How to Get Inbound Links to Your Website

One of the oldest and best ways to increase your search engine rankings and get visitors to your website is from inbound links. The importance of inbound links to your website will most likely never diminish. It's no secret that search engines, especially Google, value quality inbound links to a website for higher rankings. However, these days the emphasis is not on the quantity of links, instead it is on quality. A couple dozen links to your site from related, high quality, authority sites are much more valuable to a search engine than hundreds of low quality links you obtained by exchanging with anyone that would say yes.Before I tell you how to get quality inbound links to your website, I feel I should mention something you should definitely NOT do to obtain inbound links. Never participate in an automated link exchange program. These programs are useless. They don't benefit you because you will be automatically exchanging with all sorts of low quality and unrelated sites. The search engines may even penalize your site for links obtained this way. Even manual link exchanges do not carry nearly as much weight as they once did. However, manual link exchanges are not totally dead so if you do decide to do some "old fashioned" link exchanges, be sure you don't exchange with sites where your link will be placed on a page with hundreds of other links and make sure the page your link is on is linked from their home page. Again it's important to remember you only want to exchange with quality sites related to yours.Now I will talk about my number one strategy for getting inbound links. And that strategy is... (drum roll please)... To write and submit articles related to your website niche. Be sure to have a resource box at the end of each article. Your resource box should mention a little about your expertise on the subject and have link to your website. If you write good, informative articles then other people will want to repost them on their websites. This will give you an inbound link for the search engines and also a link for human visitors to follow. It's a win/win situation. And for the most part only people who have websites in your niche will repost your articles, so the inbound links you are getting are also relevant. Article marketing is nothing new or revolutionary but it does work and works very well.Now here are some tips for increasing your inbound links by writing and distributing articles...* Be sure to write original articles. If you purchase private label rights to articles, rewrite them to make them unique before submitting. * If you are having a hard time getting started on an article all you have to do is search article directories for other articles on your topic. Find a few that you like and use ideas from them to write a new article in your own words. Remember, you can't just copy another article. That is copyright violation. And it won't be unique anyway so it won't do much for you.* If you are good at writing with a little humor then you might want to use that skill when writing articles. Humor is very powerful and can attract a lot of readers.* Once you have a completely original article written, find a few quality websites in your niche and offer them your article for free with your resource box attached. You are not asking for a link exchange, you are simply giving away your informative article for free to selected sites.* After you have a few good articles on a topic you should compile them into an ebook. Place a short author bio at the end of the ebook with a link to your website and allow other site owners in your niche to give it away free to their visitors. They can give it away as a "thank you" for signing up for their newsletter, as a gift for visiting their site, as a free bonus for purchasing their product or any other way they want to give it away. Once your ebook gets into a few people's hands it will be passed around more and more, thus giving you inbound links and a boost of traffic to your site.* Submit your articles to a few of the top article directories. When doing this you aren't so much doing it for the inbound link from the directory itself. Of course, that link doesn't hurt but the main reason for submitting to these directories is to get your article in front of other website owners who will republish it on their sites. Two of the top directories to submit your articles to are http://ezinearticles.com and http://goarticles.com* Publish links to your articles in digg (http://digg.com) and other community based popularity sites. A well "dugg" article can generate thousands of visitors to your website as well as inbound links.* Network and build good relationships with maybe 10-20 quality site owners in your niche. The higher their site is ranked, the better. Help each other with site promotion, content ideas and article exchanges. Not only will this build relevant and quality inbound links to your website, it will also get you some good friends and JV partners who will prove to be very valuable to your business as time goes on.Overall there are many benefits of writing and submitting articles. You get inbound links which help with your search engine rankings among other things. Articles also help to establish you as an expert in your niche, bring you targeted traffic and provide you with free advertising. A little time spent each day writing and distributing articles can do incredible things for your website and business.

Can You Build A Successful Online Home Business?

I am asked every day if it's really possible to start a home business and make money online. I always answer with a definite yes! But I am also quick to make sure they know it will take time and persistence. You cannot expect to build a large income in a month or two. However, you can certainly create a successful online home business bringing you in a six figure income in as little as one year working just part time. Sure it may even take you a few years, but the point is it can be done. I highly doubt your current job will give you the opportunity to make that kind money in the same time frame!It usually takes at least one year to start seeing any significant results of your online business effort. That's a very small price to pay for this huge opportunity. It takes time to develop any home business plan. It takes a while to figure out which products sell the best and what advertising techniques give you the best return on your investment.It took me at least a month just to figure out how to use Google Adwords, another couple months at least just to get a basic idea of HTML, another month or so to get the hang of article marketing, and the list goes on and on. The point is it took time and I knew I had to do it. Anything worth doing will take time and effort. If you are not looking long term then you already set yourself up to fail. Remember that last sentence because it cannot be emphasized enough!Let's take a look at some real life examples and to give you some true perspective on this... * I'll start with myself. My success in my online home business is well known. Not everyone in the online business world will recognize my name but there are plenty of people who consider me an expert in the field. I've earned thousands upon thousands of dollars in my online business. However, most people surely don't know that I didn't make a cent my first year, actually I lost money. I barely broke even my second year. The profits for my third year were pretty good but still nothing to brag about. It wasn't until my fourth year that I started making significant profits. Would I go through it all again to get to where I am today? Absolutely! Today I live a life most people only dream about. Plus, I work a lot less than anyone I know and when I do it's out of the comfort of my own home. * How about another example? I have a close friend named Jason who started his online business about the same time I did. We were both new and just figuring things out so we helped each other with our online businesses as much as possible. Actually we still do help each other but much more so when we were both beginners and really needed it. In his first year Jason jumped around from one home business opportunity to the next. He tried everything but the success was limited. After fumbling around for almost two years he finally set his mind to one online business and within 6 months he was making over $10,000 per month. Today he makes over $500,000 per year from his online business and it just keeps growing.* Want another real life example? Ok! A guy named Marc came to me a few years ago with all sorts of questions on how to start his online home business. He literally didn't have a clue. I got calls and emails from him on a daily basis for months and months. Even today he asks me questions every once in a while. He didn't make any money his entire first year and very little his second year. Now just three years in to his online business he makes over $20,000 per month and he just launched a membership site that will bring in thousands more!As you can see, even highest earning online home business owners take several months to begin making money. And the real wealth, the hundreds of thousands of dollars per year we all strive for, takes years to achieve! Do you think any of these people would say it wasn't worth all the time, money, and hard work they put in? Do you think for a second that the years invested haven't been rewarded many times over?If I told you that after two to three years of following an online home business system, you would be earning more money per month than you make in a year right now, could you handle that? If you were sitting across from me right now, I would look you straight in the eye and tell you that is a highly possible and realistic goal.However, if you say to me you want to quit your job in less than a year and live off the income from your home business, I'll tell you that the chances of that are slim to none. Probably not what you wanted to hear, but is what I'm saying really that tough to swallow? Certainly not! Can you think of any job where you could spend just a couple hours per day at your computer for maybe 2-3 years and at the end of that time be making $100,000 per year in residual income?Sounds incredible, doesn't it? But again, this is not an income you are going to make in your first year. It just won't happen! Sure some people do hit the next big thing and get rich their first year but they are few and far between. Don't expect to be one of them. Some of you "go getters" will see it happen in your second year. But the majority of you need to be thinking more long-term, two to five years or so. I guarantee you when the time comes, you’ll say it was all worth it and you'd do it again in a heartbeat! The answer to the question is...YES, you can build a successful online home business! You just have to think long term, be patient, be persistent and take action. Never give up on building your online home business and you will not fail. Your success is only limited by your desire and actions. Follow the simple advice in this article and your dreams of building a successful home business will come true!

Choosing a Work at Home Opportunity

There are thousands of work at home jobs and home business opportunities on the Internet. To be honest, a lot of them are scams and schemes, so you have to be very careful when choosing any business opportunity. However, there are also many legitimate work at home jobs as well as home based business opportunities on the internet.
After a LOT of research, as well as plenty of trial and error, I have learned some very important things to look for in a home based business, work at home job, affiliate program and all the other ways there are to make money at home.
A few of the most important factors to look for when searching for a legitimate work at home job or home based business opportunity are...
Must have very good products or services to promote
Must be in good standing with Business Regulation Agencies
Must send paychecks out at least once per month (on time)
Must have been successfully in business for at least three years
Must have a great support, training and leadership
You are in luck because I have already done all the dirty work for you! I have found work at home opportunities that not only meet all five factors listed above... they far EXCEED them and rest of my strict criteria, many times over!

Start Working at Home Now - Best Home Based Business Opportunities

When deciding on a work at home job or home based business opportunity it is important to know who you are dealing with. You will almost certainly have a sponsor or mentor in whatever type of work at home opportunity you choose. However, most people hide behind their websites, or some pre-written advertisement. I do not believe in doing that so, before I go any further, here is a little about me...My name is Trent Brownrigg. I am a 28 year old guy born and raised in Iowa. I have a Bachelor's degree in Criminology from the University of Northern Iowa and another in Business Marketing from Iowa State University. These days you can usually find me working at home on my computer or hanging out with my friends. I do not have a regular "job" because my entire income is made online from my home based business. If you have any questions about me or about how to make money online, I will be more than happy to answer them.

"The REAL Approach to Work from Home Business Opportunities"

Are you ready to WORK AT HOME! Welcome to your home based business opportunity guide...designed to help home business seekers find the best business opportunity and succeed with a legitimate, profitable, and rewarding work at home business.
The Internet is filled with advertisements that claim you can make money easily and fast. Your local newspaper is plastered with advertisements for "getting rich quick". You turn on your radio to hear another testimonial of how a person who was in debt became a multi-millionaire entrepreneur overnight from a web-based business. You watch TV late at night and see more of the same.
This notion starts to peek your interest. You decide, "Hey! It's time for me to find happiness and financial success with my own home business! Where do I find the real, honest and legitimate opportunity?"
It is true that they exist and can be very lucrative. This can be the best life choice you have ever made. I know it was the best decision I ever made!
The challenge is finding the right one - the one that is legitimate, profitable and easy to start.
Before I started my home based venture, I decided that I was going to investigate several different online programs and companies to root out the legitimate ones from the fraudulent ones. My findings shocked me, but I did find a solution. The solution has made me thousands of dollars in profits and has made me financially secure for the past 10 years!
Business Opportunities
My research included experimenting with hundreds of online opportunities including: Internet affiliate programs, network marketing or MLM, work at home data entry jobs, paid survey opportunities, online auctions, online dollar stores, and more. I scoured the Web to find as many sources as possible. I joined, spent the money and gave the programs a try. Wow! Did I waste a lot of money!
I was dismayed at the number of programs that had poor work at home business models, out-dated information, broken links on their website, almost no customer support, and no chance to ever make money online. However, I did find a few that work and am proud to present them to you on my website!
These programs are not only legitimate, but WILL BE extremely profitable. I found these sources by contacting many happy clients that will attest to their success. Testimonials for these programs were not fabricated.

Business Plan: Rainbow Kites,

SUMMARY
BUSINESS CONCEPT
The Kite industry has expanded rapidly in the past several years and growth is expected to continue at a strong pace for the foreseeable future. This offers excellent opportunities for new companies to enter this market. We intend to address the needs of customers in this market who seek higher quality, higher priced kites. We will address this need by importing, selling and distributing higher end kites in the US and Canada. Distinguishing characteristics of our business will be top quality products, special emphasis on higher end independent retailers, and high level of service.
CURRENT SITUATION
We are a start-up, incorporated in 1998 in the State of California. The principal owner is Tom Anderson whose title is President and who has many years of experience in the toy industry. Other key personnel include Nancy Anderson, his spouse who has experience in customer service, bookkeeping and office work. At this time we are seeking additional equity capital to compliment our own equity investment and seeking to arrange a bank line for inventory and receivables financing. We have firm commitments to distribute several highly sought after overseas kite manufacturers and have verbal commitments from independent retailers primarily along the West Coast to stock our products. We hope to ship our first products within six months of finalizing financing arrangements.
KEY SUCCESS FACTORS
The success of our business will be largely a result of superior products, superior service, extra attention to detail throughout our operation, personnel and our high level of experience in the industry. focus on customers who...). In particular what really sets us apart from the competition is that we are ONLY going to sell high end kites and we are ONLY going to sell to higher end outlets. This will allow us to give absolutely top service and product selection for these accounts without getting distracted from the very different product and service demands of the more mass market outlets.
FINANCIAL SITUATIONS/NEEDS
In order to effectively launch the business, we project a total need for $300,000 in equity financing. Principal uses of the funds will be to finance operations until cash flow becomes positive and to create a stronger balance sheet in order to help secure additional bank lending against to finance inventory and receivables. To date we have raised $132,000 from founders, Tom and Nancy Anderson, and their relatives. We project that the company will be profitable within two years. We project that within three years of reaching break-even that this new investment could be cashed out by either the founding partners purchasing this investment stake or by replacing the investment stake with additional bank financing.
VISION
VISION STATEMENT
Our vision of what our company will become in the future is to have developed relationships with key retailers so strong that they will view us more as indispensable partners, than just another supplier. We will work closely with each retailer we serve to recommend product assortment unique for their customer base, appropriate stocking levels, pricing and display assortments. We will constantly seek out and work with the manufacturers we represent to deliver the most innovative and exciting products possible to the retailers we serve.
MILESTONES
1. Overseas manufacturers agreements in place...done. 2. Verbal commitments from many West Coast retailers...done. 3. Presentation to potential investors...underway now. 4. Presentation to potential banks for inventory and receivable financing...underway now. 5. Financing commitments in place..60 days. 6. Product catalog completed...30 days... 7. Additional sales reps being recruited...underway now.. 8. Sales rep selection finalized...60 days. 9. Warehouse lease signed...90 days. 10. First written orders from retailers... 75 days. 11. First orders to manufacturers...110 days. 12. First shipments from our warehouse...160 days.
MARKET ANALYSIS
THE OVERALL MARKET
The overall size of the industry is currently $150 million in the US and Canada. Because the industry includes a very diverse group of product types with significantly different characteristics, it is more meaningful to break out analysis of the industry into roughly two groups. The first group and by far the larger unit volume are lower end kites sold primarily through mass market outlets such as discount department stores. The second group are higher end kites that are sold largely at independent and specialty chain stores. While the unit volume is much less, the dollar volume is approximately the same ($75 million) as that for lower end kites because the average price point is much higher.
CHANGES IN THE MARKET
The most significant development in this marketplace recently has been the shift in toy and kite business away from independent stores to national mass marketers over the past decade. However, recently this trend has slowed as independent toy and novelty retailers have become better at differentiating themselves and their product selections from those offered by national mass marketers.
MARKET SEGMENTS
The market is primarily segmented by distribution channel. The mass market retailers are looking for low-priced products and a high percentage of their products are licensed merchandise, for example based upon kid's cartoon characters. Independent specialty retailers however are trying increasingly to be as different from the mass merchants as possible and are generally selling much higher priced product and seldom want merchandise based upon licensed cartoon characters.
It should be pointed out that there are few stores that sell just kite merchandise--even among independent specialty stores most of the volume in kites is sold at stores that sell a wide assortment of other merchandise such as toys or other novelty items.
TARGET MARKET AND CUSTOMERS
Our target market is independent and small chain merchants that are committed to selling higher end kite products. We particularly want to focus on accounts that just sell higher end kite products and that are committed to stocking a selection of at least a dozen different kite products. These accounts we feel offer the best growth potential and will benefit the most by the help we can bring to them in selecting and displaying our higher end merchandise.
CUSTOMER NEEDS
The basic need of target retail customers is to differentiate their store from mass market stores and give customers a reason for shopping their store and paying significant premiums for their products instead of getting a low-end product at a discount department store.
These stores really appreciate stocking a line that is not sold at mass market accounts. They also appreciate dealing with an importer who is committed to specialty stores exclusively, not mass market accounts.
CUSTOMER BUYING DECISIONS
The buying decision is almost always made at an in-person sales presentation. The personal touch appears to be essential for moving buyers to action for this product because at these high end retailers are very demanding about the product quality being stocked in their stores. They insist upon seeing finished products, not just mock-ups or catalog pages. Some purchases are made at trade shows, but only a small percentage.
COMPETITIVE ANALYSIS
INDUSTRY OVERVIEW
Across the US and Canada there are many firms that distribute kites. The vast majority however distribute only one or two low end kites as a very small part of their overall distribution business.
There are several distribution firms that offer between a dozen and as many as one hundred kite products. These firms represent many different products and the sale of kites represents a very small fraction of their business. These firms also to a wide variety of outlets including mass merchant accounts.
CHANGES IN THE INDUSTRY
The big change in the kite industry over the last few years has been the concentration of lower end kite sales in mass market accounts, along with a strengthening market for higher end kites in upscale specialty accounts.
Current distributors representing larger kite product lines while still selling to a wide variety of outlets, have tended to focus most of their efforts on selling lower end products to mass market type accounts--where their revenue is much greater.
OPPORTUNITIES
While the competition is well-established in, and gives a lot of focus to, current major markets for this product, they are much less aggressively pursuing the higher end kite market. This market offers terrific potential because it has significant growth potential, and the competition is not well-entrenched here. Furthermore, this market differs from the other markets in the many important ways. While this market may not be the largest, it appears a very solid opportunity for a newer competitor.
THREATS AND RISKS
Because we are a small firm, we do not anticipate a meaningful or prompt reaction to our market entrance from our larger and more established competitors. We think a strong reaction from existing distribution firms is particularly unlikely because the primary competitors derive only a very small percentage of their business from kite sales, and even that revenue is largely from mass market accounts that we plan on avoiding. However, we have developed contingency plans for certain reactions that competitors may make. If a competitor lowers their prices on the exact same product we are offering we will match their price on that product. But we intend as much as possible to emphasize products that our competitors are not selling to begin with.
STRATEGY
KEY COMPETITIVE CAPABILITIES
We are better positioned than our main competitors to take advantage of the increasing demands of upscale independent specialty stores to sharply differentiate their kite selection from those of mass merchants. Because we are going to focus exclusively on importing higher end kites for independent specialty stores we will be much better able to serve their needs than current distributors who handle many items other than kites and also give their primary attention to larger mass merchandise customers.
Tom Anderson's extensive experience in the toy business and his solid knowledge of the kite market in North America, his personal contacts at independent retailers on the West Coast and his contacts at overseas suppliers give us a strong competitive advantage.
Nancy Anderson's background in running offices and handling customer service issues will give us a strong service advantage.
KEY COMPETITIVE WEAKNESSES
Our primary weakness is that we are a new business competing largely against established firms. To significantly build sales, we must not just find new customers--we must take customers away from existing firms. However by offering a superior selection of kites and focusing exclusively on upscale independent stores we feel will can quickly open accounts at many retailers and build strong relationships. Co-founder Tom Anderson has had many discussion with owners and buyers at retailers that confirm this opinion.
Another disadvantage we have is stronger personal ties with accounts on the West Coast of the US and Canada than in other parts these countries. We plan on offsetting this weakness by hiring experienced commission reps for other territories. We have already had preliminary discussions with several highly successful reps and these reps have shown interest in continuing discussions with us.
Financially we do need additional funding. But after the targeted funding is in place we will have ample financing for the foreseeable future.
STRATEGY
Our strategy is to focus 100% of our efforts on the market for upscale kites. By focusing all of our effort and energy on this particular niche, we expect to quickly develop and maintain a leadership position. While other firms try to be all things to all people, we believe that our singular focus will give us significant advantages. Most of the firms serving this niche now also serve much larger markets and give only secondary attention to the upscale. On the other hand, our firm will give our total focus to this niche; our key people will stay in personal touch with customers in this niche; and we will be able to respond to changes in this market much faster than our competitors.
We will offer the best, most highly personalized service in the marketplace we serve. Especially being a very small, owner-operated company, we intend to use this to our advantage to be absolutely certain that every one of our customers receives excellent service. We will go out of our way to make sure that our customers know that they truly matter to us. For example we will carefully recommend seasonal inventory plans for each store that reflects the customer traffic that the store receives. We will also make display suggestions and to create a number of displays that can be adopted to the needs of particular stores. Sales reps and in-house employees who deal with customers will be carefully trained and will be given wide latitude for insuring that customers are always satisfied.
PRODUCTS/SERVICES
PRODUCT/SERVICE DESCRIPTION
Our underlying philosophy in selecting products has been to choose lines that will bring excitement, surprise and satisfaction to demanding higher end customers. We personally test each individual product. Special attention is giving to ease of assembly, durability, and general overall attraction.
We prefer to choose lines that we can represent exclusively, but because our first priority is on representing top-of-the-line merchandise, we have agreed to take on two leading lines on a non-exclusive basis.
A complete draft copy of our first catalog detailing our initial product lines and products is available upon request.
An important component of our business is not just our products but our service.
These are some of the important service elements we offer:
-Stocking of all products offered in our West Coast warehouse, avoiding long waits to fill orders from overseas -Detailed advice on inventory planning and sales forecasting for individual stores -Display fixtures custom built to suit the needs of our customers -Full returnability for any product defects -Coordination of co-operative advertising programs with manufacturers
POSITIONING OF PRODUCTS/SERVICES
We intend to position our business not just as a distributor of products, but a partner bringing a high level of service to the stores that we enter into business with.
We will work with stores through merchandise selection and display options to significantly increase the sales and profitability of their kite business. By doing this we expect to develop a strong loyalty among our customers.
SALES AND MARKETING
MARKETING STRATEGY
Our basic marketing strategy is to work with our retailers on a one-to-one basis to develop unique marketing programs for them. Especially because we want to develop close working relationships with our customers we want to establish accounts in as personable a way as possible too. Hence we will overwhelmingly emphasis in-person sales calls to build accounts.
We will closely integrate all of our marketing and sales efforts to project a consistent image of our company and a consistent positioning of our products or services. We will build this image around our name "Rainbow Kites, Inc." and will emphasize to retailers to wonderful color and excitement that a well-done display of top quality kites can add to their store.
While we will attend some trade shows and produce a color catalog these marketing initiatives are seen as supporting, not competing with our independent sales representatives.
SALES TACTICS
Our primary sales method is face-to-face selling by independent reps A particularly important aspect of our sales process is that we will fly all of our independent reps to our West Coast office to extensively train them in how product line, in building displays, and in building a bigger kite business for our customers.
We will insist that our independent reps represent only non-competing, non-kite lines. We will stay in close phone contact with our reps in addition to having sales meetings with them at least four times per year, usually at major trade shows.
We will pay our reps on a "ledger" basis, giving them commission on all sales in their exclusive territories even if the account phoned the order in directly to our main office.
ADVERTISING
We will have a small advertising budget, devoted exclusively to trade publications designed to reach buyers and owners of upscale independent stores. The objective of our trade advertising will be to limited to reinforcing the image of our company and the excitement of stocking upscale kites. All ads will be four-color and between 1/4 and 1/8 page in size. Each ad will prominently feature our logo and a bright, colorful, changing display of upscale kites.
We will also work with our retailers to obtain co-op advertising funds for their own local advertising. Currently very little co-op money is being provided by kite manufacturers, but we believe that we can make more funds available especially if we work with a US ad agency to develop effective advertising layouts and copy that our retailers could use.
PUBLICITY
Our publicity effort will be three fold. For one we will send news releases to trade magazine to try to get product or company feature coverage in front of the eyes of retailers. Second we will product a few generic press releases about kites that our retailers can use to try to obtain publicity coverage for their stores in local publications. Third we shall have a quarterly newsletter for retailers that we are currently serving or hope to be serving. We anticipate sending 1,000 copies of the news release out our first year and gradually increasing to 2,000 copies by our third year. In the newsletter we will highlight not just our products, but also display ideas and success stories of stores who increased their kite sales.
TRADE SHOWS, ET. AL.
We will have a small booth or table top display at four national conventions each year, including the National Toy Show in February in New York, The Toy and Hobby Show in April in Toronto, The International Gift Show in Las Vegas and the West Coast Toy and Gift Fair in May. We will emphasize not just our products but the custom-built displays that we are producing for retailers.
We will also provide limited funds for display space for our independent reps at regional trade shows that they attend. Typically we will pay for one table top display.
OPERATIONS
KEY PERSONNEL
The Company will be managed by the two founding partners, whose individual areas of expertise covers many of the functional aspects of the business. Tom Anderson will serve as the President of the Company, and will be responsible for Product Selection and Sales & Marketing. Nancy Anderson will be the Vice President, in charge of Administration. She will be responsible for customer service, accounting, shipping and the general administration of the business.
Tom Anderson has a long history of experience in the Toy Business and specifically in Kites. For several years he grew the Kite business at Ocean Gifts and Toys in Los Angeles into one of the largest and most profitable exciting in the country. Tom has a many industry contacts and an in-depth knowledge of the kite and toy business. See Tom's resume for further details.
Nancy Anderson directed a staff of twelve as the manager of customer service for LA Selections, a major local jobber of novelty goods. She has also held a wide variety of other inside business and operations positions. See Nancy's resume for further details.
ORGANIZATIONAL STRUCTURE
The organizational structure is very simple. The independent commissioned reps will report to Tom Anderson. And support staff at the office and warehouse will report to Nancy. Because Tom will frequently go on buying trips to the Far East or be on the road selling, Nancy will be able to support any day-to-day needs that the reps may have. However even when Tom is on the road he will be in constant touch by computer or phone.
PRODUCT/SERVICE DELIVERY
In order to deliver high quality, personalized service we will carefully select all employees--especially sales reps and customer service representatives who deal directly with customers. Tom is currently interviewing candidates for sales reps. We will carefully review references not from past employers or manufacturers but from retailers whom these sales reps have served. We will also make sure that each employee understands our way of delivering quality service to each customer. We will have immediate back-up support available by phone from our office for more difficult service issues. And we will give employees enough latitude so that they can respond immediately to almost all customer requests or complaints--which in this industry usually means granting prompt credit for damaged merchandise.
CUSTOMER SERVICE/SUPPORT
We intend to prioritize customer service and make it a key component of our marketing programs. We believe that providing our customers with what they want, when and how they want it, is the key to repeat business and to word-of-mouth advertising. Not only will we train our employees to deliver excellent service, we will give them the flexibility to respond creatively to client requests. In addition, we will continually monitor our clients' level of satisfaction with our service through surveys and other convenient feedback opportunities.
Initially we expect to have few enough accounts so that Nancy and one additional employee can handle all customer service issues. Having just one employee to train should help insure that Nancy can help make the new hire a top performer. As our business grows we intend to hire additional customer service people one at a time and pay a premium over market labor rates to attract and retain quality help.
Shipping problems are a huge issue with the firms that we compete with largely because they insist on using surface shipping methods to keep their costs down to charge low prices to keep their mass merchant accounts happy.
We intend to use air freight to import our kites from the Far East. This will add to our costs slightly. But because all of our products are more expensive it makes more sense for us. It will also allow us to have much thinner inventories in our warehouse without risking stocking out.
Our relatively high cost of shipping has put us at a competitive disadvantage. The current cost of shipping for an average order is $..., which we feel can be reduced by ...%. We intend to achieve this cost reduction by putting our overall shipping requirements out to bid.
FACILITIES
We plan to lease approximately 10,000 square feet of space as soon as our financing is finalized. We have a specific property in mind and have a tentative agreement with the landlord's agent. This building located near LAX airport has 8,500 feet of warehouse space and a small 850 square foot office. The lease rate is $6.35 per foot triple net for a 2 year lease with the option for two additional years at an increase of 5.9% per year.
The building is located in a busy industrial neighborhood, but because we do not intend to have customers visit us we have decided we are better off with a lower-rent location, than a location that could double as a fancy showroom.

Frequently Asked Business Plan Questions

Should I hire an expert to prepare the financials?It's better to prepare them yourself. A potential lender or equity investor wants to see not only that the numbers look good, but also that you understand them inside and out. If you can't answer highly detailed or thorny questions about how you arrived at your numbers, you aren't going to get your funding.
How detailed should budgets be?Budgets in business plans to raise money should have little detail beyond breaking expenses out by departments or functions. You should, however, have supporting details available on request.
Similarly, when creating annual plans, even for a very small, one-person business, I suggest that you have two levels of detail. One should be a budget summary that has just one entry for projected sales of each major product or service line, and just one entry for projected costs in each functional area such as marketing, cost of goods sold, etc. A budget summary is very important in helping you get a handle on the cost structure of your business and its major trends.
Then have a separate, more detailed budget for each functional area. But don't get buried in detail. I would suggest a maximum of ten to twenty entries for projected expense categories if your business is small.
How can I benchmark costs and profits?You need to get data for firms in your industry-perhaps from an industry association. Sometimes trade magazines and newsletters publish statistics for their industries. Compare your numbers with firms of similar size in the same industry.
Which pro forma is most important?Cash flow! It's nice to project a profit, and knowing you have a solid balance sheet can make you feel good-but if you run out of cash, your business will be dead in the water!
Just about all small businesses will feel a cash crunch sooner or later, and for most businesses it will happen sooner, later, and fairly regularly. But if you keep your cash flow projection up to date, you can take steps to avoid cash shortages before the problem becomes acute. Otherwise, you will go merrily along your way until one day you may find you have no money in the bank, your bank credit is exhausted, your payroll is due, your key vendors are howling for payment, the IRS is calling, and customers are still paying their bills slowly. Remember, cash crunches happen all the time in successful, profitable, growing businesses too!
What `tone` should I have in the plan?Keep the tone of your business plan factual. Don't use hyperbole or generalizations to describe the potential of your business plan. Investors and lenders don't want to hear phrases like `this business has incredible potential.` They want to use the more factual information you present to reach their own conclusions.
Are long plans better?Keep your plan succinct.Whether creating a business plan to raise money or an annual plan to run your business, keep it succinct. People tend to use too much detail when creating plans. If a business plan is too long, it might be skimmed. If an annual plan is too long, focus on what is really important might be lost.

Getting Equity Money

What's the #1 reason VC firms say no?They often aren't impressed by the management team. Ideally they want to see someone in the group who has already participated in a highly successful start-up. Lacking this, they want to see that people with solid and relevant experience are already committed for the key positions.
They are most likely to reject proposals that are still at the idea stage. The later the development stage the firm is in, the greater the chances for funding.
Venture capitalists aren't satisfied with a business that has only moderate profit potential. They are looking for companies that will not only be profitable but have the possibility of quickly developing into a huge business, returning to investors a large multiple on their initial investment.
If your business plan is not well thought out or well presented, venture capitalists aren't going to have confidence in your ability to run the business."
How much equity will I give up?This primarily depends on what development stage your firm is at and how much money you are seeking relative to how much capital you have already raised. If your firm is up and running and showing profitable sales, and you are looking for additional capital to finance your expansion, you will probably need to give up only a small portion of equity. On the other hand, if your firm is only at the idea stage and the outside investors are going to contribute over 90 percent of the funding, then you will probably have to give up at least half, if not more, of the equity."
What do investors focus on most?People, people, people.In seeking equity money from venture capitalists or other outside investors, you will increase your chances of success if you get someone committed to your management team who, if not known personally by a potential investor, at least will have a recognizable name. If you can't manage this, you should consider getting one or more people on your Board of Directors whom potential investors may be familiar with.
Alternately, you can include as exhibits to your plan any positive media clippings you can find, such as items from trade publications, about members of your management team. If you don't have any clippings, try contacting relevant publications to get media coverage-perhaps about your start-up business proposal.

Getting a Bank Loan

What are the three `c's`?Traditionally bankers look at what are called the three `c's`: character, credit and collateral. Character means more than not having a criminal record. It means that the banker feels confident that you are not going to suddenly disappear for parts unknown if the business runs into trouble. Specifically bankers like to see ties to the community such as long residence, family ties, and home ownership. A clean credit history is important. A couple late credit card payments shouldn't be a factor, but missing mortgage payments for three months in a row will require a good explanation. Bankers like good character and good credit, but they live for solid collateral. Equipment, buildings and trucks--that's the kind of stuff that bankers really like for collateral--solid value and likely to be worth a lot even if the business goes bust. Inventory, raw material and goods are second choices for collateral--they will lose their value more quickly than fixed assets but still be worth something.
Can you get a business loan?The criteria for business loans varies much more widely than for consumer loans and often varies quite a bit from one banker to the next at even the same bank! However here are some rules of thumbs to give you an idea of your chances of getting a loan.
Getting a loan for a new business is tough
Fixed assets such as machinery or buildings can almost always be financed
Current assets such as inventory or goods in process increase your loan chances
2+ years of profitable operation greatly increases your loan chances
The larger the owner's investment in the business the better your chances of getting a loan
Loans to small corporations will often have to be personally guaranteed by a shareholder
It is difficult to get loans to offset operating losses
It is usually possible to get a loan to modestly expand a profitable business
How to get the bank's money, even when the bank says `no!`Banks have much more lenient standards for lending to consumers than to businesses. So what you can do is borrow the money from the bank as a consumer and then turn around and personally invest the funds in your business. Just make sure that you never lie how about you are going to use the proceeds on a loan application. For example you could apply for a home equity loan to tap any available equity in your house. Then take the funds and invest them in your business. The bank feels safer because their statistics show that home equity loans or much more likely to be repaid than loans for brand new businesses. No equity in your home? Maybe you can get a car loan?
Getting an appointment with a bankDon't just show up in person--first make an appointment by phone. Ask the receptionist in the bank or the loan department for the name of the appropriate person who would handle your loan request. Of course it would be better, but not necessary, to get a referral from a friend or advisor such as your lawyer or accountant. When you get the name of the appropriate loan officer simply ask for an appointment. Don't offer any more details over the phone, unless the loan officer requests them. The more details you offer over the phone, the greater the chances you won't get the appointment at all. Sound confident. Sound matter of fact. Sound like you don't even need the money... that's the kind of person that loan officers like to lend to.

Attracting Equity Investors

Talk with your lawyer firstPeople don't invest in small companies to lend a helping hand. They invest to make money. And they expect to make a lot of money. If they expected to make just a 10% or even 15% return on their investment they would invest in largely less risky major public companies. Instead they invest in small companies because they expect to get huge returns on their investments. Often these returns do not materialize. Even if the company is successful in the eyes of the founders it may not meet the expectations of outside investors. And disappointed outside investors will often look for someone (read the company founders) to sue. This is just one reason you need to consult with a highly experienced business lawyer (not your family lawyer) before you to try to seek equity capital. There are also a lot of laws restricting how equity money can be raised from the public. And you need to be careful to structure any equity deal in your best interest--including all of the fine print.
Venture capitalistsVenture capitalist firms get a lot of attention in the financial press and they look at a lot of deals. But chances are that you are not going to get a nickel from them. Venture capitalists finance a very small percentage of new businesses. And most firms have fairly specific criteria for what type of situation they are interested in. Venture capitalists are typically looking for a company that has a realistic possibility of becoming a very large business within 5-7 years, large enough for a major public offering or for sale to a Fortune 500 size company. This would allow them to cash out their investment which they hope will have multiplied in value. Contrary to popular belief many venture capital deals are not for high tech companies, and many are for second or third round financing. Because venture capitalists are approached with many potential deals everyday, you should try very hard to get a personal referral to get your plan carefully considered.
RelativesI know that you hate to ask relatives for money--it feels like begging--but I've done it. And you can do it too. When you need money for a business you just have to swallow your pride. Approach your relatives very much like you'd approach any other outside investor. Explain not how they can help you out--but how they can make money. Have a written agreement--and have your attorney read it. A written agreement with relatives will not only help avoid legal problems but will also help avoid potentially bitter family relations. Even with your parents, siblings or spouse keep your business relationship formal. When I borrowed money from my father he was tougher than the bank--demanding interest every 30 days. But by adhering to his strict terms I was able to borrow money from him on more than one occasion.
Employee investorsOne of the most common sources of equity money is potential employees, especially people you either worked with in the past or you have personally known in the same industry. By offering equity to potential employees you not only get an equity investment but you also get (presumably) a talented and committed employee. Usually employees who have invested in a company are willing to take a significantly below market salary--but they will expect that the principal founder does likewise. While raising equity from potential employees has obvious pluses it also can raise a bunch of serious issues. What happens if the employee's work proves less than satisfactory? What happens if the employee decides to join or start a competing company? These are all issues that need to addresses with a good business attorney before you even approach a potential employee-investor.

Planning For Profits

"No matter how small or large your business, you've got to aggressively plan the work-and then work the plan!"
How To Really Jump Ahead!On a discussion panel, I was recently asked, "Was there a particular turning point when your small business really jumped ahead?" Absolutely. I always made up plans and budgets, but it was about five years into my business before I really began to proactively use them.
Before this point in time, my sales projections were miles off and, more importantly, I was always thinking up excuses for making unplanned expenditures, often for advertising that seldom matched my expectations. I'd finish the year way over budget, with profit margins a fraction of what my plan called for.
I learned that a lot of expenditures seem like a great decision if you look at them in isolation-but when you look at them in the context of the whole budget, they often look a lot less enticing.
Sharply Focus Your Plan!Too many people equate annual planning with budgeting. Worse, when they budget, they simply extrapolate last year's numbers into next year's plan, perhaps increasing by 5 percent here and 6 percent there.
Big mistake! The annual planning process is your best chance to really manage the business-and to get key people to "buy into" the total plan by actively participating.
Even if you're running a one-person business you want to get a few words into your annual plans, not just numbers. You don't need a full-fledged 100-page business plan-in fact, a big, detailed plan takes focus away from what matters. What matters is the few big things that the business is going to strive to do better or different next year. The annual planning process should be focused around these few, important changes.
Don't Jump Into Budget Numbers!Before you start doing any nitty-gritty budgeting for your annual plan, here are the crucial first steps:
Review the company's business strategy. Do changing market conditions or heightened competition mean that it's ready for an overhaul?
Establish just a few major goals for the next year. These are usually quantitative goals such as to increase sales by 18 percent or to increase profit margins by 15 percent-but they may be qualitative goals such as to improve the quality of a product or customer service. It is very important to have very few major goals-otherwise, with too many goals, the company will lose focus and be less likely to hit any of them.
If your company is big enough to have departments, have one or several specific goals for each department. To take this one step further, you may want to have specific goals for individual people within each department. Sales Projections Need Extra Attention!Once you've reviewed the company's strategy and set up company-wide, as well as department, strategies for the next year, then it's time to start cranking out budget numbers.
I always begin with sales, because sales numbers will drive many of the other numbers. Unfortunately, sales numbers, particularly of new products, are difficult to project. So I try to have at least three people, typically a project manager, the sales manager, and myself, work up new-product sales projections together. If you're really unsure of sales projections, consider multiple scenarios based on "weak," "likely," and "good" sales projections.
After we've got the sales numbers, each department works up its budget numbers. Once they're tentatively approved, the controller puts them all together into one big happy plan! But more often than not, I'm not completely satisfied with the overall profit margin, so I'll work with the different department heads to cut costs and drive up the projected earnings.
Benchmark Your Costs!One of the best ways to establish cost goals for annual planning is to benchmark your costs with other firms in your industry. Don't get too wrapped up in the details; focus on the total picture for major categories. For example, if your marketing costs are 23 percent of sales and the industry average is 16 percent, it's time for some cost-cutting. Benchmarking is a great way to get department managers to understand why they need to control costs.
Often industry associations provide standard industry costs, and occasionally they might be mentioned in articles in trade magazines.
You may want to consider hiring a consultant to put together a study of a half-dozen or more firms very similar to yours. Being a third party, the consultant will keep each firm's individual numbers confidential by providing only average and median cost information to each company as an incentive for participating. What's worked best for me is when another publisher foots the bill for the consultant, but shares the results with us in exchange for our agreeing to share our numbers.

Developing a Business Plan

Objective
Throughout the process of creating a plan, you need to keep in mind the objective of the plan. Why are you writing the plan? Is it to manage the business? Or is it to raise money?
Annual plans are used to manage a business. Business plans are used to attract capital. But there are exceptions, and often the difference between annual plans and business plans becomes muddled. Banks and other lenders or investors may require a copy of each year’s annual plan. And management may use the start-up business plan as a basis for operating the business.
Keeping a clear distinction between annual plans and business plans is not important. What is important is keeping the primary objective of and the primary audience for the plan clear. As a rule of thumb, if the plan will be used to attract investors or lenders, this is the primary objective and outsiders are the primary audience. If the plan will help manage the business, this is the primary objective and insiders are the primary audience.
Some or all of the following elements should be a part of your plan, depending upon your objective.
Summary
Summaries should be short and concise—one page is ideal. It should cover the following points:
• Strategy overview. Start with a brief overview of your business strategy. If your business will be based, at least initially, on a particular product or service, describe it in the introductory paragraph.
• Strategy logic. In the the next paragraph or two ex- plain why your strategy makes sense or why your product or service has promise. Are you entering a fast- growing market or providing a unique product or service that distinguishes your business from existing businesses?
• Business development. Next, you should describe the stage your business is in.
? Is it already generating sales?
? Have you done test marketing?
? Is a prototype developed?
? Has market research been performed?
• Business development. Name the key people in your organization and describe, briefly, what special talents, expertise, or connections they will bring to the business.
• Financial objectives. If your plan is being developed to raise capital, be clear about the amount of capital you are seeking and how you plan to use investor or lender funding.
• Business organization. Describe the form of business organization you will take and where the company will be located.
Remember to keep your summary short and easy to understand. Avoid technical jargon and details. Don’t try to summarize all of the different major elements of your plan. Just focus on the key elements that you think will be of most interest to your audience. Skip the pie-in-the-sky profit projections and outlook generalizations.
Concept
The concept is a clear explanation of your business strategy. It is not a definition of the business or a summary of its markets but, instead, a quick summary of the one or two key factors that set your business apart from the competition.
• Product description. New business strategies are often closely tied to a particular product or service. If this is your situation, include a clear and substantive description of your principal product or service. Follow this with a focused discussion of what will make your product or service stand out from any similar offerings in the marketplace. Focus, in depth, on just a few of the most competitive attributes of your product or service.
• Impact factors. You should also describe any other aspect of your business that is fundamental to your strategy. Areas that might have significant impact on your strategy are marketing, research and development, or strategic alliances with other firms. For example, if everyone else in your industry is selling their product through retail channels but you feel that you can develop a strong competitive advantage by selling via direct mail, then you should discuss this in the concept section.
Market conditions and the competition should be included as points of reference only when necessary. An in-depth analysis of these factors will be included later in the plan.
Current situation
This section is most appropriate for plans being used to seek financing. Within this section you will describe what stage of development your company is in and what the sought-after financing will be used for.
There are three basic reasons for seeking outside financing: start-up financing, expansion financing, and work-out financing.
• Start-up financing. If you are seeking start-up financing, you will need to list specific milestones that have been achieved and emphasize all positive developments without being misleading. You should anticipate the questions your lenders or investors may ask.
? Has the market research been done?
? Has a prototype product been developed?
? Have facilities been leased?
? Is the management team in place?
? Has manufacturing been contracted?
? Are marketing plans finalized?
Whether or not you receive financing and the terms of that financing will depend upon the stage of development your company is in. The more fully developed your company is, the better your financial arrangements will be.
• Expansion financing. If your business is already up and running and you are seeking expansion financing, you need to give clear evidence that you are not, in reality, seeking financing as a way to solve existing problems, or to cover losses or extraordinary expenses such as might be experienced during a start-up.
• Work-out financing. Many investors and lenders do not like to offer work-out financing. Those who are willing to consider it will want to see a plan that clearly identifies the reasons for current or previous problems and provides a strong plan for corrective action.
No matter what type of financing you are seeking, financiers like to be apprised of the source and amount of any capital that has already been secured. They will expect key executives to have made substantial personal equity investments in the business. They will feel even more comfortable if they recognize any other investors who may have participated in earlier stages of the financing process.
The market
Later in this book, you will learn how to develop and write a marketing plan. You may want to refer to that section now. Aspects of that plan need to be addressed in your business plan.
? How large is the potential market?
? How many people or businesses are currently using a competitor’s product that is the same or similar to the one you are offering or plan to offer?
? How many prospects potentially have any possible use for the product?
? Is the market growing, flattening, or shrinking?
Market segmentation
Almost every market has some major and distinctive segments. Even if it is not currently segmented, the probability that it could or will be is great. This is particularly true if the marketplace for your product or service is multi-regional or national. If this is the case, segmentation is almost necessary, especially for a small firm, if you hope to be competitive.
You will need to discuss segmentation within your business category and how you intend to cope with any positive or negative affects it may have on your particular business. Almost all markets are segmented by price and quality issues. Generally, however, price and quality do not provide the most clear or definitive market segmentation. Much stronger segmentation can usually be found through an evaluation of product or service uses and importance to various consumers.
Consumer analysis
In your business plan you will need to evaluate the typical consumers within the market segments you are targeting. There are countless variables to consider when analyzing consumer behavior. Try to focus on those behavioral possibilities that best determine how viable your product will be in your target markets. Look at
? Which features will most appeal to consumers?
? How are choices made between competing products?
? Which marketing promotions or media avenues seem to offer the best vehicles for reaching the consumer base?
And ask the following questions:
? How much disposable income do target consumers have to spend on this product?
? How do your target consumers reach purchasing
decisions?
? Are consumers presold on a particular brand before they visit a store or do they buy on impulse?
? What characteristics influence the purchase of one product or service over a competing one?
Competition
Include an overview of those firms and their products and/or services that you will be in direct competition with. Identify the market leader and define what makes it
successful. Emphasize those characteristics of the firm or offerings that are different than yours.
Don’t dismiss this section just because you don’t have
any current competition. If there isn’t a product or service similar to yours on the market, identity those firms that provide products or services that perform essentially the same function. You should also make an attempt to identify any firms that are likely to enter the market or are in the process of developing products or services that will be competitive with those you are offering.
Product features and benefits
You briefly described the key features of your product or service in the concept section of the plan. In this section you should explore features and benefits in depth. It is essential to be clear not only about the distinguishing features of your product or service but also to delineate any strong consumer benefits. What makes your product or service significantly better than competitive offerings?
Competitive analysis
In this section you need to do an in-depth analysis of the competitive advantages and weaknesses of your firm. When exploring weaknesses you should include information that will help allay any concerns that may arise as to their ability to significantly hinder your success.
This section is important, especially if your company is a start-up, because you will, typically, be competing with established companies that have inherent advantages such as financial strength, name recognition, and established distribution channels.
Positioning
Positioning can be thought of as a marketing strategy for your product or service. Positioning defines how you are going to portray your product to your targeted marketplace.
Your first step is deciding who your target market will be. It will consist of those potential customers toward whom you will direct most of your marketing efforts. Often this group will not be the sole or even the largest market
for your product, but it will be the market that, based on competitive factors and product benefits, you feel you can most effectively reach.
Start-ups are more likely to be successful if they focus on a highly specific, very narrow target market. General markets are usually dominated by large, well-established firms.
Once you have determined who your target market is, you need to decide how you want consumers to perceive your product.
? Is it the premium quality leader?
? Is it a low-cost substitute?
? Is it a full-service alternative?
If you have a one-product or service company, your marketing strategy may coincide with your overall business strategy. This doesn’t necessarily have to be the case, however, but, it is extremely important, in all cases, that your product strategy be in sync with your overall business strategy.
Advertising and promotion
Use this section to provide an overview of your general promotional plan. Give a break-out of what methods and media you intend to use and why. If you have developed an advertising slogan or unique selling proposition you may mention it, but it isn’t strictly necessary. (A detailed explanation of unique selling propositions and their purpose can be found in Chapter 2, “Marketing”.)
You should outline the proposed mix of your advertising media, use of publicity, and/or other promotional programs.
• Explain how your choice of marketing vehicles will allow you to reach your target market.
• Explain how they will enable you to best convey your product features and benefits.
Be sure that your advertising, publicity, and promotional programs sound realistic, based upon your proposed marketing budget. Effective advertising, generally, relies on message repetition in order to motivate consumers to make a purchase. If you are on a limited budget, it is better to reach fewer, more likely prospects, more often, than too many people occasionally.
Sales
Your sales strategy needs to be in harmony with your business strategy, marketing strategy, and your company’s strengths and weaknesses. For example, if your start-up company is planning on selling products to other businesses in a highly competitive marketplace, your market entry will be easier if you rely on wholesalers or commissioned sales representatives who already have an established presence and reputation in the marketplace. If your business will be selling high-tech products with a range of customized options, your sales force needs to be extremely knowledgeable and personable.
Research and development
A discussion of research and development is, obviously, not germane to all companies. If it applies, though, financiers are going to want to know that research and development projects are aimed at specific, realistic objectives. And they will want to be assured that an undue portion of the company’s resources is not plowed into this area. Remember that banks generally lend money to businesses on a short-term basis, and venture capitalists and other first-round investors generally want to cash out in just a few years.
Operations
Operations is a catch-all term used to describe any important aspects of the business not described elsewhere. If the start-up is a manufacturing concern, discuss critical elements of the manufacturing process. For retail businesses, discuss store operations. Wholesalers should discuss warehouse operations.
In addition to discussing areas that are critical to operations, briefly summarize how major business functions will be carried out, and how certain functions may run more effectively than those of your competitors. But, don’t get into long descriptions of any business or operation practices that will not sell your business plan to financiers.
People
The focus here is key people and positions. Primary attention should be on key people who have already committed to joining the firm. Elaborate on their relevant past experience and successes and explain what areas of responsibility they will have in the new company. Resumes should be included here as part of an appendix or exhibits inclusion at the end of the plan.
If there are any important positions that have not been filled, describe position responsibilities and the type of employment/experience background necessary to the position.
If there is a board of directors, present each member, and summarize that person’s background. If they will have an active role in running their business, elaborate that role here.
If consultants have been engaged for key responsibilities, include a description of their backgrounds and functions.
Fill as many of your key positions as possible before you seek funding. Many financiers reject plans if the management team is incomplete.
Payback and exit plan
Both debt and equity lenders will want to know how they can expect to receive their investment back and realize interest or profit from the company.
Most private investors and venture capitalists will want to be able to exercise a cash-out option within five years. They will be concerned that, even if the company becomes highly profitable, it may be difficult for them to sell out their share at an attractive price. This concern is particularly true in the case of minority stake holders. This is why you must provide an exit strategy for investors.
Ideally, investors hope a firm will be so successful that it will be able to go public within five years and their shares will become highly liquid investments, trading at a hefty multiple of earnings. But, often, a more realistic goal is to make the company large and successful enough to sell to a larger firm. State what your exit plan is and be sure it appears realistic.
Financials
In this section you need to show projected, or “pro forma,” income statements, balance sheets, and cash flow. Existing businesses should also show historical financial statements. While how far into the future you need to project and the number of possible scenarios you can anticipate depends upon the complexity of the business, three to five years for financial projections and three scenarios are average.
Scenarios should be based on the most likely course your business will take, a weak scenario with sales coming in well under expectation, and a good scenario with projected sales well over expectation.
Pro-forma income statements should show sales, cost of operation, and profits on both a monthly and annual basis for each plan year. For all but the largest businesses, annual pro-forma balance sheets are all that are necessary. Cash flow pro formas should be presented in both monthly and annual form. And, if your business is already established, past annual balance sheets and income statements should also be included.
Include information that will assist potential lenders in understanding your projections. Lenders will give as much credence to the assumptions your projections are based on as they do the numbers themselves.

STRUCTURING YOUR BUSINESS PLAN

Think of your business plan as a production line. What goes in at the start are raw material and unfinished assemblies. In our case, the raw materials include:
Talent and initiative from your employees
Capital
Market position
The company's creditworthiness
The firm's earning capacity
Assessment of changes in the marketplace
The unfinished assemblies include ideas and concepts that people want to try. These are the most valuable parts of the plan. They can take the company where it needs to go.
As with most assembly lines, what goes in at the front end probably doesn't resemble the completed product. The planning process refines, changes, and adopts these original input items. It uses them all. During this process, we'll
Assess all your firm's resources: financial, technological, and human, to name a few.
Identify where your company needs to go in order to prosper.
Sometimes work backwards from a target to determine what specific departmental goals are needed.
In the end we'll have a workable business plan that's far more than just a written document. We'll understand the changes in property, plant, equipment, management, technology, financial structure, and capital resources needed to reach our targets. Everyone responsible for executing the business plan will know what's expected of him or her and when it's due. We'll establish milestones where we need coordination between different departments to accomplish a particular goal. We'll be able to see progress toward those intermediate goals-definite, quantified progress, reported regularly. We'll make midcourse changes in time to avoid jeopardizing the larger goals.
The structure of this business plan is like nothing you've seen before. This one is a nuts-and-bolts, how-to-get-it-done-without-fail tool kit. We're going to grab your company and take it where it needs to go. You won't find much of the theoretical strategizing so many other planning books carry on about. That's fine for larger companies that can wait five years or more for results.
Instead, what happens to your company during the next twelve months concerns us. If you can hit your short-range targets year after year, the longer term will take care of itself. Chapter 2 introduces the planning structure we'll employ for your company. It identifies the various techniques and methods used in the process. By the end you'll have an idea of how each part of the planning process builds on what went before. Further, you'll understand how the business plan ties all the various functions in your business tie together.
ACTION PLANNINGThe way we structure this process, the action of planning is just as important as the written product (sometimes more so). The planning structure builds relationships between departments that did not exist before. The design and implementation of departmental goals cements communication between people and their departments. The need for coordination between efforts that appeared unrelated becomes obvious.
A successful business plan requires the cooperation of each department in the company. Don't worry about resistance. There are some specific things we'll do to ensure the commitment of even the most diehard antiplanners.
Demanding ResultsOur orientation in this action plan is results-driven. That's probably not a foreign concept for most small-business owners and managers. Their very survival depends on results-usually daily. But there's a twist. The results we're demanding come from your employees. These are the people responsible for implementing the business plan. For the company to prosper for any length of time, the group must commit to the plan's success. The group must understand the single thing that each person must do above all else to make the company successfully hit its targets.
Finally, the group must be the body that evaluates its own performance and rewards or punishes its members. Peer influence is far more persuasive than any single reward offered by a manager. It's made even more potent when the group becomes a team seeking a set of common goals. Of course we'll demand results. Those results are concrete targets-mostly quantifiable, but always clearly understood by everyone involved. Assign specific individuals responsibility for attaining these results. Their commitment comes from their participation in establishing worthwhile goals that they're responsible for reaching.
Let's walk through the structure of this hands-on, no-excuses way to hammer out and execute a business plan.
ASSESSING YOUR CURRENT POSITIONThis probably requires the most soul-searching you've done in some time. We want an honest appraisal of your company's present status. Include each aspect of the company you deem critical to its success. Consider such things as
Products
Distribution channels
Market share and influence
Customer loyalty
Technological innovations and advantages
Management talent
Employee capabilities
Manufacturing capacity and equipment
Competition
Pricing
The role of each of these attributes in furthering our goals does not concern us now. Indeed, we haven't established our goals yet. Instead, we want an honest appraisal of where we stand today.
Using this information and comparing it with the company's goals-once we establish them-we will see a gap emerging between where we are and where we want to be. It's that gap that much of our business plan deals with. Closing that gap is our goal.
IDENTIFICATION OF COMPANY GOALSFrom the beginning we'll work to create clearly defined goals for your business plan. These goals begin at the top of the company and work their way down. Some are longer range-twelve-month time horizons. Other subgoals needed to reach the larger targets are intermediate range-say six months. Some are just three months out or even less. These are usually extremely critical things that must happen before work can proceed on the next step of a larger goal.
Unlike those of some planning exercises you may have experienced, our goals are brutally precise. They are the product of the firm's planners recognizing the specific targets the company must meet during the next twelve months if it is to prosper. It's easier for those who implement the plan to communicate precise goals rather than fuzzy, broad goals.
That's just what we want-clarity. Since our time frame is short, there's no room for anyone wasting time doing something that doesn't specifically help us get where we want to go. To this end, there are two questions we ask when establishing company goals:
Where do we want to go in terms of products, customers, profits, return on investment?
What changes do we have to make in each department to get us there?
Differences from Larger CompaniesThe business planning needs of small companies are very different from those of their larger counterparts. First of all, small firms lack the resources and influence of large companies. Second, smaller companies worry more about survival today than conquering the world tomorrow. That's why our approach deliberately omits
Statements of philosophy and the mission of the company
Creation of a strategic plan that's consistent with management's philosophy
These are of little use to us in guiding the company over the next year to a specific end point. Now, this isn't to say that we should stick our heads in the sand and ignore a longer-term look at our future. However, that activity is probably better done once we've gotten the firm under control and understand how to make short-term changes that enhance profitability. Certainly, if this is your first planning exercise, the approach we're using gets tangible results using real targets that are achievable. It's comparable to walking before trying to run.
Attainable GoalsHave you ever seen people give up before they start because the task intimidated them? That's something we don't want to have happen here. Recognize that there may be too large a gap between the goals you come up with and the firm's current position. There may come a time when you say, There's no way we can accomplish all that this year.
It takes a smart manager to recognize that the chasm is too wide to jump in a single leap. Instead, he or she must reassess the goals, and maybe scale them back. A somewhat less ambitious set of targets results. However, they are realistic targets that everyone believes in. The outcome is greater commitment and higher probability of success than if you tried to ram unnecessarily burdensome goals down everyone's throat.
The trick to setting attainable goals is to strike a balance between targets that represent a realistic reach and those that are so far out that they'll certainly cause failure. On the one hand, we've identified something worth shooting for, and we'll reward our team appropriately. On the other hand, people view impossible goals as negative even when they are sweetened with better rewards. People would rather have a reasonable chance of receiving a bucket that's 90 percent full than no chance of receiving one that's overflowing.
RECOGNIZING FACTORS CRITICAL TO PLAN SUCCESSOnce you've identified your current position and arrived at the targets for your company, it's time to figure out how to bridge the gap between the two. The technicians call this process reverse engineering. In essence, we're taking the end result and working backwards to determine the steps we need to get there.
Analyzing Success FactorsYou'll find that your business plan leaves the foggy world of strategies and mission philosophy very quickly. Instead, what makes the company move toward specific goals interests us.
Let's say that your firm's overriding target for the next year is to reach a 10 percent return on capital. There's nothing wrong with that goal. It's quantifiable. There's no question how to determine whether you've reached it (amount available for owner distribution / capital = return on capital). Even better, we can track progress toward it each month. Now, here's where the factors needed to reach this target begin to emerge.
Let's say that two things need to happen if we are to reach our 10 percent target:
Sales must increase by $1,000,000.
Production costs must decrease by $500,000.
The plan separates factors critical to each of these targets into a series of subgoals. In our example, the plan might spread the sales increase over several different products and among the quotas of different members of the sales staff. To decrease production costs, the firm might have to acquire some new machinery. Outright purchase would require more capital. That would take us in the wrong direction. Instead, the answer might be to lease the equipment. There are many other possible sales enhancements and production cost cutting measures, but you get the idea.
See how concrete solutions begin to appear once we know exactly where we want to go? The road map to get there isn't difficult to create. Each step of the way we've identified specific targets and goals that we must meet by a certain time and assigned to certain people as their responsibility.
Analyzing success factors is an exercise that consists of merely working back from a definite goal to see just how you're going to accomplish it.

Creating Your Business Plan

Getting StartedThe hardest part of creating a business plan is getting the energy together to get started. At first it seems like a daunting task. But once you get going you'll find that writing the plan is not as tough as it seems. Start with some of the easy steps first. Describe your business and your product or services. Talk about the market you are targeting. And explain what stage of development your company is in. If you get hung up on a particular part of the plan--skip it for now--and come back and fill it in later. Don't worry about making a perfect first draft--just get some thoughts down to get the process going and you can always come back and polish it up later.
Keep in mind your audienceThroughout the writing of your business plan you want to keep in mind your intended audience and why you are writing the plan. For example if you are trying to attract equity investors you will want to emphasize the big upside profit potential. At the same time you need to be especially careful to adequately disclose the risks and uncertainties in your business, because investors often look for someone to blame (read `s-u-e`) if their investment disappears. If you are trying to get debt financing you want to emphasize not the huge upside profit potential--but the certainty that the debt can be repaid. In fact talk of big profits may scare away debt financiers because high profit potential usually means high risks. If you are writing a plan to help you run the business better you may skip or write very simple sections with general background information on the company and the industry, and instead focus in more depth on the areas of your plan that are currently most important to you.
Strategy is the core of your business planBasically the first half of the business plan is geared towards helping develop and support and solid business strategy. You look at the market, the industry, customers and competitors. You look at customer needs and the benefits of current products and services. You evaluate the strengths and weaknesses of each competing firm and look for opportunities in the marketplace. All of these steps are largely aimed at helping you create a strategy for your business. The second half of the business plan is largely to execute your selected business strategy. Your products and services, your marketing and your operations should all closely tie in with your strategy. So while it may be easy to select a smart-sounding strategy for your plan, I recommend you give a lot of thought to the strategy that will set the course for your business.
Think competitively throughout your planIn today's crowded marketplace, you're probably going to have serious competition no matter how creative your business concept is. That is why you need to think competitively throughout your business plan. You need to realistically identify where you will do things in similar manner as your competitors, where you will do things differently, where you have real strengths and where you have real weaknesses. To try to run a major aspect of your business significantly better than your competitors may be a very difficult challenge. Hence, you are often better to focus in planning on being different than your competition and competing with them less directly. Can you find a particular market niche to focus on? Can you find a unique strategy? Can you position your products differently? Can you use different sales or marketing vehicles?
Don't overreach with your business planA lot of business plans sound good on paper, but don't work in the real world marketplace. It's difficult to attract people to a new product or service. Just because it's better doesn't mean people are going to switch to it! People or companies have established buying patterns and are currently doing business with someone else. To get them to do business with you, you need to do more than to attract them to your business. You've got to steal them away from someone else's business. It's also quite possible that when you enter the marketplace, that your competitors may react with their own new products or services or by cutting their prices. And while it's easy to overestimate sales projections it's just as easy to underestimate costs--especially for a start-up. There are always going to be a hefty amount of cost overruns, expensive problems, and items that you simply overlooked. So forecast conservatively and try to have an extra cushion of cash tucked in reserve.

WHY PLAN YOUR BUSINESS?

The owner of a small sheet-metal fabrication company once told me, "Why plan? It only gets in the way of what would have happened anyway." That's a fatalistic notion often held by managers of small businesses. Too many believe that they're totally at the mercy of larger competitors. In fact, for many, exactly the opposite is true.
Think of the reasons for your company's success. You'll probably come up with a series of traits that are uniquely yours-characteristics that your larger competitors can't begin to duplicate. That's why you're in business.
Of course, you may already believe in the idea. However, you may have to sell it to the others in your company. This ammunition may come in handy.
RECOGNIZING USES OF THE PLANFor many of us who left corporate America in favor of a smaller work environment, the idea of drafting a business plan may seem offensive. After all, isn't frustration with all that busywork one of the reasons we left in the first place?
We all have an aversion to doing anything on our job that doesn't immediately help the situation we're now experiencing. However, isn't it also true that a little foresight and action before the fact can help eliminate many of the problems we face each day. Wouldn't it be nice to anticipate something like a price cut by your major competitor or a rise in the interest rate on your credit line? Of course it would. And with that anticipation comes an organized and effective response. That's what planning does. Additionally, we prepare a workable business plan to
Determine where the company needs to go
Forewarn of possible roadblocks along the way
Formulate responses to contingencies
Keep the business on track to reach its planned goals
Planning for Promotion of the CompanyMany people associate a business plan with start-up companies. Often our first exposure to a business plan is for the purpose of convincing investors and lenders that we have a viable idea at which they should throw money. That's not what we're developing here.
Though the techniques may be similar, the purposes are entirely different. So are the results. Promotional plans are often untested, pie-in-the-sky theories of what someone thinks will work. The goals, objectives, and numbers are usually unproven. Detailed departmental plans for hitting targets are frequently hazy-if they exist at all. Promoters don't want to burden their investors with the mechanics of execution. That comes later, after the money is in the bank.
Think of a start-up's promotional plan as concept-driven. It's more general in nature. The presentation leaves many questions of practical execution unanswered. These plans are fine for their purpose. However, most aren't intended as a blueprint for running the company.
Planning for Operational PurposesWe're not creating a promotional plan for a new start-up company. Instead, by using this book, you create a practical realistic planning tool for your business. The emphasis is on integrating the details of what each department within the company does to help the firm reach its overall goals. We want to tell each person in the company the single most important thing they need to do-must accomplish-to contribute to the overall success of the business. Certainly this results-oriented attention to detail can (and probably should) be used for a start-up venture. However, the promoters are right-it would confuse outsiders not familiar with the inner workings of the company.
Our focus is on practical solutions to everyday business objectives. We design these to work in concert with one another. When they do, the company moves from where it is today to where its owners, investors and managers want it to be.
ESTABLISHING GOALSWhy establish goals? I've heard from colleagues who run other small businesses that they always seem to fall short of any goals they set for the company. There's almost a feeling of helplessness. Their companies are small and lack the resources needed to turn goals into reality. Some wonder why they should spend time developing a business plan that might help the company make money over the next year or two-especially when they could be working on something else that's guaranteed to make money today. That's hard logic to refute, especially in a tight economy. Many small-business owners and entrepreneurs go after the quick buck. Those are the ones that don't last. Companies that lack a definite direction and the ability to stay on course eventually sink. It's the firms with vision and a plan to exploit that vision that become the stars. If you don't set goals and then try to reach them, it's guaranteed that your firm will stay right where it is today. With changing technology, changing customer demands, and increasing sophistication, marching in place is business suicide. During the 1990s and as we approach the next century, no company has the luxury of conducting business as usual. If you stay where you are today, the rest of us will leave you in the dust.
Company GoalsThese are the targets for change and transition that your firm must reach over the planning horizon-for our purposes, the next twelve months. Company goals cover such major issues as
Products offered
Customers targeted
Company image
Competition
Levels of service
Product quality
Companywide goals established in the business plan move the company into the position where it needs to be.
Department GoalsAt very small companies, often that's for one person. No matter. Design department goals to connect with specific requirements of both the overall company goals and the goals of other departments in terms of product and timing. We make department goals in order to
Assist other departments that depend on those specific results
Achieve the overall company goals
A good example would be in the area of finance. Say the firm needs additional funds to buy the machinery needed to expand its manufacturing operation. This will generate the sales revenue needed to meet overall profit targets. Here are examples of specific department goals:
Get additional funds.
Purchase and take delivery of new machinery.
Expand manufacturing.
Generate added sales.
Help attain the overall profit objectives.
Failure to reach of any one of these department goals could jeopardize reaching the overall company's target. Additionally, within every department, it's easy to identify exactly what that department must do to further the company's cause.
APPRAISING YOUR CURRENT POSITIONThe question here, however, is why do this? After all, most managers of small businesses are close enough to their everyday operation to know where they are, aren't they? Not necessarily. At least few take the time to think about where they are, then write it down so that others can judge its accuracy. We're talking about things like
Market position
Company strengths and weaknesses
Reputation
Industry viability
Technology
Product line
Adequacy of capital
Capability and sufficiency of employees
Sufficiency of plant, machinery, and equipment (the infrastructure) Often the hardest part of starting a business plan is honestly determining your current position today. It's not always so obvious. Take the case of Domino's Pizza Corporation. What business is it in? Of course, it sells pizza. So does every one of its competitors. The Domino's planners decided that differentiating Domino's product based on higher quality was too hard a sell. Besides, it wasn't necessary. So what business is Domino's really in? The convenience industry. Its pizza isn't any better or worse than most of the competition. However, the niche Domino's chose for itself in its plan was the business of selling convenience. For a while it had that entire market to itself. Another example is that of a payroll processing service. Its current position is that of providing financial convenience to its clients. The company performs a task that other companies would rather not do. While assessing the current position, someone came up with the bright idea of expanding the services offered. After all, financial convenience extends beyond simply doing the payroll. Why not add bookkeeping, tracking and collecting receivables, and personnel consulting? See how the planning process not only answers a lot of questions you may not have thought about for some time, but prompts questions that may turn into opportunities? That's the kind of penetrating thought that goes into assessing your firm's current position.