by Gwen Moran and Sue Johnson
A member of Penguin Group (USA) Inc.
Business Plans

by Gwen Moran and Sue Johnson
A member of Penguin Group (USA) Inc.
Business Plans
This book is dedicated to the brave, visionary people who start and run the businesses that power
our nation’s economy.
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Copyright © 2005 by Gwen Moran and Sue Johnson
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Putting your business ideas on paper
5 Getting Down to Business 47
How to put your best business foot forward
6 Industry Overview 61
Describing your industry and its climate
7 Who Are You? 75
Your people are your primary asset; how to showcase your
dream team
8 Analyzing Your Business in the Market 87
Explaining how your business will perform in the market
9 Getting the Word Out 105
Positioning and promoting your business for the best possible
results
10 Sales Plan and Forecast 119
Explaining how you’ll sell your stuff
11 Operation Success 129
Making the most of your day-to-day business activities
12 Money, Money 141
Financial statements you’ll need to know for your plan
13 Show Your Documents 159
Supporting your claims with all the right backup documents
14 Executive Summary 169
What you’re going to tell them in this critical part of your
plan
Part 3: Putting Your Plan to Work 175
15 Financing Considerations to Include in Your Plan 177
How to use your plan for investment or lending purposes
16 Using Your Plan as a Management Tool 189
How your plan can help everyone in the business get on the
same page

Finding Free or Low-Cost Help 11
Hiring Help 11
Getting Soft 12
2 Figuring Out the Financing 15
Understanding Debt and Equity 16
Debt 16
Equity 16
Money Sources 16
Grants 17
Personal Resources 17
Loans 19
Selecting a Lender 21
Angel Investors 21
Other Funding Sources 22
The Complete Idiot’s Guide to Business Plans
vi
EDA 22
Community Development Centers 22
Trade or Business Groups 22
What Lenders and Investors Want 23
Capacity to Repay 23
Capital to Invest 23
Collateral 24
Conditions of Use of Money 24
Character of Owners 24
Credit Rating 24
Credit-Reporting Bureaus 25
Your Credit Score 26
Assessing Your Report 26
Increasing Your Score 27

Getting Off on the Right Foot 48
Title Page 50
Table of Contents 52
Confidentiality Agreement 52
Executive Summary 55
Purpose 55
Business Description 55
Structure 55
Owners 56
Location 56
Hours of Operation 56
Season’s Greetings 56
What Is It? 57
We’re on a Mission 57
Mission Statement 58
Vision Statement 58
Values Statement 59
6 Industry Overview 61
Industrial Strength 61
Understanding Market Research 62
Interviews 63
Surveys 63
Focus Groups 63
Online Focus Groups 64
Observation 64
Understanding the Industry 64
Industry Life Cycle 64
Industry Economics and Trends 66
Opportunities and Obstacles 67
Innovations 67

8 Analyzing Your Business in the Market 87
Getting Down to Strategy 88
Targeting Your Customers 89
Demographic Profiles 90
Income and Spending Habits 90
Personal Characteristics 90
Standard of Living 90
Household Characteristics 91
Getting Psychographic 91
Opinions and Values 91
Political Views 91
Style and Taste 92
Contents
ix
Defining Business-to-Business Customers 92
Type of Business and Ownership 92
Sector 92
Geography 93
Psychographic Characteristics 93
Who Is Your Perfect Customer? 93
Why Do They Buy? 95
Do They Need It or Want It? Can They Afford It? 95
What’s Important to Them? 95
For Whom Are They Buying? 95
Who Are Your Customers’ Influencers? 95
Are They Brand Loyal or Price Driven? 96
How Do They Buy? 96
Creating Profiles 96
Innovators 97
Thinkers 97

Selling Yourself 119
Your Channels 120
Direct Selling 120
Manufacturer’s Representatives 120
Wholesalers 120
Retailers 121
Catalogs 121
E-tailing 121
Affiliate Programs 121
Sales Tools 122
Database 122
Technological Tools 122
Trade Shows 122
Territories 123
Finding Prospects 123
Referral Systems 123
Vendor Contacts 123
Expanding Existing Customers 123
Joining In 124
Offering a Better Price 124
Sales Cycles and Strategies 124
AIDA 125
Sales Cycle 125
Sales Forecast 127
Outlining Your Assumptions 127
Considering Your Marketing Reach 127
Past Sales or Similar Industries 127
11 Operation Success 129
Business Operations 129
Equipment 130

Outlining Repayment/ROI 152
Analysis of Financial Facts 153
Determining How Much Financing Is Needed 153
How Much Owners Are Investing 154
Insurance Needs 154
Cover Me 155
Prove It 156
13 Show Your Documents 159
Back Me Up 159
Resumés or Bios 160
Personal Financial Statements and Tax Returns 162
Business Structure (Articles of Incorporation) 162
Loans 163
Credit Reports 163
Franchise or Acquisition Agreements 163
Leases or Mortgage 164
The Complete Idiot’s Guide to Business Plans
xii
Licenses 164
Letters of Intent 165
Market Analysis 166
Other 166
14 Executive Summary 169
In Summary 169
What’s in the Executive Summary 170
Selling in Your Summary 171
Company Overview 171
Operations Overview 171
Market Overview 172
Financial Overview 172

Providing Strong Leadership 192
Stating Clear Expectations 193
Creating Actionable Steps 193
Being Ready for Barriers 193
All Aboard 194
Creating an Advisory Board 194
Identifying and Building Relationships 196
Strategic Partners 196
Staffing Up 198
Keeping Them Motivated 198
Creating Employee Incentives 199
Getting Employees Onboard with Your Plan 201
Managing the Future 202
17 Keeping Your Plan Current 205
Keeping It Going 205
Measuring Your Company’s Success 206
Getting Information 207
Your Financial Statements 207
Your Customer Database or Sales Figures 207
Your Employees 208
What Do Customers Really Think? 209
Using the Information You Find 210
When It’s Time to Go, It’s Time to Go 210
Going Forward 212
Appendixes
A Business Terms Glossary 215
B Sample Plans 221
C Business Resources 301
Index 307
xiii

After you have worked hard to put together the best plan you can, stop typing,
researching, and surveying. Instead, get out of your chair and actually talk to people
who might be real customers and are in a position to buy your product or service
today. Are they willing to part with their cash to solve a problem they have? What is
the Unique Selling Proposition (USP) you can offer prospective customers? You will
not know the real answer until you ask someone to buy what you are selling.
Although planning is essential, premeditated business can be a dangerous thing. If
you create your plan and stick by it no matter what, you could doom your business to
failure by being inflexible. Write your plan, and revisit it regularly to change what’s
not working. Too many small business owners set a goal and try to reach it no matter
what. Sometimes, that tenacity is the backbone of their success. But sometimes, when
they fail to see the signs that the goal might not be the best direction for the business,
that lack of flexibility can be a business death sentence.
What do businesses need most? Not a perfectly written business plan, but a well-
researched plan. Companies need enough cash to grow and thrive, which a good plan
can help land. They need to manage that cash through constant analysis of cash flow.
They need a management team that can execute the plan. They need a marketing and
distribution component so prospects can access the product or service. Finally, they
need repeat customers and referrals.
Read this book. Write your plan. Keep talking to customers. And then modify your
plan to make the most of what’s working and to stop wasting effort on what’s not
working. These are the steps that will get your business off to a great start.
—Barry Moltz, www.moltz.com
Chicago, Illinois
June 2005
Introduction
There’s no feeling like starting your own business. Opening a fresh box of business
cards with “Your Name, Owner” on them, or sitting in your brand-new office for the
first time—it’s heady stuff and an achievement about which many only dream.
But you’re different. You’ve taken the plunge, or are making the plans to do so. Because

we’ll show you how to put the best possible words and numbers on paper.
The Complete Idiot’s Guide to Business Plans
What You Need to Know Before You Start
The Complete Idiot’s Guide to Business Plans assumes that you’ve got basic business
knowledge. We won’t explain the nuts and bolts of how to run your business because
you already know the difference between a balance sheet and a budget.
We assume that you have a solid business idea or prospect in mind. This book takes you
through the process of extracting the information you need in an acceptable business-
plan format to secure financing or to strengthen your business operations, management,
and marketing. Anytime you put a series of goals and objectives, as well as a plan for
fulfilling them, on paper, you vastly increase the chances of achieving those goals and
objectives. That’s what we’ll help you to do.
While we recommend a format and order for the information, you may find that mix-
ing up that order works best for your business. That’s fine. You’ll see in the sample
business plans that business plans come in many forms and formats. Write the plan
that feels most comfortable for you and fulfills the purpose you need to achieve.
What You’ll Find in This Book
The Complete Idiot’s Guide to Business Plans is organized to walk you through the process
of writing your business plan in a step-by-step sequence. Because there are some sec-
tions that you’ll write out of order, we mention them within the sequence and then
pay more attention to them when you’re at the point at which you need to write it.
The book has four sections:
Part 1, “Getting Started”: This is where we give you the basics, a few facts that you’ll
need to know, and a briefing of what you’ll need to write your plan more easily. We’ve
also included a chapter on business-writing basics that will help you with some of the
common issues of structure, composition, grammar, and punctuation that often plague
those who don’t regularly write for a living (and that sometimes plague those who do).
Part 2, “Putting Together Your Plan”: Here is where the majority of the book’s
focus lies. We’ll walk you through the planning process, including how to set goals
for your plan and how to write it to achieve those goals. Throughout, we’ve woven

Pay particular attention to the sidebars and margin notes, which include tips, warn-
ings, secrets, and money-saving tidbits. These notes may be short in format, but
you’ll find great value in how they can shorten your learning curve and boost your
bottom line!
xix
Because time is money, these
tips will help save you both as
you write your plan.
Bottom Line Booster
In business, mistakes
can cost you. These sidebars will
give you fair warning about
potential pitfalls to avoid.
Red Zone
The Complete Idiot’s Guide to Business Plans
Let Us Know What You Think
For updates on the book and additional information about small-business resources,
visit Gwen Moran’s website (www.gwenmoran.com).
We welcome your feedback and success stories. If you have suggested resources or if
this book has helped you, let us know at [email protected] or [email protected].
Acknowledgments
We’d like to thank the folks at Alpha Books, including the amazing team who worked
on this book: Mike Sanders, Ginny Bess, Megan Douglass, Jan Zoya, and the produc-
tion team. Thanks to our agent, Bob Diforio, for all of his help, support, and constant
contact through his Blackberry!
Gwen would like to thank her family and friends for their support, advice, and assis-
tance in writing this book. Thanks to her parents, Thomas and Jeanice Moran, who
raised four individuals who are unafraid to open the door when opportunity knocks.
Thanks to her brothers, Shaun, Brian, and Eric Moran, who are a great group of
business advisors. And thanks to Joseph Raymond, who taught Gwen about the things

Marketing Group, which focuses on private consulting, counseling, mentoring, and
coaching for businesses, and is an SBDC counselor.
Thanks to the great people she works with at SBDC and RVCC, especially Bill Harnden
and Allison O’Neil for their team efforts and contributions, to their local SBDC, in
assisting small businesses. Thanks, also, to the many wonderful small-business owners
she has met and has had the opportunity to assist in their journey of pursuing their
dreams. Thanks, also, to Gwen for reaching out to her to co-author of this book!
A special thanks go to two very special businesses—Let’s Eat! started by owner Domenick
Celentano and Stellar Academy started by two sisters, Mary Matthews and Dr. Margaret
Buley—who have allowed us to use their business plans (modified for confidentiality) in
this book to benefit and assist other future small-business owners. Through the Small
Business Development Center, Sue Johnson had counseled with each of these businesses.
Trademarks
All terms mentioned in this book that are known to be or are suspected of being
trademarks or service marks have been appropriately capitalized. Alpha Books and
Penguin Group (USA) Inc. cannot attest to the accuracy of this information. Use of a
term in this book should not be regarded as affecting the validity of any trademark or
service mark.
xxi

1
Here’s what you need to know before you begin drafting your plan, includ-
ing the financial and basic company information you should have on hand.
This part also includes a few tips on business writing basics. In Chapter 1, we
discuss plan basics, such as how your plan can help you run your business
as well as give you an overview of what you can expect during the process.
In Chapter 2, we give you an overview of financing options and help you
understand the financing needs of your business. Chapter 3 gives you a
head start on business writing basics to help make the process of writing
much less intimidating.