot­ional costs, will become the blue­print
from suppliers. Normally, unless you’re for your marketing plan.
really unsure of promotional costs, you
shouldn’t take the time to obtain those

ChApter 8 | WRITE YOUR MARKETING AND PERSONNEL PLANS | 147

Antoinette’s Dress Shop: hard choices about which marketing tools
Marketing Budget to drop and by how much to increase the
marketing budget. We’ll leave her now
Preopening promotion to solve that problem in peace and quiet
while we move along to the next step.
1. Mail 10,000 pieces announcing
If you’re in the same predicament,
grand opening $ 5,000 take your time to balance costs and
effectiveness the best you can, and then
2. Advertisement in New City 500 move ahead to the next step.
Monthly, one month (including
graphics) Write Your Marketing Plan

3. Publicity from papers, New City 0 By now, you have asked some tough
Monthly, no cost—but much questions and faced some critical issues.
time to write articles and contact You may wish to combine the major points
of the exercises into a summary narrative,
editors or you may wish to present the results of
each exercise independently.
Total preopening costs $ 5,500
If you summarize the work into a
Monthly advertising narrative, your plan will read more easily
and look more professional. However,
1. Newsletter every two months to the potential downside to combining the
answers into a narrative format is that
mailing list—approximate cost you may inadvertently leave out a point
of major interest to your backers. If you
per month $ 650 do elect to combine the answers into
a narrative, be careful to cover all the
2. Monthly column in daily paper, 0 points in each exercise. Use Antoinette’s
no cost—but time to write marketing plan as a guide.
column
Discuss the Risks Facing
3. Advertising for sale every three 250 Your Business
months, estimated monthly
Every business faces risks. The people
4. Join service clubs, estimated 100 whom you will ask for money will want
monthly lunch and membership to see that you can not only face reality
fees but also deal with possible difficulties.

Total monthly cost $ 1,000

Despite Antoinette’s well-thought-
out marketing plan, her original budget
allowed nothing for an opening promotion
and $1,000 per month for ongoing
advertising. She could, however, decide
to take some of the $15,000 contingency
and use it for preopening promotions. It
looks like Antoinette needs to make some

148  |  how to write a business plan

The following discussion outlines risks Slow Times. Every business experiences
small business owners typically face. Once ups and downs. Is your business small and
you’ve analyzed these factors, you’ll be simple enough, or capitalized adequately
ready to write a summary of the risks that enough, to ride out slow times? Or do you
apply to your own b­ usiness. have some other ­strategy, such as staying
open long hours in the busy season and
Competition. Most businesses have closing during times of the year when
competition. How will your business business is dead?
differ in significant and positive ways from
your competition? If your competition is Owner’s Expertise. Nobody knows every­
strong, don’t minimize that fact, but figure thing. How do you plan to compens­ate
out ways you will adjust to or use that for the knowledge you’re short on? For
strength. For example, if you plan to open example, if you’ve never kept a set of
a ­restaurant next to an extremely popular books, you may need to hire a part-time
one, part of your strategy might be to bookkeeper and an accountant to make
cater to the overflow. Another might be to sure the bookkeeping system is adequate.
open on days or evenings when the other Or you may need to buy a computer and
restaurant is closed. an accounting program and devote some
time to mastering your new tools.
Pioneering. If you anticipate no direct
competition, your business probably Example:
involves selling a new product or service, Doreen Cook wanted to establish her
or one that is new to your area. How will own restaurant. She had cooked for
you avoid going broke trying to develop a other restaurant owners for years and
market? knew the practical side of putting
good food on the table. However,
Cycles and Trends. Many businesses have she had little patience with financial
cycles of growth and decline often based matters and was honest enough to
on outside factors such as taste, trends, or admit she didn’t want to learn how to
technology (discussed in Chapter 3). What keep books. To solve this problem,
is your forecast of the cycles and trends she invited George, her CPA, to be her
in your business? For example, if your junior partner, with full responsibility for
forecast tells you that the new electronic financial management. She and George
product you plan to manufacture may emphasized this ­connection in her
decline in three years when the market business plan and loan package, which
is saturated, can you earn enough money George designed. In addition, George
in the meantime to make the venture was invaluable in lining up a list of
worthwhile? potential lenders.

Chapter 8  | write your marketing and personnel plans |  149

Cash Flow. Seeing the money come and tip
go on a daily and weekly basis is very
different from looking at a yearly Profit and A note of philosophy: This is the
Loss Forecast (Chapter 6). You also want to stage when remorse or jitters may set in. You
be sure that your business can survive long may be thinking, “Am I really doing this? Think
enough so you can ­enjoy your profits. If of all the things that could go wrong. I could
you filled out a Cash Flow Forecast such as lose everything!” Your purpose in writing
the one set out in Chapter 7, you should be a risk discussion is to force yourself to face
able to demonstrate that you can survive your fears and concerns, not to scare yourself
foreseeable cash flow problems. out of going into business. If your rational,
intellectual analysis tells you that the risk
Write your risk analysis by first thinking factors are manageable, proceed as hard and
of the main dangers your business faces. fast as you can. You don’t have time for useless
This shouldn’t be hard, as you have and unnecessary worry. On the other hand, if
probably been concerned about them for you really do get overwhelmed worrying about
some time. Some of these may be on the potential disasters, pay attention to your
list set out above; others will be unique to anxieties. They may be telling you that you
your business. Once you have identified don’t have either the personality or knowledge
the ­principal risks facing your business, of your business to handle the risks you’ll take
write out a plan to counter each. But don’t in a small business.
bog yourself down worrying about all sorts
of unlikely disasters. The purpose of this book is to help
you ­understand the dimensions of the
risks your ­business faces, but you as the
potential business owner must put your
money and belief on the line. Abe Lincoln
said it: “Be sure you’re right, then go
ahead.”

150 | HOW TO WRITE A BUSINESS PLAN

Antoinette’s Dress Shop: Marketing Plan

Antoinette’s Dress Shop will concentrate on 2. Latest fashion stores such as Wild Thing,
developing a clientele consisting primarily Marian’s, and Golden Frog.
of working women. We are particularly
interested in professional women who Some of our target consumers presently
expect to advance in their chosen career. shop at the department stores for the type
These women require fashionable clothing at of business clothes we will sell, and others
reasonable prices. According to the Chamber shop at fashion stores for casual clothing.
of Commerce, the greater trading areas of However, we believe we can capture a lot of
New City include some 20,000 women who this business for a number of reasons.
fit this description.1 Forecasters expect this
market to continue to grow at the same 10% Antoinette’s will appeal to customers who
growth rate it has enjoyed for the past five are either shopping at one of the local stores
years. We believe the trend toward a higher or going out of the area to meet their needs.
concentration of professional women in this For instance, many professional women travel
county may even accelerate because of the as much as 35 miles to South City to shop at
increased concentration of professional and Freida’s because their needs are simply not
management industries locating here.2 being met locally.

Personal experience and market research3 Generally speaking, the department
demonstrate that upwardly mobile working stores offer a wide mix of merchandise.
women prefer fashionable, but slightly However, it isn’t easy to find a large
conservative, clothing at moderate or sale selection of appropriate business clothing at
prices. These women prefer to shop where reasonable prices in any of them. In addition,
they receive personal attention, especially S. Bagnin and Glendale’s are only open one
prompt, free alterations that traditionally evening a week after 6 p.m., the time most
have not been provided to women. Women working people prefer to shop. Further, the
in this group normally prefer to shop between department stores offer fairly impersonal
5 p.m. and 8 p.m. or on their lunch hour. services, with a constant turnover of
personnel. Alterations are an additional charge
Most of our target customers shop at two and usually take a week or more to complete.
types of stores for their clothing: Our policy of offering free alterations within
24 hours is sure to appeal to women who
1. Department stores such as S. Bagnin, put in at least a 40-hour week in addition to
Jerry’s, and Glendale’s. maintaining their homes.

1 Annual Survey of Business Conditions, New City Chamber of Commerce, January 19, 20xx
2 Bank of New City economic forecast for 20xx
3 See attached article from September 27, 20xx issue of Woman’s Monthly.

ChApter 8 | WRITE YOUR MARKETING AND PERSONNEL PLANS | 151

Antoinette’s Dress Shop: Risk Analysis

Like every new business, Antoinette’s faces trouble meeting our sales revenue goals. In
several risks. I believe I can overcome each addition, by starting with relatively modest
risk with the actions discussed below. capital, we will have no large loan payments.
Also, we have had several potential investors
The primary risk we face is that our express an interest in the business. If our
concept of an entire store selling business working capital reserves are exhausted,
clothing to working businesswomen is new to but the business demonstrates potential,
this area. No one else in New City is presently we should be able to attract investors. [But
doing exactly what we propose. Although remember we discovered that, on the basis of
we believe we have identified a market niche the Cash Flow Forecast, Antoinette’s business
that the competition has failed to adequately has a fatal flaw (Chapter 7) and her entire
exploit, our assumption remains to be proven plan will need reworking from the beginning.]
here in New City. On the positive side, the
population base of our target customers is Finally, there is a slight risk that the
more than adequate to support a store of population of younger working women in
our size and we have based our volume and New City will decline. However, we do not
profit projections on average figures for the expect this to happen. White collar jobs have
industry. In addition, the type of store we doubled here in the last decade and it seems
propose has been very successful elsewhere. reasonable to expect that the population of
Nevertheless, we must demonstrate that working women will continue to grow and
this type store will work here. It must take that we will profit from that expansion. This
sufficient business away from stores with a projection is based on the fact that many
broader line of merchandise to make a profit. well-established firms have located here and
more are expected to do so. Nevertheless, if
A secondary risk is that we are thinly for any reason general industry declines, or a
capitalized. If our sales volume fails to meet significant number of local companies fail or
projections in the first year, our small working move overseas, we could face some problems
capital reserve may be inadequate to meet and might have to change our marketing
our cash-fl ow needs. On the positive side, strategy.
however, we believe our sales projections are
conservative and that we will have little

152 | HOW TO WRITE A BUSINESS PLAN

Personnel Plan Analyze Your Business Personality

Chances are that you’ll need some help Every business has a personality that
to run your business. It’s hard to over- customers and suppliers spot right
estimate the impact employees have on away. Your employees help create that
small businesses. First, your paperwork personality in their daily interactions with
explodes when you hire the first employee. customers, suppliers, and each other. Your
Many government agencies regulate your job as the business owner is to decide
relations with your employees, and you’ll what personality you want your business
need help if you’ve never employed to have. Once you are clear about your
anyone before. Your accountant can business’s personality, you can easily look
help with payroll forms, and your local for employees who fit in well. Take out a
employment development agency can help blank sheet of paper or open a computer
with other regulations. file and write a statement of the personality
you want your business to have.
Second, how to successfully hire,
manage, and fire people is a fine art, Antoinette’s Dress Shop:
which this book can’t possibly cover. If Business Personality
you have any doubts about your abilities
in this area, make sure you get guidance The impression I want my customers to
from employment agencies, the local receive is that our store provides the best
employment development department, or a selection of merchandise in our clothing
private consultant. category. We also provide prices and service
that take the worry, regrets, and hassle
Fortunately there are some basic out of shopping. Our employees should be
steps you can take that will increase sincerely helpful and dedicated to solving
your chances of making hiring decisions our customers’ problems. I want them to be
correctly. Many business owners fail to very knowledgeable so that our customers
be clear in their own minds about basic consider us as their clothing advisors, in
details affecting an employee; that’s a addition to the best store.
mistake almost guaranteed to cause
trouble.

ChApter 8 | WRITE YOUR MARKETING AND PERSONNEL PLANS | 153

Write Your Staffing Schedule Write Job Descriptions

Now that you know what sort of people Next, open a new computer file or take
you want to hire, your next job is to decide out several blank sheets of paper and title
how many people you need. (You may each one “JOB DESCRIPTION.” Make sure
have completed this already in Chapter 6, you have room for a separate description
“Complete Your Profit and Loss Forecast,” for each person you plan to hire. Each job
line 4a.) description should include several items of
information:
The following example shows how
Antoinette thought through her staffing • job title
schedule. You will make your decisions a • job duties
little differently, depending on the needs of • skills required, personality desired
your particular business. • education required
• supervisor, and
Antoinette’s Dress Shop: • pay rate and monthly total wages/
Staffing Schedule
salary, including benefits, if any.
My dress shop will need two people on As an example, here’s how Antoinette
the fl oor at peak times (lunch and after completed a job description sheet for her
work). I can open the store at 11 a.m. and sales clerks.
can usually be available to fill in if the store
suddenly gets busy at an unexpected time,
as well as doing the books and ordering
when the store is not crowded. Therefore, I
plan to hire one full-time clerk, with the title
of assistant manager, to work 40 hours a
week, and two full-time clerks, so that there
is always one employee in the store. That’s
a total of 120 hours per week of labor. The
assistant manager will work from 12 p.m.
to 8 p.m. Tuesday through Friday and from
opening to closing on Saturday. The two
clerks will be scheduled so that all the open
hours are covered.

154 | HOW TO WRITE A BUSINESS PLAN

Antoinette’s Dress Shop: Once you complete a job description
Job Description for Sales Clerk for each employee, add together all the
monthly total wages/salary amounts
Job Title: Sales Clerk you’ll pay each employee. Verify your
calculations against the numbers you used
Job Duties: Sell clothing, interact with on line 4a of the Profit and Loss Forecast
customers, and present a good image of my (Chapter 6).
shop.
exAmple:
Skills and Personality: The clerk must Antoinette learns that sales clerks often
have basic retail and cash handling skills make minimum wage, even with one or
and must demonstrate good math skills more years’ experience, and that there
before hiring. She must be friendly and well- are lots of qualified people looking for
dressed. She must know current fashions clerk positions. Assistant managers with
and proper accessorizing as well as basics several years’ experience make about
about alterations. She must be adept at $11 per hour. In each case, Antoinette
working with the occasional irate customer. plans to pay above the low end of
the wage range to assure she’ll find
Education: She must be at least a high competent people and to minimize
school graduate. problems with turnover.
Accordingly, Antoinette plans to pay
Supervisor: Since she will be supervised her sales clerks $8 per hour. Although
by both my assistant manager and by me, she could probably hire an assistant
she must be comfortable in situations with manager for $10 per hour, she decides to
more than one person able to give orders. pay $11 because she knows an excellent
person whom she really likes and trusts.
Pay Rate and Monthly Wages: The clerk will If each of her two sales clerks and her
work about 40 hours per week for a total manager work 40 hours per week, her
of approximately 170 hours per month. I weekly wage cost will be $1,020 ($8 +
think I can hire a suitable clerk for about $8 $8 + $11 = $27, which she multiplies by
per hour plus payroll taxes. That brings her 40). Multiplying these weekly f igures
monthly total to $1,376 ($8 × 40 hours × 4.3 by 4.3 weeks to get an average month
weeks). results in an average monthly wage cost
of $4,644. Extra costs for mandatory
employers’ contributions to Social
Security, unemployment insurance, and

Chapter 8  | write your marketing and personnel plans |  155

so forth will average out to about 14% of Write Your Personnel Plan
each person’s salary. She uses this 14%
figure since she plans no extra b­ enefits, As we discussed before under the
like health insurance or vacations, until marketing plan section, you may wish
the business is a success and she can to summarize the information in these
a­ fford them. exercises into a narrative personnel plan.
Just make sure you don’t forget some
When you work out these numbers for i­mportant information when you do that.
your business, check them against your Here’s Antoinette’s written summary of her
entries on lines 4a and 4b of your Profit personnel plan.
and Loss Forecast.

156 | HOW TO WRITE A BUSINESS PLAN

Antoinette’s Dress Shop: Personnel Plan

Antoinette’s Dress Shop will employ a full- The sales clerks will be paid slightly above
time assistant manager and two full-time prevailing wage. They must be personable,
clerks. presentable, and have some prior retail sales
experience. They will work evening hours
The assistant manger will be Sally Walters Thursday through Saturday and be available
(resume attached). I have known Sally for to help Sally and me during peak selling
several years and believe we will work well times. They will also assist in keeping the
together. Until recently, she was the assistant store attractive by stocking, cleaning, and
manager of the dress department of a large developing window displays. Sally and I know
department store, where she helped modern- several acceptable candidates and the local
ize the merchandise line. Her department unemployment office indicates that many
increased sales by 25% in two years. more are available.

Sally will be paid $11 an hour to start, with I will work six days a week at the start,
a raise to $12 as soon as the business pays but will consider closing the store on
the owner $3,000 per month and shows a Mondays if that proves to be a slow day. I
profit. My goal is to fully involve Sally in the will act as seamstress until business expands
business so that I will feel comfortable leaving significantly. If business expands more rapidly
her in charge when I take time off or have than forecast, additional part-time clerks
obligations outside the store. and a part-time seamstress will be hired as
appropriate.
Sally will work a 40-hour week primarily
assisting customers. She will also assist in Antoinette’s will not offer health insurance
ordering decisions. Sally will sometimes open or other employee benefits until the profit
and close the shop and make bank deposits, picture warrants them.
although she will not have to do so regularly.
She will work from 12 p.m. until 8 p.m.
Tuesday through Friday and all day Saturday.

●

Editing and Finalizing 9C h a p t e r
Your Business Plan

Introduction............................................................................................................................................................... 158

Decide How to Organize Your Plan.............................................................................................................. 158
Quick Plan (One-Day Plan)—
Suggested Outline.................................................................................................................................... 158
Complete Plan—Suggested Outline.................................................................................................. 158

Write Final Portions of Your Plan................................................................................................................... 159
Write Your Plan Summary....................................................................................................................... 159
Section Introductions................................................................................................................................. 162
Personal Goal Statement.......................................................................................................................... 162

Create the Appendix............................................................................................................................................. 165

Create Title Page and Table of Contents....................................................................................................166

Complete Your Final Edit....................................................................................................................................166
Let Your Plan Rest.........................................................................................................................................167
Final Details......................................................................................................................................................167

Consider Using a Business Consultant........................................................................................................168

158  |  how to write a business plan

quick plan you’re happy with the order in which the
If you’ve chosen the quick plan various parts appear, chances are that your
method to prepare a business plan (see readers will be also.
­Introduction), you need to read and complete
these sections of Chapter 9: Quick Plan (One-Day Plan)—
• “Decide How to Organize Your Plan” Suggested Outline
• “Write Your Plan Summary”
• “Create the Appendix” Title Page: Section: “Create Title Page and
• “Create Title Page and Table of Contents” Table of Contents” of this chapter

Introduction Plan Summary: Section: “Write Your Plan
Summary” of this chapter
Lenders and investors see lots of business
plans. You’ll want to make sure your plan Table of Contents: Section: “Create Title Page
gets the­a­ ttention it deserves by presenting and Table of Contents” of this chapter
it in the best possible manner. This chapter
shows you how. Problem Statement: Chapter 3
Business Description: Chapter 3
Decide How to Organize Business Accomplishments: Chapter 5
Your Plan Sales Revenue Forecast: Chapter 3
Profit and Loss Forecast: Chapter 6
Each business plan has a unique structure Capital Spending Plan: Chapter 7
that to some degree is determined by the Cash Flow Forecast: Chapter 7
particular ­business and fundraising needs. Appendix: Table of Contents: Section:

Although you’ll be writing a few more “Create the Appendix” of this chapter
short sections in this chapter, you’ll Appendix: Supporting Documents: Section:
probably want to take a few minutes now
to get organized. Take out all the work “Create the Appendix” of this chapter.
you’ve completed so far using this book.
Then arrange the various components in Complete Plan—Suggested Outline
the order suggested below for a complete
plan or a quick plan, whichever you’ve Title Page: Section: “Create Title Page and
chosen. (See the Introduction for an Table of Contents” of this chapter
explanation of these ­different methods.)
Of course, you can vary the sequence if a Plan Summary: Section: “Write Your Plan
different order makes more sense to you. If Summary” of this chapter

Table of Contents: Section: “Create Title Page
and Table of Contents” of this chapter

Problem Statement: Chapter 3
Business Description: Chapter 3
Business Accomplishments: Chapter 5
Marketing Plan: Chapter 8

Chapter 9  | editing and finalizing your business plan |  159

Length of Your Plan Appendix: Supporting Documents: Section:
“Create the Appendix” of this chapter.
Some of you probably wonder how long a
b­ usiness plan should be. Should it be five Write Final Portions of Your Plan
pages or 500 pages? The best answer is that
your plan should completely and concisely Now that you have an overview of what
cover all the issues that we raise in this your f­inished plan will include, it’s time
book. You may be able to place all that to begin writing the final sections. Every
information on 15 to 20 pages or you may business plan needs a summary, which
need more, especially if you provide several is covered below. In addition, you may
appendixes. choose to write several short statements
that will improve your plan and make it
The key is to include all the information more cohesive. Those optional statements
you need to tell your story and exclude any are also covered below.
information that isn’t needed. Remember,
more isn’t necessarily better. If you have any Write Your Plan Summary
doubts about this, have a consultant review
your plan’s length. The plan summary introduces and empha­
sizes the high points of your plan. It
Sales Revenue Forecast: Chapter 3 includes a statement of the total amount
Profit and Loss Forecast: Chapter 6 of money you seek. Because the summary
Capital Spending Plan: Chapter 7 is based on the rest of your plan, we’ve
Cash Flow Forecast: Chapter 7 waited until now to cover it. Your job is to
Future Trends: Chapter 3 tell your readers who you are, what you
Risks Facing Your Business: Chapter 8 want to do, how much money you need,
Personnel Plan: Chapter 8 and how much money you expect to make,
all on one page.
• Business Personality: Chapter 8
• Staffing Schedule: Chapter 8 caution
• Job Descriptions: Chapter 8 Pay attention! Many people will
Specific Business Goals: Chapter 2 never read your entire package. They will make
Personal Financial Statement: Chapter 5 their preliminary decision about lending you
Personal Background: (Your Strong and money or investing in your project on the
Weak Points, General and Specific Skills, basis of their first impression of your plan
Your Business Needs, Your Likes and summary. Others will d­ ecide to read the rest of
D­ islikes): Chapter 2 your materials only if your summary engages
Appendix: Table of Contents: Section:
“Create the Appendix” of this chapter

160  |  how to write a business plan

their interest. So put all your strong points in almost certainly not propose selling stock
the first few paragraphs, saving the details for to the public at large. Therefore, you will
later. Absolutely follow these rules: need to propose that investors will receive a
significant share of ownership of the business
• Keep it short. and perhaps some monthly or a­ nnual cash
• Be specific. payment as well. (For more details on equity
investments, see Chapter 4.)
Your plan summary needs a statement
of the total cash you need to begin or Example:
expand your business. This is the sum of An investment of $20,000 in John’s Roof
the preopening costs and the maximum Repair business will result in the investor
negative cash flow. (See Chapter 7.) receiving a 33% interest in the business.
Present plans are to distribute one-half of the
Example: annual profit of the company to the owners
This summary introduces Juanita’s each year. Based on projections contained
Waffle Warehouse. in this proposal, this means a person who
“My Waffle Warehouse requires invests $20,000 will receive $5,000 the first
$45,000 in preopening costs, which year, $17,500 the second year, and $25,000
are detailed on the following pages. I each year thereafter. In addition, investors will
have researched my equipment costs be entitled to have any necessary roof repairs
carefully, resulting in a ­potential savings done to their homes or business buildings
of $15,000 by buying second-hand and those of immediate family members at
(reconditioned and guaranteed) cooking 50% off the regular rate.
equipment. Also, my grand opening
costs are firm estimates resulting from Some people worry about their ability to
verbal quotes from the ad agency write in a businesslike style. If that applies
recommended by the Waffle Warehouse to you, you’ll probably want to follow the
franchising company. I am confident same three-step process as Antoinette:
that these are accurate estimates and I
look forward to proceeding.” • First, list the positive facts you want to
cover; you’ll probably need to review
caution the work you’ve done to get that
information.
Businesses seeking investors. If you
will solicit equity investors instead of applying • Second, rearrange the facts in a logical
for a loan, you’ll need a statement delineating s­equence that presents the most
what investors will receive for their money positive facts in a coherent pattern.
rather than information about how a loan
will be repaid. As a small business, you will • Finally, write the facts in simple prose.

ChApter 9 | EDITING AND FINALIzING YOUR BUSINESS PLAN | 161

Here is Antoinette’s preliminary outline Next, Antoinette rearranges these
of the most positive facts of her business highlights in a logical order. Here is how
plan. Remember, at this stage she is only her second version looks.
doing this exercise for herself, so she has
no need to be fancy. Antoinette’s Dress Shop
Business Plan Summary:
Antoinette’s Dress Shop Outline of Most Positive Facts
Business Plan Summary:
Outline of Most Positive Facts (2nd draft)

• Dress shop catering to working women 1. Open a dress shop catering to
• 20,000 potential customers in the city professional working women/need
$162,500 to do it.
and it’s a growing market
• No competitor exploits market 2. My market analysis demonstrates the
concept is sound and that I have more
systematically than enough potential customers
• Risks such as newness of my concept to (20,000) to make it work.

our community appear moderate and 3. I have several unique marketing ideas
I have a plan to overcome all identified that should attract customers.
risks
• I have a good friend with solid 4. No competitor targets our customers
qualifications to be assistant manager systematically.
• My background includes responsibility
and knowledge in all critical areas 5. Both my qualifications and Sally’s prove
• My personal goals coincide with the that I can do it.
financial success of the business
• Detailed f inancial projections show 6. Financial projections show the loan can
that I can start the business and reach be paid back with ease.
my goals with $162,500
• Creative marketing ideas include free 7. The money will be well-used for
alterations, clothing tips for working opening inventory, equipment, working
women, occasional fashion shows. capital, and the other things necessary
for starting the business.

8. Conclusion: This business represents
my long-held dream and I am eager to
begin.

162  |  how to write a business plan

Finally, Antoinette writes a narrative in those assumptions. Also list your
summary, which is shown below. major ­assumptions about cost of sales
and fixed expenses that you used in
Section Introductions creating the Profit and Loss Forecast.
You may choose to make lists instead
When you look over your plan, you may of writing a prose ­narrative. Finally,
notice that some of the sections seem summarize the annual sales and profit
incomplete or that one section doesn’t flow figures you forecast.
into the next. If so, you have these options: • Capital Spending Plan and Cash Flow
Forecast. This narrative should list
• write short introductions to those the major ­assumptions you made
sections that need more explanation in adjusting your monthly profits to
derive the monthly cash flow. Also
• rewrite the entire plan into a single summarize the preopening costs you’ll
comprehensive narrative, taking care to incur. Mention whether or not you will
cover ­every important point, or sell on credit or seek extended terms
from your suppliers and how long it
• leave the plan as is—it’s possible that will be before your customers pay you
your circumstances make it appropriate and before you pay your suppliers.
to use rough drafts and financial docu- (See Chapter 7 for more details.)
ments and nothing more.
Personal Goal Statement
Many of you will take a middle course
of r­ewriting some of your earlier work, You may include a statement of your
presenting some of it intact, and providing personal goals. It is a tricky part of
written introductions and summaries for your plan, even though it’s a big help to
others. If you write a narrative or introduc- potential backers who don’t know you
tion, keep your writing as short as ­possible personally. Your lenders and backers want
while presenting all your conclusions and you to be happy in your new venture,
assumptions. since you’ll be likely to work hard at it.
However, people who back you will also
Sections that typically benefit by short want to be sure that you’re truly committed
narrative introductions include: to the financial success of your project.
For instance, they won’t back a beekeeper
• Profit and Loss Forecast. You don’t who loves bees so much she can’t stand
need a lengthy treatise, but you to disturb them by removing honey from
should describe the assumptions you the hive.
made about the ­significant numbers.
Explain how you d­ erived the sales
volume forecast you used to ­create
the Profit and Loss Forecast; your
backers will be extremely interested

ChApter 9 | EDITING AND FINALIzING YOUR BUSINESS PLAN | 163

Antoinette’s Dress Shop
Business Plan Summary

[In her summary, Antoinette puts her best foot fund will be allocated as follows: furniture,
forward and tries to answer any questions the fixtures, and leasehold improvements
lender may ask.] $110,000, rent deposit $7,500, opening
This business plan requests a loan of $110,000 inventory $30,000, and contingency $15,000.
to open a dress shop catering to working and Cash fl ow forecasts show a positive cash
professional women in New City. fl ow from opening, so no allocation is made
for working capital.
Today, many women identify themselves as
“professionals.” This is part of an evolution in My qualifications include three years of
work force patterns and no local store caters experience as a clothing buyer and assistant
to this group’s needs for moderately priced, merchandise manager for the local Rack-
stylish work clothing—including carrying the a-Frax department store. I was able to
three most popular labels: Narak, YYY, and show a 35% sales increase in my principal
Pag. Antoinette’s will fill this gap. We will sell area of responsibility, the Designer Dress
stylish, good quality, and moderately priced Department. During that time, I developed
clothing to upwardly mobile women, provide many industry contacts which will be
free alterations, and help our customers dress invaluable at Antoinette’s.
well at a reasonable cost.
Sally Walters will be my assistant
Financial projections show first year reve- manager. She has five years’ experience in
nues of $450,000, with a profit of $35,000 the field, the last three as assistant manager
before loan payments and a nominal personal of the dress department at Glendale’s. We
draw. Second year revenues rise to $540,000 plan to open Antoinette’s by Labor Day in
and profits increase to $46,000. Profits are the downtown shopping mall and have an
adequate in both years to service the loan and informal commitment from the shopping
provide me with a draw. To secure the loan, I center manager to lease space to us. We will
will consider a second trust deed on my home, both continue our activities in New City
which has equity of about $200,000. service clubs, especially those that feature
women members.
I will combine loan proceeds with $50,000
in savings to provide a $160,000 cash fund. The

Dated

Antoinette Gorzak

164 | HOW TO WRITE A BUSINESS PLAN

Ideally, your personal goals and plan come true; enjoy the prestige and
commitments will tie into the business independence accruing to a successful
goals exactly. In reality, you probably have business owner; provide a legacy for
at least some personal goals that don’t have my children; and provide the means to
much to do with business profitability. a richer and more fulfilling life for both
myself and my family.”
exAmple 1:
“My reasons for starting this business Notice that in Example 2, “time to
are to make a good living, prove I can work on cars” was translated to “provide
be successful, enjoy the freedom of the means to a richer life.” Perhaps your
independence, and have lots of free statement will neither be this lyrical nor
time to work on my car collection. obfuscatory, but hopefully you get the
In addition, I would like to create a picture.
business that I can bequeath to my
children.”

Most people starting small businesses Antoinette Gorzak’s
are tied to them full-time (if not more), Personal Goal Statement
and it’s unrealistic to think that there
will be a lot of time left to tinker with I want to accomplish a number of goals by
a car collection. Assuming our budding starting Antoinette’s Dress Shop.
entrepreneur is willing to postpone
most of his tinkering until his business I want to prove that I can create a
is established, here’s how this statement successful and worthwhile business by
could be rewritten to sound a little better drawing on my educational background
to a potential backer. and work experience. I feel that choosing
and selling good clothes at a fair price will
exAmple 2: be an honest service to my customers and
“My personal and business goals largely the community generally. I want to spend
coincide. Successful implementation of my time working with customers and
this business plan will enable me to meet people in the clothing business who share
the following personal goals: provide my values.
a good living for my family; work in
a field I know and like; achieve the I want the chance to make a better
personal satisfaction of seeing my living than I can make by working for
others, along with the responsibility and
freedom to be my own boss.

Chapter 9  | editing and finalizing your business plan |  165

Create the Appendix Here are several things that you should
c­ ommonly include in your appendix:
This book covers the primary business
building blocks all businesses share. Of • prior years’ financial statements if you
necessity, it leaves out any mention of are expanding an existing business
items that are specific to any one business. (profit and loss statements and balance
Yet, in many cases, specific items are sheets from at least two prior years)
critically important to the success or failure
of your business. Your job is to decide • copies of proposed lease agreements
which items to include in your business • copies of bids for any needed construc-
plan.
tion work
For example, suppose that you are • plans for construction work
establishing a franchise business. You • drawings of business signs or logos
want to include all the information about • a list of what will be purchased for
the franchise you can, including copies
of the agreements and any information your opening inventory
the franchisor provides you about the • key employees’ resumes, if available,
operation. Or let’s say you have invented
a revolutionary new gadget. You’ll want to and
include a copy of the patent, patent search, • copies of any newspaper stories or
or patent application to ­support your
claims. other publicity you have received
which relates to your business. This is
The key to deciding what to include is particularly important for people who
whether the information helps the reader are entering service ­businesses, where
understand your proposal. Include proof of they are their own main product.
statements a lender or investor would be Finally, organize your material in
likely to question—for instance, horse­shoeing a logical ­order and include a table of
is a growth industry. Do not include support contents for the ­appendix.
for obvious statements—for example,
people like ice cream. Don’t be afraid to
edit by cutting and pasting, as long as you
don’t unfairly change the meaning.

166 | HOW TO WRITE A BUSINESS PLAN

Antoinette’s Dress Shop: • Title page. This is a separate page with
Table of Contents for Appendix the title of your business plan, the
date, and your name and address.
1. Annual Survey of Business Conditions,
New City Chamber of Commerce, • Table of Contents. This appears after
January 19, 20xx the Plan Summary and before the
body of the plan. List the headings
2. Bank of New City Economic Forecast for the major sections of your plan as
for 20xx well as important subsections. After
you assemble your plan and number
3. Article from September 27, 20xx issue the pages, come back and put the
of Woman’s Monthly concerning the appropriate page number next to each
need for specialized clothes for the heading.
working woman
Complete Your Final Edit
4. Newspaper articles and picture of
Antoinette when she put on a large and By now, your material should be assembled
successful fashion show for working and ready for a final edit. It’s wise to make
women at the Rack-a-Frax Department a working copy of the entire plan that
Store incorporates all the changes you’ve made
so far, either from a computer printout or
5. Copy of proposed store lease (critical by photocopying your earlier work. Read
pages only, others available on request) through everything you’ve written to spot
any inconsistencies or obvious goofs. Make
6. Planned fixture layout for Antoinette’s any necessary corrections.
Dress Shop
CAUTiON
7. Antoinette’s Dress Shop sign drawing
and bid, Smith Sign Co. First impressions count. You won’t
have time to show your potential backers a
8. Leasehold improvements bid for shop, rough draft, followed by a final edit and more
Jones Construction Co. revisions. Somebody said that you only get one
chance to make a first impression; make your
9. Quote from Meyer Supply on dress first impression your best.
racks and cash register.

Create Title Page and
Table of Contents

Every business plan should have these two
pages:

Chapter 9  | editing and finalizing your business plan |  167

Let Your Plan Rest sophisticated market. On the other hand,
if you’re planning to establish a bait and
Put your completed and organized business tackle shop on Pier 37, your plan won’t
plan aside for a day or two. You want to need fancy graphs and charts.
come back to it as fresh as possible.
As one of the last steps, number the
Assess the overall business message pages of the plan and place the numbers
of your proposal. Does it make sense? in the Table of Contents. If your report is
Would you lend money on the strength of thick, use divider pages with colored tabs
it? Can you make it more convincing by to mark each major section, so readers can
strengthening some of its sections? Can find what they want quickly.
you document all your claims? If someone
asks you to elaborate on your plan, are you It may seem obvious, but good writing,
ready with facts and figures? good organization, and good spelling can
make all the difference. If you’re uncertain
Check for consistency one more time. about your plan, have it reviewed by a
Your plan should say the same things professional writer. If you don’t know a
in the financial section that it says in reasonably priced experienced writer,
the business description, and so on. For check the local newspaper, an ad agency,
example, if Antoinette says she will do free or the English department at the local high
alterations, she must budget enough money school or college. For a modest fee, you
for a sewing machine. may well be able to improve your work
substantially. But don’t go overboard—just
Final Details make sure that your writing is clear and to
the point.
Your plan needs a neat and businesslike
appearance to give the best impression. You may want to check out a word
If you are using a word processor, make processing service in your area if you
sure it has a laser or ­letter-quality printer. haven’t already done so. Some of these
Most low-cost dot matrix printers do not services can offer effective and inexpensive
produce acceptable results. It should be ways to improve the visual appeal of your
placed in a three-hole binder or folio. plan at a reasonable price. Also, they may
be able to offer suggestions about binding
What about visuals, charts, colors, and your final plan. But above all, remember
so forth? Simply watch the sophistication that your plan’s content will speak the
level of your business plan. If you’re loudest. Don’t make your document so
going to market a new laser printer, fancy that it detracts from the message or
your plan will include elaborate ­visuals suggests that you like to spend too much
that demonstrate your product’s abilities in inappropriate places.
as well as your ability to compete in a

168  |  how to write a business plan

When your plan is complete, make a consultant or CPA who specializes in
point to hang onto the original; don’t give businesses similar to yours may be able
it away. Also, make sure you keep a list of to save you from a costly mistake or point
the people who get copies and the dates out a­ dditional profit opportunities. At the
they received them. very least, he should be able to suggest
how to improve the way your information
Finally, take yourself out for a terrific is presented. If he gives you minor
dinner with someone whose company you suggestions for improvement, you can
enjoy. You deserve it. incorporate them easily. If the suggestions
are more major, give some thought before
Consider Using a making changes. Remember, this is your
Business Consultant business and your proposal and it’s up
to you to make the final decisions. (See
It is often wise to have your plan reviewed Chapter 12 for a ­discussion of consultants.)
after you think it is in good shape. For
a modest fee, a good small business

ChApter 9 | EDITING AND FINALIzING YOUR BUSINESS PLAN | 169

Antoinette’s Discouraging Moment

Antoinette was pleased with her plan after Antoinette was stunned. She expected
putting it together, reviewing it, and polishing to discover some minor f laws, not a
it. She was convinced she had a winner. possibly fatal one. Nevertheless, after much
Almost as an afterthought, she decided soul-searching, she was relieved to have
to have a business consultant review her uncovered the problem before, not after,
business plan before taking it to the bank. she began her business. She decided that
She was glad she did. In brief, here is what raising the extra money for inventory wasn’t
the consultant told her. “Antoinette, you an insurmountable problem. The question
have written a fine business plan and have a was whether she could reasonably increase
good idea for a business, but your financial her sales projections enough to justify the
projections contain one serious error. I believe increased inventory. To make this decision, she
that you have underestimated the amount of decided to again talk to a number of women
inventory you will have to carry by $45,000 in the target audience to get a better idea of
to $50,000. Unfortunately, changing this how often they might patronize her store.
number will inf luence all your other f inancial
projections and will mean you have to rethink I shall leave the decision to you as to
your entire plan.” whether Antoinette decides to proceed with
her plans or decides to go back to work for
The consultant then discussed the same a salary. After all, it’s much the same sort of
inventory turnover problem we discovered difficult choice you may have to make about
in Chapter 7. The consultant suggested that your own business.
Antoinette take a few days to decide if she
wished to try and raise more money and
rework her entire plan or drop the idea.

●



Selling Your Business Plan 10C h a p t e r

How to Ask for the Money You Need......................................................................................................... 172
Write a Telephone Pitch............................................................................................................................ 172
Telephone for Appointments................................................................................................................ 172
Meet Your Backers....................................................................................................................................... 173
Ask for the Money ...................................................................................................................................... 174
Leave Your Plan With Your Backer...................................................................................................... 174
Follow Up.......................................................................................................................................................... 174

How to Approach Different Backers............................................................................................................ 174
Friends and Relatives ................................................................................................................................. 174
Business Acquaintances............................................................................................................................ 175
Supporters........................................................................................................................................................ 175
Banks.................................................................................................................................................................... 176
Equity Investors (Venture Capitalists)............................................................................................... 177
Government Agencies............................................................................................................................... 178

What to Do When Someone Says “Yes” .................................................................................................... 178

Plan in Advance for Legal Details................................................................................................................... 179
Loans.................................................................................................................................................................... 179
Equity Investments...................................................................................................................................... 181

172  |  how to write a business plan

How to Ask for the Telephone for Appointments
Money You Need
Avoid lengthy telephone discussions when
Once your business plan has been polished making the call; you simply want to set
to perfection, you’re ready to use it as part up a personal appointment to discuss all
of your campaign to get financing. If you the details and ask for the money. If you’re
haven’t done so already, you must decide not sure what to say, read the sample
where you’d ideally like to get the money telephone script below. You can adapt it to
you need. You should know whether you suit your style and needs.
prefer to get financing from a lender or an
investor. (This is discussed in Chapter 4.) “Hello, Jack? This is Antoinette. How are
you today? How’s the family? Say, Jack, the
Before you call people and make reason I’m calling is that I have a great idea
appointments, give some thought to a few for a new ­business and I’d like to meet
preliminaries. Like it or not, you’re now a with you and show you my business plan
salesperson. Your task is to sell your plan. to see what you think of it.
Don’t let this discourage you, even if your
experience with selling has been negative. “Can we get together next Thursday
There are all sorts of good ways to sell morning in your office? Oh, you’d like to
things, most of which depend on a good hear a little more about my ideas before
product and an honest, straightforward we meet.” (Antoinette briefly explains why
presentation. I can’t tell you exactly how to she wants to open her business—she can
sell yourself and your plan, but I can make read her list of reasons if she’s ­nervous.)
a number of suggestions. “Well Jack, I’m glad to hear that you like
my ideas.”
Write a Telephone Pitch
(Before she discusses the loan she
Since some of your preliminary selling will wants, she asks Jack for an appointment. If
be done over the telephone, you’ll want she can personally meet with him, she will
to be p­ repared. Write a short statement wait until then to ­discuss money.)
of what you’re doing and why. Simply
list your two or three ­major reasons for “What about next Thursday? Oh,
entering or expanding this ­particular how much money do I need? I need a
business. Then write down how much good-sized loan that I can pay back in
money you need and how much you’ll three years. So we can get ­together next
pay the lenders or investors for using their Thursday morning in your office? Good.
money. I’ll see you at 10:00 in the morning. Bye,
Jack.”

Chapter 10  | selling your business plan |  173

Meet Your Backers Your relatives, on the other hand, may
be interested in family solidarity and the
Show up on time, well-prepared to answer prestige of a family-owned business as well
any questions that may arise. Then let your as making a good investment.
natural enthusiasm help you explain your
business idea fully. Your basic objective in Offer investors/lenders a fair return, as
the meeting is to­answer all the questions much security as you’re comfortable with,
you are asked. If you can’t handle a and a little romance. By romance, I mean
question on the spot, do not make up an to emphasize the fact that investing and
answer—promise to find the information. lending money are very personal activities.
Then promptly write, phone, or visit with Your backer wants to feel good about you
the information later. and your project. Your backer also wants
to share in your enthusiasm. So, in a­ ddition
Talk about what the investment will do to presenting a potential lender or ­investor
for your prospect. For example, bankers with a sound financial plan, make sure he
want to hear that their loan will be soundly knows what makes the project exciting
secured and paid back with no problem. for you.

How to Handle Past Financial Problems

What if you’ve previously declared bankruptcy students have an obligation to take what they
or have had other credit problems, such as a can to partially balance the scales.”
lawsuit for a delinquent student loan? Don’t
try to camouflage it. The banker or investor Here’s a better way to handle the same
will probably find out this sort of informa- s­ ituation:
tion from a credit reporting agency anyway,
so it will help you to be up front. However, “Yes, I did have a student loan and wasn’t
you need to come up with a ­plausible—and able to pay it back. I had a rough time adjust-
true—explanation for your past credit prob- ing to the working world for several years after
lems. It should also reflect your determination I graduated and couldn’t come up with the
to meet your obligations in the future. money in time. Since then, I have discovered
work I like to do and am good at, as evidenced
Here’s the wrong sort of explanation for a by my recent work history. I have arranged a
student loan lawsuit: sensible monthly payment schedule, which I
have been honoring.”
“Yes, I acknowledge that I took a student
loan and didn’t pay it back. I didn’t pay it back The second explanation shows that you
because the militaristic system we live under will play by conventional credit rules. It also
is shameful. It’s my firmly held conviction that tugs at the heartstrings a little, something that
never hurts a good cause.

174  |  how to write a business plan

Ask for the Money Follow Up

Here’s one bit of essential advice about After a week or ten days, telephone all
meeting with your backers: You must ask of your potential backers and ask if they
for the money. Don’t make the common have any q­ uestions. If they do, you can
mistake of discussing your plan in gener­ answer them on the telephone or make an
alities and then saying “Thank you” as you appointment to meet. Remember to ask for
walk out the door. the money you need.

As part of every presentation, you must How to Approach
ask the potential source of funds if he Different Backers
will invest in your venture or lend you the
money. Repeat this phrase: Chances are you have long since decided
whom to approach first for a loan or invest­
“Thank you for listening to my business ment. For e­ xample, you might decide to
plan. Will you invest/lend me the money I first approach your father, then the Bank
need to get started?” of Newcastle, then the Small Business
Administration. If you haven’t decided
If you are turned down, don’t hang your yet, review Chapter 4 and develop a list of
tail between your legs and slink away in a ­priorities now. Below are some ways you
puddle of embarrassed perspiration. Ask might approach specific types of backers.
why. Sometimes the reasons why a person
won’t help finance your business will be Friends and Relatives
more valuable to you than the money.
The first rule of borrowing money from
Leave Your Plan With Your Backer people close to you is that you want to be
very sure they can afford to lend it to you
Give your potential backer a copy of the and that you will be able to pay it back.
business plan after you’ve met with her. Everyone who works with small business
If at all possible, don’t mail copies of financing can tell horror stories about
your business plan, or ­summaries of your business owners who had to deal with
plan, to people before you meet. Your both the failure of their enterprise and a
presentation loses a great deal without bunch of ­angry relatives. Put simply, it’s
your personality and enthusiasm. It’s also no fun.
a good idea to number each copy of your
plan and keep track of who gets which
plan. That way you can remember to
follow up with everybody. Also, if you’re
selling stock in a private offering you need
to keep track of who gets the plans.

Chapter 10  | selling your business plan |  175

If you want to ask a relative or friend for Business Acquaintances
a loan, much of your approach depends on
the people involved and your relationship One good way to approach business
to them. We can’t tell you much about acquaintances is by networking. For
either of these ­areas, but here are some example, you might call your attorney or
general suggestions: accountant or someone you know who
owns a small business and say, “I’ve got
• Approach your friends in a respectful a great business proposal in the retail
and organized way. Don’t spring your clothing business. I need about $40,000
request on anyone in a social context. and the investor will get a 25% annual
return on the money they invest, paid
• Don’t assume your relatives and monthly. Do you know anybody who
friends know all your plans and might be interested?”
accomplishments, even though
they know you well. Make your She might reply, “Well, I’m not interested
presentation just as professional as for ­myself, but why don’t you try Joe Spats?
your banker, even if it’s less formal. He just retired from the menswear business
and has been a little restless lately.”
• Tailor your presentation to your Obviously, the next step is to call Joe,
audience. For example, if you stop by mention your mutual friend’s name, and
your brother’s place early Saturday set up a meeting. If he’s not interested, ask
morning wearing your banker-meeting if he knows anyone who might be. If you
best, he will probably laugh you out strike out with your accountant, attorney,
of the kitchen. But bear in mind that or business friend, try your uncle, the
your brother will be as interested as a owner of the local hardware store with
banker in seeing your well-thought-out whom you trade jokes, or the investor who
business plan. put money into the bakery where you buy
coffee.
• Above all, give the person you’re
talking to a graceful way not to lend Supporters
or invest. ­Remember, this is a business
proposition, not proof of someone’s Supporters are people who care—often
feelings for you. Once everyone is deeply—about the subject area of your
assured an easy exit if they don’t have business. Your best approach is to try to
the money or desire to invest, you may enlist this enthusiasm and to honestly
find they will be relaxed enough to involve these people in your dream. ­Often
give you a fair hearing. it’s best to involve supporters at an early

176  |  how to write a business plan

stage so that you get the full benefit of owns a successful small business will have
their good ideas. friendly contacts at a ­local bank, as will
accountants or business consultants. See if
If your business will have enthusiastic you can arrange an introduction or at least
supporters, whether it’s a music store or a get permission to use your contact’s name.
dentist’s office in a rural area where there If all else fails, call the receptionist and ask
is no dentist now, these people may offer the name of the small business loan officer.
financial help. Figure out ways to get the
word out in the correct circles. If people Once you have a name, telephone
care, they may respond favorably. for an a­ ppointment and briefly describe
the subject m­ atter you’ll want to discuss.
Banks Show up on time with your business plan
and loan package. Open the discussion
The main point to remember about banks by talking about your personal business
is that they lend money, they don’t invest and employment history. Highlight your
it. A banker will want to know all about community involvement while trying to
you and your business, but when it comes ­discover common interests and acquain­
to saying “Yes” or “No,” the security of the tances. Maybe you both have children in
loan will be paramount. Little League, maybe you both belong
to the Rotary Club or the Symphony
When approaching a bank for the first Association or the Volun­teer Fire
time, it is important to understand that Department. Who you are in the com­
within all banks, responsibility for different munity and what you have accomplished in
tasks is divided. You want to talk to the other jobs or businesses is an important part
loan officer in charge of small business of the loan a­ pplication process.
loans, not the trust officer or the person
in charge of getting the automatic teller While it’s important to be businesslike,
machine to work right. it’s also important to take your time. After
all, you want to avoid giving the banker
Bankers, like almost everyone else, the impression that you’re in a hurry or are
prefer dealing with people they know. desperate—he is not going to approve your
The ideal way to meet a bank lending plan immediately under any circumstances.
officer is to know a bank vice president Expect lots of checking and probably a
socially and have her refer you to the loan series of meetings. But never forget that to
officer. However, if you are like most mere get a loan, you have to ask for it. As part of
mortals and don’t have any old school each meeting with the bank, ask politely but
ties or country club connections, you will specifically about the status of your loan.
have to be creative. Almost anyone who

Chapter 10  | selling your business plan |  177

Here are a few things to emphasize Equity Investors
when talking to bankers: (Venture Capitalists)

• Your other bank business. If you don’t I use the term “venture capitalist” a bit
already patronize the bank in question, loosely to include people who invest
make sure the lending officer knows relatively small amounts of equity financing.
you plan to do so if you get the loan. These may be relatives, ­acquaintances, or
anyone else with money to ­invest in what
• Security. Remember that the banker looks to be a profitable business.
wants to lend money, not invest it. Tell
the banker how sure he is to get his As you should know from reading
money back with interest. If you can the discussion in Chapter 4, the ­primary
offer collateral for the loan, emphasize distinction between a venture capitalist
it. (See the discussion of bank loans in and a lender involves risk, security, and
Chapter 4.) amount of return. The venture capitalist
is traditionally willing to take more risk
• Be realistic. Your banker wants to be­ in exchange for a chance to make a large
a­ ssured about your knowledge and profit. Here are some suggestions:
enthusiasm about your business. But
he also needs to know that you have • Prepare a summary of what you are
your feet on the ground. If you puff offering. In addition to the business
too hard, the banker is almost sure to plan you have already designed, you
be turned off. need to tell the ­equity investor both
what you are offering (partnership,
• Be persistent. There are lots of limited partnership, shares in a
banks. People who work with small corporation, etc.) and what the
businesses in your area can probably projected return is.
suggest the banks that are most likely
to lend to your type of business. If you • Do not promise a certain return.
are turned down by one bank, make Especially if your potential investor
sure you understand why you were is unsophisticated, emphasize in
rejected. If it’s realistic, change the writing that there is always some risk
items in your proposal that caused this associated with a high potential return.
­rejection. Pay extra attention to aspects Make certain the investor knows your
of your plan that continue to receive projections are just that—projections.
negative comments. In short, never guarantee a return that
you may not be able to deliver. The
person ­putting up the money should

178  |  how to write a business plan

even understand there is a possibility What to Do When
she may lose the entire investment if Someone Says “Yes”
things go very badly.
• Ask for names of others who might Your first job when someone indicates his
invest. If a potential investor turns interest in lending you money or investing
you down for any reason, ask if he in your plan is simple—don’t faint. It’s fine
knows anyone else who might be to prepare for a ­negative result so you are
interested in investing. Don’t be not too disappointed if you are rejected,
surprised if someone suggests putting but remember also to be prepared for
a deal together for you for a fee. This a positive reception. If your proposal is
means he acts as a finder or broker as good, it will be funded sooner or later.
discussed in Chapter 4.
One good approach is to have a number
Government Agencies of answers ready, depending on what the
lender or investor offers. It’s a little like
The hardest thing about getting money being a major league baseball outfielder in
from the government is finding out which a close game, with several men on base.
program can help you. The second-hardest Depending on where the ball is hit, you
thing is finding out who in that agency need several alternative plans. You can see
can make a decision for or against your some pretty funny plays when a fielder
proposal. Compared to these two, filling fails to think ahead and throws to the
out the forms is easy. wrong base.

Ask your bankers if they know any of If you’re asking for a loan for a set
the ­programs. Most will have some exper­ amount of money at a certain interest rate
ience with at least one of the agencies, and the lender says “Yes,” presumably you
such as the Small ­Business Admini­s­tration will, too. But, what if the lender offers
(www.sba.gov), and can steer you in the you less than you want, asks for a higher
right direction. If you run into a wall, try interest rate, wants collateral, or proposes
your local elected representatives. They a different financial formula entirely?
have aides whose job it is to help people Make sure you understand exactly what
like you. If you find a ­program that looks the proposal is. Think through your risks,
good, be sure your elected representative especially if the lender wants collateral.
knows about your application. (See the Compare the terms—for instance, a small
discussion of the SBA in Chapter 4.) increase in interest rate could mean that
you will end up paying more money for a
longer period of time.

Chapter 10  | selling your business plan |  179

Don’t answer on the spot. Take the Plan in Advance for Legal Details
proposal home and see if you can live with
it. If you can’t, meet with the person again Taking money into your business requires
and explain exactly what you can’t accept lots of legal documentation. You will
and why. Then propose changes. If this present a more professional image if you
doesn’t result in agreement, start looking understand some of the basics.
for other funding sources. It’s far better to
say “No” than to accept a bad deal. Anyone Loans
who has been in business for a while
will tell you the times he turned down Whatever loan you arrange will have to
poor business proposals were at least as be ­reduced to writing. If you deal with a
important to his ultimate success as the bank or other institutional lender, it will
ones to which he said “Yes.” have the necessary forms. However, if
your arrangement is with a friend, family
Example: Charlie wanted a loan of member, or private investor, these details
$20,000 to start a limousine service. will probably be up to you.
The bank offered him $20,000, but
wanted equal monthly ­payments of If your loan is simple—a specific
$1,018 over two years. Charlie had amount of money, at so much interest,
expected to make payments of $530 to be paid at regular intervals—you can
per month over five years. After he ran safely design it yourself. While a course in
the d­ ifferent loan payments through contract law is beyond the scope of this
his cash flow schedule, he discovered book, the sample notes provided may help
that he couldn’t pay his own rent and you focus on this task.
grocery bill if he had to pay $1,018
per month on the loan in the first two However, if the loan involves compli­
years. After he explained his problem cated ­default provisions, security, and
to the loan officer, the bank offered balloon payments, you and the person
Charlie interest-only payments for the you are dealing with would be wise to
first two years. That was a much better have it checked by an attorney. If you have
deal and Charlie took it. done most of the work, this shouldn’t be
expensive; negotiate the fee in advance.

180 | HOW TO WRITE A BUSINESS PLAN

exAmple 1: exAmple 2:

Promissory Note Promissory Note

Robert Lee of 1411 South St., Homer, $8,639.00 July 30, 2010
Alaska, and Gertrude Fox of 123 Main St.,
Fairfax, Alaska, agree that Gertrude Fox For value received, the undersigned
hereby lends Robert Lee the sum of Fifty-Six promises to repay to Sebastian Grazowtski,
Thousand ($56,000) Dollars to be repaid on of New City, Oregon, the sum of EIGHT-
the following terms: THOUSAND SIx-HUNDRED AND THIRTY-
NINE DOLLARS ($8,639.00) including
1. Principal and interest of 10% per year interest at 12% per year. This money is to be
will be paid in equal monthly installments paid in equal monthly payments of $315.00
on the first day of each month beginning (principal only) commencing on September
the first day of September 2010 and 1, 2010 and continuing until November 1,
continuing through the first day of August, 2011, at which time the monthly payments
2011. will increase to $440.61 per month until the
entire balance of principal and interest is
2. On September 1, 2011 the entire paid.
unpaid balance of principal and interest
shall be due and payable in full. Should default be made in the payment
of any installment when due, then, at the
3. Should Robert Lee fail to pay an option of the holder of the note, the entire
installment on the date due, as set out in amount of the principal and interest shall
Paragraph 1 of this agreement, the whole become immediately due and payable. In
sum of the principal and interest then the event of any default on this note, the
outstanding shall, at the option of Gertrude holder shall be entitled to recover all costs
Fox or any subsequent holder of this note, of collection of same, including reasonable
immediately become due and payable. attorneys’ fees and costs.

4. Should Robert Lee fail to meet any Date
condition of this agreement, and should Sebastian Grazowtski
Gertrude Fox or any subsequent holder
of this note take legal action to collect Date
it, Robert Lee shall be responsible for all Virginia Woo
attorneys’ fees and costs.

Date
Robert Lee

Date
Gertrude Fox

Chapter 10  | selling your business plan |  181

Equity Investments Example:
Wilhelmina Whalen needed $35,000
If you plan to arrange for an equity to start a coffee shop. She decided
investment, you have considerable work to to form a small corporation and sell
do beyond the scope of this book. In short, an investor 25% of the company for
you need to have a detailed plan for the $35,000. If the coffee shop succeeded,
legal form of organization you prefer—a as she expected, the 25% investment
general partnership, limited partnership, or would be worth $100,000 in three years.
small corporation. Harrison Flyright liked Wilhelmina and
her business idea. He offered $25,000
Most entrepreneurs form corporations but wanted 50% of the company.
and sell shares to raise money. They are Wilhelmina thought that was too high
regulated by both the federal Securities and a price and said “No.” Sometime later,
Exchange Commission and by their state’s Harrison increased the amount to
corporation department. All require confor- $32,000, and Wilhelmina agreed to give
mity to numerous regulations designed to him 49% of the stock, thereby retaining
protect investors from dishonest promoters. control of her business. As a California
resident, Wilhelmina incorporated her
While the regulations are extensive, business using How to Form Your Own
they are designed to help the process. California ­Corporation, by Anthony
For example, some stock offerings can Mancuso (Nolo). She issued 49% of the
be exempt from expensive filings if they stock to Harrison in exchange for his
involve a small number of shareholders
and a small amount of money. (Chapter 4 cash, and was off and r­unning. ●
discusses corporations and partnerships in
more detail.)



After You Open—Keeping on the 11C h a p t e r
Path to Success

Introduction............................................................................................................................................................... 184

Watch Out for Problem Areas.........................................................................................................................184
It’s Lonely at the Top...................................................................................................................................184
Anticipate Problems Before They Arise............................................................................................ 185
You May Be the Problem and Not the Solution..........................................................................186
Plan Beyond Opening Day.......................................................................................................................186
Know When You’ve Succeeded—Or Failed................................................................................... 187
Prepare for Success......................................................................................................................................188

Getting Out of Business......................................................................................................................................189
Lock the Doors and Leave........................................................................................................................189
Sell the Business.............................................................................................................................................189
Close the Business and Negotiate With Your Creditors..........................................................190
Hold a Going Out of Business Sale......................................................................................................190
Declare Bankruptcy.....................................................................................................................................190

184  |  how to write a business plan

Introduction of determination and drive to make things
happen. As a result, you may focus so
If you have followed all the steps in this completely on the immediate goals at hand
book, you have completed a thorough that you lose sight of the larger picture.
plan for your business. You should feel
good about completing a hard, demanding Recognizing that you don’t know every­
task. It’s also important to remember that thing is a good first step toward business
completing your plan, finding the money success. If you’re unsure of yourself in
you need, and opening or expanding your any particular area, please take advantage
business are just the first three steps in of the advice and help that is there for
your journey. the asking. That way, you’re less likely
to be sabotaged by something you didn’t
Many small business books take fairly know—and didn’t know you didn’t know.
extreme approaches. Two common ones
can be summarized as follows: It’s Lonely at the Top

1. Here comes another lamb to the As a business owner, you often make
slaughter—hopefully this book can decisions in a vacuum. Most of the time
frighten him out of his dumb idea. you won’t have immediate peers who
understand your business and can also offer
2. Anybody can find fame and fortune in you good, dispassionate advice. Probably
a small business; just read this book you have to go it alone, and that can be
and get a big strongbox in which to pretty tough.
store your surplus gold.
You and your business become targets
I hope to steer a middle course by for an army of job-seekers, government
offering you both encouragement and regulators, charities, competitors, consul­
caution. In my view, small business is tants, salespeople, insurance brokers, and
one of the last great frontiers of both so forth. All these people have their own
individualism and opportunity, but like the goals and objectives, which may or may
prairies of yesteryear, there are more than not coincide with yours. As a matter of
a few rattlesnakes among the poppies. This survival, you must become skeptical about
chapter contains some highly personal what people claim they can do for you or
recollections and observations on pitfalls your business. This isn’t necessarily either
and diversions you may encounter on your bad or good, it’s just the way things are.
way to business success. You are the only one who can decide what
is good for your business.
Watch Out for Problem Areas
You also have to manage relations
As a small business owner, you’ll have to with your three primary sources of
work hard to meet your goals. It takes a lot

Chapter 11  | after you open—keeping on the path to success |  185

business success: customers, suppliers, Things always go wrong in business.
and employees. Again, each person in Your job is to notice troubles and problems
these groups has her own set of goals and before they become major hurdles. If you
objectives. Your job is to reconcile all those don’t notice the mistake until others tell
competing interests so that your business you about the unfortunate results, it may
prospers. be too late for an easy, inexpensive cure.

Incidentally, I hope this doesn’t read like If your business is like most, you’ll
a nightmare to you, because it isn’t a night­ spend some time every day creating
mare. In fact, I think it’s one of the best solutions to problems. But, if you don’t like
parts about being in business for yourself. playing detective and prefer sailing along
As a business owner, you decide the goals on smooth waters so much that you don’t
and the steps to reach them. The compar­ see the first signs of storms, you may have
ison is similar to the difference between a problem surviving for long.
riding in the back seat of a car and driving
the car. If you’re like me, you’re a lot more Here’s one way to keep a handle on
comfortable when you’re driving the car. problems. Every month, make a line-by-
line comparison of your monthly actual
Axiom: If you need approval from others to profit and loss statement to the monthly
­function at your best, you will be uncomfortable Profit and Loss Forecast you made for
as a business owner. your business plan. That way, you’ll see
problems as they develop and before
Advice: Get tough. Learn how to set goals and they become serious. For example, if
reach them. Learn when to take others’ views your profits are down by $1,400 and your
into consideration and when to ignore them. advertising expenses are up by $2,000,
you’ll want to spend some time analyzing
Anticipate Problems why that happened and what you should
Before They Arise do about it.

Your business plan describes the risks Another way to spot problems before
your business faces. Periodically reread they become too large is to listen to what
that risk discussion to see if you’d like to your customers, suppliers, and employees
add anything to the list. If you’re like most say about your business. While some of
people, you’ll admit that there may be their comments may be self-serving, you
something you missed and that you don’t can’t afford to ignore all their complaints
know what it is. and suggestions. Experience shows that
most customers will tell their friends about
a problem they had with your business
long before they tell you. So, you may have
to develop creative ways to encourage your
customers to communicate with you.

186  |  how to write a business plan

Axiom: The business owner constantly makes Axiom: Everybody has blind spots. Your blind
small corrections to keep the business on course. spots can determine whether your business will
The business may fail if the owner falls asleep at succeed or fail.
the wheel. Complacency kills.
Advice: Ask a friend who knows you well
Advice: Establish an information system that where your blind spots are. You can’t afford not
lets you know when the business goes off course. to get help if they are critical.
You may also choose to have an experienced
business consultant review your business Plan Beyond Opening Day
periodically.
To illustrate the importance of planning
You May Be the Problem for the operation of your business after it
and Not the Solution opens, I’d like to share the experiences of
Molly, a friend and former student, who
“To live is to change, and to be perfect wanted to open a bath supply shop. Molly
is to have changed often.” (John Henry encountered a long series of depressing
Newman, as quoted in First Data Resources obstacles on the way to getting the money
ad in Credit Card ­Management, January to open her business. But since she was
1992, Volume 4, Number 10.) Unfortu­ both stubborn and a fighter, each setback
nately, most people aren’t very good at made her even more determined. In truth,
analyzing their own strengths and weak­ before long, getting the necessary money
nesses objectively and then changing their had become an obsession. Finally Molly
behavior to compensate. They just go succeeded. Unfortunately, at this point
ahead doing what they’ve always done, she became strangely lethargic. Molly had
regardless of the outcome. put an enormous push into opening her
­business, but she hadn’t prepared herself
Many businesses are started by people for the gritty day-to-day realities of owning
who are very good at a skill that people a business. Now Molly lacked energy,
demand. But many of these people know innovative ideas, and the knowledge of
little about the complexities of starting and how to compete in a changing market­
growing a business and can be hurt badly place. Her business closed in 12 months,
by their lack of knowledge about basic which was just about how long it took to
management skills. start it. She lost a lot of money and a lot
of pride.

Chapter 11  | after you open—keeping on the path to success |  187

Axiom: You need a flexible continuing four months? Do you triple the advertising
operating plan for your business. budget and hope that sales will pick up? I
hope not. A more sensible approach is to
Advice: Make sure you can adapt your make another business plan, adjusted to
business plan to changing circumstances. the sales you are actually getting. This is
psychologically difficult for many people
Know When You’ve to do. It’s all too easy to get hung up on
Succeeded—Or Failed proving that your original plans were right,
rather than accepting what the numbers
Success in a small business involves tell you.
meeting your objectives, especially the one
that says you have a positive cash flow by Example:
a specific date. Normally it shouldn’t take Pierre, who had never run a business,
long to know whether your business will bought a failed cafe. He was confident
meet your objectives. in his abilities to turn the cafe around,
since he had a degree in hotel manage­
Many people wait a year or two to ment and was an accomplished chef.
see whether the business will succeed. I Pierre projected $30,000 a month in
think that’s a mistake. Instead, figure out sales and budgeted accordingly. Actual
how long it should take for your potential sales in that first three months were
customers to hear about your opening $12,000, $18,000, and $16,000. Sales
and then add a month or two. In a retail leveled off at the $14,000-per-month
business, that’s usually no more than three level for the next several months,
to six months, depending on the type of resulting in a first quarter loss of $60,000.
business and how good a promoter you are. Pierre cut back to where he was only
Put another way, your sales will probably losing $2,000 or $3,000 per month for
level out three or four months after you the next three months, but stuck to the
open. People in service, wholesale, and idea that he could generate monthly
small manufacturing businesses may expect sales of $30,000. In the meantime, he
a longer start-up cycle. For example, a sold his house and his wife’s jewelry
real estate agency normally allows six to to keep up with the bills. Many people
12 months for money to begin coming in. suggested that he make cutbacks so
That’s how long it takes to find clients, that he could make a profit on $14,000
negotiate deals, and generally get known in per month or, as an alternative, sell the
the community. restaurant. So far, he has refused. If he
doesn’t take in $30,000 a month soon,
What if your sales are less than you he’ll go broke.
expected after you have been operating