Business Plans: An Overview

What is a business plan? A business plan is a written summary and guide to starting and running a business - your business.
A well-written plan creates a blueprint for success. A well-written plan can help an entrepreneur obtain financing, create strategic plans, and develop and follow marketing and sales plans.
For many, developing a business plan is the first step in the process of deciding whether to start a business. Determining if an idea for a business "fails on paper" can help a prospective business owner avoid wasting time and money on a business with no realistic hope of success.
That's why a good business plan:

• Requires objective analysis and critical thinking. What may have seemed like a good idea can, after some thought and analysis, turn out to be a business that is not viable due to excess competition, insufficient funding, or a non-existent market. (Sometimes even the best ideas are simply ahead of their time.)
• Serves as a guide to operations for the first months and sometimes years, creating a blueprint for management to follow.
• Communicates the company's purpose and vision, describes management responsibilities, describes personnel requirements, provides an overview of marketing plans, and evaluates current and future competition in the marketplace.
• Creates the underlying foundation of a financing proposal for investors and lenders to use to evaluate the company.

A good business plan delves into each of the above categories, but it also should accomplish other objectives. Most of all, a good business plan is convincing. A good business plan proves a case. A good business plan provides concrete, factual evidence showing your idea for a business is in fact sound and reasonable… and has every chance of success.

Whom must a business plan convince?

• You. First and foremost, your business plan should convince you that your idea for a business is not just a dream but can be a viable reality. Entrepreneurs are by nature confident, positive, "can do" people. After you objectively evaluate your capital needs, your products or services, your competition, your marketing plans, and your potential to make a profit, you'll have a much better grasp on your chances for success. If you are not convinced, fine. Take a step back and refine your ideas and your plans.

Whom can a business plan convince?

• Lenders. If you need financing, either from a bank or from friends and relatives, your business plan can help you make a great case. Financial statements can tell where you have been. Financial projections describe where you plan to go. Your business plan shows how you will get there. Lending naturally involves risk, and a great business plan can help lenders understand and quantify that risk, increasing your chances for approval.
• Investors. If you plan to bring on friends or family as partners, sharing your business plan may not be necessary (although it certainly could help). Other investors - including angel investors or venture capitalists - generally require a business plan in order to evaluate your business.
• Employees. Say you plan to start a technology company and you need to attract skilled employees. Since you are in the start-up phase, what do you show a prospective employee? During start-up, your business is more of an idea than a reality. Your business plan can help prospective employees understand your goals - and more importantly, their place in helping you achieve those goals.
• Joint ventures. Joint ventures are like partnerships between two companies. A joint venture is a formal agreement to share the work - and share the revenues and profits. As a new company, you will likely be an unknown quantity in your market. Setting up a joint venture with an established partner could make all the difference in getting your business off the ground.

Above all, your business plan should convince you it makes sense to move forward. As you map out your plan, you may discover issues or challenges you had not anticipated. Possibly the market isn't as large as you thought. Possibly, after evaluating the competition you determine your plan to be the low-cost provider isn't feasible since the profit margins will be too low to cover your costs.
On the other hand, you might realize the fundamental idea for your business is sound, but how you implement that idea should change. Perhaps establishing a storefront for your operation isn't as cost-effective as taking your products directly to customers - not only will your operating costs be lower, but you can charge a premium since you provide additional customer convenience.
Think of it this way: No successful business remains static. Successful businesses learn from their mistakes. Successful businesses adapt and react to changes - changes in the economy, in the marketplace, in their customers, in their products and services, etc. Successful businesses identify opportunities and challenges and react accordingly.
Creating a business plan lets you identify opportunities and challenges - without risk. Use your business plan to dip your toe in the business water. It's the perfect way to adapt and revise your ideas and concepts before you ever spend a penny. Many people see writing a business plan as a "necessary evil" required to attract financing or investors. Instead, see your business plan as a no-cost way to explore the viability of your potential business and avoid costly mistakes - before they happen.

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Key Elements of a Business Plan

While every business plan is unique, most business plans share a number of common elements. The following are some of the key elements of a well-crafted business plan.

Executive Summary

The Executive Summary (sometimes called a Vision Statement) is a brief outline of the company's purpose and goals. The Executive Summary should be relatively brief. While it can be tough to fit on one or two pages, a good Summary includes:

• Brief description of products and services
• Business objectives
• The market space the business will inhabit
• Justification for viability (including a brief look at competition and competitive advantage)
• Growth potential
• Funding requirements

For many people, the Executive Summary is the make-or-break section of a business plan. Companies solve customers' problems; if the Summary cannot clearly describe how the business will solve a particular problem - and profit by doing so - in one or two pages, then it is very possible the opportunity does not exist, or the plan to take advantage of the opportunity has not been well developed.
How should you approach writing your Summary? Think of it as a snapshot of your business plan. The Summary is not an introduction, and doesn't serve to "hype" the business. A great executive summary helps a busy reader understand exactly what you plan to do, how you plan to do it, and how you will succeed.
Try to accomplish two different - but complementary - objectives in your Executive Summary. Since a business plan should primarily aid you in developing your business, the first objective is to help you:

1. Refine and tighten your concept. The Summary is the snapshot version of your business plan; think of it as a written "elevator pitch" (with more detail, of course). Your Summary describes the highlights of your plan, includes only the most critical points, and leaves out less important issues and factors. As you develop your Summary, you will naturally focus on the issues that contribute most to potential success. If your concept is too fuzzy, too broad, or too complicated - head back to the drawing board. Most great businesses can be described in several sentences, not several pages.
2. Determine your priorities. Your business plan walks the reader through your plan. What ranks high in terms of importance? Product development? Research? Acquiring the right location? Creating strategic partnerships? Your Executive Summary can serve as a guide to writing the rest of your plan.
3. Make the rest of the process easy. Once your Summary is complete, use it as an outline for the rest of your plan. Simply flesh out the highlights with more detail.

Accomplish your second objective by focusing on your readers. Even though at this point you may be creating a business plan solely for your own purposes, at some point you may decide to seek financing or to bring on other investors - so make sure your Executive Summary meets their needs as well. Set the stage for the rest of the plan. Let your excitement for your idea and your business shine through. Make readers want to turn the page and read more.
Just make sure the sizzle meets the steak by providing clear, factual descriptions.
How? The following is an example of how an Executive Summary for a proposed ski equipment retail store might read. (This and other examples provided throughout this guide were developed specifically for this guide and were not pulled from a real business plan.)

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Executive Summary

The Executive Summary (sometimes called a Vision Statement) is a brief outline of the company's purpose and goals. The Executive Summary should be relatively brief. While it can be tough to fit on one or two pages, a good Summary includes:

• Brief description of products and services
• Business objectives
• The market space the business will inhabit
• Justification for viability (including a brief look at competition and competitive advantage)
• Growth potential
• Funding requirements

For many people, the Executive Summary is the make-or-break section of a business plan. Companies solve customers' problems; if the Summary cannot clearly describe how the business will solve a particular problem - and profit by doing so - in one or two pages, then it is very possible the opportunity does not exist, or the plan to take advantage of the opportunity has not been well developed.
How should you approach writing your Summary? Think of it as a snapshot of your business plan. The Summary is not an introduction, and doesn't serve to "hype" the business. A great executive summary helps a busy reader understand exactly what you plan to do, how you plan to do it, and how you will succeed.
Try to accomplish two different - but complementary - objectives in your Executive Summary. Since a business plan should primarily aid you in developing your business, the first objective is to help you:

1. Refine and tighten your concept. The Summary is the snapshot version of your business plan; think of it as a written "elevator pitch" (with more detail, of course). Your Summary describes the highlights of your plan, includes only the most critical points, and leaves out less important issues and factors. As you develop your Summary, you will naturally focus on the issues that contribute most to potential success. If your concept is too fuzzy, too broad, or too complicated - head back to the drawing board. Most great businesses can be described in several sentences, not several pages.
2. Determine your priorities. Your business plan walks the reader through your plan. What ranks high in terms of importance? Product development? Research? Acquiring the right location? Creating strategic partnerships? Your Executive Summary can serve as a guide to writing the rest of your plan.
3. Make the rest of the process easy. Once your Summary is complete, use it as an outline for the rest of your plan. Simply flesh out the highlights with more detail.

Accomplish your second objective by focusing on your readers. Even though at this point you may be creating a business plan solely for your own purposes, at some point you may decide to seek financing or to bring on other investors - so make sure your Executive Summary meets their needs as well. Set the stage for the rest of the plan. Let your excitement for your idea and your business shine through. Make readers want to turn the page and read more.
Just make sure the sizzle meets the steak by providing clear, factual descriptions.
How? The following is an example of how an Executive Summary for a proposed ski equipment retail store might read. (This and other examples provided throughout this guide were developed specifically for this guide and were not pulled from a real business plan.)

Introduction

Peak Ski and Snowboard Rentals will offer ski and snowboard rentals in a strategic location directly adjacent to the entrance of Massive Peak Mountain, a premier four-season resort located in Massive Peak, VA. Our primary strategy is to develop Peak Ski and Snowboard Rentals as the most convenient and cost-effective rental alternative for the thousands of visitors who flock to the resort each year.
Once underway, we will expand our scope, taking advantage of high-margin new equipment sales and leveraging the existing labor force to perform custom equipment fittings. Within three years, we intend to create the area's premier destination for snow enthusiasts.

Company and Management

Peak Ski and Snowboard Rentals will be located at 1234 Resort Lane, a location providing extremely high visibility as well as direct entry and exit from the primary resort access road. The owner of the company, Joe Skier, has over twenty years experience in the ski and snowboard business, having served as a product manager for Epitome Snowboards as well as the general manager of Slope Side Resort Ski Shop.
Because of his extensive industry contacts, initial equipment inventory will be purchased at significant discounts from OEM suppliers as well by sourcing excess inventory from other resorts around the country.
Due to the seasonal nature of the business, part-time employees will be hired to handle spikes in demand. Those employees will be attracted through competitive wages as well as discounts on season lift passes and equipment.

Market Opportunities

325,000 people visited Massive Peak Mountain during the last winter season. While the ski industry as a whole is flat, the resort expects its number to grow over the next few years.

• The outlook for the economy means fewer VA, WV, and MD snow enthusiasts will travel outside the region.
• The resort has added a number of other activities, including a year-round water park, which will attract more visitors.
• The resort has expanded its snowmaking capacity, ensuring a greater number of "ski days" and therefore a greater number of visitors.

The market potential inherent in those visitors is substantial. According to third-party research data, approximately 60% of all skiers and snowboarders rent rather than own equipment.

Competitive Advantages

The ski shop at Massive Peak Mountain is a direct and established competitor. Our primary competitive advantage will be lower cost.
A key disadvantage is a perceived lack of convenience. We will overcome that perception through our location, by offering drive-up return service with employees on hand to unload equipment, and an equipment shuttle service to deliver rentals directly to customers already on the mountain. Customers will also be able to reserve and pay for equipment online as well as store individual profiles regarding equipment size, preferences, and special needs.

Financial Projections

Peak Ski and Snowboard Rentals expects to earn a modest profit by year two based on projected sales. Our projections are based on the following key assumptions:

• Initial growth will be moderate as we establish awareness in the market.
• Initial equipment purchases will stay in service for an average of three to four years; after two years, we will begin investing in "new" equipment to replace damaged or obsolete equipment.
• Marketing costs will not exceed 14% of sales.
• Residual profits will be reinvested in expanding the product and service line.

We project first-year revenue of $1,780,000 and a 10% growth rate for the next two years. Direct cost of sales is projected to average 60% of gross sales, including 50% for the purchase of equipment and 10% for the purchase of ancillary items. Net income is projected to reach $145,000 in year three as sales increase and operations become more efficient.

Keep in mind the preceding is an example of how your Executive Summary might read. Note this Summary was adapted specifically for the snow rental business. Since Peak Ski and Snowboard Rentals will not plan to sell new skis and snowboards, at least at first, no mention of product is required. If your business will manufacture or provide a new product or service, you will want to include a Products and Services section in your Executive Summary. In this case, the products and services are relatively obvious, and including a specific section would be redundant and distract the reader from the main points.
Remember: Provide the sizzle in your Executive Summary… but show plenty of steak, too.

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Business Overview and Objectives

Business Overview and Objectives

Providing an overview of your business can be tricky, especially for a start-up. (If you already own an existing business, summarizing your current operation should be relatively easy; it can be a lot harder to explain what you plan to become.)
If you are planning a start-up, start by taking a step back. Think about what products and services you will provide, how you will provide those items, what you need to have in order to provide those items, exactly who will provide those items - and most importantly, to whom you will provide those items.
Consider our ski and snowboard equipment business. It's a retail business serving retail customers. It has an online component, but the core of the business is based on face-to-face transactions. You will provide ski and snowboard rentals to resort customers. (Or possibly, if your prices are low enough, some people living in your area may rent equipment from you even though they plan to ski at a different resort than the one nearby - as long as the savings are substantial enough to offset any convenience disadvantage, of course.) You will need a physical location, ski equipment, racks and tools and supporting equipment, and other brick-and-mortar related items. You will need employees to service those customers, and you will need an operating plan to guide your everyday activities.
Sound like a lot? It boils down to:

• What you will provide
• What you need to run your business
• Who will service your customers, and
• Who your customers are

In our example, defining the above is fairly simple. You know what you will provide to meet the customers' needs. You will of course need a large quantity of items to service demand, but you will not need a number of different types of items. (In general, you need skis, ski boots, ski poles, snowboards, and snowboard boots. Those items cover the majority of your rental product needs.) You need a retail location, furnished to meet the demands of your business. You need semi-skilled employees capable of sizing and customizing equipment.
Moreover, you know your customers: Snow enthusiasts.
In other businesses and industries, answering the above questions can be more difficult. If you open a restaurant, what you plan to serve will in some ways determine your labor needs, the location you choose, the equipment you need to purchase… and most importantly will help define your customer. Changing any one element may change other elements; if you cannot afford to purchase expensive kitchen equipment, you may need to adapt your menu accordingly. If you hope to attract an upscale clientele, you may need to invest more in purchasing a prime location and creating an attractive ambience.
So where do you start? Focus on the basics first:

• Identify your industry. Retail, wholesale, service, manufacturing, etc. Clearly define your type of business.
• Identify your customer. You cannot market and sell to customers until you know who they are.
• Explain the problem you solve. Successful businesses create customer value by solving problems. In our rental example, the problem is snow enthusiasts pay premium prices for rentals at the resort itself. The rental shop will solve that problem by offering a lower-cost yet still convenient alternative.
• Show how you will solve that problem. Our rental shop will offer better prices and enhanced services, like on-site deliveries, drive-up equipment returns, and online reservations.

If you are still stuck, try answering these questions. Some may pertain to you; others may not.

• Who is my average customer? Whom am I targeting? (Unless you plan to open a grocery store, you should be unlikely to answer, "Everyone!")
• What problem do I solve for my customers?
• How will I solve that problem?
• Where will I fail to solve a customer problem, and what can I do to overcome that issue? (In our rental example, one problem is a potential lack of convenience; we will overcome that issue by offering online reservations, on-resort deliveries, and drive-up equipment returns.)
• Where will I locate my business?
• What products, services, and equipment do I need to run my business?
• What skills do my employees need, and how many do I need?
• How will I beat my competition?
• How can I differentiate myself from my competition in the eyes of my customers? (You can have a great plan to beat your competition, but you also must win the perception battle among your customers. If customers don't feel you are different - you aren't truly different. Perception is critical.)

Once you work through this list, you will probably end up with a lot more detail than is necessary for your business plan. That is not a problem: Start summarizing the main points. For example, a Business Overview and Objectives section could start something like this:

History and Vision

Peak Ski and Snowboard Rentals is a new retail venture that will be located at 1234 Resort Lane, directly adjacent to the ski resort at Massive Peak Mountain. Our initial goal is to become the premier destination for equipment rentals as the low-cost provider in the area. We will then leverage our customer base and position in the market to provide new equipment sales as well as comprehensive maintenance and service, custom equipment fittings, and professional skiing and snowboarding instruction.

Objectives

• Achieve the largest market share for ski and snowboard equipment rentals in the area.
• Generate a net income of $145,000 at the end of the second year of operation.
• Minimize rental inventory replacement costs by maintaining a 10% attrition rate on existing equipment (industry average is 16%).

Keys to Success

• Provide high quality rental equipment, sourcing that equipment as inexpensively as possible through existing relationships with equipment manufacturers and other snow resorts.
• Use signage to attract visitors traveling to the resort, highlighting our cost and service advantage.
• Create additional customer convenience factors to overcome a perceived lack of convenience due to our off-resort location.
• Develop customer incentive and loyalty programs to leverage customer relationships and create positive word of mouth.

You could certainly include more detail in each section. If you plan to develop a product or service, you should thoroughly describe the development process as well as the end result. The key is to describe what you will do for your customers - if you can't, you won't have any customers.

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Products and Services

Products and Services

In this section, you will clearly describe the products and services the business will provide. (Without products or services - in other words, without something to sell - you don't have a business.)
Highly detailed or technical descriptions are not necessary. Use simple terms and avoid industry buzzwords so your readers can easily understand. Describing how the company's products and services will differ from the competition is critical, and so is describing why your products and services are needed if no market currently exists.
For example, when Federal Express was formed, overnight delivery was a niche business served by small companies. FedEx had to define the opportunity for a new, large-scale service and justify why customers needed - and would use - such a service.
Patents, copyrights and trademarks you own or have applied for should be listed in this section.
Depending on the nature of your business, this section could be very long or relatively short. If your business is product-focused, you will want to spend more time describing the product. If you will sell a commodity item and the key to your success lies in, say, competitive pricing, you may not want to provide significant detail. If you plan to sell a commodity readily available in a variety of outlets, the key to your business may not be the commodity itself but your ability to market that commodity more cost-effectively than the competition.
If, on the other hand, you are creating a new product (or service), thoroughly explain the nature of the product, its uses, and its value, etc. - otherwise your readers will not have enough information to be able to evaluate your business.

Key questions to answer in this section:

• Are the products or services already on the market, or in development?
• What is the timeline for bringing new products and services to market (if applicable)?
• What makes your products or services different? Are there competitive advantages compared to other offerings from other competitors? Are there competitive disadvantages you will need to overcome? (If so, how?)
• Is price an issue? Will your operating costs be low enough to allow a reasonable profit margin?
• How will you acquire your products? Are you the manufacturer? Do you assemble products using components provided by others? Do you purchase products from suppliers or wholesalers? If your business takes off, is a steady supply of products available?

In the rental equipment business example we have been following, products and services could be a relatively simple section to complete - or it could be fairly involved. The difference lies in the nature of the products the company plans to rent to customers. If Peak Ski and Snowboard Rentals plans to market itself as a provider of high-end equipment, describing that equipment - and sources for that equipment - is important, since "high-end equipment rentals" is a competitive advantage. If the company plans to be the low-cost provider, then describing specific brands of equipment is probably not necessary.
Also, keep in mind that if you plan to sell a commodity, describing your sources is important. If you sell lumber, and the lumber mill from which you purchase runs out of capacity - or goes out of business altogether - you may not have a sufficient supply to meet your demand. Plan to set up multiple vendor or supplier relationships, and describe those relationships fully in your plan. A company without a product to sell is no longer a company.
The Products and Services section for the rental equipment business could start something like this:

Product Description

Mountain Peak Ski and Snowboard Rentals will provide a comprehensive line of ski and snowboard equipment for all ages and levels of ability. Since the typical customer seeks medium-quality equipment and excellent services at competitive prices, we will focus on providing brands like Excel Skis, Pinnacle Snowboards, and Snow Tuff boots. These manufacturers have a solid reputation as mid- to upper-mid-level quality, unlike equipment manufactured specifically for the rental market.
The following is a breakdown of anticipated rental price points:

	Per Day	Per Week	Per Season
Skis/Boots/Poles	$10	$40	$180
Snowboards/Boots	$12	$45	$190

In addition:

• Customers can extend the rental period online, without visiting the store
• A grace period of two hours will be applied to all rentals; customers who return equipment within that two-hour period will not be charged an additional fee.

Competition

Mountain Peak Ski and Snowboard Rentals will have clear advantages over its primary competitor, the ski shop at Peak Ski Resort. Mountain Peak Ski and Snowboard Rentals will have:

• Newer equipment inventory with higher perceived quality
• Price points 20% below the competition
• Online renewals offering greater convenience
• A return grace period reinforcing our reputation as a customer-friendly rental experience

Future Products

Future expansion will allow us to expand product offerings into new equipment sales. We will also explore maintenance and fitting services, leveraging our existing maintenance staff to provide value-added services at a premium price.

When you draft your Products and Services section, think of your reader as a person who knows little to nothing about your business. Be clear and to the point.
Think of it this way: Products and Services answers the "What?" question for a business. Fully understand the "What?" component; you may run the business, but your products and services are the lifeblood of your business.

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Market Opportunities

Market Opportunities

Market research is critical to business success. A good business plan analyzes and evaluates customer demographics, purchasing habits, buying cycles, and willingness to adopt new products and services.
The process starts with market research and market analysis.
Why? Before you start a business, you must be sure there is a viable market for what you plan to offer. Without ready, willing, and able customers, even the best ideas and best-run businesses have no chance to succeed.
The process requires asking - and more importantly answering - a number of questions. The more thoroughly you answer the following questions, the better you will understand your market.
Start by evaluating the market at a relatively high level. To help you write your business plan, start by answering some high-level questions about your market and your industry:

• What is the size of the market? Is it growing, stable, or in decline?
• Is the overall industry growing, stable, or in decline?
• What segment of the market do I plan to target? What demographics and behaviors make up the market I plan to target?
• Is demand for my specific products and services rising or falling?
• Can I differentiate myself from the competition in a way customers will find meaningful? If so, can I differentiate myself in a cost-effective manner?
• What do customers expect to pay for my products and services? Are they considered to be a commodity or to be custom and individualized?

Fortunately, you've already done some of the legwork. In the last section, you clearly defined and mapped out your products and services. This section provides a sense-check of that analysis, which is particularly important since choosing the right products and services is such a critical factor in business success.
Nevertheless, your analysis should go farther: Great products are, in a word, great - but there must be a market for those products.
So let's dig deeper and quantify your market. Your goal is to understand thoroughly the characteristics and purchasing ability of potential customers in your market. A few quick Internet searches can yield a tremendous amount of data. For the market you hope to serve, determine:

• Your potential customers. In general terms, potential customers are the people in the market segment you plan to target. For example, if you sell Jet Skis (personal watercraft), in general terms anyone under the age of 16 and over the age of 60 or so is unlikely to be a customer. Further, again in general terms, women make up a relatively small percentage of Jet Ski purchasers. Determining the total population for the market is not particularly helpful if your product or service does not serve a need for the entire population. Most products and services do not.
• Total households. In some cases, determining the number of total households is important depending on your business. For example, if you sell heating and air conditioning systems, knowing the number of households is more important than simply knowing the total population in your area. While people purchase HVAC systems, "households" consume those systems.
• Median income. Spending ability is important. Does your market area have sufficient spending power to purchase enough of your products and services to enable you to make a profit? Some areas are more affluent than others. Don't assume every city or locality is the same in terms of spending power. A service that is viable in New York City may not be viable in your town.
• Income by demographics. You can also determine income levels by age group, by ethnic group, and by gender. (Again, potential spending power is an important number to quantify.) Senior citizens could very well have a lower income level than males or females age 45 to 55 in the prime of their careers. Say you plan to sell services to local businesses; try to determine the amount they currently spend on similar services.

The key is to understand the market in general terms and then to dig deeper to understand whether there are specific segments within that market - the segments you plan to target - that can become customers and support the growth of your business.
Also keep in mind that if you plan to sell products online the global marketplace is incredibly competitive. Any business can sell a product online and ship that product around the world. Don't simply assume that because, for example, "The bicycle industry is a $62 billion business worldwide," that you can capture a meaningful percentage of that market. However, if you live in an area with 50,000 people and only one bicycle shop, you may be able to enter that market and attract a major portion of bicycle customers in your area. It is much easier to serve a market that you can define and quantify.
After you complete your research, you may feel a little overwhelmed. While data is good, and more data is great, sifting through and making sense of too much data can be daunting.
For the purposes of your business plan, narrow your focus and focus on answering these main questions:

• What is your market? Include geographic descriptions, target demographics, and company profiles (if you plan to sell business-to-business). In short: Who are your customers?
• What segment of your market will you focus on? What niche will you attempt to carve out? What percentage of that market do you hope to penetrate and acquire?
• What is the size of your intended market? What is the population and spending habits and levels?
• Why do customers need, and why will they be willing to purchase, your products and services?
• How will you price your products and services? Will you be the low cost provider or provide value-added services at higher prices?
• Is your market likely to grow? How much? Why?
• How can you increase your market share over time?

The Market Opportunities section for the rental equipment business could start something like this:

Market Summary

Consumer spending on ski and snowboard rental equipment rose to $14,500,000 in the states of VA, WV, and MD last year. While we expect sales to rise, for the purposes of performing a conservative analysis we have projected a zero growth rate for the next three years. In those states, 1,832,000 people visited a ski resort last year. Our target market includes customers visiting the Peak Ski Resort; last year 325,000 people visited the resort during the snow season.
Over time, however, we do expect equipment rentals and sales to increase steadily as the popularity of snowboarding in particular continues to rise. Specifically, we forecast a spike in demand during the 2014 Winter Olympics year due to the sport's heavy media exposure.

Market Trends

Participation and population trends favor our venture:

• Recreational sports in general and both family-oriented and "extreme" sports continue to gain in exposure and popularity.
• Western VA and eastern WV have experienced population growth rates nearly double that of the country as a whole.
• Industry trends show snow sports have risen at a more rapid rate than any other recreation sport.

Market Growth

According to the latest studies, recreation spending in our target market has grown by 10% per year for the past three years.
In addition, we anticipate greater than industry-norm growth rates for Peak Ski Resort due to the addition of a four-season water park and its ability to attract more visitors to the resort itself, even during the winter months.

Market Needs

Out target market has one basic need: The availability to source quality ski and snowboard rental equipment at a competitive price. Our only other competition is the ski shop at the ski resort itself, and our location will give us a competitive advantage over any other companies who try to serve our market.

You may want to add other categories to this section based on your particular industry. For example, you may want to provide information about market segments. In our example, the equipment rental business does not require segmentation: Currently, the ski and snowboard rental business is not broken down into, for example, segments like "inexpensive," "mid-range," and "high-end" quality. For the most part, rental equipment is rental equipment.
However, say you decide to open a bookstore: You could focus on textbooks, or children's books, or travel books, or religious books - you could segment the market in a number of ways. If that is the case, provide detail on segmentation that supports your plan.
The key is to define your market to show how you will serve that market.
The Market Opportunities section helps you answer the "Who?" question.

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Sales and Marketing

Offering great products and services is wonderful, but customers must know those products and services exist. Marketing plans and strategies are critical to business success.
Keep in mind marketing is not just advertising. Marketing - whether advertising, public relations, promotional literature, etc. - is an investment in the growth of your business. Like any other investment you would make, money spent on marketing must generate a return. (Otherwise why make the investment?) While that return could simply be greater cash flow, good marketing plans result in higher sales and profits.
Don't plan simply to spend money on a variety of advertising efforts. Do your homework and create an overall marketing program.
Here are some of the basic steps involved in creating a plan:

• Focus on your target market. Who are your customers? Whom will you target? Who makes the decisions? Determine how you can best reach potential customers. (In the rental equipment business, the best way to reach customers may be billboards located on the way to the resort.)
• Evaluate your competition. Your marketing plan must set you apart from the competition, and you can't stand out unless you understand your competition. (It's hard to stand out from a crowd if you don't know where the crowd stands.) Know your competitors by gathering information about their products, service, quality, pricing, and advertising campaigns. In marketing terms, what does your competition do that works well? What are their weaknesses? How can you create a marketing plan that highlights the advantages you offer to customers?
• Consider your brand. How customers perceive your business makes a dramatic impact on sales. Your marketing program should consistently reinforce and extend your brand. Before you start to market your business, think about how you want your marketing to reflect on your business and your products and services. Marketing is the face of your business to potential customers - make sure you put your best face forward.
• Focus on benefits. What problems do you solve? What benefits do you deliver? Customers don't think in terms of products - they think in terms of benefits and solutions. Your marketing plan should clearly identify benefits customers will receive. Focus on what customers get instead of on what you provide. (You may sell mp3 players but the customer "gets" portable music.)
• Focus on differentiation. Your products and services have to stand out from the competition in some way. How will you compete in terms of price, product, or service?

Then focus on providing detail and backup for your marketing plan.

Key questions to answer:

• What is your budget for sales and marketing efforts?
• How will you determine if your initial marketing efforts are successful? In what ways will you adapt if your initial efforts do not succeed?
• Will you need sales representatives (inside or external) to promote your products?
• Can you set up public relations activities to help market your business?

The Sales and Marketing section for the rental equipment business could start something like this:

Target Market

The target market for Peak Ski and Snowboard Rentals is western VA, eastern WV, and southwestern MD. While customers in the counties surrounding Mountain Peak Ski Resort make up 20% of our potential customer base, the vast majority of our market travels from outside that narrow geographic area.

Marketing Strategy

Our marketing strategy will focus on three basic initiatives:

• Road signage. Access to the ski resort is restricted to one entrance, and visitors reach that entrance after traveling on one highway for approximately 8 miles in either direction. Since customers currently rent their equipment at the resort itself, road signage will communicate our value proposition to all potential customers.
• Web initiatives. Our website will attract potential visitors to the resort. We will partner with local businesses that serve our target market to provide discounts and incentives.
• Promotional events. We will hold regular events with ski and snowboard athletes, such as demonstrations and autograph signings, to bring more customers to the store as well as to extend the athletes' "brand" to our brand.

Pricing Strategy

We will be the low-cost provider for our target market. We will also create web-based loyalty programs to create an incentive for customers to set up online profiles and reserve and renew equipment rentals online. Over time, we will be able to market specifically to those customers.

Just like in the Market Opportunity section, you may want to include a few more categories. For example, if you plan to employ a commission-compensated sales force, describe your Sales Programs and incentives. If you distribute products to other companies or suppliers and those distribution efforts will affect your overall marketing plans, lay out your Distribution Strategy.
The key is to show you understand your market and you understand how you will reach your market. Marketing and promotions must result in customers: Describe how you will acquire and keep your customers.
Also keep in mind you may want to include examples of marketing materials you have already prepared, like website descriptions, print ads, web-based advertising programs, etc. While you don't need to include samples, taking the time to create actual marketing materials might help you better understand and communicate your marketing plans and objectives.
Make sure your Sales & Marketing section answers the "How will I reach my customers?" question.

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Competitive Analysis

This section is devoted to analyzing your competition - your current competition or potential competitors who might enter your market.
Keep in mind every business has competition. Understanding the strengths and weaknesses of your competition - or potential competition - is critical to making sure your business survives and grows. While you don't need to hire a private detective to understand your competition, you do need to assess thoroughly your competition on a regular basis even if you only plan to run a small business.
In fact, small businesses can be especially vulnerable to competition, especially when new companies enter a marketplace.
Competitive analysis can be incredibly complicated and time-consuming, but it does not have to be. Here is a simple process you can follow to identify, analyze, and determine the strengths and weaknesses of your competition.

Profile Current Competitors

First, develop a basic profile of each of your current competitors. For example, if you plan to open an office supply store, you may have three competing stores in your market. Online retailers will also provide competition, but thoroughly analyzing those companies will be less valuable unless you also decide you want to sell office supplies online.
To make the process easier, stick to analyzing companies with whom you will directly compete. If you plan to set up an accounting firm, you will compete with other accounting firms in your area. If you plan to open a clothing store, you will compete with other clothing retailers in your area.
Again, if you run a clothing store you also compete with online retailers, but there is relatively little you can do about that type of competition other than to work hard to compete in other ways: Through great customer service, friendly salespeople, convenient hours, stocking hard to find items, etc.
Once you identify your main competitors, answer these questions about each one. Be objective. It's easy to identify weaknesses in your competition, but less easy (and a lot less fun) to recognize where they may be able to outperform you:

• What are their strengths? Price, service, convenience, extensive inventory are all areas where you may be vulnerable.
• What are their weaknesses? Weaknesses are opportunities of which you should plan to take advantage.
• What are their basic objectives? Do they seek to gain market share? Do they attempt to capture premium clients? See your industry through their eyes. What are they trying to achieve?
• What marketing strategies do they use? Look at their advertising, public relations, etc.
• How can you take market share away from their business?
• How will they respond when you enter the market?

While these questions may seem like a lot of work to answer, in reality the process should be easy. You should already have a feel for the competition's strengths and weaknesses - if you know your market and your industry.
To gather information, you can also:

• Visit their websites. Most of the information you need about products, services, prices, and company objectives should be readily available. If that information is not available, you may have identified a weakness.
• Visit their locations. Take a look around. Check out sales materials and promotional literature. Have friends stop in or call to ask for information.
• Evaluate their marketing and advertising campaigns. How a company advertises creates a great opportunity to uncover the objectives and strategies of that business. Advertising should help you quickly determine how a company positions itself, whom it markets to, and what strategies it employs to reach potential customers.
• Browse. Search the Internet for news, public relations, and other mentions of your competition. Make sure you search blogs and Twitter feeds as well as review and recommendation sites like Yelp.com. While most of the information you find will be anecdotal and based on the opinion of just a few people, you may at least get a sense of how some consumers perceive your competition. In addition, you may also get advance warning about expansion plans, new markets they intend to enter, or changes in management.

Keep in mind competitive analysis does more than help you understand your competition. Competitive analysis can also help you identify changes you should make to your business strategies. Learn from competitors' strengths, take advantage of competitors' weaknesses, and apply the same analysis to your own business plan.
You might be surprised by what you can learn about starting your business by evaluating other businesses.

Identify Potential Competitors

It can be tough to predict when and where new competitors may pop up. For starters, search the Internet regularly for news on your industry, your products, your services, and your target market. Press releases, for example, can be a great way to uncover future plans.
However, there are other ways to predict when competition may follow you into a market. Other people may see the same opportunity you see. Think about your business and your industry, and if the following conditions exist, you may face competition down the road:

• The industry enjoys relatively high profit margins
• Entering the market is relatively easy and inexpensive
• The market is growing - the more rapidly it is growing the greater the risk of competition
• Supply and demand is off - supply is low and demand is high
• Very little competition exists, so there is plenty of "room" for others to enter the market

In general terms, if serving your market seems easy you can safely assume competitors will enter your market. A good business plan anticipates and accounts for new competitors.
Now distill what you have learned by answering these questions in your business plan:

• Who are my current competitors? What is their market share? How successful are they?
• What market do current competitors target? Do they focus on a specific customer type, on serving the mass market, or on a particular niche?
• Are competing businesses growing or scaling back their operations? Why? What does that mean for your business?
• How will your company be different from the competition? What competitor weaknesses can you exploit? What competitor strengths will you need to overcome to be successful?
• What will you do if competitors drop out of the marketplace? What will you do to take advantage of the opportunity?
• What will you do if new competitors enter the marketplace? How will you react to and overcome new challenges?

The Competitive Analysis section for the rental equipment business could start something like this:

Primary Competitors

Our nearest and only competition is the ski shop at Peak Ski Resort. Our next closest competitor is located over 100 miles away at Pinnacle Ski Resort.
The ski shop will be a strong competitor. Its location creates unmatched proximity to potential customers. On the other hand, it offers inferior-quality equipment at a higher price point.

Secondary Competitors

Mountain Peak Ski and Snowboard Rentals will not sell new equipment for at least the first two years of operation. However, sellers of new equipment will indirectly compete with our business since a customer who buys equipment no longer needs to rent equipment.
Later, when we add new equipment sales to our operation, we will face competition from online equipment retailers. We will compete with new equipment retailers through personalized service and targeted marketing to our existing customer base, especially through online initiatives.

Opportunities

• By offering mid-level quality equipment, we provide customers the opportunity to "try out" equipment they may wish to purchase at a later date, providing additional incentive (besides cost savings) to use our service.
• Offering drive-up, express rental return services will be seen as a much more attractive option compared to dealing with long lines at the resort's ski shop.
• Online initiatives like online renewals and reservations enhance customer convenience and position us as a cutting-edge supplier in a market largely populated, especially in the snowboarding segment, by customers who tend to be early technology adapters.

Risks

• The business of renting ski and snowboard equipment may be perceived by some of our target market as a commodity "purchase." If we do not differentiate ourselves in terms of price, convenience, and service, we could face additional competition from other entrants to the market.
• The Peak Mountain Ski Shop is owned and operated by a major corporation. The corporation has access to significant financial assets. If we, as hoped, carve out a significant market share, the corporation may use those assets to increase service, improve equipment quality, or cut prices.

Keep in mind most investors will look closely at your competitive analysis. A common mistake made by entrepreneurs is assuming they will simply "do it better" than any competition. Experienced businesspeople know they will face stiff competition: Showing that you understand your competition, your strengths and weaknesses relative to that competition, and that you understand you will have to adapt and change based on that competition, is critical.
Moreover, even if you do not ever plan to seek financing or bring in investors, you absolutely must know your competition.
The Competitive Analysis section helps you answer the "Against whom?" question.

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Operations

The next key step in creating your business plan is to develop an operations plan that will serve your customers, keep your operating costs in line, and ensure profitability. Your Operations plan should detail plans for research and development, processing, manufacturing, staffing, managing¡­ in short, how to run the business on a day-to-day basis.
Fortunately, most entrepreneurs have a better handle on their Operations plan than on any other aspect of their business. After all, while it may not seem natural to analyze your market or your competition, most budding entrepreneurs tend to spend a lot of time thinking about how they will run their business.
For that reason, let's focus on answering the following key questions:

• What facilities, equipment, and supplies do you need?
• What is your organizational structure? Who is responsible for which aspects of the business?
• Is research and development required, either during start-up or as an ongoing operation? If so, how will you accomplish this task?
• What are your initial staffing needs? When and how will you add staff?
• With what vendors and suppliers will you establish business relationships? How will those relationships impact your day-to-day operations?
• How will your operations change as the company grows? What steps will you take to cut costs if the company initially does not perform up to expectations?

Operations plans should be highly specific to your industry, your market sector, and your customers. As a result, instead of providing an example of an Operations plan, the following describes key areas your plan should address:

Location and Facility Management

In terms of location, describe:

• Zoning requirements
• The type of building you need
• The space you need
• Power and utility requirements
• Access: Customers, suppliers, shipping, etc.
• Parking
• Specialized construction or renovations
• Interior and exterior remodeling and preparation

Day-to-Day Operations

• Production methods
• Service methods
• Inventory control
• Sales and customer service
• Receiving and Delivery
• Maintenance, cleaning, and re-stocking

Legal Needs

• Licenses and permits
• Environmental or health regulations
• Patents, trademarks, and copyrights
• Insurance

Personnel Requirements

• Typical staffing
• Breakdown of skills required
• Recruiting and retention
• Training
• Policies and procedures
• Pay structures

Inventory

• Anticipated inventory levels
• Turnover rate
• Lead times
• Seasonal fluctuations in demand

Suppliers

• Major suppliers
• Back-up suppliers and contingency plans
• Credit and payment policies

Sound like a lot? It can be - but not all of the above needs to be in your business plan. You should think through and create a detailed plan for each category, but you won't need to share the results with the people who read your business plan.
Working through each issue and developing concrete operations plans helps you in two major ways:

1. If you don't plan to seek financing or outside capital, you can still take advantage of creating a comprehensive plan that addresses all of your operational needs.
2. If you do seek financing or outside capital, you may not include all the detail in your business plan - but you will have answers to any operations questions at your fingertips.

Think of Operations as the "implementation" section of your business plan. What do you need to do? How will you get it done? Then create an overview of that plan to make sure your milestones and timeline make sense.
That way, the Operations section can answer the "How?" question.

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Management Team

Many investors and lenders feel the quality and experience of the management team is one of the most important factors used to evaluate the potential of a new business, but putting work into the Management Team section will not only benefit people who may read your plan. It will also help you evaluate the skills, experiences, and resources your management team will need. Addressing your company's needs during implementation will make a major impact on your chances for success.
Key questions to answer:

• Who are the key leaders? (If actual people have not been identified, describe the type of people needed.) What are their experiences, educational backgrounds, and skills?
• Do your key leaders have industry experience? If not, what experience do they bring that is applicable to the business?
• What duties will each position perform? (Creating an organization chart can be helpful at this stage.) What authority is granted to and what responsibility is expected of each position?
• What salary ranges will be required to attract qualified candidates for each position? What is the salary structure for the company, by position?

The Management Team section for the rental equipment business could start something like this:

Joe Skier, Owner and Manager

Joe Skier has over twenty years experience in the ski and snowboard business. He served for ten years as a product manager for Epitome Snowboards. After that, he was the General Manager of Slope Side Resort Ski Shop, a full-service facility located in Big Air, Montana. He has an undergraduate degree in finance from Waterside University and an MBA from Viewpoint University. A complete r¨¦sum¨¦ for Mr. Skier can be found in the Appendix.

Martha Boarder, Assistant Manager

Martha Boarder was the 2006 U.S. National Champion in Downhill Skiing. She worked in product development for Ultra Skis, creating cutting-edge designs and modifications for advanced and novice skiers. She also has extensive customer service and sales experience, having worked for three years as the sales manager for Boots and Poles Ski Shops, a chain of ski shops with locations at resorts around the world.

In some instances, you may also wish to describe your staffing (if you have staffing plans in place). For example, if you manufacture a product or provide a service and will hire a key skilled employee, describe that employee's credentials. Otherwise, include staffing plans in the Operations section.
One key note: Do not be tempted to add a "name" to your management team in hopes of attracting investors. "Celebrity" management team members may attract the attention of your readers, but experienced lenders and investors will immediately ask what role that person will actually play in the running of the business.
If you don't have a lot of experience - but are willing to work hard to overcome that lack of experience - don't be tempted to include other people in your plan that will not actually work in the business. If you can't survive without help, that's okay - make plans to get help from the right people.
Finally, when you create the Management section, focus on credentials but pay extra attention to what each person actually will "do." Credentials are great, but action is everything.
Then, the Management section will answer the "Who is in charge?" question.

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Appendices

Some business plans include other, less essential but potentially important information in the Appendix section. You may decide to include, as backup or additional information:

• Key management team r¨¦sum¨¦s
• Additional descriptions of products and services
• Legal agreements
• Organizational charts
• Examples of marketing and advertising collateral
• Photographs of potential facilities, products, etc.
• Backup for market research or competitive analysis
• Additional financial documents or projections

Keep in mind creating an Appendix is generally only important if you seek financing or to bring in partners or investors. Since you created your business plan, you already have the backup. Readers of business plans do not wish to wade through reams and reams of charts, numbers, and backup information. If a reader does wish to dig deeper into your analysis, he or she can turn to the Appendix.
That way your business plan can share your story, clearly, concisely, and persuasively.

A Final Note

Every business encounters challenges and opportunities. A good business plan recognizes challenges exist and identifies and describes how pitfalls or roadblocks will be overcome.
Make sure you recognize competition exists and find ways to overcome that competition.
If funding is an issue, identify ways to start up on a shoestring and seek out partnership opportunities.
If your management team lacks critical skills, identify those skills and develop a plan to improve weaknesses or bring in advisors or other assistance.
Don't just focus on how great your idea may be and how you will implement that idea. Also focus on things that could derail a great opportunity - and how you will overcome the inevitable challenges you will face.
Good luck!