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Why a Business Plan is so Important to your Business Success

January 31, 2010 by Frank Goley, Business Consultant

A Business Plan is a Roadmap

If you don’t know where you are going (i.e. have a roadmap), then how do you expect to get there?  Running, expanding or starting a business without a business plan is like trying to drive from New York to Chicago for the first time without a roadmap or MapQuest!  Planning gives you a path to follow, otherwise, you are just guessing.  In running or starting a business, the learning curve is short before you run out of resources and are forced to close.  Therefore, a business plan helps you set up a sound framework, model and system ahead of time, as well as, address potential problems and threats, so that you can capably run a business.  If you don’t have a system in place to deal with problems and you don’t have a sound strategic plan in place, you will find yourself needlessly sidetracked by working “in” the business instead of “on” the business. Consider the services of a professional business planning firm to ensure your roadmap is the very best it can be.  

A Business Plan Saves Time and Money

A Business Plan will save you a lot of time and money.  Careful planning ahead of time will help you wisely budget your resources and significantly minimize the time you spend assessing threats, problems, obstacles and opportunities.

Create the Future You Want for Your Business

A business plan actually creates the future you want it to be.  It gives you the process to develop the future business you want, whether it is to successfully start, expand, acquire or build.  Granted, a business planning process can’t predict everything and markets change very quickly; yet, a business plan puts a solid process model in place to deal with such unpredictability.  Otherwise, you will become even more lost in the unpredictable nature of future market changes without a system in place to deal with and predict these changes. 

A Business Plan is a Success Manual for Your Business

A business plan is an actual guide to starting, acquiring, expanding, building and managing a business.  It is a step by step process that will guide you through the complexities and intricacies of building a successful company. Business school will teach you something about business planning, an MBA will teach you a little more, but most good business planning experience comes from doing and learning from others who have gone before you.  Find a good business plan mentor!

A Business Plan Helps to Raise Funds for your Business

If you need to raise funds for your business venture or project, a well thought out business plan is the very best tool available to achieve the mix and amount of funds your business requires.  A good business planning process will actually determine and design financial structures which specifically address your funding requirements. Utilize a planning process to develop and design a financial structure customized to your particular company’s requirements.  When times are tough in your business, industry or lending market, a good funding plan will give you a fighting chance of obtaining the badly needed funding.

A Business Plan is a Great Communication Tool

A business plan is a fantastic communication tool.  It establishes a system so that you can effectively communicate with your executives, managers, employees, shareholders, investors, lenders, customers, potential customers, markets, suppliers, on down the line.  So many companies fail because effective communication was significantly hampered by assets and people doing contrary things.  Effective strategic planning within the business planning process establishes strong communication ties, links and systems so that all the fore mentioned human variables can come together in a directional, well coordinated strategy for success.

Nothing Stays the Same in Business

Nothing stays the same from one day to the next in this global, fast tracked business world.  Because of this constant change, your business will quickly fall behind and suffer without having a good business plan in place.  A plan puts a system in place to identify and address changes in the market place so you can proactively seize and turn them into opportunities.  Without a forward thinking system in place, changes in your market place can quickly become insurmountable problems and obstacles.  A business plan empowers you to convert these changes into opportunities and increased profitability.

Don’t Drive Your Business Blindfolded

Operating a company without a well developed business plan is just like operating a car blindfolded, driving down an expressway in LA.  You wouldn’t blindfold yourself and drive down a busy expressway would you?  Why would you do that with your business, future and money?

About the Author 

This article was written by Frank Goley, the ABC Business Consulting Chief Business Success Consultant, who has over 20 years experience helping companies start, grow, turn-around and succeed.  Please visit The ABC Business Consulting Website for more information on what a Business Consultant can do for your Company.

Visit the ABC Business Success Blog for Real-World, Real-Time Business Success Strategies you can use today!

We appreciate your Feedback.  Please let us know what you think about this Article, Your Small Business Experiences and ways to improve our website.  Your Comments are appreciated!

Ensure your Business Success with the ABC Comprehensive Business Planning Guide & Workbook and The Business Success Guide.

What’s in the Name?

“ABC” Business Consulting describes proven, step by step, proprietary business planning, consulting and implementation Action Strategies and Processes designed for Business Success.

Posted in Business Planning. Comment

How to Write and Develop an Executive Summary

January 24, 2010 by Frank Goley, Business Consultant

An executive summary summarizes your entire business plan in two or three pages.  This is a tall order and can be very difficult to accomplish.  You want the executive summary to be concise and brief, yet complete, encompassing and inclusive.  This article will show you how to write an executive summary that is effective, concise, yet adequately covers your entire business plan.  This article will also provide an overview on the sections of a business plan which are important to include in your executive summary and explain different uses for an executive summary.

Process

First, you must complete your business plan before writing your executive summary.  Then pick out the important sections of the business plan to put in the executive summary.  Order the sections in a format that makes logical sense and outline the important parts of each section.  With the outline in hand, write your first draft executive summary.  This first draft will typically be ten to twenty pages long.  Take the draft and condense it into five to seven pages in length.  We will call this your long version executive summary, which is really a mini-version of your business plan.  Working off the long version, you will condense it into the final two to three page summary, hitting on the most important aspects of your business plan.  It will take at least three renditions of outlining, writing and condensing to develop an effective executive summary. Later in this article I will explain the different uses of the long and short versions of the executive summary.

Organization

Here is a suggested fourteen section executive summary format to use.  Amend it for your particular use.

Section One – Company Information

Section Two – Business Plan Purpose and Objectives

Section Three – Company Goals and Vision

Section Four – Company Mission Statement

Section Five – Company Description

Section Six – Company Purpose

Section Seven – Company Situation

Section Eight – Founders, Management and Principals’ Capabilities

Section Nine – Products and Services

Section Ten – The Competition

Section Eleven – Keys to Success

Section Twelve – Finance

Section Thirteen – Growth and Expansion Goals

Section Fourteen – Return on Equity and Investment

Uses

The executive summary gives the user a quick overview of the important facts contained in your business plan.  The long version can be used as a standalone document, i.e. a mini business plan, or to succinctly explain your business and generate interest in your opportunity, products and services.  The long version summary can be sent to an investor or venture capital firm, accompanied by a venture and investment overview to generate and gauge initial interest.  If the VC firm or investor indicates interest, you can then send your custom tailored, to their investment objections and requirements, funding business plan which contains the shorter version executive summary.  Long and short versions of your executive summary can be used as a sales document; to approach new suppliers and customers; or to accompany a loan package to a lender; to accompany your marketing plan or strategic plan. It is an initial stand-in for your business plan.  The executive summary is not just an overview, but a tool to be used to accomplish your business goals. 

About the Author 

This blog is written by Frank Goley, the ABC Business Consulting Chief Business Success Consultant, who has over 20 years experience helping companies start, grow, turn-around and succeed.  Please visit The ABC Business Consulting Website for more information on what a Business Consultant can do for your Company.

Visit the ABC Business Success Blog for Real-World, Real-Time Business Success Strategies you can use today!

We appreciate your Feedback.  Please let us know what you think about this Blog, Your Small Business Experiences and ways to improve our website.  Your Comments are appreciated!

Ensure your Business Success with the ABC Comprehensive Business Planning Guide & Workbook and The Business Success Guide.

What’s in the Name?

“ABC” Business Consulting describes proven, step by step, proprietary business planning, consulting and implementation Action Strategies and Processes designed for Business Success.

Posted in Business Planning. Comment

Small Business Finance: Equity, Debt, Cash Flow and IPO

January 17, 2010 by Frank Goley, Business Consultant

The Business Success Blog is sponsored by ABC Business Consulting

Often times Financing a Small Business can be the hardest, most time consuming activity that a Business Owner and/or a CFO do when running a business.  Needless to say it can be the most important element of growing a business, but one must be careful not to allow it to consume the business.  How do you achieve that?

First, write a solid Business Plan that has a well developed Strategic Plan which translates into very realistic and believable Financials.  Before you can finance a business, a project, an expansion or an acquisition, you must develop precisely what your Finance needs are.  This is only accomplished initially through a good Business Plan Process.   

Second, finance your Business from a position of strength.  This means good old cash.  As a Business Owner you should illustrate your confidence in the business by investing up to 10% of your Finance needs from your own coffers.  This also puts you firmly in the driver’s seat.  Ten percent cash investment (or Equity) isn’t enough cash.  So the remaining 20-30% of your cash needs should come from Private Investors or Venture Capital.  Remember, Sweat Equity is expected and is a major contribution, but it is not a replacement for cash.  Ok, so you bring 10% of the finance needs to the table as cash investment and the Private Equity/ Venture Capital component invests 30% of the finance needs.  That means, you have a cash position of 40% of your Total Finance needs from the get go.  This puts you in control of your Financial Destiny.

Depending on the valuation of your business and the risk involved, the Private Equity/ Venture Capital component will want an average of 30-40% equity in your company on a semi-short term basis (3-5 years).  Giving up this Equity position in your Company, yet maintaining clear majority ownership will bring you exponential leverage in your remaining 60% of your Finance needs.  (Not to mention, the expertise and connections VC brings to the table to help you become successful).  Another good reason to have a solid Business Plan is to seek and secure this private investment. 

Third, now that you have developed a good Business Plan, invested your own cash into the business and obtained the necessary Private Equity/ Venture Capital cash, you are in a strong position to obtain the remaining 60% of your Finance needs.  This remaining Finance can come in the form of Long-Term Debt, Short-Term Working Capitol, Equipment Finance and Inventory Finance.  By having a strong cash position in your company, a variety of lenders will be available for your picking to fill your Finance needs.  It is advisable to hire a good, experienced Commercial Loan Broker to do the “shopping” for you and present you with a variety of options.  Just as a Business Plan is important to secure the Cash Investment you require, a good Loan Package to secure the remaining Finance requirements.  It is important at this juncture that you obtain Finance that fits your business needs and structures, instead of trying to force your structure into a Financial Instrument not ideally suited for your operations.  Having an initial strong cash position gives you the power, flexibility and option to choose a Financial Products Package that suite your needs.

By having a strong cash position in your Company, the additional Debt financing will not put an undue strain on your Cash Flow.  60% Debt Capacity is a very healthy level of Debt which will allow a business to grow and cash flow successfully.  This Debt Finance can come in the form of Unsecured Finance:  Short-Term Debt, Line of Credit Financing and Long-Term Debt.  Unsecured Debt of this nature is typically called Cash Flow Financing and requires credit worthiness.  Debt Finance can also come in the form of Secured or Asset Based Financing:  Accounts Receivables (or Factoring), Inventory, Equipment, Real Estate, Personal Assets, Letter of Credits, and Government Guaranteed Loans.  A customized mix of Unsecured and Secured Debt, designed specifically around your Company’s Financial needs, is the advantage of having a strong cash position from the get go.

As a result of having the ability to generate strong Cash Flows, your strongest, most flexible form of Finance, will be self-investment.   Or cash derived internally within your business.  You can even ask your suppliers to extend the term of your re-payment period, so you can use this additional cash flow to serve your short term capital needs.  In a new venture, it is always wise for the top executives, who have equity in the venture, to take minimum salaries in order to bolster self-investment back into the capital needs of your venture.  Or let’s say an existing Real Estate Development Company can waive its “Developers Fee” during the construction phase of a project so that less strain will be exhibited on the early stage cash flows, which in the long term, will derive much better equity returns for the developers involved.

If you haven’t noticed, the Cash Flow Statement is your most important Financial in tracking the effects of certain types and terms of Finance.  It is critical to have a firm handle on your Monthly Cash Flows, along with the Control and Planning elements of a Financial Budget, in order to successfully plan and monitor your company’s Finance Requirements and overall picture.

Let’s take a moment to review Financial Structuring.  It is important in your Business Planning Process to run a few scenarios of Equity and Debt mixtures to see what is favorable for your type of business, but it is important to keep that structure Open in the Funding Business Plan for Private Equity and Venture Capital audiences.  PE/VC are often put off by entrepreneurs forcing financial structures down their throats as they are the true experts in this field.  Let their expertise and experience help you determine an Equity Structure that makes sense for everyone involved.  Having thought out and analyzed different Financial Structures ahead of time, will allow you to contribute intelligently to this negotiation, yet not be overbearing.  With the Equity Structure in place, you can easily adjust your Debt Structure accordingly and seek out Debt finance to meet that structure.

It is important at this juncture to determine what Finance really is.  It is the relationship between Cash, Risk and Value.  In short, what Cash will do, how to manage Risk and how Value is derived.  Some important considerations about cash:

1.     An Entrepreneur’s Focus Outlook is Free Cash Flow (FCF).

2.     Moreover, An Entrepreneur’s measure of profitability is Net Present Value of Future FCF (less) Investment.

3.     As a result, Sales Growth is strongly supported by a Growth in Assets (Working Cap and Fixed Assets).

4.     Yet, a Growth in Assets must be buoyed by increases in Stock Holders Equity and factoring in for Inflation Rates.

5.     So the fundamental rule of Finance is don’t run out of Cash.

The Risk element of Cash:

1.     How risky a Cash Flow Stream is, determines its value.

2.     Risk is determined by:  the uncertainty of FCF and Risk that can’t be diversified.

3.     Therefore, Entrepreneurs and Investors alike want to maximize Returns and minimize Risks for a given level of Risk (for the former) and Expected Return (for the latter).

4.     While keeping in mind, the Entrepreneur must have his focus on contributing to the Company’s Long Term Value and not being blinded by Short-Term Operating Results.

In a building block process, Value is determined by how Cash and Risk interact.  Furthermore Value is affected by: A) Investments that create FCF and B)  Finance Structures that do not unduly strain FCF to Investors and the Entrepreneur alike.  Therefore, Finance is the process of “selling” certain claims about your business’ FCF.  You must in essence “sell” the results that FCF generates through your business or simply put selling the Value of your Cash Flow.  Finance is how you think about the relationship between Cash, Risk and Value, and when the Entrepreneur determines that value, it can be sold to lenders and investors alike to obtain the type and amount of funding your business needs.

Fourth, your Finance plan is a result and a very important part of your Strategic Planning Process.  You need to be very careful of matching your cash needs with your cash goals.  Using Short-Term Capital for long term growth and vice versa is a no no.  Match the type and term of the Finance with the term of the Goal.  Violating the Matching Rule can bring about:

1.     Interest Rate Risk

2.     Re-Finance Risk

3.     Operating Independence Risk

Some deviation from this age old rule is permissible; for instance, if you have a long term need for Working Capital, then a permanent Capital need may be warranted.  Another good Finance Strategy is having Contingency Capital on hand for freeing up your Working Capital needs and providing maximum flexibility.  A mix is the best way to go about your strategy.  For example, you can use a Line of Credit to get  into an opportunity that arises speedily and then arrange for cheaper, better suited long term, permanent finance subsequently, planning this upfront with a lender.

Finally, Finance is not typically addressed until a company is in crisis.  Plan ahead with an Effective Business Planning Process.  Equity Finance does not stress Cash Flow and gives other lenders (like banks) confidence to do business with your company.  Good Financial Structuring reduces the Costs of Capital and utilizing Specialists and Consultants in this area is very advantageous.

After you have successfully captured the Finance you require and successfully grown your company, businesses often start considering Going Public.  Companies start thinking of this Finance Alternative when present funding structures fail to meet the Company’s Growth.  Or put another way, Business Growth has exceeded Company Debt Capacity.  It is interesting to note that a majority of IPOs come from companies with Assets Less than $500,000, with an average value of $2,000,000.  Due to this phenomenon, the SEC has come up with different Registration Processes to simplify the very expensive process of Going Public.  Specifically Form S-18 and Regulation D, exemptions , processes and structures allows smaller Companies to enter the once cost prohibitive process of raising funds via an IPO.  There have been some significant changes to Rule 144 stock restrictions which will revolutionize how Private Equity and Venture Capital will view investing in smaller companies.  This may very well be a reason for many companies to stay private, yet grow, without the added expense and reporting procedures of an IPO.  Fees for an IPO can run $175,000-$400,000 plus an Underwriter’s Commission of 5-15%.  Total Expenses can range 10-35% of the Gross Offering.

So you must be asking yourself, who should go Public?  Some benchmarks are as follows:

1.     High Growth, sustained at a rate to attract public investors.  (Therefore, an IPO is typically not suited for a start-up company)

2.     Have sustained Annual Growth of 25-50% for 5 years.

3.     Underwriters seek IPO candidates with at least $10m in sales and $1m in profits.

4.     Your Product or Service is highly visible and of interest to the Public.  Must be unique.

5.     Investment Risks have been minimized.

6.     Can you meet the disclosure and reporting requirements?

If you determine an IPO is in your best interest, then you need a solid, experienced Registration Team of Managers, Upper Executives, Company Attorneys, Underwriter, Underwriter’s Counsel, Independent Accountants, a Financial Printer and a Financial Public Relations Firm.  The Process takes several months and timing is critical to determining the Final Shore Price, so it is imperative to have an Underwriter experienced with your type of market and target investors.  When Underwriters arrange meetings with Financial Analysts and Brokers for potential investors, it is very important the President of the Company handles the meeting, projecting credibility and the ability to respond to inquiries important to the offering’s success.  Since it is very difficult to keep your market position post IPO, the need for a solid Financial Public Relations Firm is imperative.

The best advice we can make about the Financing of a Small Business is to start with a solid Business Plan and put your company in a position of Financial Leverage.  Cash Flow early and reduce the impact of Finance on that cash flow.  Use the strength of Equity to propel your company forward toward the Debt Markets, remembering the relationship of Cash, Risk and Value.  Then when you have outgrown your Debt capacity consider raising funds through an IPO and/ or selling the company.  An IPO doesn’t have to be the end for the Entrepreneur (but often it is as Entrepreneurs prefer early stage growth models), but it is often an exit for Venture Capital and the next stage in Growth from a Small/ Medium Business to a Medium/ Large Scale Business.  If the Entrepreneur sticks with the Public Company, his role in the Company will change from making Venture Capitalists happy to answering to Share Holders.  Therefore, Public Relations become an important factor going forward.

Please visit our Small Business Finance Resource for more articles and e-books on financing your Business.

For my 4 part series on Business Finance in a Recession go to: Recession Business Finance Tactics 

About the Author

This article was written by Frank Goley, the ABC Business Consulting Chief Business Success Consultant, who has over 20 years experience helping companies start, grow, turn-around and succeed.  Please visit The ABC Business Consulting Website for more information on what a Business Consultant can do for your Company.

Visit the ABC Business Success Blog for Real-World, Real-Time Business Success Strategies you can use today!

We appreciate your Feedback.  Please let us know what you think about this Article, Your Small Business Experiences and ways to improve our website.  Your Comments are appreciated!

Ensure your Business Success with the ABC Comprehensive Business Planning Guide & Workbook and The Business Success Guide.

What’s in the Name?  “ABC” Business Consulting describes proven, step by step, proprietary business planning, consulting and implementation Action Strategies and Processes designed for Business Success.

Posted in Business Finance. Comment

Strategic Planning for Business Success

January 11, 2010 by Frank Goley, Business Consultant

The Business Success Strategies Blog is sponsored by ABC Business Consulting

Now that you have developed your Marketing Plan, you can put it into action through the Strategic Plan and Sales Plan.  This overview of the Strategic & Sales Planning Process is divided into Eleven Sections, which are presented in a particular, building-block order.

1)     Potential Problems & Company Objectives:  First identify and rank your Potential Problems in your Company Operations:  Cash Flow, Market Changes, Competition, Costs, Distribution, Productivity, Employee Turnover, Regulation, Market Acceptance, Pricing, Quality, Capital, Service, Control Systems and Facilities are some of the areas you should examine in identifying potential Problems.  With your Problems identified and ranked in importance and severity, you can develop Company Objectives you aim to obtain.  These Objectives should strive to minimize and manage the identified Potential Problems, while emphasizing your Company’s Strengths.

2)     Risk Analysis:  Building on your Potential Problems identified in Section One, this Analysis produces Expected Risks.  Look at Litigation Threats, Liabilities, Regulatory Issues, Major Risks and Problems and answer the following questions:  When are Problems likely to occur?  What can you do to mitigate the potential risks and problems?  How will you deal with these problems?  The last part of the Risk Analysis looks at how you can turn these problems into opportunities, which parlays into Section Three.

3)     Company Strategies, Strategic Tactics & Strategic Programs:  First develop your Strategies, then the relating Strategic Tactics and then the resulting Strategic Programs.

a)     Strategy is Focus.  Strategy consists of key factors that distinguish your Company and are most expected to contribute to your success.  It is important that your Company Strategies complement each other so you are not sending your business in separate directions.

b)    Tactics are used to implement strategies and relate to a specific Strategy. 

c)     Programs are specific business activities which have concrete dates, assigned responsibilities and developed Budgets.  Programs relate to Specific Tactics of a Specific Strategy.

4)     Sales Strategy:  Remember that sales close the deals which Marketing opens.  Sales are dealing directly with your Customers.  Develop the Sales Strategy as it specifically relates to the Marketing Strategies you have set forth.  Describe and develop the different sale methods and channels you will use to sell your Products and Services.  Determine your Sales Goals and your Sales Process.  Develop an effective Salesperson Training Program and Compensation Structure.  You should also look at order processing optimization, sale milestones expectations, price maneuvering, sales leads generation, distributor roles; credit and collection policies; how the Internet will be utilized; and so forth. 

5)      Sales Programs:  After developing your Sales Strategies, it is time to define your resulting Sales Programs.  The Sales Program addresses how your Sales Strategy will be implemented.  Once implemented.  Once implemented, you should have systems in place to measure the Strategy Implementation and support your sales efforts.

6)     Strategic Alliances & Joint Ventures:  Define your Keystone Strategic Alliances and Partnerships.  Identify and develop Co-Marketing and Co-Development Opportunities; Product Help; Commission, Cooperative and Product / Service Agreements.  Is the fate of your Company tied to another Company?  Explain how these Alliances help your Company and any inherent risks. 

7)     Rolling Basis, Monthly Outlook (Yearly Basis) Operating Budget:  The Operating Budget is a Planning and Control Mechanism which helps you develop Section Eight, the Sales Forecast.  It should be on a Rolling Basis, Outward looking for one year and the format on a Monthly Basis.  Rolling Basis means after each quarter you Budget for the next three months.  The Budget should be twelve months forward looking.  You should have a Target and Actual Column so you can track results and adjust throughout the year as necessary.  Your Operational Budget should directly reflect your Strategic Planning Goals.  Determine whether it is best to use a Top-Down, a Bottom-Up or Blended approach for your Operational Budgets.  Ask yourself:  How will your Budget be used as a Control Measure?  How will your Budget be used to judge Company, Management and Key Employee Performance?  Your Budget is a valuable tool to use for Employee Management, Education and Delegation; Managerial and Executive Goals.  For a detailed explanation of Operational Budgets and an Example Budget Format, Please refer to ABC Business Consulting Comprehensive Business Planning Workbook.

8     Sales Forecast:  Based upon your developed Sales Strategy and Programs, along with your One Year Operational Budget, develop a Five Year Projected Sales Summary Forecast.  This Forecast, in turn, will be used to develop your Detailed Profit & Loss Statement in the Financials Section of your Business Plan.  If you are an existing business, be sure to highlight your Historical Sales Trends going back three years.  It is important to show how you will achieve your Annual Sales Volume Goals, and the Assumptions used to develop the Sales Forecast.  What Growth Rates are you projecting and expecting for your most Vital Products and Services?  What are the major driving forces behind the Forecast?  Is your Sales Forecast believable?  What risks are involved?  It is very important to show how your Sales Forecast relates to your Market Analysis, Target Market Segments, Sales Strategy and Marketing Strategy.   This ensures your Marketing Plan is a direct influence on your Strategic & Sales Plan, resulting in a Synergistic and Focused Company-Wide Strategy.  Please see our Business Plan Workbook for more details and an example Sales Forecast format.

9)     Milestones Table:  Provide your Future Company Goals, Milestones and Strategies, along with your Marketing and Sales Program rollouts.  For each Milestone Event provide:  Quantitative and Qualitative Descriptions; Start and End Dates; Budget Numbers; Manager and Department Responsibilities. During the Milestone Table Development, it is important to answer the following key questions:ü   What are the Critical Checkpoints as your Business develops?ü  What specific Milestones will mark the lowering of risks due to the increased viability of your Company? ü  If you need to deviate from your Plan, can your resources surmount these plan variations?  What contingencies are built into your Strategic Plan?ü  What Systems are in place to gauge your Company’s progress in achieving the prescribed Milestones?ü  How are your Milestone Analysis & Goals an integral part of your day to day Management and Planning Process?For a detailed example of a Milestone Table / Milestone Analysis & Goals, please refer to the ABC Business Consulting Business Planning Guide and Workbook.

10)   Control Mechanisms:  What Mechanisms for Control of each critical Skill and Resource are available to you?  Is direct ownership necessary for your Resources and Skills or can they be Outsourced and at what cost savings?  How can you build upon Incentives for Cooperation with your critical Resource and Skill Providers; what are the Benefits?  These are just some of the questions to address when identifying Control Mechanisms for your Strategic Plan’s Resources.

11)  Strategic Planning Advisors:  Strategic Planning is such an important part of running a Successful Business, we highly recommend  to retain a competent team of Professionals, Advisors, Experts and Consultants.  An Experienced Business Consultant can be a very important part of your Strategic Planning Team, ensuring your Strategic Plan is not just effectively developed, but most importantly, effectively implemented through out your Company Operations.  After your Strategic Plan is implemented, an Experienced Business Consultant can also help you ensure the Strategy stays on track, reaches it’s goals and / or is adjusted as necessary due to market changes and unforeseen problematic events.  In conclusion, a Successful Strategic and Sales Plan starts with your Products and Services Development, then moves into your Marketing Analysis and Plan Development; this in turn, is a direct influence on your Company’s Strategic Plan.  Flow Charts showing these important development steps and their relationships:

Products & Services Development => Market Analysis & Segmentation => Market Trends => Market Growth => Competitive Analysis, Positioning & Edge => Marketing Strategy:  Positioning, Pricing, Promotion & Distribution Strategies => Marketing Strategy Profit & Loss Projection => Marketing Programs = An Effective Marketing Plan.

Marketing Plan => Strategic Potential Problems & Risk Analysis => Company Strategies, Strategic Tactics & Strategic Programs => Sales Strategy => Sales Programs & Alliances => Company Operating Budget => Sales Forecast => Milestones & Control Mechanisms = Successful Company Strategic & Sales Plan.

Company Strategic & Sales Plan => Company Profit & Loss Statement Projections = Believable Financial Forecasts.

For more help in developing an Effective Marketing Plan, a Successful Strategic Plan, Product & Service Development, along with Comprehensive Business Planning, please see the ABC Business Consulting Comprehensive Business Planning Guide & Workbook.

About the Author

This Business Success Strategies Blog is written by Frank Goley, the ABC Business Consulting Chief Business Consultant, who has over 20 years experience helping companies start, grow, turn-around and succeed.

Visit the Business Success Articles for more of Frank’s “how to” business success articles covering topics like Business Planning,  Business Management,  Financial Management,  Growth Strategies and Business Finance.

Check out Frank’s books that are about to come online: The Comprehensive Business Planning Guide and Workbook and The Business Success Guide.

Be sure to subscribe to the Business Success E-books and Articles Distribution Service and the Business Success Tips Newsletter! 

We appreciate your Feedback.  Please let us know what you think about this Article, Your Small Business Experiences and ways to improve our website.  Your Comments are appreciated!              

Copyright 2010, ABC Business Consulting, LLC

Posted in Business Strategic Planning. 1 Comment

Developing and Implementing A Winning Marketing Plan

January 5, 2010 by Frank Goley, Business Consultant

The Business Success Strategies Blog is sponsored by ABC Business Consulting 

Developing, writing and implementing a successful Marketing Plan starts with solid Industry and Market Analysis and concludes with an implementable Marketing Strategy and Marketing Programs.  A Marketing Plan is not developed and implemented independently; rather, it should be developed in close coordination with your Business Plan’s Products and Services Section and ultimately implemented through your Company’s Strategic and Sales Plans.  This article gives you an overview of what an effective Marketing Plan contains.  For more information and a step by step guide on developing a Marketing Plan, see the ABC Business Consulting Business Plan Workbook.

There is a certain approach and building-block process to developing a Marketing Plan.  The place to start is analyzing your Industry:  its current state; who the major participants are; changes in the industry; opportunities, economic modeling forecasts; and examining who else may enter the industry.  With that completed, move on toward determining how distribution works in your industry and how technology affects its distribution systems.

After your analysis on the Industry level is complete, it is time to narrow your focus to analyzing and defining your market segments.  Determinants of Market Segments are Demographics, Geographic’s, Customer Needs, Buying Patterns, Psychographics and so forth.  Once your Market Segments are defined and analyzed, then for each of the Market Segments, explain how the Market Needs lead these identified groups to buy your products and services.  A good Tip when analyzing and explaining Market Needs:  Define your Products and Services’ Offerings in terms of Target Market Needs; focus not on what you have to sell but more importantly, on the buyer needs you satisfy.  Determine why customers buy from you and formulate that strategy behind your Market Segmentation.

With your Market Segmentation Strategy outlined, you can now narrow down your Target Markets, determining what Market groups are more important to your operation, along with, the Target Market Niches you can effectively target.  It is vital to narrow down what your Target Customers’ needs and characteristics are, along with, what makes certain target groups more advantageous to exploit than others. 

The next step in the Marketing Plan Process is to analyze Market Trends from a Strategic standpoint.  Look at Market Trends as a way to get ahead of the market direction, knowing with a probability of certainty where it is going before hand.  Having established the nature and direction of Market Trends, you can now adeptly and realistically project your Market Growth and specific Growth Rates.  Your Growth Rate Projections should identify in detail the relationship between your potential customers, sales, revenues and ultimately, profits.  Now you will be able to establish a realistic projection of Return on Equity and Return on Investment, as well as, identify the funds needed to finance and sustain this growth from an internally generated source (i.e. Cash Flow) and an externally generated source(s) (i.e. Lenders, Venture Capital, Investors, etc).

With Market Trends and Growth rates determined, it is time to explain the Nature of your Competition, why customers choose one provider over the other and why customers will buy from your company instead of these competitors.  Provide a detailed competitive summary of your Products and Services’ Variables, ranking them in comparison to your Competition (example variables: Pricing, Sales, Trends, Positioning Clarity, Quality, Value, Reputation, Packaging, Advertising, Customer Service, Target Market Focus, Innovation, Brand Awareness and so forth).With this Competitive Analysis on a Product and Service Variable level completed, determine your Top Five Competitive Strengths and Weaknesses, as well as, identifying your top Competitive Gap Threats.

Having established your competitive Gap Threats, you can now develop a detailed Analysis of your Competitors.  You must show how you can bridge your Competitive Gaps, clearly showing you can effectively compete, and what areas your business is better than the Competition.  It is important at this juncture to illustrate how Competitively Positioned your Company will be in the Market.  Specifically, what is your Positioning Strategy and what your areas of specialty and customization?  With your Company’s Competitive Positioning Strategy clearly defined and established, you can clearly explain your Company’s Competitive Edge.  Competitive Edge is sustainable value which can be maintained and developed over time.  As importantly, what Barriers to Entry can your Company create to sustain superior growth and keep this Competitive Edge?  Things like Cost Structure, Distribution, Trade Secrets, Product Differential, Customer Integration, etc. should be analyzed to determine how you can effectively establish strong Barriers to Entry, thereby, protecting your Competitive Edge and Future Growth. 

Let’s pause and see what has been accomplished so far in this Marketing Plan Process Overview:

1.     Industry and Market Analysis

2.     Market Segmentation

3.     Target Markets

4.     Strategic Market Trends

5.     Market & Company Growth Rates

6.     Competitive Analysis & Gaps

7.     Competitive Positioning & Edge

Two parts remain:  your Marketing Strategy and Marketing Programs.  These two parts of your Marketing Plan are closely linked as your Marketing Programs will implement your Marketing Plan’s underlying strategies.

It is important to remember that the term “Marketing” is defined as the broader effort of generating Sales Leads on a large scale basis and enticing customers to consider your products and services.  Your Marketing Strategy will explain how your Marketing Program will support your Company’s Strategic Plan and specifically identify the Sales Appeal of your Products and Services.  Elements to consider: Company Uniqueness, Products and Services, Positioning; Attracting and Maintaining your Market.

This is further developed in the core components of the Marketing Strategy.

1.     Positioning Statements:  Strategic Focus on the most important Target Markets; the Market’s most important Needs; and how your Products and Services meet those Needs.  State the Main Competition; how your Products and Services are better.

2.     Pricing Strategy:  Provide a Price Breakdown of your Products and Services and relate your Pricing Determinants and Strategy to your overall Marketing Strategy.  Consider things like:  What your Products and Services cost you to produce and sell; what your Margins will be; Discount Policies & Strategies; Dealer and Distributor Margins; Recouping R & D costs; Possibility of Pricing Wars; Critical Supply and Demand factors; How Pricing will change over time, etc.

3.     Promotion Strategy:  This component of your Marketing Strategy will answer how you spread the word about your Company to future Customers, and how you will Promote your Products and Services.  Elements to consider:  Advertising, Public Relations, Trade Shows, Events, Direct Mail, Internet Strategies, Seminars, Sales Literature, Expected Response Rates, Promotion Costs, Name identification, Brand Loyalty, Advertising Budgets, Incentives; Advertising Message, Theme and Vehicles; Customer Communications and so forth.  It is important to determine the Marketable Differences in your Products and Services over your Competition.

4.     Distribution Strategy:  How will you / who will distribute your Products and Services?  What is Unique in your Distribution Strategy compared to the Competition?  What are your Distribution Strengths?  Types and numbers of Sales People?  Sales People Compensation Structure? Sales Territories? These are some of the questions you should be asking while developing your Marketing Strategy’s Distribution System. 

Your Marketing Strategy should conclude with determining the Changes over the next three to five years which would impact most on your Marketing Strategies.  What potential changes can harm your market and bring advantage in your market?  How can you prepare for these changes?  A Marketing Strategy is never stagnant, it is always developing and adjusting to Market Conditions, Trends and Changes. With your Marketing Strategy fully developed, you can now assemble your Marketing Strategy Profit & Loss Statement.  This P&L Statement is less about Sales Forecasting (which is developed in more detail in the subsequent Strategic Planning Process) and more about a general indication of whether the Marketing Strategy will be successful.   

Example Marketing Strategy Profit & Loss Statement Format

Proposed     Estimated   Actual

Volume     

Value    

Cases    

Percent Increase

Share

Cost of Goods

Sales & Distribution Expenses

Advertising & Promotion Costs

Misc Costs

Pre-Tax Profits 

The last Section of your Marketing Plan deals with your Marketing Programs.  Areas to consider include:

Ø  Defining Marketing Programs

Ø  How the Marketing Strategy will be implemented

Ø  Identify specific Marketing Plans

Ø  State Market Gaps and how they will be met

Ø  How implementation of your Marketing Programs will be measured and quantified

Ø  How your Target Markets relate

Ø  How you will capture Markets others are competing for

The Marketing Programs put your Marketing Strategy into action, bringing “life” to your Marketing Plan.

Conclusion: Your Marketing Analysis and Plan are developed in concert with your Products and Services Development, resulting in a Marketing Strategy and implemented through the Marketing Programs.  These Marketing Strategies and Programs are then assimilated into your Company and executed through your Company’s Strategic and Sales Plan. A Flow Chart outlining this inter-relationship:

Products and Services Development => Market Analysis => Marketing Strategy => Marketing Programs => Marketing Plan => Strategic Plan => Sales Plan => Happy Customers and Financial Success.

So you are probably asking, what is entailed in a Strategic Plan and Sales Plan?  Please see the ABC Business Consulting  Article on Strategic Planning for Business Success.

For a step-by-step guide on developing an Effective Marketing Plan and a Successful Business Plan, please consult the ABC Business Consulting Comprehensive Business Planning Workbook.

About the Author

This Business Success Strategies Blog is written by Frank Goley, the ABC Business Consulting Chief Business Consultant, who has over 20 years experience helping companies start, grow, turn-around and succeed.

Visit the Business Success Articles for more of Frank’s “how to” business success articles covering topics like Business Planning, Business Management, Financial Management, Growth Strategies and Business Finance.

Check out Frank’s books that are about to come online: The Comprehensive Business Planning Guide and Workbook and The Business Success Guide.

Be sure to subscribe to the Business Success E-books and Articles Distribution Service and the Business Success Tips Newsletter!   

Copyright 2009-2010 ABC Business Consulting, LLC

Posted in Business Marketing Strategies. Comment

Writing An Effective Business Plan- Part Two

January 1, 2010 by Frank Goley, Business Consultant

The Business Success Strategies Blog is sponsored by ABC Business Consulting

This is Part Two of a two part blog on Writing and Developing an Effective Business Plan. Please refer to the previous blog for Part One.

Picking up where we left off in the previous blog with Section 4 of the Business Plan:  

Section Four: Products and Services

Now that you have developed the Company and Management sections, it is time to describe in detail your company’s Product or Service (P/S).  This section also contains information on your competitor’s P/S.  One of the most important aspects of the P/S section of the Business Plan explains why your P/S is unique: i.e. its competitive advantage or put another way, the utility of your P/S.  On the converse, the P/S section states where you have weaknesses in your P/S line-up.

A Resource Audit is an honest self-evaluation of your company.  In this analysis you identify your strengths, weaknesses, opportunities and threats, which will be considered in your Marketing Plan and addressed in your Strategic Plan.  You develop your P/S price points, features and value to be fully exploited in the Marketing Plan and implemented in the Strategic Plan.  Customer identification, analysis and segmentation starts in the P/S Section to be later developed in the Marketing Plan (and yes, implemented in the Strategic Plan).

Section Five: Marketing Plan

The Marketing Plan fully develops how your P/S will be marketed; summarizes your Marketing Research (actual research contained in the Appendix); fully details your specific Target Market Segments; and explains your P/S Competitive Advantage.  In essence, The Marketing Plan explains in great detail how your P/S will be positioned in the market and should be supported by detailed, believable market research. The Marketing Plan carves out your niche(s) and develops effective Marketing Programs, along with a Strategic Marketing Plan.

Resource: Please see the ABC Business Consulting Article: Writing, Developing and Implementing a Winning Marketing Plan for more details on the Marketing Plan Section.

Section Six:  Strategic & Sales Plan

The Strategic Plan puts the Marketing Plan into action.  The Strategic Plan will show how to implement the Marketing Plan. The Strategic Plan equals action and implementation.  It also details your Sales Forecast for each particular product or service.  The Strategic Plan translates what will be the result of the Marketing Plan, and how it will be implemented and achieved.  The Strategic Plan takes the vast amount of marketing information and research and puts it into a clearly defined Sales Plan.  It is very important a Strategic Plan is believable and achievable.  It works out the “kinks” and road blocks in your Marketing Plan and illustrates how you will overcome your Competitive Gaps.

The Strategic Plan also provides a process for Strategic Management, Strategic Auditing and Strategic Reassessment.  The end product not only implements The Company’s Strategy, but also it provides measurable performance, control functions, corrective actions and reassessment when necessary.  It is a top down and bottom up approach, completely integral with your Company’s Operations, from the Vision and Leadership of the CEO, to Management’s implementation oversight of the Strategy, to the Sales and Operations units of the company.  It provides a Company-Wide Strategic Vision, Focus, Structure and Discipline, while providing an atmosphere of learning and awareness, with a process for identifying deficiencies, and in turn, fixing those problems.

Resource: For more information on developing a Strategic & Sales Plan, please see the ABC Business Consulting Article: Developing A Successful Strategic Plan.

Section Seven: Financials

If you develop your Strategic Plan effectively, completing the Financials will not be difficult.  The principal reason why business owners have such a hard time with the Financials Section of a Business Plan is often due to a cursory job on their Strategic Planning (as well as other important sections).  Financial Projections are not believable chiefly because a suitable, well developed Strategic Plan wasn’t accomplished.  Guess what makes a successful Strategic Plan?  The proceeding section, the Marketing Plan.  As stated previously, the sections and the order of the sections in a business plan are very important because each section builds on the previous section, the culmination of which makes for certain data from which solid Financial Projections can be made. 

You should have two sets of Financials, simple and detailed, as well as, conservative and best case.  The following types of financials are typical for a Business Plan:

Ø  Cash Flow: Monthly basis for 12 months. Yearly and Quarterly basis for 3-5 years.

Ø  Income Statement: Monthly basis for 12 months. Yearly and Quarterly basis for 3-5 years.

Ø  Balance Sheet:  Yearly and Quarterly basis for 3-5 years.

Another very important Financial in addition to the three prescribed Financials, is the Budget.  Budgets are used principally for two purposes:  Planning and Control.  A Budget matches short term targets with long term Strategic Planning, while providing an indication of problems ahead.  A good Budget system will indicate when Expenses are heading over Budget and there is sufficient time to correct the problem. Budgets are often developed during the Strategic Planning Process.

We like Rolling Budgets which look ahead 12 months on a monthly basis, and it budgets an additional Quarter at the end of each Quarter.  This way, you always have a 12 month continuous Budget Outlook.  A Budget should also be flexible so that you can separate the effects of variations between Actual and Estimated results.  Lastly, a Budget is a tool to Evaluate your Business Units and Management’s Performance.  Needless to say, assembling and actively managing a good Budget requires the input of your entire organization.It is important to understand that your Financials relate to each other when building them (a reason why Financial Software Programs are so beneficial).  There’s a lot of back and forth between the Income Statement, Balance Sheet and Cash Flow Statement.  The Cash Flow Statement is the most important Financial for many reasons but principally because it shows in detail how much cash is necessary to finance and grow your company.

Computer Programs are excellent resources for developing your company’s Financials, such as Quicken for Business, Quick Books or other Business Planning Financial Software Programs. It is important that these programs allow you to 1) customize the Formats for your needs and 2) are downloadable into Excel Spreadsheets for maximum utility and flexibility.

The projection period differs and depends for a particular company, venture or project.  For instance, a large scale Real Estate development project’s Cash Flow could be 5+ years and 60+ months depending on the length of the project build out.  Also, Real Estate development projects require more Financials than detailed above. Typically, a Construction Cost Analysis and Cash Flow, Schedule of Real Estate, Construction Cost Schedule and so forth are requirements. Real Estate Development Financials are developed through a Loan Package and transferred to the Business Plan Financial section, so consult how to properly package a loan in order to learn more about these project specific Financials. 

A very important element of the Financial Section is the Assumptions area.  This details the assumptions you have utilized in constructing the financials.  You should also list the various calculations and formulas used in your financials since those formulas can be company, deal or project specific.  Financials should also include Return of Investment / Return on Equity calculations and the assumptions used in those calculations.

Your Financials need to be believable and realistic.  If anything, they need to be conservative.  Too often we see extremes of too few numbers or too many numbers.  If you build out your Financials as a direct result of your Strategic Plan (as we have prescribed), this process results in numbers that are realistic and achievable.  An option is to build two sets of Financials, conservative and a little more aggressive.  We find if you have truly conservative numbers, you will often exceed your Plan, which is a great Psychological boost for any company in any stage of development.  (This assumes these numbers are based on sound planning and thinking and most importantly, that your company can make a nice profit at the conservative level).

Resources: Please refer to the following ABC Business Consulting Business Success Articles for more detailed information on Business Financials:

Cash Flow Management

Profit Statement Analysis

Section 8: Appendix

The Appendix Section of a Business Plan contains all the bulky items:  marketing research, construction plans, appraisals, valuations, company art work and graphics, company charters and share details and so forth.  Since an Appendix is often large in volume, it is important to have a table of contents in the beginning of the section, detailing what is contained and where it appears in the Appendix section.

MORE TIPS FOR WRITING AN EFFECTIVE BUSINESS PLAN

Ø  Have a business mentor who has a lot of experience in your area of business read your business plan and critique it.

Ø  Business Plans do not need a lot of fancy graphics and art work to be effective.  Simplicity and straight forwardness are more important than a bunch of pretty graphs.  Many modern business plans lack substance and have lots of flash.  Add some flash and graphics to the plan after the substance of the plan is completed and only if it aides the understanding and comprehension of the written content.

Ø  What is the most effective way to build a business plan?  For each section of the plan, write out questions prior to writing the section.  Pull the questions from your experience, your team’s experience, your mentor’s experience and published business planning books and software.  Answers to the questions will build out that particular section.  Order the sub-sections in a logical, building block order. Please see the ABC Business Consulting    Business Planning Book for more details on this process.

Ø  After you have developed your Comprehensive Business Plan, you should develop business plans of shorter length and format (usually no more than 20-30 pages in length) for various purposes:  Funding Business Plan, Investor Plan, Joint Venture Business Plan, Marketing Business Plan, Strategic Plan, Customer Plan, Supplier Plan and so forth.

Ø  A Business Plan is a technical document – a business document.   It should be written as such.  It should not be written like a novel or a book.  It should be concise and utilize outline organization versus long, wordy paragraphs.

Ø  A business plan should be realistic and believable.  It should contain facts and figures to support the “believability factor.”  For instance, just stating in your Marketing Plan that you will achieve 5% market share is not enough.  Your Strategic Plan in combination with your Marketing Plan should carefully illustrate how you will achieve 5% market share.

Ø  A comprehensive Business Plan serves two purposes typically: a dynamic document to run your company, and a document to start, acquire or expand a company, backed by the shorter version business plan formats (i.e. Funding Business Plan).

Ø  A Business Plan is never static.  It should be dynamic and easily adaptable to changes in the market and opportunities which arise.  It is a “living” document used to run your business on a daily, monthly, quarterly, and annual basis.

An Important Consideration

Should you hire someone to write your business plan?  The answer is Yes and No.  You do not want a business plan writer or technical writer to build the business plan.  You can use these writers after the business plan is built to make it more professional (i.e. adapted for a Funding Business Plan).  However, hiring an experienced Business Consultant can be quite advantageous when building a business plan. 

A good Business Consultant will take the time to get to know you and your business and issue you important questions for you to answer, which when analyzed, will build an effective Business Plan.  Nobody can solely write a business plan for you.  The business owner / founder must be integrally involved in the Business Planning process as you know your business better than anyone else.  A good Business Consultant harnesses the necessary information by asking the right questions in order to build a solid Business Plan, while applying and providing valuable experience during the planning process.

A  Business Consultant can also offer years of experience in working with many different businesses, business sectors, utilizing that know-how and experience in building your Business Plan.  Additionally, if you hire a Business Consultant early on in the business opportunity / business development stage, the consultant can not only help you build an effective Business Plan but also be available for advice as you implement your Business Plan and grow your company.  A Business Consultant can show you effective ways to maximize profits and margins, while minimizing expenses.  Moreover, a Business Consultant can introduce you to important business networks and connections to bolster your company operations.

Please visit The ABC Business Consulting Website for more information on what a Business Consultant can do for your Company.

This article on Business Planning is a simplistic overview. For a step-by-step guide on developing a Successful Business Plan, please consult the ABC Business Consulting Comprehensive Business Planning Workbook and Guide.

Author Bio

This Business Success Strategies Blog is written by Frank Goley, the ABC Business Consulting Chief Business Consultant, who has over 20 years experience helping companies start, grow, turn-around and succeed.

Visit Business Success Articles for more of Frank’s “how to” business success articles covering topics like Business Planning, Business Management, Financial Management, Growth Strategies and Business Finance.

Check out Frank’s books that are about to come online: The Comprehensive Business Planning Guide and Workbook and The Business Success Guide.

Be sure to subscribe to the Business Success Articles and E-Books Distribution Service and the Business Success Tips Newsletter! 

Disclaimer:  ABC Business Consulting, LLC is not offering or providing business investments or loans.  This is for informational purposes only.

Copyright 2009-2010 ABC Business Consulting, LLC

Posted in Business Planning. Comment