CLICK TO DOWNLOAD: 15 Steps Writing a Business Plan e-book

Many of you who follow this blog are small business owners and you have either wrote your first business plan or about to start on the journey. For some it might seem like an easy task but I will bet that it seems easier to summit Mt. Ranier that finish your business plan. It is the procrastinators ultimate project to put off and the perfectionists ultimate project to endlessly tweak.

I will guess that while sitting down with all these great ideas swimming around in your head about how you are going to create the next great product or service you couldn’t wait to tell someone about your business. But when it came time to actually ask for money from someone or actually lay out how you will execute, there was a hard realization that you needed a business plan.

But you can’t write just any business plan. A Killer Business Plan.

One that even your strongest detractors will read and say “this could work” and those whose wallets you are trying to pry free of investment capital ask “where do I sign?”. This book is written for you.

After writing many business plans, many for businesses that never launched and a few that did launch and were eventually sold, I felt compelled to share my experiences and advice to save you from the rocky process of getting started so you can just start writing.

I wrote a 15 part series through the last year that addressed many issues and gave you a basic plan of action. However, I kept getting asked to put it into an e-book format for easy reading and note taking.

While this is not a end‐all book on business plans, I hope that this helps you frame your plan so you can get started and put together something that is relevant for what you are trying to accomplish.

There are many other resources out there which I have mentioned at the end of this e-book so I invite you to use this book along with those resources to build your killer business plan and be the success I know you can be.

I don’t need to wish you luck. Just get started, get out there and crush it.

In case you missed the big button up top, you can click here to download the e-book.

Read it and please leave a comment. We want to know how your business plan journey is going.

Overnight something wholly amazing happened.
They opened their email box one morning a month into the passively pushed campaign and found they had, honest to Bob, over 7,000 submissions requesting to be a part of the campaign. Emails poured in from all over the nation taking part in the submission. We all clamored to the marketers’ desk to see this with our own eyes. An email box so overloaded with requests it called to mind the commercial of the new business that puts its store online and the orders just keep going up, and up, and up. Just like the emails that continued to pour in.

From joy to panic.
Some thought it was spam. Some were excited at the potential of something they did being that “viral”. Some freaked out at how they were going to service all of the requests with a limited supply.

With one of their web team helping, I started looking through some of the emails to see if we could detect signs of spamming. We couldn’t find any that were that obvious. The submission forms were filled out were each unique, accurate, and different, that the only thing that kept the curiosity of it being spam was the frequency of how these came in. It was roughly twenty emails a minute with each second a part from each other.

The Google Search is strong with this one.
So there we sat, debating on what to do, and I thought “Google will have the answer”. I threw the name of the campaign between some quotes in Google’s search box and hit send. My screen, and Google’s Search results, were maxed out with Freebie Sites, sites that do nothing but list where to find, and how to get, free stuff online, listing the “Free Gift” that came with campaign and how to get it.

I figured, “if it’s already this deep into Google…where else could it be”. I turned m search to the tools of Social Media. The links started popping up on Twitter with a link back to the directions on how to get the “Free Gift”. It was in different spots all throughout Social Media.

In a very short time, less then ten hours, the “Free Gift” had spread like wild fire. It was time for some damage control.

From excitement to frustration
From there, I created a timeline of when the first Freebie Site listed the campaign, which linked off of it, when other posts picked it up, and cross referenced it with when the emails came in and how often they spiked. Yeah, I know, I’m a geek. My wife reminds me constantly. Sure enough, the spike in email requests coincided with each time the campaign appeared on a Freebie Site.

This wasn’t spam after all, but an army of people who collectively thought the “Free Gift” was worth their time to blog about the “Free Gift” and share how sign up for it. They rallied their own troops, got the message out, and took action on it. This was truly an example of the kind of Viral Marketing companies’ dream of!

Yet notice nothing in that last paragraph talks about the connection with the campaign, the belief in the goal, sharing the message of the campaign over the free gift, or any positive remarks about the non-profit’s effort?

With learning that submissions were still flooding in, we closed down the submission request box. I sent emails to the Freebie Sites letting them know what the intention of the campaign was and how we hoped they update their info. Some did and thanked us. Some ignored us. I sent a few emails to those who submitted letting them know what happened. Some did and thanked us. Some got frustrated and said that they did what the website said and they wanted their “Free Gift” anyway. Some ignored us.

The moral of the story, kids.
This outcome was not what they expected, or intended, when they created their marketing campaign. They just wanted to add a little value for being a part of it. Those online saw the value not in supporting the campaign, but just filling out whatever they needed to get the free item they wanted.

Rather than give a long, lengthy explanation, here are the top five things the non-profit quickly learned:

1. Be proactive on learning the reason once you find a negative reaction to your campaign.a. You could have unintentionally created it. If you sit back and blame the people doing the very thing you asked them to, but for a different reason than you intended…you get nowhere.
2. Accept the mistake, learn from it, and work with it instead of running away from it.a. It’s safe to say, that on the next campaign this will be something that will be brought up and avoided.
3. Don’t give into our initial fear.a. Fear can cause you to assume your first reaction is the best one. Sometimes that’s not the case. Imagine what would happen if they thought they were spammed instead of doing the research?
4. Find out what worked, what didn’t, and, depending on your outcome, how you can either duplicate that later on or never let it happen again.Clearly the free gift had value to people. Is there something that they could leverage in this?
5. When people ask for your free gift that does not mean they are interested in you.a. Free gifts are great. They little items, that shouldn’t break the bank, that if well done should spark conversation or curiosity. They should not be a crutch to get people interested in you or your company.

I say, give “Free Gift” away, but don’t let the value of the gift be greater than the message. There are some really big marketing lessons in this that came to light. What, life lessons, have you learned from you marketing experiences?

Until next time, stay wicked.

If you liked it, please Tweet it.

How is this different than the Income Statement stuff you just talked about in a previous section?

Think of the income statement as a view of revenues booked and expenses accrued. Which means that it is not an accurate picture of how much cash is really on hand. That is where the cash flow statement provides this view of the business.

Investipedia puts it the best:

“The cash flow statement differs from these other financial statements because it acts as a kind of corporate checkbook that reconciles the other two statements. Simply put, the cash flow statement records the company’s cash transactions (the inflows and outflows) during the given period. It shows whether all those lovely revenues booked on the income statement have actually been collected. At the same time, however, remember that the cash flow does not necessarily show all the company’s expenses: not all expenses the company accrues have to be paid right away. So even though the company may have incurred liabilities it must eventually pay, expenses are not recorded as a cash outflow until they are paid (see the section “What Cash Flow Doesn’t Tell Us” below).”

So how can some one have negative net income on their income statement and still be in business?

This is where the cash flow statement comes in. Because the income statement is prepared under the accrual basis of accounting, the revenues reported may not have been collected (translation: you book the business but you haven’t gotten the money yet). Similarly, the expenses reported on the income statement might not have been paid. This is why you leverage the balance sheet which we just covered in part 14. You could review the balance sheet changes to determine the facts, but the cash flow statement already has integrated all that information. As a result, savvy business people and investors utilize this important financial statement.

Four Sections of the Cash Flow Statement
The cash flow statement organizes and reports the cash generated and used in the following categories:

SECTION 1: Operating activities
Converts the items reported on the income statement from the accrual (you book the sale but you might not have the money yet) basis of accounting and includes the following:

• Cash receipts from sales or for the performance of services
• Payroll and other payments to employees
• Payments to suppliers and contractors
• Rent payments
• Payments for utilities
• Tax payments

SECTION 2: Investing activities
Investing activities include capital expenditures – disbursements that are not charged to expense but rather are capitalized as assets on the balance sheet.  Investing activities also include investments (other than cash equivalents as indicated below) that are not part of your normal line of business.  These cash flows could include:

• Purchases of property, plant and equipment
• Proceeds from the sale of property, plant and equipment
• Purchases of stock or other securities (other than cash equivalents)
• Proceeds from the sale or redemption of investments

SECTION 3: Financing activities
Financing activities include cash flows relating to the business’s debt or equity financing:

• Proceeds from loans, notes, and other debt instruments
• Installment payments on loans or other repayment of debts
• Cash received from the issuance of stock or equity in the business
• Dividend payments, purchases of treasury stock, or returns of capital

SECTION 4: Supplemental information
Reports the exchange of significant items that did not involve cash and reports the amount of income taxes paid and interest paid.

Two Ways that a Cash Flow Statement is Generated
There are two methods for preparing the cash flow statement – the direct method and the indirect method.  Both methods yield the same result, but different procedures are used to generate the cash flow statement. If you want a great accounting lesson that is not in plain English but extremely good, this site has a page on the Direct Method and the Indirect Method.

Final Thoughts on the Cash Flow Statement

Cash fuels a business, but there are certain things that the cash flow statement doesn’t shed light on. It doesn’t tell the whole profitability story, and the cash flow statement doesn’t do a very good job of indicating the overall financial well-being of the company. It indicates what the company is doing with its cash and where cash is being generated, but it does not account for liabilities and assets, which are recorded on the balance sheet. Furthermore accounts receivable and accounts payable, each of which can be very large for a company, are also not reflected in the cash flow statement.

The bottom line is that the cash flow statement is a compressed version of the company’s checkbook that includes a few other items that affect cash and you should use the income statement and the balance sheet together to provide a clear multi-dimensional view of the business. Hopefully, with these last three sections of the business plan series that the financial section will make more sense to you.

So this is why someone like myself who has started a few business, has an accounting degree he never used and loves to write might be unique qualified to bring you Business Plan Financials in Plain English. Now we get to dive into a portion that is just as important but a little more complex. This is the one that is the report of a company’s possessions, debts and capital invested – The balance sheet.

Plain English Definition of the Balance Sheet

The Balance Sheet is one of the most important financial statements of a company. It may be presented quarterly, semiannually or monthly. Think of a balance sheet like a snapshot of the company at a moment in time. There are two sides to the Balance Sheet – the left and the right. The left side provides information on what the company owns (its assets). The right side has two parts: what it owes (its liabilities), and the value of the business to its stockholders (the shareholders’ equity). They call this a Balance Sheet because the left must equal the right or “be in balance”.

Plain English Components of the Balance Sheet

I could go crazy on the types of assets, liabilities and owner equity on a balance sheet, but I won’t because I care too much about your sanity. However, if your inner accountant is calling to you, I would invite you to go here. With that disclaimer said, I am going to do my best to stay at a high level, talk in plain english and make sense of this stuff.

Assets are what you have to make stuff. Assets can be buildings and machinery. They can be patents or copyrights that provide financial advantages for their holder. You need to know that there are two major categories – Current Assets and Long Term Assets. Current assets are those assets that are usually converted to cash within one year. They usually include cash, accounts receivable and inventory. Long-term assets are, you guessed it, converted to cash past one year. They include fixed assets (e.g. buildings, equipment), depreciation and intangible assets (e.g. patents and copyrights).

Liabilities are what a company owes to outside parties. Liabilities are generally broken down into two major categories – current liabilities and long-term liabilities. Current liabilities are those obligations that are usually paid within the year, such as accounts payable, interest on long-term debts, taxes payable, and dividends payable. Long-term liabilities concern those liability of a period greater than one year. It usually refers to loans a company takes out.

Owners or Shareholders Equity is a very fancy way of showing the value of a business to its owners after all of its obligations have been met. Owners equity generally reflects the amount of capital the owners invested plus any profits that the company generates that are subsequently reinvested in the company. This reinvested income is called retained earnings.

Plain English Explanation of Why People Need to Review the Balance Sheet

People want to review the balance sheet to examine if the firm can meet its financial obligations, if it has taken on too much debt, what assets it has bought with the money it has and how much, if any, has been invested in the company.

The balance sheet provides a person with insight into a firm’s future performance. The income statement is about how well or badly we have done and the balance sheet is snapshot that looks toward the future.

NEXT TIME: The Cash Flow Statement in Plain English

Granted, many who will review the financial statements are spreadsheet junkies or “quant-jocks” who live and breath numbers. In fact, if they get their hands on a business plan, they jump to the end of the plan to read this part just like those who read the end of a mystery to find out who did it and the outcome of the story.

So this is why someone like myself who has started a few business, has an accounting degree he never used and loves to write might be unique qualified to bring you Business Plan Financials in Plain English. So what is the best one to start with? Easy. The one that shows you how much money a company earned and all the money a company spent during a certain time frame – The Income Statement.

Plain English Definition of the Income Statement

A company’s income statement is a record of the money it made and spent for a given time frame, usually a quarter or year. It shows all of the money a company made (revenues) and all of the money a company spent (expenses) during this time frame. It also accounts for the effects of some basic accounting principles such as depreciation.

Plain English Components of the Income Statement

To keep on the plain english format we have set, we need to tread carefully into the definitions of terms you see on the income statement. We will do our best and not go anywhere near equations. If you would like to geek out and dive a little deeper, I would invite you to go here. With that disclaimer said, let’s dive into the kiddie side of the financial statement pool.

Gross profit on sales (also called gross margin) is the difference between all the revenue the company earns and the sales of its products minus the cost of what it took to produce the. They also call this “top line revenues”.

Operating income is how much a company makes from its core business after it has deducted its cost of goods sold and its general operating expenses. Operating income does not include interest expenses or income generated outside the normal activities of the company (e.g. investment income).

Earnings before interest and taxes (EBIT) is a term that investors love to ask you because it includes the combination of operating and non-operating income but excludes interest expenses and income tax expenses.

Net earnings or net income is basically the bottom line. If it is positive, you are “in the black for the year. If it is negative, you are “in the red”. This is the profit your company makes after all of its income and all of its expenses are taken into consideration. Positive net income is usually the typical benchmark of success. You might also be asking how a company can have negative net income and still be considered ok. This has to do with cash flow, assets and its growth projections that will be explained in other posts.

Plain English Explanation of Why People Need to Review the Income Statement

The income statement is important for investors because it’s the basic measuring stick of profitability. A company with little or no income has little or no money to pass on to its investors in the form of dividends. You can identify where the company spends much of its income and compare that to similar companies. If the company continually makes substantial profits, it indicates to bondholders that it is a stable company. If a company continues to record losses for a sustained period, it could go bankrupt. In such a case, both bond and stock investors could lose some or all of their investment. On the other hand, a company that realizes large profits will have more money to pass on to its investors.

NEXT TIME: The Balance Sheet in Plain English

The Operations section of a business plan usually comes before the Financial Plan, but after the Management section. The purpose of the Operations Plan is to describe the where’s and how’s of your business, meaning where you will locate the business (along with any physical necessities) and how you will produce products or services for your clients.

To write an operations plan, you’ll need to answer the following questions:

* How will your product be made (for product-based businesses) or how will you serve your customers? Can you describe the process from start to finish?
* What regulations and organizations are in place to monitor your industry? How do you plan on staying up to date? Are you a member or plan on becoming one?
* Who are your suppliers? How do you receive products/services from these organizations? How long will it take? How much will it cost? Do you have backups in place?
* What quality-control measures will you implement, if any?
* Getting the Business Operational

Content of the Operations Plan

* Business location
* Operating facilities and equipment
* Production and operating procedures
* Purchasing procedures
* Inventory management procedures
* Quality control procedures
* Customer service procedures
* Organization structure
* Management plan
* Establishing a Web Presence
* Web site hosts
* Web site development
* Selecting a domain name

Your next step in writing an operations plan is taking the list above, determining what you’ve already done, and what still needs to be done in order to get your business up and running. Write these points out in full, explaining to someone who doesn’t know your industry just what it all entails. Then, take the questions you answered in the first section of your operations plan, and answer them at length as well.

It might take separate sections to list the risks associated with your business, as well as your quality control measures and supply procedures. If you are a service business it might only take several pages to flesh out this section of the operations plan. However, if you are a manufacturers or producer of hard goods you may have dozens of pages along with flow charts and appendixes.

One Last Note: About Day-to-Day Processes
Since this is the most detailed I thought would help you detail the day-to-day operations. To do so, make sure you list the following items (where applicable to your business):

* General, such as the hours and days your business will be open;
* Buildings, including layouts, engineering drawings and lease agreements. Essentually, anything to do with the physical space your business will inhabit;
* Equipment, such as what you’ll need to get, what you already have available, and how much it will all cost;
* Special requirements specific to your business that are operational in nature, such as ventilation or parking;
* Any and all materials needed to produce your products or services;
* Production, including the length of time needed to create each product;
* A description of your inventory plans; and
* The costs involved with all aspects of the operational processes.
* Most business plans take several pages to flesh out this section of the operations plan, but manufacturers and producers may have dozens of pages along with flow charts and appendixes.

NEXT TIME: We wrap up this business plan series with a three-part series on Financial Statements which is explained in plain English to all the uninitiated.

Marketing strategy deals with broader markets but the sales strategy focuses on the individual..

Sales Strategy is separated into four major areas in the Sales and Marketing section. They are:

1.) Direct Sales Force Strategy
This is about demonstrating how a direct sales channel is internal and is focused on signing new customers. The advantages to this approach allow a company to focus resources like account managers and bonus them based on achievable and measurable goals. The disadvantage is the overhead entailed with managing a direct sales force and waiting for them to produce. One approach to this strategy is to find more experienced sales managers who have sold in a respective industry and for entry level sales people to be trained and molded to sell your product(s). You also need to discuss compensation which includes possibly a base salary and a bonus based on performance. You should show growth numbers and plans to leverage that increase in staff.

2.) Indirect Sales Channel Strategy
Related to the “Direct” approach is the Indirect Sales Channel Strategy. This is really focused on the various sales channels you can leverage to increase your sales success. For example, this could be resellers, franchise partners and licensed partners. You will want to discuss the type of partners, how many and the regions you will leverage and the growth strategy attached to the revenues you expect these indirect channels will produce.

3.) Sales Prospecting Strategy
Once you have defined your sales channels it will be time to craft the proper processes to do prospecting. This Sales Prospecting Strategy will be supported by a direct sales force, indirect sales channels and supported by direct mail, web advertising, and search engine placement. To build our sales prospects to a quality level, one strategy is to offer free access or use to the first group of clients (10 or 100) that sign with you. You should identify how you will create these lists of prospects. Sources include membership directories, trade show lists, Hoovers and even D&B.

4.) Sales Campaign Strategy
Finally, you will connect the dots of how you will utilize your direct sales force, indirect channels and prospecting processes to run campaigns that are effective and meet the numbers set in the financial projections. This Sales Campaign Strategy is designed to layout a clear direction in which to maximize all resources at your disposal with clear campaign ideas, messages and target markets/customer groups.

As you write these subsections always keep in mind how sales leverages markets and supports the long term goals of the company.

Closing Thoughts

NEXT TIME: We close our written section of the Business Plan series (cause the number crunching is next) with the operations plan and discuss how to not only sell and market a great product but how to scale it properly so it doesn’t crash and burn.

1.) Market Profile and Approach
Market Profile is the discussion of the types of customers in your initial markets. This sets the stage for how and why you will market to them in various ways. You should talk about how many potential customers exist that you could sell to. You should discuss how big the market potential is and how much of that you think you can capture. Be sure to be able to back up your numbers and not say things like “1% of a $1 billion market”. That won’t work and no one will take it seriously.

2.) Market Penetration Strategy
how you will use your unique value or selling propositions to create a compelling story that sells your customer on your business. The whole point is to discuss how fast and how deep you can get in there and market to acquire new customers.

3.) Market Growth Strategy
Once you enter the market, you need to grow our current and future opportunities. This includes both retaining and acquiring customers through various growth strategies. These growth strategies can include expanding product and service offerings, expanding into new verticals or even expansion through new locations or franchising.

4.) Market Communication Strategy
As you continue executing your marketing strategy, you will need a solid communications strategy that includes public relations, product marketing, creating tactical selling tools and an online marketing strategy.

IMPORTANT NOTE: If you are developing a marketing plan on its own, rather than as part of a business plan, the marketing plan will also need to include a Target Market and a Competitive Analysis section.

Closing Thoughts

There are a few schools of thought on how to construct this kind of section. The approach outlined above took four key market areas and dove into their strategy. However, there are other resources that see the marketing plan include the Products and Services section that we discussed in a previous section. It also brings in the pricing strategy, the sales/distribution plan and advertising and promotions plan. While the last one on that list is a part of the Market Communications Strategy above, the other two (pricing and sales) could go into a sales plan that follows this marketing plan. Most importantly is that as you write these subsections always keep in mind how this ties into an overall selling strategy.

NEXT TIME:  Will connect the marketing dots to make sales in “Sales Strategy”.

I am not talking pedigree or a minimum number of years of experience but it is the results that make the team. You want people that can execute because even the best new concept or existing plan will fail if executed poorly. The Management Team section of the business plan must prove to other parties like potential management hires, the bank or investors on why the key company personnel are “eminently qualified” to execute on the business model. The A-Grade Team can always execute and adjust along the way to make the company successful, not so much with the B-Grade team. This become a major element in differentiating why your team wins and why others, just suck.

So, do you have an A-Grade or B-Grade management team? Know the answer to this before you dive in and start writing.

What is the makeup of the management section?

The basics are key management team members, Board of Directors, Board of Advisors and any outside consultants.

BizPlanIt sums it up well:

Specific Team Members
Construct a narrative description for each team member, clarifying his or her background and intended contribution. This should include:

- Title of this position
- Duties and responsibilities of this position – what will they be doing, which functions will they be overseeing, who do they supervise, who do they report to, etc.
- Previous industry and related experience – should be those that relate directly to this new position. Who have they worked for, what were they doing, for how long did they do it, etc.
- Previous Successes ® what did they accomplish, what successful teams or projects did they spearhead, did they grow a company or a division, were they responsible for a turnaround or some new breakthrough idea.
- Education ® keep educational descriptions brief

Board of Directors
Briefly describe who is on your Board and what role they play within your company. Briefly list the names, backgrounds, and contributions that will be made by each board member.

Board of Advisors
Your board of advisors should consist of individuals with valuable industry expertise and insight, and they help and consult with you on your business. A solid and experienced board of advisors goes a long way towards building credibility in the eyes of investors. Briefly list the names, backgrounds, and contributions that will be made by each of your board members.

Consultants
The last part of your management section should include a brief mention of the outside consultants you will work with as your company grows. A typical list of consultants would include accountants, attorneys, bankers, insurance agents, and experts such as technology advisors, web developers, and payroll specialists, for example.

Explain the background of the founder(s) of the company at some length. However, limit this background information to under 1-2 a page. Stick to the facts on all your management team bios, making it evident why each person is experienced, why they hold their position and the benefits they provide your company.

Growthink also recommends “Depending upon the stage of the company, key functional areas may be missing from the team. This is acceptable provided that the plan clearly defines the roles that these individuals will play and identifies the key characteristics of the individuals that will be hired. However, it is generally not favorable if personnel are missing for ultra-critical roles. For example, a plan that is fundamentally a marketing play should not seek financing without a stellar marketing team.”

Side question – Are you writing the business plan to raise money?

Many investors base their entire investment decision on the management team behind a venture. Investors expect a well-rounded team of professionals with experience in every function critical to the business. Your management section should clearly demonstrate who each person is, why he or she is on your team, and what each person will do.

According to Growthink, “Depending upon the stage of the company, key functional areas may be missing from the team. This is acceptable provided that the plan clearly defines the roles that these individuals will play and identifies the key characteristics of the individuals that will be hired. However, it is generally not favorable if personnel are missing for ultra-critical roles. For example, a plan that is fundamentally a marketing play should not seek financing without a stellar marketing team.”

Final Thoughts – Building the A-Grade Team increases your chances of success

Many people have walked down the path of starting a business and writing the plan only to run into the wall of attracting a team that is as passionate as you are and dedicated to seeing it succeed. When I mentioned an A-Grade team

Get a few things answered first

Before you get started on this section you need to have the following questions answered:

• What markets or market segments your competitors serve;
• What benefits your competition offers;
• Why customers buy from them;
• And as much as possible about their products and/or services, pricing, and promotion.

You can learn these things by gathering information on your competitors. So how do you do that? Dumpster dive.

Competitor Dumpster Diving

There is an old term from computer hackers called “dumpster diving”. The concept was to dive into the dumpsters to get printouts or old manuals in the hope of finding phone numbers, user manuals, passwords, computer programs and anything else that might help you hack into a system.

About.com Canada has some excellent advice on gathering information on your competitors:

A visit is still the most obvious starting point – either to the bricks and mortar store, or to the company’s Web site. You can learn a lot about your competitor’s products and services, pricing, and even promotion strategies by visiting their business site, and may even be able to deduce quite a bit about the benefits your competitor offers. Go there, once or several times, and look around. Watch how customers are treated. Check out the prices.  You can also learn a fair bit about your competitors from talking to their customers and/or clients – if you know who they are. With a bricks and mortar local competitor, you might be able to find out about the reasons customers buy from them by canvassing friends and acquaintances locally.

Other good “live” sources of information about competitors include a company’s vendors or suppliers, and a company’s employees. They may or may not be willing to talk to you, but it’s worth seeking them out and asking.

And watch for trade shows that your competitors may be attending. Businesses are there to disseminate information about and sell their products or services; attending and visiting their booths may be a excellent way to find out about your competitors.

You’ll also want to search for the publicly available information about your competitors. Newspapers, magazines, and online publications may all have information about the company you’re investigating for your competitive analysis. Press releases may be particularly useful.

Once you’ve compiled the information about your competitors, you’re ready to analyze it. Tips and instructions for analyzing the competition are on the following page.

Breaking it all down

There are a few key sections of the competitive landscape in a business plan.

The first is Competitive Analysis Summary. The point of this section is to give some one reading this without diving into the details the top points and reasons that your company is different and beats the competition. Hopefully, this section will be compelling and interesting enough that people will read into it more. Most likely, people will not read to deep into the competition but it is there for review when necessary and is an exercise you must complete.

The second is Competitive Analysis Matrix. This can be done in table format with the main competitive areas and companies on different axis. Many times people will spin the diagram so your company has all the boxes checked. Don’t do this. Be honest and recognize the 800lb gorilla. Don’t fear them, understand how to beat them.

Once you are done the summary you must go into more details regarding competitive advantages and competitive disadvantages. Hopefully, the advantages will out weigh the disadvantages.

Competitive Advantages are the ways that you stand out from the competition. Examples could be the following:

* Integrated Payment Processing for Credit Cards and Checks/Wire Transfers
* Streamlined marketing systems that integrates popular third party data
* High performance reporting and business intelligence analysis capabilities
* Ability to market in real time
* Providing a branded and personalized portal interface for X
* Building a patented technology to be licensed and integrated with major technology platforms and portals
* Flexible foundation technology designed to expand into other types of alternative services
* Providing an outsourced call center to assist companies with customer service requests and after hours client management
* Ability to leap frog our competitors who have designed their systems on an outdated business model

Competitive Disadvantages are the threats and adversity you must overcome from the competition. Examples could be the following:

* Segment is extremely fragmented making any type of scale difficult
* Our market penetration is shallow at this point
* Our track record and reputation in the industry is unknown
* Product Development in proof of concept phase behind one competitor
* Larger competitors could invest lots of money to compete very quickly

Last on in this section is the best way to wrap it up. This are the Barriers to Entry that will make you a real threat to the competition. Examples could be the following:

* Low cost offering of superior technology to lock in a provider network
* Patentable technologies for license to other providers
* Personnel with deep industry knowledge and extensive contacts
* Current customer inertia from our current network
* Existing relationships with vendors and providers
* Deep network of partners and managers

Final Thoughts…

While this is a critical section that makes you test your business before you start and might make you change a few things for the better, this should not be an incredibly long section. James Joyce already wrote Ulysses, so we don’t need 200 pages on the competition. Keep that in your research files. However, you do need to persuade the reader of your business plan that you are knowledgeable about the competition and that you have a clear, definitive plan that will enable your new business to successfully compete.

NEXT TIME: Management Teams – Why do some win and others lose?