Business Planning Guide
Using the Business Planning Guide
Robert C. Hill, Ph.D.
2
INTRODUCTION: Writing an Effective Business Plan
The Business Plan
A business plan can serve many purposes. It is frequently used as the document to raise
funding for new businesses. As such the plan is a selling document. A business plan is also a
useful roadmap that can help you to get where you want to go. When you use the team
approach to the planning process, the plan can be an excellent management tool that aids you
in motivating employees, obtaining better information for decision-making, and improves
communication within your company. In many cases, the business plan becomes a reality
check for business owners. Thus, the business plan and the process of producing it can help
you to establish direction, set goals, and begin the process of accomplishing those goals.
The Planning Guide
The following guide is written for use in developing plans for new as well as existing
businesses. The modular approach was developed through field and classroom use. The
modules follow a logical progression of steps important to any business but particularly for the
early planning of a new venture or growth plans for an existing one. Each module begins with
relevant sample questions that provide an information base for development of an effective
business plan. These questions are followed by a format and presentation suggestions for the
use of that information.
Who Writes the Plan?
An effective business plan should not be done by a consultant or one of your employees. YOU
should direct the process and involved as many people from your organization (or nascent
organization) as possible. It comes from your goals, vision, philosophies, experiences,
thoughts, and finally, your research into the business opportunity you are pursuing. This
planning guide outlines the fundamentals of creating your own workable business plan.
Why Plan?
People frequently start businesses to gain more control over their professional destinies.
Unfortunately, the reverse is frequently occurs. Business owners often find that they spend
most of their time “putting out fires” and spend very little time on direction setting and
planning. As a result, business owners often report that they are frustrated by their lack of
control over their businesses. The business plan is a means of gaining additional control over
where your business is headed. As described above, the mere process of planning can help you
establish direction and movement in that direction.
What is a "Good" Plan?
A good business plan is a dynamic document. You don't just “set it and forget it.” You should
refer to frequently in decision-making, evaluating, and future planning. Your business plan
should change as the environment in which you work changes. It may contain some gospel, but
the plan itself is not sacred. In fact, pretty much all business plans are WRONG from the day
they are written. The world changes and so must you. You must be prepared to significantly
change or even scrap ideas from your plan occasionally. Using milestones developed in the
planning process will help you to determine if and when this may be necessary. Writing and
maintaining an effective, dynamic, and flexible plan will be one of the most difficult tasks you
will encounter in developing, growing and maintaining your business.
BUSINESS PLAN OUTLINE
3
PHASE 1.
THE COMPANY MISSION STATEMENT
I. The Company
A. Background
B. Current Status
C. Future Plans
II. The Industry
A. Chief Characteristics
B. The Participants
C. Trends
III. Product/Service
A. Description of Product/Service
B. Proprietary Features
C. Future Development Plans
D. Product Liabilities
IV. Technology: Research and Development
A. Concept Development
B. Research, Testing, and Evaluation
C. Milestones
D. Current Status
PHASE 2.
V. Market Analysis
A. Target Market and Characteristics
B. Current Market
C. Market Trends, and Growth Potential
VI. Competitive Analysis
A. Competitors Profile
B. Product/Service Comparisons
C. Market Niche and Share
D. Comparison of Strengths and Weaknesses
VII. Marketing Strategy
A. Market Penetration Goals
B. Pricing and Packaging
C. Sales and Distribution
D. Service and Warranty Policies
E. Advertising, Public Relations, and Promotions
PHASE 3.
VIII. Manufacturing/Operations
4
A. Location
B. Facilities and Equipment
C. Operations
D. Labor Considerations
E. Environmental and Economic Impact
IX. Management and Ownership
A. Management
B. Board of Directors
C. Ownership
D. Professional Support
X. Administration, Organization, and Personnel
A. Management Philosophy
B. Organization Plan
C. Administrative Procedures and Controls
D. Staffing and Training
XI. Milestones, Schedule and Plan
A. Milestones
B. Schedule
XII. Critical Risks and Problems
A. Inevitable Risks and Problems and Planned Response
B. Potential Risks and Problems and Planned Response
C. Worst Case Scenarios
PHASE 4.
XIII. Financial Data and Projections
A. Funding Needs
B. Terms of Investment
C. Financial Projections
D. Assumptions
XIV. Supporting Documentation
5
Business Planning Guide
"The Executive Summary"
6
The Executive Summary
Suggested Length
1-2 pages
Objective
The executive summary should highlight the key points raised in each module of the business
plan. It forces you to boil down your business plan to the essentials that make your company what
it is. It should create interest in your business and make the reader want to read more.
Relevant Questions

What type of business is this? What products/services will it offer? Why are they unique?

Do they solve a significant unmet need or unsolved problem? Do they address a major opportunity?

What is the current status of your business status? What is your stage of development?

What is the legal form of organization?

Where is your location strategy? What are the advantages of your location strategy?

Who and what is the target market?

What percent of the total available market do you expect to obtain?

What is your plan and strategy for penetrating the market?

Who is your competition? What are their strengths and weaknesses? What is their market share?

Who is going to manage the business? What qualifications are needed to manage the business? What is the
experience, education, and background of your key people?

What are you major near-term objectives? What is your schedule for accomplishing these objectives?

What are your long range growth and development goals? What is the time frame for accomplishing these
objectives?

What are your financing needs to accomplish your goals? What type of financing are you seeking? debt?
equity? return?

What are your key strengths in this business? What will make it successful? What are your limitations?
7
The Executive Summary (continued)
What to Accomplish
The entire summary should be clear and to the point. The language should be simple and
demonstrate clarity of management objectives. Above all, the summary should show opportunity
and a plan to meet the opportunity!
Presentation
Recommendations
Concept
The opening statement should grab attention! Start with a key differentiating feature of your
company, its products and/or services. Describe the nature of the business, its type, form, and
status. Profile the trade area in which you will operate. Show how you are positioned within your
competitive space.
Product/Service
Describe your product/service. Discuss specialization, significant, or unique features. Discuss
where you will be located and why it is advantageous. Discuss your distribution plans. Describe
any relationships you have with manufacturers or suppliers that enhance development and
introduction of your product or service.
Market
Describe your target market, your projected share, and overall potential. Discuss the competition
and what advantages you have over them. Discuss your plans for introducing your product/service
and your strategy for gaining market acceptance and loyalty.
Manufacturing/Operations
Discuss the processes involved in producing your product and getting it to market. Highlight the
areas of specialization and technology that you have pioneered in the making of your products. If
you plan to subcontract or license production, describe the arrangements and why they are
advantageous.
Management
Discuss the people involved in your company, their management expertise and experience.
Highlight their distinctive competencies. Discuss the support personnel that will be needed as the
company grows. Show that the people involved are qualified and committed.
Funding and Investment
State the amount of funding needed and its intended use. Discuss what you will offer in return for
the money. Include the payback period and potential return on investment. State what the earnings
projections are for the next three years.
Milestones and Time frames
Describe the milestones enroute to accomplishing the goals of your business. Specify the phases
and time frames along the way.
8
Business Planning Guide
PHASE 1
"Defining the Business"
9
PHASE 1:
The Company and the Industry
Suggested Length
2-3 Pages
Objective
To provide a general description of your business. To outline your competitive environment (trading area)
and describe how your business fits into it.
Relevant Questions

What is your mission or vision for the company?

When and where was your company started?

What is the form of organization?

Where is(are) your business(es) located?

What proprietary rights do have? What advantages do they create?

Who are the owners and other key people?

What is your market?

How do you plan to penetrate the market?

What are your overall strengths & weaknesses?

What are your goals and strategies for achieving them?

How will economic, social, technological, environmental or regulatory trends affect your business?

What, specifically, is your industry and competitive environment? What are its characteristics?

What is the current state of the industry?

How big is it? Where is it expected to be in 5 years? 10 years?

Total sales? profits? margins?

Who are the major industry participants (competitors, suppliers, major customers,
distributors, etc.)?

How have your competitors performed? What are their market shares?

What competitive advantages do you have over them?
10
PHASE 1:
The Company and the Industry (continued)
Subheadings to
Include
THE COMPANY MISSION STATEMENT
I. The Company
A. Background
B. Current Status
C. Future Plans
II. The Industry
A. Chief Characteristics
B. The Participants
C. Trends
What to Accomplish
Translate the vision for your business into words. Describe how your business is positioned
relative to the competition. Discuss where you want to be positioned in the next 3-5 years.
Presentation
Recommendations
THE COMPANY MISSION STATEMENT
Your company mission statement should be a short paragraph (typically 50 to 100 words) and
precede the body of your plan. It is typically indented and bold faced over the opening paragraphs
of the plan. It must clearly answer the following three questions: Who are we? What do we
do? and; Where are we headed? These are the three most critical questions for your business
and should be the drivers for the entire plan that follows.
Among the purposes of the mission statement, the most critical is to establish direction. Exactly
what is it that you want to accomplish with your business? A good mission statement makes it
clear to all what you are all about and should serve as a motivator for all members of your
organization. Finally, while the mission statement must be narrow enough to provide direction,
you must also be careful not to be so narrow as to limit flexibility and stifle creativity and
ingenuity.
THE COMPANY
Background
Note the form of organization chosen, who is involved, and what their contributions have been to
date. Discuss any patents, copyrights, trademarks or other proprietary rights you may have.
Current Status
Describe where you are now. Discuss your strengths and weaknesses. What are the major internal
issues for your business and what are their implications?
Future Plans
Discuss 3-5 year goals for your business. Overview how you plan to achieve them. Discuss the
future development and expansion plans for your business.
11
PHASE 1:
The Company and the Industry (continued)
THE INDUSTRY
Chief Characteristics
Provide an overview of your business’s current competitive environment (trading area). Profile it,
including information on: size, dispersion, market, history, status, sales, profits, etc.
The Participants
List your direct competitors and other important participants (such as substitutes) within your
competitive environment. Briefly describe your direct competitors in terms of positioning, their
strengths and weaknesses, and market strategies.
Industry Trends
Where is the industry headed? What opportunities and threats do you see in the industry?
Describe trends in terms of any significant events or factors that may affect the industry
profitability and/or market size positively or negatively.
12
PHASE 1:
Products/Services
Suggested Length
2-4 pages
Objective
To describe your product or service, special features, benefits, and future development plans.
Relevant Questions

What is the purpose of your product/service?

What need does it serve or what opportunities does your product address?

What are the product/service's unique features? benefits?

What is its life cycle? technological? market?

How does it compare to "state-of-the-art"?

Does the product/service's success depend on someone else? who?

What future products/services do you plan to develop to meet a changing market?

What regulatory or approval requirements affect your product/service?

What liabilities will the product/service expose you to?

What are the insurance requirements?

What testing has the product/service undergone?

Is there more than one product/service involved? How will they effect one another?

How does the product/service compare to similar products of competitors?

Are there any special production or delivery considerations?

What related services will you provide?

How will these services enhance the product/service?
13
PHASE 1:
Products/Services (continued)
Subheadings to
Include
III. Product/Service
A. Description of Product/Service
B. Proprietary Features
C. Future Development Plans
D. Product Liabilities
What to Accomplish
Explain your product/services, what they do that's special or different, and who they serve.
Highlight future development plans.
Presentation
Recommendations
Product/Service Description
Describe your product/service and its purpose (i.e., the need it serves for the customer/client) in
detail. Discuss features, benefits and capabilities. Discuss other related product or services. Note
the stage of development of the any new products or services.
Proprietary Features
Detail any patents, copyrights, trademarks, servicemarks or other binding agreements that protect
your product or service. In general, discuss how you plan to protect your product and your
competitive advantages. Brief any approvals required to produce and distribute your product or
service.
Future Development Plans
Discuss future development plans for improvements and expansion of your product or service
lines. Note the present and future markets targeted as well as the time frame for development.
Product Liability
Detail liability and insurance considerations associated with the making and distribution of your
product/service. How will you limit your exposure?
14
PHASE 1
Technology: Research and Development (Optional)
Suggested Length
1-2 pages
Objective
To provide an overview of your product and its unique characteristics. To outline the
product's past, present and future development.
Relevant Questions

How much of the product is developed? development costs to date?

What technical tests has the product undergone? market tests?

Have you applied for, or received, patent or other protection?

How does the product compare to similar products? Its relative advantages?

When will the product be ready for mass production and distribution? Who will produce it?

What spin-off products do you plan to develop in the future?

What are the major risks or problems associated with the product's development?
Subheading to
Include
IV. Technology: Research and Development
A. Concept Development
B. Research, Testing, and Evaluation
C. Milestones
D. Current Status
What to Accomplish
Describe how your idea was/will be developed from concept to viable business opportunity.
Presentation
Recommendations
Concept Development
Detail how the product came about, its development time and cost. Detail your targeted
applications or market opportunities. Describe ownership issues relative to the product.
Research, Testing, and Evaluation
Detail all research, testing, and evaluation activities related to your product's development. Present
supporting factual data in an appendix to the plan.
Major Milestones
Discuss milestones and achievements during R&D. Detail how the product is different or superior
to similar product. Note risks and problems need to be overcome.
Current Status
Where does your R&D effort stand now. What still needs to be done and by whom?
15
Business Planning Guide
PHASE 2
"Assessing the Market"
16
PHASE 2:
Market Analysis
Suggested Length
4-6 Pages
Objective
To demonstrate that you understand the market, that you can penetrate it, and that you are in
control of the critical success factors which will enable your company to reach its sales goals.
Above all, to prove there is a demand for your product or service and a place in the market for
your business.
Relevant Questions

Who or what is your target market?

What is the size of your target market?

Can this market be segmented? How?

What is the profile of your targeted customers?

What are the major uses of your product or service? In other words, what function does it provide for the
customer? For example, the McDonald’s product offering is pretty much the same everywhere, but the
functions they serve may change. Is it just quick food? Or is it a party? A study hall? A friendly meeting
place? Everybody eats at McDonald’s. Thus, an important means of segmentation is based on use, not on
demographics.

For each major application, what are the requirements by customers?

What are the requirements of regulatory agencies? How are they fulfilled?

What are the buying habits of the potential customers?

What will be the impact on the customers who use your product or service? Economic benefits? Will it
change the way they do things? Will they need to purchase other goods or services to utilize yours? Will
they have to change their work or living habits to use yours? Overall, how will you satisfy their needs or
wants better?

What share of the served available market (SAM) do you hope to capture?

What are your market share objectives for the total available market (TAM)?

What is the growth (historical and potential) of your market?

What are the market trends? What factors affect it?

Why do you think you can attain the given level of market penetration?

How will the segments and applications of your market change over the next 3-5 years?
Have you gotten reactions from current and prospective customers? What were the reactions?
17
PHASE 2:
Market Analysis (continued)
Subheadings to
Include
V. Market Analysis
A. Target Market and Characteristics
B. Current Market
C. Market Trends, and Growth Potential
What to Accomplish
Citing facts from your market research, show why and how your company will be successful.
Most importantly, prove there is a sustained market for your product/service and that your
potential share and resulting profit projections are realistic.
Presentation
Recommendations
Target Market and Characteristics
Describe your target market and profile your customer. Discuss how your product/service meets
the needs/wants of this market. Discuss the "buying" record and habits of your potential
customers. State the pertinent facts concerning the size, age, location/area, profession, income,
and other demographic information about the market. Detail any research, studies, or surveys
conducted. Include a list of these in a bibliography in an appendix.
Current Market
Describe the broader market as it now stands ( The served available market or SAM). What are
customers buying and why? Discuss overall market size and approximate sizes of individual
segments. Discuss the profitability of each segment.
Market Trends, and Growth Potential
Discuss the trends of the market at the industry, regional, and local level. How large could the
market become (The total available market or TAM)? Discuss any cyclical or seasonal market
trends and the approximate time frames. Propose, briefly, how you will adjust or compensate
during any "off-season" periods. Discuss how the market will change over the next 3-5 years.
Discuss the growth potential of the entire market and your specific target market. State the
rationale and assumptions on which you base your expectations for the market. Discuss fully the
opportunities and threats associated with possible market trends and fluctuations.
Appendix Information
Analyst Summaries
Provide quotes and detailed discussion summarizing significant facts, figures, and trends about the
market (and the market potential) from various reputable sources. Make sure you properly credit
the source. The objective is to pinpoint specific opportunities that exist within the industry, and
how your products and services capitalize on these opportunities. The information should make it
clear what problems and needs exist in your market. It should be evident that your
products/services can solve these problems and/or meet the needs better than existing solutions or
alternatives.
18
PHASE 2:
Competitive Analysis
Suggested Length
2-4 pages
Objective
To fully describe the competitive forces at work in your marketplace. To explain your strengths
over the competition, how you will counteract their advantages and overcome or compensate for
your weaknesses.
Relevant Questions

Who are your nearest and largest major competitors?

Is their business steady, increasing, or decreasing? Why?

How does your planned business compare to your competitors' (strengths and weaknesses of each)?

What are the similarities/dissimilarities between your business and your competitors' business?

On what bases do you compete with them? Product? Price? Marketing/Promotion?
Technology/Innovation? Other?

In what respects is your business better? What is your distinctive competence? Operations? Management?
Product? Price? Service? Distribution? Other?

What direct (industry incumbents) and indirect (substitutes) competition will you meet in each
product/service line?

How does your product/service compare with the competition in the eyes of the consumer?

What do you know about other potential competitors (new entrants) not yet in the marketplace?

If you see no competition, what kind might you create if you're successful?

Do you threaten the major strategic objectives or self image of the competition? If so, how will they
respond? How will you respond?

What do you know about how the competition operates? Their strategies?
19
PHASE 2:
Competitive Analysis (continued)
Subheadings to
Include
VI. Competitive Analysis
A. Competitors Profile
B. Product/Service Comparisons
C. Market Niche and Share
D. Comparison of Strengths and Weaknesses
What to Accomplish
Give a brief run-down on the other industry participants. Highlight your particular competitive
edge.
Presentation
Recommendations
Competitors' Profile
Discuss the competition: size, age, location(s), sales, management, mode of operation, and other
characteristics that you think relevant. What are the strategies and philosophies of business of your
competition? How do they make decisions? Also discuss the potential for new entries in the
market.
Product/Service Comparisons
Discuss the similarities and differences between your product/service and that of the competition.
Compare your operations and management approach with your various competitors. Highlight
whatever it is that makes your product/service and company more attractive in the marketplace.
Market Niche and Share
State the approximate percentages each of your competitors' holds in the market. Discuss those
that hold the largest percentages and why they have an edge. Discuss the competitors who are
coming on strong and are making (or expected to make) bigger gains in the market. Discuss the
particular segments of the market that each of your competitors addresses. Discuss your niche in
relation to these and what percent of the total market it makes up. Describe where the market is
headed and how each competitor's niche and share may change over the next 3-5 years.
Comparison of Strengths and Weaknesses
Discuss your strengths and weaknesses in relation to your major competitors. You should
summarize: product superiority, price advantages, market advantages (contracts, proximity to
market, proximity to labor supply, raw materials, energy, transportation, etc.) and finally,
management strengths and weaknesses.
20
PHASE 2:
Market Strategy
Suggested Length
2-4 pages
Objective
To explain specifically how you will enter and/or penetrate the market, obtain a niche, maintain a
market share, and achieve the stated market objectives.
Relevant Questions

What geographic market area do you now cover? What markets do you intend to cover in the future?

What is the sales appeal of your product/service? i.e., why do people buy it?

What is special or unique about your product/service "package"?

On what basis will you attract and maintain your market? How will you expand it?

What are your marketing priorities among segments and applications?

Who makes the purchasing decision, and how will you reach them?

What intensity of selling effort will be required?

How will you sell? In-house salesmen? Manufacturer representatives? Other?

What advertising approaches will you use?

What promotional strategies will you use? e.g. trade shows, demos, etc.?

On what basis will you evaluate the effectiveness of your advertising/promotions?

How large will your customer's average order be? Dollars? Units?

How frequently might your customers buy from you? How often could they be enticed to buy from you?

What do you expect as the sales "cycle" for your products/services?

What are your yearly sales milestones for the next 3-5 years?

What is your pricing strategy? Your margins? On what basis are prices set?

How will your pricing policies change over time?

What will your discount policy be? Your dealer pricing program?

How might your competition respond to your strategies? Marketing? Pricing?

How will your packaging and labeling enhance name identification? Brand loyalty?
21
PHASE 2:
Marketing Strategy (continued)
Subheadings to
Include
VII. Marketing Strategy
A. Market Penetration Goals
B. Pricing and Packaging
C. Sales and Distribution
D. Service and Warranty Policies
E. Advertising, Public Relations, and Promotions
What to Accomplish
Describe your plan of action for being successful in the market. Discuss how your internal policies
and your utilization of the media will contribute to that success.
Presentation
Recommendations
Market Penetration Goals
Describe your plans for penetrating the market. State what your estimated sales and share will be.
Discuss the sales appeal among specific segments of the market. Discuss how you will identify
prospective customers within each segment, how you will prioritize them, and how you will reach
them. State your timetable for achieving these penetration goals and how your strategy may be
affected by the reactions of competitors and market trends.
Pricing and Packaging
Describe your pricing policies and how they are determined. Discuss the influences of the
competition, discounts, cost of goods, market forces and other factors that affect pricing. Justify
your prices, particularly if they are substantially above or below the prices of similar
products/services in the marketplace. Above all, demonstrate that your pricing decision is based
on the market and that it will allow your company to make a profit.
Sales and Distribution
Discuss any special relationships that you may have with distributors. Mention any distribution or
licensing agreements that are in force or that you are seeking. Describe how your product/service
will be distributed and over what geographical area. Discuss the method(s) of sales and retailing,
direct sales and other methods.
Service and Warranty Policies
Describe your service arrangements, product support, warranty terms and customer orientation of
these programs. Discuss how these policies help make you competitive and how they will affect
profits. Discuss the procedures for implementing these policies.
Advertising, Public Relations and Promotions
Describe your advertising, public relations and promotional programs and campaigns. Discuss the
media you will use and professional services you will require to implement your plans. Describe
your overall approach and strategy for introducing your product/service and gaining market
familiarity and acceptance. Discuss how the company's name, or the product/service name may
contribute to market identity.
22
Business Planning Guide
PHASE 3
"Operations & Organization"
23
PHASE 3:
Operations
Suggested Length
2-4 Pages
Objective
To explain how you will produce your product in a cost efficient way and make it ready for the
market.
Relevant Questions

How will you produce your product/service?

How much of the production will be done internally? through subcontracts?

What are the sources of supply for components of your product? Are there backup or alternative suppliers?
lead times?

What are your facility plans? dollars? units? expansion capacity?

How will you acquire the necessary facilities? lease/purchase? other?

What are your direct costs of production? indirect costs? How will you track and control these costs?

What are your quality control plans? How will you define quality for your product/service? How will you
measure it? What systems will you (or do you) have in place to ensure delivery of quality?

How will you (do you) control inventories?

What are your productivity goals?

What is the potential environmental impact of your processes?

What are the advantages or disadvantages of your location? facilities? How will you (do you) compensate
for the disadvantages?

What are your short and long-term plans for facilities and locations?

Overall, what production or operating advantages do you have?

What economic impact will your business have on the community in which you will be located? job
creation? spurring economic development?
24
PHASE 3:
Manufacturing/Operations (continued)
Subheadings to
Include
VIII. Manufacturing/Operations
A. Location
B. Facilities and Equipment
C. Operations
D. Labor Considerations
E. Environmental and Economic Impact
What to Accomplish
Describe how you will make your products, how you will minimize costs and manage the
problems inherent in producing your product/service.
Presentation
Recommendations
Location
Describe your location and the surrounding area. Discuss the advantages and disadvantages of
your location in terms of closeness to customers; availability of labor, suppliers, and capital;
access to transportation, energy, utilities and other resources, and the relevant state and local laws
and regulations. How will/does your location affect your production and operating costs. Propose
your long range location plans, including full analysis of the above.
Facilities and Equipment
Describe the characteristics of your planned facilities. Highlight how the facilities and equipment
give you better production or operating advantages over similar businesses. Discuss the longrange needs and plans for your facilities and equipment.
Operations
Describe how you will produce your product and/or conduct service operations. Discuss the
methods and processes involved. State how much will be done internally and how much will be
subcontracted. Detail your raw material needs and how they will be supplied (and what backup
suppliers you have). State your initial and planned production capacity in dollars and units. Break
down production into fixed and variable, direct and indirect, costs. In general terms, discuss your
the control systems and tracking systems you will establish to ensure that cost and quality goals
will be met. More detailed information should be provided in an appendix.
Labor Considerations
Discuss your labor requirements. How many people will you need to hire and when? What
training will be necessary for new and current employees.
Environmental and Economic Impact
Describe how your company and its production operations will impact the environment and the
community. Highlight the economic benefits that will result from your business operating in the
community.
25
Business Planning Guide
" Organization"
26
PHASE 3:
Management and Ownership
Suggested Length
2-3 pages
Objective
Describe how your management team operates. Ensure that the leadership is in place to move
your company toward the fulfillment of its goals. Show how ownership will be distributed.
Relevant Questions

Who are your key managers?

What is the history of each principal? education? experience? skills and abilities?

What does each principal bring to the venture?

What are the positions and roles of the principals? Their responsibilities? Their duties?

What will be the compensation package of each principal?

What is the ownership interest of each principal?

Do you have or will you eventually add a board of directors? Who is on your board? What will its function
be?

What are the primary goals of the owners and managers? Growth? Sellout? Income Substitution?

How will you attract and compensate additional key people as you grow?

What agreements will you use to direct your relationship with key employees?

How much stock (or ownership shares) will you issue? distribution?

How about you? what are your motives for going into business?

Are you suited for the role you plan to play in your company?

Who is on your professional team of outside advisors? How are they used?
27
PHASE 3:
Management and Ownership (continued)
Subheadings to
Include
IX. Management and Ownership
A. Management
B. Board of Directors
C. Ownership
D. Professional Support
What to Accomplish
Assess your company’s management balance. Do you have adequate expertise in the areas of the
business? Will you in the future? How will you manage this issue? How have you (or will you)
cover management skill areas in which you are weak? Be sure to differentiate between ownership
and management roles.
Presentation
Recommendations
Management
Discuss your management team. Give a brief background of the. Describe each principal's special
skills and what they bring to the company. Discuss education, experience, knowledge of the
industry, special talents, training, skills, and abilities.
Discuss each principal's position, duties, and responsibilities. Discuss each principal's
compensation package and terms of employment. State what each principal's goals are for the
company (i.e., what they want to get out of their involvement with the company). Discuss any
legal employment contracts that each may execute with the company.
Describe the qualifications that will be needed to fill key management positions in your company.
State how you will recruit and compensate key people. Describe how your management program
will change as your company grows.
Attach personal resumes and personal references of each principal and key management as an
appendix. (This is a must for business plans used to obtain capital. But is less important for plans
used as management tools only.)
Board of Directors
Discuss who is on your board and their value to the business. List their fields of expertise and their
other relevant affiliations. Describe any special contributions they have made or are expected to
make. How does the board function? How are they compensated? How much power do they
have?
Ownership
Detail the ownership interest of all parties involved and the form of ownership. Discuss how
ownership may change over time, including: plans pertaining to buyouts, dissolution of the
company, owners leaving the company and other possible developments. Discuss the rights and
privileges of all current and future owners.
Professional Support
Describe your support team and how it will assist in the development of your company.
28
PHASE 3:
Administration, Organization, and Personnel
Suggested Length
2-3 pages
Objective
To outline how your company is organized to accomplish your goals. Explain how you deal with the
issues of authority, and responsibility. Provide a description of your approach to staffing.
Relevant Questions

What is your organizational structure (with chart)?

What are the lines of authority and responsibility? communication?

What are your administrative policies, procedures, and controls (by function)?

What are your management philosophies and style?

How will you motivate your employees?

How will you create a positive (conducive) work environment?

How will you manage for goal attainment?

How will you encourage creativity and entrepreneurship?

How will you foster commitment and loyalty in your employees?

What is your planned personnel make-up? number? skills? hiring?

What are your short and long-term staffing needs?

How will you attract and compensate employees?

How will you communicate your expectations to your employees?

How will you evaluate your employees? On what basis can they advance?

What are the costs (in dollars) of your administration and staffing?
29
PHASE 3:
Administration, Organization, and Personnel (continued)
Subheading to
Include
X. Administration, Organization, and Personnel
A. Management Philosophy
B. Organization Plan
C. Administrative Procedures and Controls
D. Staffing and Training
What to Accomplish
Describe how your company will be managed. Discuss your personnel needs and how you will
ensure that these positions are filled. Include an organizational chart that illustrates the company's
structure, lines of authority, and responsibility. Provide a summary of your management
philosophy and style.
Presentation
Recommendations
Management Philosophy
Summarize your management philosophy and style. Tie those into how you will go about getting
the most out of your people. Describe your plans to encourage group goals over individual goals.
Discuss how you will keep your team involved and growing in abilities and interests. Discuss how
you will keep communication lines open, encourage creativity and commitment to company goals;
remain flexible and action oriented.
Organizational Plan
Describe how you are organized. How do you address issues of responsibility and authority and
ensure that the work of the organization is accomplished? As best you can, draw an
organizational chart. A military-like hierarchy is not necessary, but it is useful both as a
conceptual tool and for communication to attempt to sketch out how your organization fits
together. How will your organization look in 3-5 years? Why?
Administrative Procedures and Controls
Describe your administrative systems, procedures and controls for all critical functions. Discuss
your compensation plans, productivity and quality incentive programs, and employee benefits.
Detail company policies that relate to labor and how you will communicate them to your
employees.
Discuss any employment contracts you use or plan to use and enforce.
Staffing and Training
Discuss your current and future personnel needs. Describe how you identify, attract, hire, and
compensate employees. Provide job descriptions for all current and planned positions in an
appendix. Include in these descriptions a discussion of what is expected of the job holder and the
expected qualifications for that position.
Assess your training needs. What will training be needed and when. How will you fill this need?
30
Business Planning Guide
“Establishing Yardsticks”
31
PHASE 3:
Milestones, Schedule, and Strategic Plan
Suggested Length
1-2 pages
Objective
To outline major company objectives and explain how and when they will be achieved and
measured.
Relevant Questions
For Start-up Planning

What needs to be done to launch your venture?

What needs to be done to raise capital?

What needs to be done to identify and enter the market?

What needs to be done to identify, recruit, place and train people?

What needs to be done to locate the company? line up suppliers?

What needs to be done to go operational?

Who is going to be responsible for getting 1-6 done? When will they be completed?
For All Business Planning

What are your strategic goals for the company? How do they fit with your mission?

What are the measurable objectives that can be used to determine if you have accomplished or are making
progress toward your goals?

Do your goals (and the corresponding objectives) reflect a "real world" view" or just hopeful thinking?
Most importantly, are they challenging yet realistic within the context of your timeline?

How do you develop your goals and objectives? Who is involved in the process?

What are the critical milestones that must be reached for you to accomplish your goals? Include a timeline
chart showing your milestones by month/year.

What contingency plans to you have if you do not reach key milestones within your expected time frame?
What if it appears that reaching these milestones is not likely to occur?

Do you have a consistent and coordinated plan toward the attainment of these goals?
32
PHASE 3:
Milestones, Schedule, and Strategic Plan (continued)
Subheadings to
Include
XI. Milestones, Schedule and Plan
A. Milestones
B. Schedule
What to Accomplish
Describe what must be done enroute to accomplishing your goals and how you will pursue these
goals in a realistic way, within a reasonable time frame. Identify the critical milestones towards
goal attainment. Summarize the implications of not reaching them and your alternative action
plans.
Presentation
Recommendations
Milestones
List the significant goals for the company. Describe how you will attain them and when. Plot out
the milestones enroute to accomplishing your goals. Develop a timeline to depict when you
expect to achieve each step in your plan. Show who is responsible for seeing that development
plans are implemented. Describe why your goals and time frames are realistic. Specifics for
measurement should be detailed in the appendix on control systems.
Schedule
Include a timeline chart showing significant milestones and their priority (time or importance) for
completion.
33
PHASE 3:
Critical Risks and Problems
Suggested Length
1-2 pages
Objective
To identify the potential problems and risks associated with your business. Most importantly you
must demonstrate your understanding of these risks and describe your plans to deal with them
should they occur. Realistic completion of this section requires a team effort. Input from
disinterested third parties with a working knowledge of your business is frequently needed.
Relevant Questions

What are the inherent risks and potential problems associated your business?

There are three generic risks generally associated with practically all businesses. The risks are technological
change, regulatory change and legal liability. What is the likelihood that your company will encounter any
of these risks. Are there any other potential problems risks?

Can you avoid these problems or manage them such as to minimize their impact? How?

Unexpected change and other problems can sometimes be sources of opportunity. Can you take advantage
of any of the potential problems turn them into opportunities?
Subheading to
Include
XII. Critical Risks and Problems
A. Inevitable Risks and Problems and Planned Response
B. Potential Risks and Problems and Planned Response
C. Worst Case Scenarios
What to Accomplish
Presentation
Recommendations
Address the negatives that exist or may develop. Readers will appreciate your integrity by you
giving them the full story. Counteract the downside by describing how you plan to avoid,
minimize, or turn around the major problems and risks.
Inevitable Risks and Problems
Describe the nature of the problems and risks that your venture will be faced with. Discuss how
you will avoid or minimize their impact. Discuss any liability or insurance problems you might
have.
Potential Risks and Problems
Describe and discuss in the same manner as above the problems and risks that may present
themselves. Discuss the circumstances or situations that would prompt these to happen and how
you will deal with them if they did.
Worst Case Scenario
Give a worst case scenario of all inherent and potential risks that the company may suffer.
Summarize the downside and what, if anything, could be done if these risks materialized.
34
Business Planning Guide
PHASE 4
"Financing, Financial Projections & Supporting Information"
35
PHASE 4:
Financial Data and Projections
Suggested Length
As Needed
Objective
To illustrate current financial status and projections. To describe the type of financing planned;
the amount required; payback terms and potential return on investment(s). In as much as possible,
you should draw upon data based on your own past performance and/or on financial data drawn
from comparable businesses. Be sure to take a look at publications from Robert Morris
Associates.
Relevant Questions
For Start-up Planning

What are your start-up and research and development costs? Provide as detailed a list as possible rather
than simply “guestimating” overall figures for categories of items.

Are your market entry plans justified by the projected sales, profits, and, most importantly, cash flow?

What provisions are made for investor liquidity? What is the payback period?

What's the potential return to investors? How does it compare to other investments?

What are the types of funding available to you? What is or will be the makeup of your capital structure?
debt? equity? What are the terms of investment?
For all Business Planning

What are the financial projections for your business for the next three years? For start-ups, this should be
by month for the first year and by quarter for the second and third years. You should provide an optimistic,
a realistic, and a worst case scenario for your projections. These are tremendously valuable for planning
purposes. They also prove to potential sources of capital that you have fully considered the possible
outcomes of your plan their implications for the future of your business.

How do your projections compare to industry norms? Have you explained the rationale for any substantial
deviations from industry averages?


What assumptions are necessary to support your projections? List them and provide explanations.
What are the costs to produce your product(s) or offer your services?

Do a full activity chain analysis of your operation. Where are your most significant costs? How volatile
are they? Could you make them more controllable?
36
PHASE 4:
Financial Data and Projections (continued)

Have you fully differentiated between fixed and variable costs? What is your break-even in units and
dollars? When do you break-even under each of your sales scenarios? How many months before you
reach positive cash flow?

What systems do/will you use to monitor costs and manage cash?

What are your margins? gross? operating? after fixed costs? after financing? net?

Have you analyzed your capitalization scheme? How will it affect issues such as cash flow , flexibility,
control, and so on?

Have you analyzed cost alternatives? subcontracting? shared services?

Have you translated your forecasts into physical goods requirements?

How much investment capital and working capital will you need? When will you need it?

How much equity is or will be invested? In what form? What is the ownership distribution?

What are your future financing plans? Do you plan an eventual public offering?

Are the end results of financing in line with your stated goals and objectives? Does it allow for control and
flexibility? Does it provide the needed resources?
37
PHASE 4:
Financial Data and Projections (continued)
Subheadings to
Include
XIII. Financial Data and Projections
A. Funding Needs
B. Terms of Investment
C. Financial Projections
D. Assumptions
What to Accomplish
This section is generally closely scrutinized by people outside your company such as bankers,
investors, etc. It must be thorough and convincing. Document everything. If you are using the plan
in pursuit of funding, detail how you will use the funds and how they will help ensure your
success. Show that your projections are realistic, based on sound economics, comparables and
revenue data developed in Phase2 and cost data from Phase 3. Support your projections with
reasonable assumptions.
Presentation
Recommendations
Funding Needs
State the amount and type of funding being sought. Describe the intended use of the funds. Give a
breakdown of how the money will be applied. Discuss what effect the capital will have on the
business in terms of growth and profitability. Specify when the money will be needed. Include a
graph, table or other figure showing the amount and timing of the funds. Discuss the amount of
stock or ownership that will be made available. Discuss your future funding expectations and
when it will be needed.
Terms of Investment
Describe the terms of investment. Detail ownership distribution and rationale for it. Discuss the
payback period and potential return on investment. Describe why investment in your venture is
attractive and how it compares to other investments. Discuss provisions for owner liquidity and
when and how investors can expect to recover their initial investment.
Financial Projections
Your projections must be based on realistic expectations. Be prepared to support all data for at
least a 3 year period. You should provide projections for the following:
1. Projected income: pessimistic, realistic, optimistic, by month (first year)
2. Projected income: realistic, by quarter (years two and three)
3. Projected cash flows: by month (first year)
4. Projected balance sheet: three year (year-end)
5. Break-even analysis: first year
Assumptions
Assumptions are the basis for predicting the future, especially when it applies to economics,
markets, and financial projections. Your projections are only as good as the assumptions on which
they are based. Your challenge is to offer reasonable assumptions that the reader will see as valid.
Discuss why you think they are valid and what alternatives you will pursue if they don't
materialize.
38
PHASE 4:
Supporting Documentation
Suggested Length
As needed
Objective
To provide more comprehensive documentation that supports the information and claims made in
the various sections of the business plan.
Relevant Questions

Do you have photos of the products, facilities, equipment?

What contracts have you signed?

Do you hold a patent, trade, service mark or copyright?

Have you developed a bibliography of all self-produced and professional research, studies or surveys
conducted or used to plan the venture?

Have you charted the venture's sales, profits and break-even by products? markets?

Do you have a chart that details competitors' share and sales over a 3-5 year period?

Have you done a competitive comparison chart of your strengths and weaknesses?


Do you have samples of your planned advertising materials?
Do you have resumes and personal references from potential customers, suppliers, bankers, former
employers, etc. on each of the principals?

Do you have personal financials for each principal?

Do you have "role" descriptions for major positions and support personnel?

Do you have an organizational chart?

Do you have a timeline chart depicting significant milestones and priorities?

Have you listed your equipment and other capital expenditures, with a description and the cost of each?

Have you graphed the amount of money and timing of the funds to be infused?

Do you have detailed financial projections?

Have you developed budgets for key products? markets?
39
PHASE 4:
Supporting Documentation (continued)
Subheadings to XIV. Supporting Documentation (Appendices) May Include
A. Company and Product(s)/Services Support Materials
1. Photos of the product(s), equipment, facilities
2. Patents, trademarks, service marks, or copyright documents
3. Bibliography of research, testing, and studies
B. Legal Support Materials
1. Ownership agreements and/or contracts
2. Marketing agreements and/or contracts
3. Employment agreements and/or contracts
4. Financial agreements and/or contracts
C. Market Support Materials
1. Magazine, newspaper, trade journal articles
2. Brochures, drawings, mailings, and materials
3. Market share chart
4. Competitive comparison of strengths and weaknesses
5. Customer contacts and status
6. Letters of interest or intent
D. Management/Ownership support Materials
1. Resumes of key people, references, recommendations
2. Management philosophy and style outline
3. Significant milestones and time frames
E. Administrative and Personnel Support
1. Organizational chart
2. Staff/training outlines
3. Role descriptions for key personnel
4. Systems descriptions
F. Financial/Investment Support
1. Break-even analysis
2. Principal's financial statements
3. Equipment and capital expenditure listing
4. Additional financial statements
What to Accomplish
When using the plan as a management tool, the appendices provide you with an excellent source
of stored information for all to see and use. Moreover, for the potential investor, they demonstrate
that you have done your homework in all areas of the venture. Make sure the supporting
documents can be easily read and understood.