POVLITZ Inc | Business and Entrepreneur

This is part 2 element of business, you can read part 1 in here

Competition
This section of your business plan should include all pertinent information about your competition, including the length of time they have been in business, where they are located, and what their average annual sales are. You will want to analyze the following:

• The reasons behind their success
• What they do right and wrong
• What customers are looking for
• How those needs are being met by your competitors
• How those needs are not being met

The Internet sites listed in the Secondary Research section can help you fill in this information. Getting some good, solid data about your competitors will impress investors and teach you plenty in the process.

In addition, you should explain how you perceive your business will compete in terms of strengths and weaknesses compared to the strengths and weaknesses of these competitors. Explain how you intend to overcome your competition and your expectations of the impact your company will have on their business. Consider how well your competition satisfies the needs of potential customers. Determine how you fit into this picture and what niche you plan to fill. Will you offer a better location, convenience, a better price, later hours, better quality, or better service?

Management Team

What are your qualifications and those of your team? Do not underestimate the importance an investor puts in the management team. Banks, angels,and venture capital firms will want to see that you have a board of directors or officers with a record of entrepreneurial success—proven business leaders, people with legal and finance skills, marketing experts, and the like.

Those types of people will help prove the viability of your business and can make all the difference between funding and no funding. The resumes of all key personnel should be included in this section as well.

Sales Forecast

The next part of the business plan covers sales, operations, and finances. This section deals with hard numbers and forecasts of sales, operating expenses, profits, and the like. This section should include:

• A monthly forecast for coming year (sales volume in units and dollars)
• An annual forecast for the following two to four years (sales volume in dollars)
• Assumptions on which you base these forecasts

By this point, your research on the competition is vital. Analyze their location, customer volumes, traffic patterns, hours of operation, busy periods, prices, quality of their goods and services, product lines carried, promotional techniques, positioning, and product catalogues and other handouts. If feasible, talk to customers and sales staff.

Use this research to estimate your sales on a monthly basis for your first year. The basis for your sales forecast can be the average monthly sales of a similar-sized competitor’s business that is operating in a similar market.

Financial Analysis

A business plan is not just words; it is words and numbers. You need to understand and explain how much it will cost to get your business up and running, and how much it will cost to keep it going on a monthly basis. The financial needs of the plan depend greatly on your marketing and sales strategies.
They all must fit together. Remember, though, that while projections are projections, they must show an understanding of how all of the variables of the business plan fit together. In the end, you must really understand the numbers because investors will grill you on them.

In this section, you are also going to explain how much money you are asking for and how you will be spending it. This section will include a spreadsheet that analyzes income and expenses for the next few years, including:

• Profit and loss statement (P&L). This is a summary of your projected business transactions over a period of time. It explains the difference between your income and expenses. An income statement is the same as the profit and loss statement. Your P&L will include analyses of sales by month, gross profit and profit margin, overhead, depreciation, interest payable on any loans, and net profit.

• Cash flow statement. This statement shows how much cash your business will need, when it will be needed, and where it will come from. Do you need to buy inventory? How much will that cost every month? What are your receipts, bills, wages paid, etc.? That is what you will be discussing here. The cash flow statement is important because it forces you to realistically look at the bottom line and see if you are making (or are going to make) enough money to service your debts. A cash flow statement is a great tool that you should use throughout your business career as it is a mirror of where things are.

• Balance sheet. The balance sheet forecasts your assets and liabilities. It shows your financial position at a fixed point in time, usually at the end of the year. It helps you understand where all the money coming into the business has come from and where it has gone. Balance sheet information is extracted mostly from the P&L and cash flow statement.

This section is often the most difficult part of a business plan for many entrepreneurs. It’s easy to wax poetic about your fantastic business idea and how it will make everyone rich. Actually putting hard numbers to those projections is not always easy, but you have to do it. You have to crunch some realistic numbers to go along with your realistic (and hopefully enthusiastic) plan.

Where do you get this information? There are many sources of information to assist you. Some key sources are competitors, trade suppliers, business associations, trade associations, trade publications, and trade directories. Once you have this information, you will need to provide it in your financial statement.

The financial section of your business plan will also analyze the use of any loan proceeds you are seeking, including the amount of the loan, the term, and when it is required. Finally, you need to disclose your financial situation and how much you will personally be contributing to the venture. The appendix of your plan should include the past three years’ income tax returns. Also include a current credit report.

Critical Risks

This section will analyze what you consider to be the biggest risks and obstacles to the success of the business and how you plan to overcome them.

Action Plan

This section will contain specific steps you will take to accomplish this year’s goals and checkpoints for measuring results. Identify significant dates, sales levels, and production levels as decision points.