Isn’t it somewhat strange, that with literally thousands of books, articles and software programs available in the marketplace to tell you how to develop a business plan, they all still seem to be long laundry lists of ill-defined questions that fail to identify what is important to business success for the new entrepreneur. I believe that what follows provides a more meaningful approach and structure for understanding your business and creating a sound business plan. The concept is very straightforward and understandable. Simply stated, a successful business consists of “A Good Idea and Good Resources”. There are six elements that make up the Business Idea and six elements that make up the Business Resources. These twelve elements contain the data to create an accurate, customized business plan and concurrently create a business model, which is a realistic representation of the business concept. This approach satisfies the other prerequisite for creating a good business plan, which is to assemble the facts, goals, assumptions, and decisions that the owner believes to be realistic before attempting to write the business plan. Writing the business plan before accumulating accurate data will almost always create a bad, though perhaps great sounding business plan. Using these worksheets is the easiest and most effective method of collecting the data for the business plan. Writing the plan becomes easy because the data from the worksheets is directly transferrable to specific sections of the business plan.

The Six Business Idea Elements


The six business idea elements are the best way to describe your business concept – “what you expect you business to look like as an active participant in your segment of the marketplace”. Keep in mind that this is just an Idea or a concept of what you expect to create. If it is a good idea, anyone with the required resources (the real business assets) could start or operate the business successfully. The business idea is defined by six elements that form three related pairs of elements. Briefly, here’s what the worksheet questions for these six elements are trying to establish.


Products/Services and Customer Profiles
These two elements define what you expect to sell and who you expect to sell to. They are the most important decisions you will make. The other ten elements will be used to help you evaluate the soundness of these two decisions. These two worksheets will help you be quite precise in describing what products and services you expect to sell and the specific characteristics of your primary buyers.


Competition and Differentiation (Competitive Edge)
When you defined your products and services and customer profiles, you automatically defined your competition because they sell the same or similar products and services to the same customers. Competition is the greatest barrier to successful entry into any marketplace segment. You are asked to research and define the strengths and weaknesses of your competition. This will permit you to identify the characteristics of your business concept that will differentiate you from the competition and provide a competitive edge. Without a positive differentiation, securing an adequate market share is very difficult.


Advertising and Sales
Advertising is how you create interest and develop prospects to buy your products and services. The characteristics of the preceding four elements tend to define what type of advertising will be most cost effective in developing prospects. Advertising can be Personal (human) or Impersonal (media driven). The sales approach is usually dictated by the pattern established by the preceding elements. Sales can be closed by Personal (human) or Impersonal techniques. The worksheets help clarify the alternatives available for these two elements. Remember, sales are the ultimate measure of business success.

The Six Business Resource Elements


The six Business Idea worksheets defined what you expect your business to look like in the real competitive world. The six Business Resources worksheets help you identify and quantify the specific assets necessary to implement and operate the business successfully. Here’s what the worksheet questions for these six Resource elements are trying to establish.


Ownership
Ownership identifies the owners, their experience in managing this type of business, the legal form of the business, and most importantly what the owner(s) expects in financial return from the business to consider it a success. Some want a lot, some need very little, so this is a variable, but extremely important characteristic in measuring the potential success of the business.


Staffing
This element identifies the position titles and the number and type of employees that are required to operate the business over the two year period. It includes a brief position description and the average monthly salary/wage for each position.


Facilities
Facilities include the physical location of the business and the vehicles, tools and equipment to operate the business. The importance of the actual location varies from not very important to the most critical resource. For a restaurant it is often the most important element, for warehouse storage it may be relatively unimportant, and for a sales person it may be a cell phone in the car and totally unimportant. The location should satisfy both operational needs and customer expectations. Facilities also include the equipment required to deliver the products and services to the customers.


Financial Model
The Financial Model is used to estimate five categories of financial information. They are sales volumes, income, cost of goods, expenses, and profit or loss (the Bottom Line). This financial report is used to determine if the business can be financially successful and if the projected profits will meet the owner’s financial goals. If not, most owner/investors would not proceed with the business initiative as defined.


Funding
Funding is the term used to estimate the startup costs (new business), operating capital requirements, and reserve requirements, and to identify the source of these funds. Inadequate funding is a common reason for business failure.


Balance Sheet
The business Balance Sheet reflects the actual assets and liabilities and resulting net worth for the business at the beginning of the planning period. It changes over time as income and expenditures fluctuate with business operations. The Balance Sheet provides a reality check for the funding requirements and availability.