Five Crucial Components Of A Business Plan

The format of a Business Plan is something that has been developed and refined over the years and is something that should not be changed. Like a good recipe, a business plan needs to include certain ingredients to make it work.

When you create a business plan, don’t attempt to recreate its format. Those reviewing this type of document have expectations you must meet. If they do not see those crucial decision-making components, they’ll see no reason to proceed with their review of your business plan, no matter how great your business idea.

Executive Summary Section

Every business plan must begin with an Executive Summary section. A well-written Executive Summary is critical to the success of the rest of the document. Here is where you need to capture the attention of your audience so that they will be compelled to read on. Remember, it’s a summary, so each and every word must be carefully selected and presented.

Use the Executive Summary section of your business plan to accurately describe the nature of your business venture including the need that you plan to fill. Show the reasons why people need your product or service. Show this by including a brief analysis of the characteristics of your potential market.

Describe the organization of your business including your management team. Also, briefly describe your sales and marketing plan or approach. Finally include the numbers that those reviewing your business plan want to see – the amount of capital you seek, the carefully calculated sales projections and your plan to repay the loan.

If you’ve captured your audience so far they’ll read on. Otherwise, they’ll close the document and add your business plan to the heap of other rejected ideas.

Devote the balance of your business plan to providing details of the items outlined in the Executive Summary.

The Business Section

Be sure to include the legal name, physical address and detailed description of the nature of your business. It’s important to keep the description easy to read using common terminology. Never assume that those reading your business plan have the same level of technical knowledge that you do. Describe how you plan to better serve your market than your competition is currently doing.

Market Analysis Section

An analysis of the market shows that you have done your homework. This section is basically a summary of your Marketing Plan. It needs to show the demand for your product or service, the proposed market, trends within the industry, a description of your pricing plan and packaging and a description of your company policies.

Financing Section

The Financing section must show that you are as committed to your business venture as you expect those reading your business plan to be. Show the amount of personal funds you are contributing and their source. Also include the amount of capital you need and your plan to repay this debt. Include all pertinent financial worksheets in this section: annual income projections, a break-even worksheet, projected cash flow statements and a balance sheet.

Management Section

Outline your organizational structure and management team here. Include the legal structure of your business whether it is a partnership, corporation or limited liability corporation. Include resumes and biographies of key players on your management team. Show staffing projection data for the next few years.

By now you’re probably thinking that you don’t need Business Plan just yet. Well you do, and there is business plan building software that can help you through this immense project. These software packages are easy to use and affordable. Use one today and produce a professional-quality Business Plan – including all critical components – tomorrow!

First Steps to Starting Your Own Small Business

You’ve been dreaming about what it would be like to start your own small business. It has been on your mind since you were in school, and there are times, especially on Monday mornings, that you daydream about it. But, you’re not really sure what it would look like. You don’t have the first clue how to get started, and of course, you’re afraid that you would put your heart and soul into it, only to fail and look like a fool. You barely even talk about it out loud, because you don’t want family and friends to laugh at you.


But, anything is possible! The only limitations we have are the ones we put on ourselves! With planning and learning the steps, and doing your homework, if this is something you really want to do, you can do it, AND succeed greatly at it, too!


I’m not saying it’s easy! Nothing worth having is. I have had to learn a great deal; about myself, about business, about my clients and potential clients. And it never ends, because my interests and passions change with the years. But, how exciting!


When my daughter started kindergarten, I returned to school. It took me five years to get through school, but I had a vision: I wanted to help people become healthy and fit in the privacy of their own homes. After school, I didn’t have that plan fully in place, even in my mind, but after six years of working in a hospital, I was ready. I opened MEG Fitness in June, 1996. It’s been an incredible ride! I’ll never look back at my life with regrets that I didn’t pursue my dream. I really have learned that the only limits are those I impose on myself, too! So, I continue to dream bigger and allow my vision to become more grand. Why not? What’s the worst that can happen?


That’s what you have to ask yourself. If you never try, will you be happier? If you never try, how will you know if you could have done it? Consider some of the well-known names in sports, such as Michael Jordan, the basketball player; he has thrown more MISSED shots than those that have made their mark. What if he had not taken the chance to see what was possible for himself?


Okay, so now you’re ready to take the next step! First, in order to help you focus, I recommend that people start working on their business plan. The Small Business Association has invaluable resources on their website (www.sba.gov). This was the route I took. A year before I quit the hospital, I started working on my business plan. It helped me determine exactly who I was, what I offered, why, who my ideal client was, who my target market was (at that time), who my competition was, where I would offer my services, how I would offer them, and so on. As I coach other health professionals who want this dream, I now use a 3-page business plan for clients who don’t plan to look for outside funding. Regardless of the type of business plan, it will help answer many hard questions for you.


There are resources specific to most specific fields, too, including other professionals who help others get started. Do your research to see who you can contact for support and to ask questions of as you progress. Once you have your business plan in place, it’s not time to celebrate, yet! How are you going to accomplish the goals you have come up with in that plan? You next need a marketing plan. Now, although the marketing plan is also part of a business plan, it’s really just the intro! The marketing plan will become your template, your schedule, and will spell out the actions you will take to make those goals reality. If you use it seriously, it will be your day-to-day guide to making your dreams come true!

Finding a Venture Capital Firm

Many ventures are faced with the challenging task of raising venture capital. The first part of this process is finding the right venture capital firm (VC). While this may seem simple, it isn’t. There are thousands of venture capital firms in the United States alone, and going after the wrong ones is one of the most common reasons why companies fail to raise the capital they need.

When seeking a venture capital firm, there are six key variables to consider: location, sector preference, stage preference, partners, portfolio and assets.

Location: most venture capital firms only invest within 100 miles of their office(s). By investing close to home, the firms are able to more actively get involved with and add value to their portfolio companies.

Sector preference: many venture capital firms focus on specific sectors such as healthcare, information technology (IT), wireless technologies, etc. In most cases, even if you have a great company, if you fall outside of the VC’s sector preference, they’ll pass on the opportunity.

Stage preference: VCs tend to focus on different stages of ventures. For instance, some VCs prefer early stage ventures where the risk is great, but so are the potential returns. Conversely, some VCs focus on providing capital to firms to bridge capital gaps before they go public.

Partners: Venture capital firms are comprised of individual partners. These partners make investment decisions and typically take a seat on each portfolio company’s Board. Partners tend to invest in what they know, so finding a partner that has past work experience in your industry is very helpful. This relevant experience allows them to more fully understand your venture’s value proposition and gives them confidence that they can add value, thus encouraging them to invest.

Portfolio: Just as you should seek venture capital firms whose partners have experience in your industry, the ideal venture capital firm has portfolio companies in your field as well. Portfolio company management, since they are industry experts, often advises VCs as to whether the company in question is worthwhile. In addition, if your venture has potential synergies with a portfolio company, this significantly enhances the VCs interest in your firm.

Assets: Most companies seeking venture capital for the first time will require subsequent rounds of capital. As such, it is helpful if the VC has “deep pockets,” that is, enough cash to participate in follow-on rounds. This will save the company significant time and effort in maintaining an adequate cash balance.

Finding the right venture capital firm is absolutely critical to companies seeking venture capital. Success results in the capital required and significant assistance in growing your venture. Conversely, failing to find the right firm often results in raising no capital at all and being unable to grow the venture.

Factoring Financing: How to grow your business without debt or loans

What is factoring?

Accounts receivable financing, also known as factoring, is a powerful financial tool that has fueled the growth and success of a number of companies.

Factoring enables companies to capitalize on their unpaid receivables by selling them to a factoring company for immediate payment. With factoring, companies

immediately get paid for their invoiced work from the factoring finance company, while the factoring company waits to be paid by the customers. Factoring

strengthens a business' cash position by shortening the time to get invoices paid to 48 hours and providing the needed funds to meet current expenses and

target new opportunities.

Factoring Benefits

As opposed to loans and lines of credit that require that the client have tangible assets and strong financials, factoring relies more heavily on the

financial strength of the clients' customer. This is a critical feature,since many new and small businesses do not meet the financial criteria of traditional

lending institutions. However, many small businesses have a roster of financially strong customers that can be leveraged. Factoring empowers businesses to

capitalize on their customer list, and provides them with a tool to transform outstanding receivables into immediate cash, without generating debt. Since

Factoring is not a loan, it is an ideal financial product for the following:

o New and emerging businesses including small and home businesses, consultants and solo-preneurs.
o Businesses with financially strong customers
o Businesses that are preparing to grow significantly
o Business with intangible assets (e.g. consultants)
o Businesses that do not want to take a loan

An additional benefit of factoring is that the factor usually assumes part of the clients' credit risk for the customer. This means that if the customer

becomes financially insolvent due to bankruptcy and does not pay the invoice, the factor will assume the loss. This is a critical service for small companies

who may not be able to afford the bankruptcy of a customer.

Costs

The costs of a factoring transaction - also known as the discount - vary based on a number of variables such as the financial strength of the customer and

the amount being factored. Generally, the discount is a percentage of the invoice's face value that increases with time until the invoice gets paid. Small

businesses, those that have between $20,000 and $300,000 in yearly revenues, can expect to pay a discount rate of about 2% for every ten (10) days that the

invoice remains unpaid. Businesses with factorable revenues in excess of $300,000 can expect lower discount rates.

Factoring at Work: Business Services and Products, Inc. Case Study

Business Services and Products, Inc. (BSP, Inc.) is a small fictional company, which provides business consulting and equipment to local companies. It has

$300,000 of annual revenues and during the past year BSP Inc. has enjoyed significant sales growth. Although most business owners would be very happy to

manage such a company, Jane Sullivan, BSP Inc's president, is very worried about her company's financial position.

Most of BSP Inc.'s customers are large companies with a good reputation for always paying their invoices. However they always take between 30 to 45 days to

pay them. BSP Inc., however, needs to pay their employees every two weeks and their vendors every four weeks. This discrepancy between the time that

customers pay their bills and the time BSP Inc. needs to pay their employees and vendors has created cash flow problems in the past. Furthermore, these cash

flow problems have already caused Jane to delay payroll twice this year and have placed her trade (vendor) credit in jeopardy multiple times. This has also

caused her to pass on a number of significant business opportunities because she was unsure of the company's financial ability to hire and pay for additional

staffers. Unfortunately, BSP Inc. did not have a large enough financial cushion in the bank to afford paying employees while waiting for 45 days new clients

to pay their invoices.

The following table provides an overview of BSP, Inc's current financial position.

Business Services and Products, Inc (without financing)

Yearly sales: $300,000
Lost new sales opportunities: Unknown
Total Sales: $300,000

Variable Costs (60% of Sales): $180,000
Fixed Costs (Rent, phones, etc): $20,000
Total Costs: $200,000

Profit (Sales - Costs): $100,000

Although the company's prospects appear great, Jane may have to stall her company's growth until she builds a large enough cash cushion at the bank to

finance her company's growth. After careful consideration, Jane decided that a factoring line of working capital could help strengthen her company's

financial position. Furthermore, factoring her invoices would enable BSP Inc. to take on new customers and continue growing, knowing that she could

capitalize on her slow paying customers. BSP Inc.'s financing agreement will provide the company with an advance of 70% of her invoiced services. This means

that the company can get 70% of the face value of the factored invoices within 24 to 48 hours of submitting them to the factor. The remaining 30% of the

funds, less the factoring fees, will be quickly rebated as soon as the customer pays their invoice.This line of working capital strengthened the company's

financial position and bank account, enabling Jane to pay for new employees to service new contracts. Jane also decided to use the extra capital to pay her

vendors early, obtaining quick payment discounts and helping to reduce the cost of factoring.

BSP Inc. customers pay their invoices within 30 days of receipt. The discount (factoring fee) for these invoices is 6%. Every time an invoice is paid, the

factor rebates BSP Inc. the remaining 30% that was not advanced less the factoring fee. This means that once the transaction is completed, the factor rebates

24% (30% - 6%) to BSP Inc. Thanks to the factoring line of working capital, Jane was also to secure an additional $120,000 worth of business, bringing her

annual revenues to $420,000.

The following table shows BSP Inc.'s financial position a year after using factoring.

Business Services and Products (with factoring)

Existing Sales: $300,000
New Sales: $120,000 (factored)
Total Sales: $420,000

Variable Costs (60% of Sales): $252,000
Fixed Costs (Rent, phones, etc.): $20,000
Cost of Factoring (6% of $120,000): $7,200
Total Costs: $279,200

Net Profit (Sales - Costs): $140,800

As can be seen from the above table, factoring helped BSP Inc. increase profits substantially from $100,000 to $140,800 - a 40% increase. It placed BSP Inc.

on a more stable financial footing, priming it for growth. Furthermore, the cost impact of factoring on the bottom line was minimal, as it was easily

absorbed by the additional business, showing that factoring was paid for directly by the growth.

Enjoy The Benefits Of A Credit Merchant Account

A credit merchant account can make your business more productive than ever. That’s because a merchant account will let you start accepting credit card payments from customers in any part of the world at any time of the day or night. Could business possibly be better than that when conducted in any other way? That is why you need to know more about potential benefits of a merchant account.

Your credit merchant account will let you grow your business in ways you may not have imagined. For example, in addition to taking credit card payments on location at your store, you can take a wireless credit card processor with you to customers’ residences or places of business and accept payment on the spot. This makes it easier for the customer to pay the charges and not give another thought to the transaction. You, on the other hand, likewise benefit when the bill is paid promptly without the hassle of waiting for payments that may never arrive. You can hire few billing clerks and accounts receivable employees when you accept credit transactions that are processed instantly.

Another way that a credit merchant account can serve your business is when you implement a phone order and payment system. A digital program will let customers call a toll-free number, listen to messages about products and services or select other options, such as “payment” or “catalog request,” and then finish up by processing a credit card for any purchases made during the phone call. You don’t even have to hire someone to answer the phone; the entire process can be automated, although you may want to have a customer service rep available at certain hours of the day if needed.

The credit merchant account benefit that is creating quite a buzz in the business world is the Internet credit card processing option. More companies are putting up a Website in cyberspace to get their names out there and to attract a larger, more global client base. You can enjoy these benefits, too, when you get approved for a credit merchant account and hire a Web designer to create an artistic or thoughtful Website that represents your business to customers around the world. Registering with search engines will bring thousands of visitors to your site by accident, but they may decide to remain when they find exciting features on your home page, such as a survey, a helpful hint, or links to product lists and descriptions. They can shop in any time zone or region in any continent from a computer with Internet access. Think of the possibilities for building a super-size client base!

Give some thought to applying for a merchant credit account from a trusted lender or underwriter. This special account will confer professional merchant status and allow you to collect credit payments in a timely manner instead of working through a time-consuming billing process that may render less fruitful results. Shop soon to compare prices and terms for your credit merchant account.

Effectively Completing the Operations Plan Section of Your Business Plan

The Operations Plan is a critical component of any business plan as it presents the Company’s action plan for executing its vision. The Operations Plan must detail 1) the processes that are performed to serve customers every day (short-term processes) and 2) the overall business milestones that the company must attain to be successful (long-term processes).

Everyday Processes (Short-Term Processes)
Every company has processes to provide its customers with products and services. For instance, Wal Mart has a unique distribution system to effectively move products from its warehouses to its stores, and finally to its customers’ homes. Technology products manufacturers have processes to convert raw materials into finished products. And service-oriented businesses have processes to identify new areas of customer interest, to continually update service features, etc.

The processes that a company uses to serve its customers are what transform a business plan from concept to reality. Anyone can have a concept. And more importantly, investors do not invest in concepts -- they invest in reality. Reality is proving that the management team can execute the concept better than anyone else, and the Operations Plan is where the plan proves this by detailing key operational processes.

Business Milestones (Long-Term Processes)
The second piece of the Operations Plan is proving that the team will execute the long-term company vision. This is best presented as a chart. On the left side, there should be a list of the key milestones that the Company must reach, and on the right, the target date for achieving them. Sample milestones include expected dates when:

• New products and services will be introduced to the marketplace
• Revenue milestones will be attained (e.g., date when sales will surpass million dollar mark)
• Key partnerships will be executed
• Key customer contracts will be secured
• Key financial events will occur (future funding rounds, IPO, etc.)
• Key employees will be hired

Additional text should be used, where necessary, to support the projections laid out in the chart.

The milestone projections presented in the Operations Plan must be consistent with the projections in the Financial Plan. In both areas, it is important to be aggressive but credible. Presenting a plan in which the company grows too quickly will show the naiveté of the management team, while presenting too conservative a growth plan will often fail to excite the potential investor who will require a high rate of return over a relatively short time period.


- New products and services will be introduced to the marketplace
- Revenue milestones will be attained (e.g., date when sales will surpass million dollar mark)
- Key partnerships will be executed
- Key customer contracts will be secured
- Key financial events will occur (future funding rounds, IPO, etc.)
- Key employees will be hired

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A credit score is defined as a statistical method of assessing an applicant's credit worthiness. An applicant's credit card history; amount of outstanding debt; the type of credit used; negative information such as bankruptcies or late payments;
collection accounts and judgments; too little credit history, and too many credit lines with the maximum amount borrowed are all included in credit-scoring models to determine the credit score.

Raising your credit score is possible. It's a well known fact that lenders will give people with higher credit scores lower interest rates on mortgages, car loans and credit cards. If your credit score falls under 620 just getting loans and credit cards with reasonable terms is difficult.

Here are five things that you can use to raise credit score.

1. Correct obvious mistakes.

Your credit score is what shows up in your credit report. Review your reports from all three credit bureaus for accuracy once a year as well as several months before applying for a loan. Changing a mistake on your report can take 30 days to three
months, or more. Get Your credit report from the three major bureaus: Experian, Trans Union and Equifax.

2. Pay Your Bills On Time

Your payment history makes up 35% of your total credit score.
Your recent payment history will carry much more weight than what happened five years ago.

Missing just one payment on anything can knock 50 to 100 points off of your credit score.

Paying your bills on time is the best way to get started rebuilding your credit rating and raising your credit score.

3. Reduce your credit card balances.

A heavily weighted factor in your FICO score is how much money you owe on your credit cards relative to your total credit limit. Generally, it's good to keep your balances at or below 25 percent of your credit card limit, said Jeanne Kelly, founder of The Kelly Group in Brookfield, Conn., which helps clients improve their credit scores.

4. Don’t Close Old Accounts

In the past people were told to close old accounts they weren’t using. But with today's current scoring methods that could actually hurt your credit score.

Closing old or paid off credit accounts lowers the total credit available to you and makes any balances you have appear larger in credit score calculations. Closing your oldest accounts can actually shorten the length of your credit history and to a
lender it makes you less credit worthy.

If you are trying to minimize identity theft and it's worth the peace of mind for you to close your old or paid off accounts, the good news is it will only lower you score a minimal amount.

But just by keeping those old accounts open you can raise credit score for you.

5. Avoid Bankruptcy

Bankruptcy is the single worst thing you can do to your credit score. Bankruptcy will lower your credit score by 200 points or more and is very difficult to come back from.

Once your credit score falls below 620, any loan you get will be far more expensive. A bankruptcy on your credit record is reported for up to 10 years.

The reality of a bankruptcy is it will limit you to high-interest lenders that will squeeze out high interest rate payments from you for years.

It is better to get credit counseling to help you with your bills and avoid bankruptcy at all costs. By getting credit counseling instead of declaring bankruptcy you can raise credit score over a much shorter period of time.