Business plan outlines your strategy
Written by Shirley Lichti for The Record, May 19, 2004

Many people who hope to start a small business have no prior business experience. Nor have they taken business courses. This presents a challenge because every company needs a business plan.

A good business plan describes the business idea, explains the company objectives, outlines the strategies and tactics for the business to succeed and identifies the resources (both human and financial) that will be needed for implementation.

Once completed, the plan becomes a roadmap to keeping your business on course.

If you've never written a business plan, don't despair. A wealth of assistance is available, most of it free.

For example, the Waterloo Region Business Enterprise Centre and Lutherwood CODA have locations in Kitchener-Waterloo, Cambridge and Guelph with resource centres to help you develop a business plan, experienced staff to answer questions and workshops and seminars related to starting and operating small businesses.

Local Resources
I asked Peter Kerr, a business research advisor with the Business Enterprise Centre and Beth Pitt, a business advisor/trainer with Lutherwood CODA for recommendations on how to get started, what to include in your plan, where to get help and how to judge the effectiveness of your business plan.

Although you can hire someone to write a plan for you, Kerr recommends against it. "You benefit a lot more if you do it yourself," he says. This makes a lot of sense - after all, you're the one who needs to run the business later.

Pitt, who works with students in the Self-Employment Benefits Program, suggests that before you create a plan, you should take the time to do an entrepreneurial self-assessment to determine your motivation for starting a business, examine the timing and evaluate if you have the necessary financial resources.

If you are just getting started, you should visit one of the Business Enterprise Centre or Lutherwood CODA resource centres.

Once there you can get a business plan outline and access to publications like the Business Plan Handbook, which contains sample business plans, or Preparing a Successful Business Plan, which goes into more detail and includes sample worksheets. (The main branch of the Kitchener Public Library also offers great resources for business planning.)

There are many opinions on what information should be included in a business plan. For the most part Kerr and Pitt suggest similar components, although they call the sections by slightly different names.

Although written last, your plan should begin with an executive summary.

This is the most important section of your business plan because it may be the only section other people, lenders for example, read in its entirety. Simply put, the executive summary is a high level summary of your report and must be short - two pages maximum.

Next your plan should provide a background section or overview of your business idea.

You'll also need to include a section analysing the industry you'll be competing in, for example, what trends are taking place and why.

Analyse Industry
A section analysing the environment looking at economic and demographic information, technology, cultural and other relevant factors is also needed.

Another key section is a competitive analysis. Kerr says many entrepreneurs tell him "We don't have any competitors." Generally when this happens, people simply haven't looked hard enough. Or perhaps they've overlooked indirect competition.

In the rare case when there really is no competition, Kerr suggests people consider how they would deal with a new competitor who offers lower prices.

Of course, every business plan needs sections that identify the company's target markets and marketing tactics describing the 4Ps: product, price, place and promotion.

The plan should also touch on the company's management and ownership.

Lastly, you must have a financial section that includes income statements, balance sheets, and cash flow forecasts for two to three years. Often people will include additional information related to their plan in appendices.

You can get more details on what to include in the sections outlined above by referring to publications like the Business Plan Handbook. It provides sample business plans you can use as a template, which may help you visualize your own plan.

There are also online resources, such as the Interactive Business Planner - it's available for free at www.cbsc.org/Ontario - which can be used to prepare plans for new or existing businesses.

Kerr observes that in his experience, the Interactive Business Planner is a good tool to get you thinking about your plan before you start working on paper - but the plan doesn't print out very nicely, he notes.

Another option to consider is a commercial software package, such as Business Plan Pro Canada, available for around $99.95. However, most banks and large consulting companies will provide you with business plan templates for free.

For example, the Royal Bank offers an online planning guide to creating business plans as well as sample plans at www.rbcroyalbank.com/sme/bigidea/index.html.

According to Pitt, the market research that goes into your plan is critical because it builds the foundation for the numbers for financials, risk assessment, and information for pricing.

She suggests not to treat market research as a "feel good" exercise, but to be brutally honest. This is the time to find out your business isn't going to work - not later.

"Market research is the hardest part of the plan," says Pitt. "It's not that the information isn't out there - it is. But the task is sifting through it."

Once you've finished developing your business plan, you should probably run it by an unbiased outsider who is in a better position to judge its effectiveness.

At the Business Enterprise Centre, Kerr says he looks for red flags such as are the financials consistent with the business plan story? If the industry is predicted to grow at 12 per cent annually, do the financials match? Is the target market clearly defined? Is the advertising plan realistic?

Kerr says too often people tell him "I don't need to advertise - everybody will buy my product!"

Passion for Idea
One last bit of advice comes from Pitt who commented that, "passion for a business idea really helps in the whole planning process."

"If someone is truly enthused about their idea and committed to making it a reality, that comes through loud and clear in their business plan. The motivation fueled by that passion often results in a creative, innovative document that really comes to life!"

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