Archive for

A Sample Business Plan for a Small Business May Not Be the Best Way

You can find a sample business plan for a small business in all kinds of formats. There is a sample business plan for a small business where you basically fill in the blanks or you can have access to a sample business plan for a small business where you can pattern yours from it or you can develop a business plan that is centered on what you want for your dreams and your life.

I don’t know of better way than to let your business give you what you want for your lifestyle. Whether it’s a sample business plan for a small business or one where your business gives you a plan, it should tell you what is needed to take you where you want to go and when and how you can get there and it should be in clear simple terms, supported with all the specifics.

So using a sample business plan for a small business is just one of many ways to make a business plan but frankly I think designing one that will have your business give you exactly what you want is by far the best way.

So, why not start out with what you would like to have in life for you and your family? Then develop a business plan that could show you exactly what your business would need to do to give you that life style. If you think about it, there is no other way where you have more control over what you want in life than letting your own business do it for you. If you work for someone else, you’re sure not going to have as much control over your future.

So how would you go about making a plan like this? Well if you know a fair amount about business, you can. It will take some special calculations and some work but if you know how to put together a Profit & Loss Statement, you can probably do it.

You would first do a P&L for the present year for your existing business and the first year and as many years after as you would like to have your plan cover. Your existing business financials will be the foundation for building yourself a business plan for as many years out as you want. This data will tell you a number of things but first if you want to build your plan around what you want in life, you would need to decide some things about your life:

1. You would need to decide how much income you would like to have for yourself for each of the years you plan for.
2. You would need to determine what kind of profit margin you would want from your business for each of the years.
3. And by combining these 2 things into a P&L format you can develop a financial business plan that can extend as for into the future as you would like.
4. The first thing it will show you is how much sales you would need each year to give you the income and profit you would like. Once you see the sales needed, if you know your business well enough, you should be able to estimate those additional expenses needed to overcome capacity constraints that will occur as your business grows.

With this information you can actually predict not only what your sales will be, but you can see how much your fixed and variable expenses will be, what your labor cost will be, your material cost, and your profit.

1. So let’s first look at what exactly are fixed expenses? They are exactly what they say they are; they are fixed. This simply means these are expenses that are ongoing whether you have a lot of sales or “0″ sales. They are expenses like utilities, taxes, rent, salaries other than the wages used in the making of the actual product or doing a service, business fees, telephone, etc. See how these expenses would continue on even if you have 0 sales? Any expenses that fall into this category are fixed expenses. Far too many small business owners never divide their expenses into fixed and variable. As a matter of fact, if you could have a business that had “0″ fixed expenses; this would be the best of all worlds, why? If you had “0″ sales, you would have “0″ expenses. So the closer you could get to this the better you would be.

2. Variable expenses are those expenses that track directly with sales. If sales stop they stop. These are expenses like supplies used to support in the making of your product or doing your service. Such things as shipping cost for raw materials for your product or service. If you have no sales then you’re not going to be purchasing materials so your shipping cost for those materials will stop as well. As an example, if you have a lawn mowing business and there are no lawns to mow, then you wouldn’t be buying gasoline to travel to your lawn mowing site. These kinds of things are variable expenses. If you’re producing a product, it would include supplies used to produce that product like sand paper, glue, finishing materials, cutting tools, etc.

3. Labor and material costs are also directly proportionate to sales. These are things that go directly into the making of the product or into doing the service.

a. Labor cost is the actual direct labor used in the making of product or doing the service. The cost would also include all the fringe benefits like social security, payroll taxes, vacation pay, holidays, sick pay days, etc.
b. Material costs are all the materials used in the making of product or in doing the service. In the lawn mower service as an example it would be the gasoline used in the mower and any other materials used directly in that service. For producing a product it would be all the materials used in the product that is sent to the customer including all the packaging materials.

Average Selling Price

Now when you calculate your average selling price which is your cost of sales (material + labor) divided by (1-gross profit), you can determine how many customers you would need and then come up with what you think your conversion rate would be for converting leads to customers, you can determine how many leads you would need. Then from this and with the aid of the U.S. Census Bureau and some basic research on your own you can actually have a pretty decent idea of what size your market is and is going to be in the future so you can see if it will support your business plan or not.

So if you can put this all together, you can have a complete business operating plan that would show you exactly what your business would need to do to give you the income and profit you would like to have and a rough idea whether your market would support it or not. All you would have left to do would be to figure out how to make it all happen.

It’s like planning backwards.

1. Determine what you want in life
2. Figure out what your business would need to do to give you that life.
3. Figure out how long it would take you to reach it.
4. Figure out how big of a market it would take each of the years you’re planning for.
5. Then see if that market is big enough.

Isn’t this a much better way to go about planning your business? Shouldn’t your business be designed to give you want you want instead of you working yourself to death just hoping for the best?

So how would you go about calculating all this?

There is quite a bit of calculations and you should know a little about business principles but it isn’t that complicated. So first let’s look at figuring out your future needed sales with this formula:

Projected sales = fixed expenses divided by (1-(var exp % of existing sales + mat cost % of existing sales + lab cost % of existing sales + desired net prof %))

So, let’s say you existing sales is $850,000 annually, your fixed expenses are $275,000, variable expenses is $55,000 or 6.5% of the $850,000, material cost is $236,000 or 27.8%, labor cost is $109,000 or 12.8%, and your existing profit margin is $175,000 or 20.6%.

Now let’s say next year you want to have a profit margin of 25% so what would your sales need to be to give you that profit margin? Now you might think you would simply tack on 4.4% more to sales (25% – 20.6%) and you would have it. Well not quiet. it doesn’t work that way because you are going to have the additional variable expenses, material cost, and labor cost too. Remember, the more sales the more each of these expenses and cost will be.

So here is how you would do it:

Projected sales = fixed exp ($275,000) divided by 1-(6.5% + 27.8% + 12.8% + 25% (your new profit margin) = $896,057 (new sales)

You can do this for as many years out as you want. Obviously this is based on your first year’s fixed expenses remaining constant and no consideration of depreciation, inflation, or taxes.

But most likely you would need to increase your fixed expenses because you’re going to probably have more rent, utilities, or such as your business grows. So, you would simple put in your new fixed expense number in place of the existing one for each of the years you would be planning for.

So, you see if you decided you wanted a 35% profit margin at year 5 then you could see how much sales it would take to give you that.

Now it’s also important to know how many more customers you would need as well so you should always look at that unless you have another way of growing your sales other than with new customers.

Let’s say your average selling price for your service is $925.50 and you have one transaction per year per customer.

Using that first years sales example we used above, you would calculate it this way.

$896,057 divided by $925.50 = 968 customers needed for the year. Now if your average transactions per customer are more than 1, then you would need fewer customers. As an example, let’s say your average transaction per customers per year is 2.5 then 968 divided by 2.5 = 387 customers per year.

Now let’s say you estimate your conversation rate to be 3% of turning leads into paying customers with the advertising method you’re going to use, how many leads would need to contact to get 387 customers? Simply divide 387 by 3% and you get 12,909 leads you’re going to need to contact.

Then the question is; is your market going to be big enough to provide you with 12,909 leads for the next year and how many will you need each of the following years?

It may be easier than you think to figure this out. You would do some research and with the aid of the U.S. Census Bureau you can roughly determine whether your plan can be supported by your market or not.

So what do you think? Is it better to build a business plan around what you want in life then see how your business can maybe give you that or is it better to use a sample business plan for a small business where you are probably guessing?

I’d love to help you some more. Please go to http://www.StrategicBusinessSolutionsLLC.com and see what might be available.

7 Steps to Writing an Effective One-Page Business Plan

Writing a business plan doesn’t have to be boring or complicated.

And it certainly doesn’t have to be long.

In fact, the longer your business plan, the less likely you will use it.

A business plan is meant to be used. It’s meant for you to make use of and revisit often. It’s not something you create once and store in some remote part of your hard drive.

If you have been avoiding creating a business plan because you find it overwhelming, tedious and time consuming, then I want to introduce you to the simple 7 steps to writing a business plan on a single page.

Yes, a one-page business plan.

Writing your business plan on a single page can be much less daunting and something you can easily use and modify as needed.

It’s a much more efficient and faster way of writing a business plan – one that you will actually use – and won’t take a lot of time or effort on your part as a traditional business plan.

So don’t waste too much time starting a business plan, and start with the following 7-step plan to developing a business plan from scratch for your online business.

Step 1: Know Your Target Audience

If you’re going to create a product or service that people want to buy, then you’re going to have to first understand the needs of your customer – their fears, frustrations, challenges and desires.

If your customer doesn’t have a need for your product, then there is no point in creating it in the first place.

But that is exactly what many aspiring entrepreneurs will do. They will often spend months and sometimes even years developing a product or service that no one has any interesting in buying. This is probably the most inefficient way to create a sustainable business that will create real results.

Instead, it’s better to get input and feedback from your customer while developing your product.

First ask at least 5-10 prospective customers or clients what challenges they are facing and if they have a need for your solution. If not, keep digging deeper until you have something they might be interested in buying.

Armed with this knowledge you will find it much easier to develop your solution.

Step 1b: Create an Ideal Customer Profile

You probably already know the importance of demographics (age, gender, location, etc.), but what many entrepreneurs often overlook are factors like customer interests, buying behavior, etc. Knowing these things may seem trivial, but it’s extremely insightful to have this data at your disposal.

For example, if you do any sort of advertising on Facebook, then knowing your audience’s interests can help you target the right people. If you are going solely on basic demographics, then you won’t be targeting your ideal customer and will end up paying more for traffic.

To find out who your ideal target audience is you can use tools such as quantcast.com and Facebook graph search. These tools will give you little known insights about your consumer – their interests, household income, purchasing behaviour, etc.

Once you create a basic profile of your target audience, then you will be in much better position to create a solution that they will be interesting in buying.

Step 2: Know Your Competitors

If you don’t know who your competitors are, then it’ll likely be an uphill battle to become relevant in your industry.

One of the most important first steps you can take is to identify your top 5 competitors and study their business – their products, services, pricing, sales funnel etc.

Once you’ve identified your primary competitors, then it’ll be much easier to find a way to differentiate yourself from them (step 4), as well as knowing how to price your products, what solutions to develop and creating your sales funnel.

There is no point in re-inventing the wheel if something is already working for your competitors. All you need to do is create better products and services, offer something they aren’t offering (such as a better guarantee, lower prices, more value, etc.).

This way you’ll be much more likely to create a business that has been proven to work and your job is to develop the best possible products and services for your clients and prospects.

Step 3: Develop a Simple Solution

If you’re going to develop a product (solution) centered around customer’s problems or needs, then it’ll be much more useful to think about creating your solution with the bare minimum features that will solve their problem.

It’s important to realize that you won’t build a perfect product the first time around. And you certainly won’t develop a perfect product without any input from your ideal customer.

So when developing your product or service, first focus on creating a minimum viable product (MVP), which is a bare minimum product that your customers be willing to pay you for (even if it doesn’t have all the bells and whistles).

Once you create and test your MVP in the market place, you will know if there is demand for your product or service, and you can go onto developing version 2.0, 3.0 and so on. By the 3rd or 4th iteration your product will start to look much more polished and something your customers will be lining up to buy (they’re the ones that helped you build it!)

So initially, when writing down your solution on your business plan, think of the top 1-3 features that your product will have that will solve the problem.

For example, if many of your prospective customers problem are finding it challenging to stay motivated and consistent with their diet and exercise routine, then you can create a solution that includes an online community or personal online coach that will help them stay on track and break through any barriers when they lose focus.

It important to create your solution around their needs and only include the minimum set of features that will capture their interest in trying out your services. As you learn more about your customers and get their feedback, you can start to add more features if needed as your product or service develops.

Step 4: Create your USP

The reason why many startup entrepreneurs fail to gain any traction in a competitive marketplace is because they don’t have anything that differentiates them from their competition. Too often they are simply copying what’s already out there, instead of uniquely position themselves to give themselves an upper hand on their competition.

You can do create this unique positioning by creating what’s known as a unique selling proposition. It’s the answer to the question, “what do you do differently then your competition?”.

A lot of entrepreneurs will simply say things like, “we’re better, we’re faster, we’re high quality, etc”. But anyone can claim that they are better, faster and higher quality. It’s not enough to call yourself these things.

Instead, it’s much more effective to offer something that your competition won’t be able to copy that easily. And if they do, it may affect their bottom line since they can’t offer it the way that you do.

For example, many business owners won’t give a money-back guarantee if the customer isn’t satisfied. And even if they do, it will only be for 30 days. So if everyone in your market place is offering a 30 day guarantee, then why not offer 60 days, 90 days, or even 365 days?

A lot of entrepreneurs would fear that they will lose money because a customer has more time to refund their products, but in fact the opposite is true. If you create a quality product that actually delivers results for the customer or client, then they will most likely stick around long term. They will appreciate that you have placed enough trust in them to provide them with that sort of guarantee and in turn will trust you even more.

So when creating your USP, think in terms of what you can do differently than what’s already being done by every other competitor out there.

Is there something they are not offering that you can offer? Can you deliver results faster than your competition? Is your customer service experience better than theirs in terms of quality and responsiveness (I.e available 24/7 or with reply within 3 hours?)

Step 5: Know Your Pricing

When creating your first product or service, it can be challenging to know how to price it. A lot of times entrepreneurs will simply guess what is the ideal price point for their product and will pricing it accordingly.

However, instead of guessing, why not first see what prices your competitors are using, and then use that as a starting point.

Once you have your starting price, the next step would be to test 3 different price points for each product. This way you can determine which price point is ideal and settle on the sweet spot.

It’s important to note that your pricing also depends on how well you position your product and build value on your sales pages. If you don’t do a good job of building value and interest, then it won’t matter how low you price your products – people simply won’t buy them.

But if you do a good job of conveying that value on your sales pages, then you may even be able to price your products much higher than your competition – especially if you do things they don’t as described in Step 3.

Step 6: Choose a Marketing Channel

Knowing which platforms you’re going to use to create awareness about your products and services is very important when launching your business.

There are many ways to market your product, so it’s important to pick the one best suited for your business.

Choosing the right marketing channel doesn’t have to be complicated. You simply need to find out where your ideal target audience congregates or hangs out (as determined in Step 2), and use that as your starting point.

It’s usually a good idea to start marketing on one platform before moving on to the next. You don’t need to be on all platforms. For example, if you’re primary channel is social media, then pick one (Twitter, LinkedIn, Facebook, etc.). If you find that most of your customers are on Facebook, then create a Facebook Page and start using this platform as your primary marketing medium.

Here’s a list of some marketing channels:

  1. SEO
  2. Social Media
  3. Ads (Google AdWords, Facebook Ads, Bing Ads)
  4. Guest Posts
  5. Banners
  6. Joint Ventures

Step 7: Know Your Business Model

When starting your business, it’s important to know how you’re going to monetize. Knowing your business model answers the question, “how do I make money?”

There are many business models to choose from, but it’s important to identify and select the one that will make the most sense for you and has the greatest ROI.

For example, if you’re an online instructor, then it make sense to utilize the membership/subscription model as your primary business model.

Or if you’re going to be blogging, then it might make sense to use advertisements and affiliate marketing.

And if you’re going to be podcasting, then it will make sense to get businesses to sponsor your show.

Here are some business models that you can integrate into your business:

  1. Membership Site
  2. Software
  3. Done-For-You Service
  4. Email Series
  5. Newsletters
  6. Group Coaching Calls
  7. Teleseminars
  8. Webinars
  9. Coaching/Consulting
  10. Service
  11. Affiliate Marketing
  12. Ads
  13. Subscription/Membership
  14. Software/App/Tools/Templates
  15. Speaking
  16. E-commerce
  17. Physical Products
  18. Books
  19. Mastermind Programs

So as you can see, creating a business plan doesn’t have to be long and arduous. If you follow these 7 steps and write everything down on a single page you will have a business plan that will be easy to use. Once you go through these 7 steps, you’ll find that you not only have a solid business plan, but something you can use again and again.

Three Tips To A Better Business Plan

A Business Plan Has To Be More Then Information

I was reviewing a business plan yesterday for a client who had spent hours working on it. He had a deadline he had set for completion and was very frustrated as it seemed that there was so much still to do. He had taken a sample plan that he found on line, for a similar company and made modifications thinking that this could be the perfect plan to go forward with.

What he had failed to understand was what the plan itself was actually for. I explained to him a business plan should serve one to two purposes an internal one and, in his case, an external one. Because he was looking for funding, he needed to have a plan that he could show possible investors along with a tool to help him guide his business.

Where he had gone wrong was that he thought by copying someone else’s work he had developed a plan. As I explained to him, the external purpose of the plan is to prove to investors you accurately understand your business. Which means:

1) Do you know who and what your direct and indirect competition is?
2) Do you know how much money it’ll cost you to operate a business like the one you want to establish?
3) Do you understand the needs, demands and wants of the market today and into the future?
4) Do you know what your value proposition is and how to articulate it in a way that can make you unique?
5) What is your marketing strategy and how will you employ it to obtain clients and create a differentiation from the competition?
6) How long is your sales cycle, and what will it cost to get your sale?
And So On!

Your Numbers Must Make Sense

This is one of the things that will turn an investor off faster then anything else. The first page an investor will go to in your business plan is your numbers. They’ll bypass all the glossy pictures and your executive summary, they aren’t going to check out your resume and your background, they’re going to see if the figures make sense.

So make sure the fundamentals are covered. Make sure you have a spread sheet where all your numbers foot, silly as this seems, I see this problem all the time. Also, if you quote numbers anywhere in your plan, an investor needs to have the ability to find those numbers inside your spreadsheet easily, and they better match. So if you say that you anticipate 10% growth in the first year and your chart displays 12% growth, your plan will likely be rejected before you get any farther. Regardless of how great the copy is.

Your numbers also have to be reasonable for your industry. Try and find as many companies out there, doing something similar to what you do. Observe how their growth has progressed. That should provide you with an idea of what you can expect. Don’t be too aggressive, unrealistic targets either way are not good, but growth that’s too rapid can harm a business as bad, if not worse, then sluggish growth.

Your Business Plan Needs To Show You Understand What’s Coming & Its Impact

It’s not sufficient to be able to show your snapshot in time. Your plan also needs to illustrate where you see your market heading over the following five or more years. It will tell an investor that you actually have an understanding of current and future trends of the business. It will also provide them insight into how you see the strategy for your company going forward. They may challenge your strategy and assumptions, but that’s better then outright rejection because they feel that you don’t have a clue about where your industry is going.

Remember, your investors are in this with you for a long haul. What you do to build your business over the next twelve months will be a significant indicator of your survival skills. What you do over the following five years will make the difference between a so-so investment and a terrific one. So this is your one chance to prove you’ve got what it takes.

Two more quick points to remember when submitting a plan.

You don’t get the chance to explain anything when your plan is in an investors hands, if the plan doesn’t do a good and concise job of explaining things, then you are cooked.

With every paragraph you write, you will need to ask yourself “So what”. In other words, you write something about your market, how important is it to growth and profitability. If an investor can say “so what, how is that going to make me money?” to anything you have written, don’t put it in there, unless you have answered the question.

Finally, your business plan also must be a guidance tool that you can utilize to run your company. It is a gut wrenching process to get it completed. But after you have completed it, don’t put it on the shelf, use it as a road map towards your success.