WRITING
AN
EFFECTIVE
BUSINESS PLAN
Good Spirit Regional
Economic Development
Authority Inc.
Introduction
Workbook Objectives
What is a Business Plan?
Why do you need a Business Plan?
Where to start?
How to write a Business Plan?
How to use the Plan?
What is it?
Business Planning is not just about producing a report. The work of writing, of thinking things through is as important as the final document.
It's a tool for understanding how your business is put together. The process will help you learn how to manage your own company more effectively while you become an expert in your industry and business. It creates a framework for you to start and grow your business.
The Business Plan is dynamic. Each business and its personality are different and the Business Plan should reflect this.
Of the primary functions of management, planning is the most important. Plan your work
and work your plan.
Old...but it holds.
Grant Hooker, Beavertails Pastry
Starting a business without
a Business Plan is like driving
from Esterhazy to Sturgis
without a map. Chances are
you'll make it, but with
guidelines the trip will be shorter
and much more pleasant.
Every time you write a
Business Plan you become
a better businessperson.
Why Write One
Plots a course
It helps you think long term - about the big picture, not just about starting a business but staying in business.
It assists in keeping you motivated.
Feasibility study
Is your idea viable?
Is your business going to be profitable?
Will you require outside financing to start or operate this business?
What are your barriers to success?
Become a better decision maker
It will help you anticipate problems.
Gathering information for your plan will increase your knowledge of the industry thereby assisting you in making more informed decisions.
Your plan provides an organized way to conduct your investigation.
Reality Check
Your plan raises questions that will help inspire solutions before a crisis occurs.
It helps you to know what will be required of you as an entrepreneur.
By identifying strengths and weaknesses, it reveals where you will need assistance.
Implementation plan
Use the Business Plan as a guide to keep you focused and making progress during the business start up phase.
Selling Tool
Use the Business Plan to sell your business opportunity to potential investors, employees and suppliers.
Where to begin
1. View Samples
The Business Plan Handbook
Interactive Business Planner (www.cbsc.org/ibp)
Online Business Plan samples (www.bplans.com)
Chartered bank templates (www.royalbank.com)
2. Define objectives and potential
readers and determine your Action
Plan.
3. Prepare a time line.
4. Begin to gather research
information.
5. Organize research into business
plan components.
6. Write the plan.
Know your audience
Use clear vocabulary
Avoid jargon
Clearly identify sections
Quality vs. Quantity
Know your plan
7. Get help where required.
The Good Spirit Regional Economic Development Authority in Yorkton has much of what you need to fully research and develop your business idea. We provide guidance, advice and professional services to members in the region.
Gord Bulmer, General Manager, Good Spirit REDA, Yorkton
Let research define your products and write your ads, brochures, and web site. It's the best investment you'll make.
Don Hewson, Hewson Bridge and Smith Ltd.
Business Plan Research
Business Plan research helps you make informed decisions and develop new knowledge and direction.
What is it?
Business Plan research is the systematic gathering, recording and analyzing of information about problems and opportunities relating to the operations of your business.
Where do I conduct my research?
A. Secondary Data
Associations (Association
Canada)
Networking
Newspapers, Magazines,
Periodicals
The Internet - Industry Canada
(www.strategis.gc.ca)
Statistics Canada
(www.statcan.gc.ca)
Directories (Scott's, Frasers)
Economic Development
Departments (Good Spirit REDA
Inc., Ventures CFDC)
B. Primary Data
Questionnaire/Survey - telephone,
mail, email, personal
Focus Groups
Product or Service Sampling
Books (Market Research Made
Easy Successful Market Research)
You can begin your Business Plan at the Good Spirit REDA Business Resource Centre.
Read and photocopy your research - then build your own research library.
Business Plan Outline
There are many different Business Plan formats. The layout may vary depending on the type of the business, the purpose of the plan and the readership. The following format can be amended to meet the needs of your business.
1. Table of contents
2. Executive Summary
3. Company Profile
4. Marketing Plan
Industry Trends
Product/Service
Target Market
Competitive Analysis
Marketing Mix
Promotion
Place
Price
Product
5. Operational Plan
Suppliers
Manufacturing Plans
Operating Requirements
Human Resources
6. Financial Plan
Start up Costs
Cash Flow Statement
Income Statement
Balance Sheet
7. Appendix
Executive Summary
What is it?
This is a concise summary of the business opportunity, however it covers all important components of the plan.
As a future-oriented, two-page document, it demonstrates your knowledge of the business opportunity and proves that any investment in the venture will yield a good return.
Why is this information important?
It is important to develop a concise description of your business to capture the interest and support of the reader. The readers may include partners, potential investors, lenders or regulatory agencies.
An investor may read the executive summary to decide if they should read the remainder of the plan. It must create excitement to entice the reader to continue reading.
Where do I conduct my research?
Your summary is supported by documentation from the main body of your Business Plan.
The executive summary should not introduce information that is not reinforced in other sections of the plan.
Finish this section of your plan last.
Executive Summary
What do I include?
Introduction to your business opportunity
MARKETING HIGHLIGHTS
Product/service distinctive features
Target market summary
Competitive analysis
Key marketing strategies
OPERATIONAL HIGHLIGHTS
Critical legal issues related to your business
Supplier summary
Management team overview - critical roles and pertinent skills
FINANCIAL HIGHLIGHTS
Summary of financial requirements and projections
Equity investment of owner
Company Profile
What is it?
It is a snapshot of your business and who
is involved in it.
Company Profile - Sample
Form of Business
Sole Proprietorship
Advisors registered in the Province of Saskatchewan, May 2003
Owners:
My name
Name of Business:
New Business
Business Start Date:
July 2003
Business Operation:
Full time venture
Monday to Friday
7:00 am to 6:00 pm
Business Description
Supplier of high quality childcare products
Location
1250 Any Street
Anytown, SK
X2X 2X2
Tel: (306)000-0000
Fax: (306)000-0000
E-mail: name@Business.com
Advisors
Mr. A. Countant
Chartered Accountant
5200 Any Street
Anytown, SK
What do I include?
FORM OF BUSINESS
Sole Proprietorship
Partnership
Corporation
OWNERS/PRINCIPALS
NAME OF BUSINESS
START DATE
BUSINESS OPERATION
BUSINESS DESCRIPTION
LOCATION
CONTACT INFORMATION
BUSINESS ADVISORS
Lawyer:
Accountant:
Industry Overview
What is it?
This is an analysis of the industry and economy that you are operating in. It demonstrates an understanding of the current trends and industry characteristics.
A trend is a definite, predictable direction or sequence of events.
Why is this information important?
Industry trends help to identify opportunities to create a product or service that will satisfy the needs of a particular customer base. There should be a natural flow from the industry trends to your product or service.
Trends can provide you with strategic information that can help you be competitive and provide direction for growth in new products and company strategy.
Trends can assist you in determining your longevity in the market. Most products follow a product or industry life cycle curve. Knowing where your product or industry fits on this curve will help you in your marketing and promotional strategies.
INDUSTRY OVERVIEW
Where do I conduct my research?
Statistics Canada (www.statcan.ca)
Trade Magazines, Canadian Almanac and Directory
Business Magazines, print version and Internet
Economic Indicators - inflation, unemployment levels
Industry Canada (www.strategis.gc.ca)
INDUSTRY OVERVIEW
Opportunities arise as
industries develop, expand
or contract. For instance,
changing government rules
and regulations can often
create new opportunities.
Local issues will most likely
be more important to you
than North American or world
issues.
Industry Overview
What do I include?
OVERALL BUSINESS OR CONSUMER TRENDS AND BUSINESS OPPORTUNITIES AS A RESULT OF:
Social Change
Economic Change
Demographic Change
Environmental Change
Technological Change
Political Change
AN INVESTIGATION OF THE PAST, PRESENTAND FUTURE INDUSTRY TRENDS:
KEY SUCCESS FACTORS IN YOUR INDUSTRY:
BARRIERS TO ENTRY, SIZE OF INDUSTRY:
Service or Product
In many cases it is not just a service or a product you are providing but both. Your product or service may be redefined or refined at different stages of the business planning process. The first definition of your offering probably won't be the last.
What is it?
This section describes the features and benefits of the product or service that you are selling. How will your product be used?
Why is this information important?
Your business is built around the product or service that you are offering to the market. You should be able to completely, yet concisely, describe what you are selling and what makes it distinct.
From your industry analysis you should have determined needs or gaps in the industry. The features and benefits of your product or service should fill some of these identified needs or gaps.
By focusing on the Unique Selling Proposition (USP) of your product or service, you should be able to clearly differentiate yourself from your competition and use this differentiation to secure competitive advantage.
Where do I conduct my research?
Competition Analysis
Primary Market Research
Suppliers (Scott's Directory)
What do I include?
What are your product's/service's unique features?
What are the value added features?
What are the benefits of these features?
How is your product/service positioned against the competition?
What are you doing differently?
What has been the history of this product in the marketplace?
Provide photos or diagrams if available.
Target Market
What is it?
A target market is a homogeneous group of potential customers that have both a need and a willingness to pay for the business' product or service.
A target market could be other businesses or consumers.
You may have more than one target market. For example, it is very common to have a primary target market and various secondary markets.
Why is this information important?
Understanding the size of your target market will help you forecast your sales for your cash flow projections.
You need to determine if there are enough people who want to buy your product to assess if you will be profitable.
Knowing your target market profile helps in making critical and focused marketing mix decisions.
Where do I conduct my research?
Statistics Canada (www.statcan.ca)
Industry Canada (www.strategis.gc.ca)
Internet
Survey, Focus Groups, Interviews, Competitor Analysis
You can't know enough about
your target market. You
must keep them top of mind in
everything you do - the customer
is the focus for all your efforts.
Christine Kincaid,
Mediaplus Advertising
Target Market
What do I include?
CONSUMER DEMOGRAPHICS
Age range
Income range
Gender
Marital status
Number of children
Occupation
Location boundaries
Average purchase
Frequency of purchase
CONSUMER PSYCHOGRAPHICS
Lifestyle
What do they read?
What need does your product fill?
What/who influences their purchasing decision?
BUSINESS DEMOGRAPHICS
Number of businesses
Location of businesses
Frequency of purchase
Size of business
Who makes the purchasing decision?
BUSINESS PSYCHOGRAPHICS
What influences the purchasing decision?
What need does your product fill?
Competitive Analysis
What is it?
This is a thorough analysis of both direct and indirect competitors.
Your analysis must identify the strengths and weaknesses of the competitors.
Your indirect competitors are not providing the same product or service but are competing for the same consumer's dollars.
Why is it important?
Information such as how your competitors price, market and sell their products can help you differentiate your business.
A good understanding of the competitive environment may identify areas that are currently not being targeted.
Understanding why your strongest competitors have been successful will provide you with important information about the market's likes and dislikes.
Where do I conduct my research?
Visit or call your competition, observe their set-up, customers, staff, professionalism
Ask their customers and suppliers
Review their promotional materials - yellow pages, web sites, brochures, flyers
What do I include?
YOUR COMPETITION
Hours of Operation
Years in Business
Product/Service description
Product/Service differentiation
Customer profile
Pricing
Marketing/Advertising
Strengths/weaknesses - why do customers buy from them?
Opportunities/threats to your business
The Marketing Mix
Promotional Strategy
What is it?
These are methods you choose to communicate to your target market to obtain your sales projections.
You need a well-defined plan of action that includes the timing, costs and expected return of the chosen promotional methods.
Why is it important?
A new business must create awareness with an action plan to generate business.
This is a critical link in the overall marketing strategy.
The timing of promotional methods will have a direct impact on cash flow, both cash receipts and disbursements.
Where do I conduct my research?
CARD (Canadian Advertising Rates and Data)
Small Business Industry Profiles (www.sme.ic.gc.ca)
Contact:
Advertising agencies
Radio stations
Newspapers
Direct mail services (Canada Post)
Review promotional materials of your competitors and other successful promotional items
Never sign a contract
for a lease that you
don't fully understand.
You might call distribution
the universal marketing
method - everyone does it.
Marketing Masters
by Profit Magazine
Place
What do I include?
Where is it?
What are all the costs associated with your location?
What is the marketing importance of the location?
Residential vs. commercial location
Is there potential for future growth at the location?
What are the traffic flows of the potential location selected?
How will your method of distribution affect:
1. Sales
2. Service
3. Promotion
4. Timing
5. Economics
The Marketing Mix Pricing
What is it?
The pricing of your product is the fee that will be charged to the customer. From a marketing perspective, it is how you will position yourself in the marketplace against your competition.
Price is a function of your costs, competition and customers. Your customers must have a desire, willingness and ability to pay for your product or service.
Why is it important?
Your pricing information will be a portion of the revenue equation that will determine profitability and profit margins.
Your price will serve to differentiate you in the market and will illicit a value perception.
An effective pricing strategy can help you enter a market quickly.
Your pricing strategy should be consistent with the overall positioning of the product/service.
Where do I conduct my research?
Competitor Analysis
Suppliers (business directories)
The promotions, human resources, location and operations components of your business plan
The Retail Council of Canada
has found that consumers
cite dissatisfaction with price
as the reason for not buying an item only 33% of the time.
Pricing Strategy
What do I include?
PRICING FOR A SERVICE
Labour
Overhead
Profit Margin
PRICING FOR A PRODUCT
Labour
Overhead
Materials
Profit Margin
PRICING CONSIDERATIONS
Low, medium, high
Client's perception of value
Will you be discounting your price on a regular basis?
Will you give trade or volume discounts?
Consumers value service and may be willing to pay more for it.
BREAK EVEN ANALYSIS
Identifies the sales level (units or dollars)
Required to cover the overhead expenses of a business based on a certain price and gross margin level.
Visit our Business
Resource Centre and
search a business directory to
source suppliers.
Operations Suppliers
The price may not always be the best reason for choosing a supplier.
Also consider:
are they reliable;
what are the delivery times;
is the product available;
what are the terms and conditions;
what support services are available?
What is it?
These are the companies, which will provide the necessary materials, products and services to operate your business.
This research of determines which suppliers best meet the needs of your business.
Why is it important?
Trade suppliers will provide you with the cost of materials and product availability. These costs must be factored into your pricing strategy and financial statement projections.
The terms and conditions of the purchasing can greatly affect the timing of the purchase.
Where do I conduct my research?
Trade Shows (Shows and Exhibitions)
The Yellow Pages (Internet versions)
Trade Magazines (Canadian Almanac and Directory)
Business Directories (Canadian Trade Index, Frasers, Scott's)
Operations Suppliers
What do I include?
NAME OF SUPPLIER
TERMS AND CONDITIONS
PRODUCT LINE
PRICING
IN AN APPENDIX - CONSIDER ADDITIONAL INFORMATION
Trade discounts
Shipping restrictions
Exclusive product rights
References
Back up suppliers
Operating
Regulations
What is it?
This section of the business plan outlines what operating regulations are required by all levels of applicable government for your business start-up.
Why is it important?
It ensures the business meets all legal requirements to minimize the small business start up risks.
It ensures that all elements of legal requirements are followed.
FOR EXAMPLE:
cost;
filing dates;
restrictions;
industry specifics consideration;
number of permits required;
qualifications required;
insurance.
Where do I conduct my research?
Municipal Economic Development
Township/County
Regional
Provincial (www.cbsc.org/sask)
Federal (Information on the Government of Canada (613) 941-4823)
Industry Specific (Industry Associations)
Operating
Regulations
What do I include?
LEVELS OF GOVERNMENT
Municipal
Regional
Provincial
Federal
Other Countries
TAX CONSIDERATIONS
Retail Sales Tax
Goods and Services Tax
Commercial Business Tax
Home Based Business Tax
Personal/Corporate tax rates
Employer Health Tax
SAMPLE REGULATIONS
Business Name
Business Identification Number
(BIN-Provincial)
Business Signage
Zoning
Intellectual property (CIPO)
Packaging and Labeling
Business Number
(BN - Federal)
Export Permit
Import Permit
Product Standards
Workplace Safety and Insurance
Board
Source Deductions (EI, CPP...)
Manufacturing Plan
What is it?
It outlines the method by which your product or service will be produced and sold.
This is a statement of where your product is in the development cycle and what resources are required to complete the development.
It outlines the critical points in your production process.
Why is it important?
You need to establish a plan to move into the production phase in a timely manner.
This section ensures that you have considered all components of the production process, as these will add to your physical and financial requirements.
Your production requirements will have a direct impact on your physical location, human resource and licensing needs and time frame.
The ability to protect your product through patents or trademarks will provide you with a stronger competitive advantage.
Where do I conduct my research?
Intellectual Property (CIPO - Canadian Intellectual)
Property Office
Patents
Trademarks
Copyrights
Industrial design
Municipal Zoning Offices
Government Restrictions
Packaging and labeling
Product specific restrictions
Manufacturing Plan
What do I include?
Production methodology
Research and Development requirements
Cost Analysis (Direct and Indirect Overhead)
Time requirements
Equipment and Plant requirements
Facilities description
Leasehold improvements
Warehousing requirements
Sub-contracting arrangements
Human Resources
What is it?
This is a description of the people who will provide the expertise required to run your business.
Why is it important?
It forces you to do a skills inventory of yourself and develop a plan to "fill in the gaps" with the expertise of staff or contractors.
You only have a limited amount of time in the day. Use your time to focus on what you do well and find people to do the rest.
If you are going to hire employees or contractors you need to factor this into your pricing and cash flow projections.
A strong management team is extremely important to potential investors
Where do I conduct my research?
Canada Customs and Revenue Agency Guides
Employee vs. Contractor
Employee Source Deductions
For salary rates contact:
Statistics Canada
(www.statcan.ca)
Your industry association
(Associations Canada)
Potential contractors
For legal contracts - contact your
lawyer
People are your greatest
asset. Investors look
closely at the management
team and need to know
what have they done
in the past.
Include the management
team's resumes as
an appendix.
Human Resources
What do I include?
ORGANIZATIONAL STRUCTURE/STAFFING PLAN
Full-time
Part-time
Seasonal
Legal considerations
Salaries
Rates
Benefits
Source deduction costs
JOB DESCRIPTIONS
Detailed listings
Roles and Responsibilities
SERVICE AND EMPLOYEE CONTRACTS
FUTURE HUMAN RESOURCES PLANS
BUSINESS SKILLS AUDIT - DO I HAVE:
Technical experience
Marketing experience
Financial experience
Management experience
Office administration
If I don't have these skills can I hire someone who does?
Financial Statements - Balance Sheet and Income Statement
What is it?
BALANCE SHEET - It shows the financial picture of a business at a given point in time. What the business owns versus what they owe.
INCOME STATEMENT - It shows the profit/loss of a business over a period of time.
Why is it important?
BALANCE SHEET - The balance sheet will assist you in determining your liquidity.
Do you have enough current assets
to meet your current liabilities?
The investor will look to this
statement to determine your
debt/equity ratio.
Bankers use this ratio to ensure that
the owners have a vested interest in
making the business successful, as
demonstrated by their equity in the
business.
INCOME STATEMENT -The income statement provides you with an overall profitability summary for a period of time and will determine your tax liability for the year. A banker or other investor will look at this statement to review margins, profit trends and ability to pay back debt.
Balance Sheet and
Income Statement
What do I include?
BALANCE SHEET
INCOME STATEMENT
Cash Flow Statement
What is it?
It is the actual money that is collected from sales and the actual money that is paid out for expenses on a monthly basis.
A cash flow statement takes the predictions and estimates that you have determined in your business plan and transfers them to a comprehensive financial statement.
Why is it important?
It helps determine whether or not the business is viable and if you will be able to draw funds from the business.
Knowing your monthly sales and expenses helps you make good decisions such as when to purchase equipment or hire staff and if you need to obtain a line of credit.
There are always
opportunities to improve
upon a negative cash flow
experience.
CFO of Laidlaw upon viewing a
$250 million cash flow deficit.
You need to be able to justify your numbers!
Happiness is a positive cash flow!
What do I include?
SOURCES OF CASH
Sales
Loans
Equity Investments
USES OF CASH
Expenses to be paid
Start-up Costs
BALANCE (Monthly cash receipts minus
monthly disbursements equals monthly
cumulative to date cash balance)
FACTORS TO CONSIDER:
Seasonality
Return on Promotions
Payment terms