Management Basics

Part 7- World Domination

By Gary Hart

Well, maybe we are not talking about world domination in this series of articles, but certainly we are on our way to market domination. In order to reach our goals and ensure that our business runs smoothly, we must have two roadmaps: a business and marketing plan. First, let's focus on the business plan.

To put it simply, a business plan is your detailed roadmap to Successville. Typically a business plan is used for several reasons, but mainly for raising capital from an investor and a reference as your business grows. Writing a business plan can be intimidating and if you don't know the difference between a tablecloth and a spreadsheet, you'll definitely want to enlist some professional help. If you are planning to hire a business consultant to help you write your plan, you should still try and write a rough draft on your own.

The first step is to familiarize yourself with the basics of a business plan by reading through the components of a hypothetical one. I recommend that you check out a commercial software package called Business Plan Pro 2005 by PaloAlto Software. Both the standard and premier editions contain over 450 sample business plans.

There are 11 components to a business plan:

1-Executive Summary. The executive summary is so important that we'll discuss it further on in its entirety but for now know the executive summary, or business plan summary, is just what it sounds like: a compact version of the big plan.

2-Table of Contents. A table of contents is exactly what you'd expect. No doubt you'll be editing your first draft like crazy, so double and triple check that your table of contents is well-organized and still correctly numbered after all the changes you've made. If you use a software package like Business Plan Pro, this will be done for you automatically.

3-Company Description. Here's your chance to dazzle strangers with the history of your company. Most business plans deal with the expansion and improvement of existing businesses rather than with the funding of a start-up. This is your opportunity to brag (factually) about how you transformed ACME AutoGlass from your garage to a strong local employer that's ripe to burst onto the national scene. Here are some things to include:

o Explain how you got started and how the company has grown.
o Provide a history of sales, profits, and other important numbers.
o Lead up to a description of where you are now, and what plans you have for the future.

4-Product/Service. Describe the automotive glass industry in jargon-free language, if that is possible. What does your company do? What differentiates it from all the other shops out there? What prevents someone else from doing the same thing more cheaply? What kind of equipment do you need?

5-Market Analysis. In the next few sections, you're demonstrating that you're a clever seasoned veteran who's been hanging around the AGRR industry long enough to know all about things like distribution problems, government regulations, technological opportunities, and employee relations in your chosen line of work. Market analysis includes your insightful discussion of industry characteristics and trends, projected growth, customer behavior, complementary products/services, barriers to entry, and so on. To do this effectively, you'll have to do a ton of research. Talk about how similar products/services have done well in the market and how you're fulfilling an obvious need.

6-Marketing Plan. This is your grand strategy of how you and your fellow managers intend to sit masterfully atop this market. In other words, you have to detail exactly what steps you will take to ensure that customers know about your product/service and prefer it over the competition. Be as detailed as you can, and give several different tactics (start off with the cheapest marketing tactic, and proceed to the most expensive).

7-Operations Plan. This is the nuts and bolts. You gave them vague assurances in your executive summary that you'd be able to run your business, now they want to understand precisely what's involved in running the show. Location, bricks and mortar, equipment needs, and labor requirements are laid out here in black and white.

8-Financial Plan. Then comes the numbers. Unless you were the kind of kid who thought trigonometry was fun, there's a good chance you're not too fond of financial tables. Yet, even if you have a very fine accountant whom you trust as your best friend, it's a wise idea to acquire a rudimentary knowledge of sales forecasts, profit-and-loss statements, cash flow projections, balance sheets, and standard biz ratios. Investors will expect you to be completely independent in this important area of knowledge; if they call you saying they'd like to set up a meeting with you, they will ask you questions about your financial plan and you will be expected to answer intelligently.

9-Management. Never underestimate the importance of the collective genius of your management team. Investors will take a great management team with a mediocre business model over a great business model with mediocre management any day of the week. If you have somebody in the team (or at least on your board or among your advisors), who's had serious entrepreneurial success, you'll earn double bonus points from investors.

10-Exit Strategy. Not all business plans have one of these. The exit strategy is for the investor, not the entrepreneur. It's basically a plan for him/her to get out of his/her investment in three to seven years. The exit usually comes in the form of a merger, acquisition, or more spectacularly, an initial purchase offering (a.k.a. "going public!").

11-Appendices. Include in the appendices all those necessary extra bits, such as managers' résumés, promotional materials, and independent assessments. Emphasis on the word "necessary;" clutter in a bulging set of appendices is as bad as verbosity elsewhere in the plan.

Of the many parts listed here, by far and away the most important is the executive summary. Just as you augmented your non-reading of literary greatness in high school with the relevant edition of CliffsNotes, so too the harried reader of your plan augments his/her non-reading of your entire business plan with a quick glance through the executive summary. The summary must have punch, panache, passion; it has to be able to do a standing backwards somersault, then stick the landing and demonstrate a thorough knowledge of accounting.

The executive summary should answer the following questions:

  • What sort of company is it?
  • What's the product/service, and what's special about it?
  • Who are the managers?
  • Will you need additional capital? In what stages? What will you use it for?

Stick to the hard facts, and limit yourself, however difficult this may be, to the length of a concise résumé: no more than a couple of pages. Write the summary first, and, if you do a good job, you'll generate enough enthusiasm to carry yourself through the rest of the plan.

There are lots of different ways to lay out a business plan. It probably seems like an awful lot to have to know, even if you happen to be a business whiz; but never fear, once you get working you'll find ways of breaking up the major sections into manageable little subsection morsels.

No matter which business plan format you choose, a few cardinal rules apply. Avoid these common errors and you'll get a leg up on the competition:

  • Don't wait until the last minute to start writing.
  • Don't worry about originality.
  • Try not to be a windbag.
  • Avoid inappropriate packaging .
  • And before you send your business plan to anyone, proofread, proofread, proofread!

Unless you happen to make your living as a business consultant turning out business plans, you're going to need some help. There are lots of books, software programs, and Web sites that'll walk you gently through each of the dozens of steps involved. I really suggest that you check out Business Plan Pro; however, a Google search on the Internet will turn up dozens of pages of resources.

In the next part we will discuss the marketing plan and how it fits as the final piece in your pursuit of entrepreneurial domination.

Gary Hart is CEO of eDirectGlass.

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