Section 2. Creating a Business Plan

Learn how a business plan will increase your likelihood of success and should convince potential supporters that the current leadership can carry out the plan.

 

• What's the connection between business and community development?

• What's a business plan?

• Why should you make a business plan?

• When should you make a business plan?

• How do you make a business plan?

What's the connection between business and community development?

Although your primary goal is improving the community rather than making a profit, "business" can still be important to your work. Even non-profit organizations need resources to sustain their work, and business operations can be a good way to acquire those necessary resources.

Your business operations usually involve things you sell. Those "things" can be products - actual goods - or they can be services. Below are some examples of each.

Products	Services
Books, or booklets	Child care
Crafts (homemade)	Food delivery (from supermarkets)
Flower seeds, or flowers	Gardening/landscaping, yardwork
Greeting cards	Housing, or space rentals
T-shirts	Recreational programs/camps

But is it ethical for us to sell products and services?

Yes, if it is done honestly, openly, and fairly. What is sold should be of high quality and good value,fairly advertised and delivered as stated.

And selling products and services can be more than ethically permissible. It can be the ethically responsible thing to do if you are selling something that people need, and that will actually help them.

And is it legal?

Yes, in a great number of cases. Here's a key fact:

A nonprofit group can make a profit. Of course, the selling of products and services must comply with local laws and regulations. It's up to you to know what those laws and regulations are where you live.

Does this mean all nonprofit groups should go into business?

No, not necessarily. There are other ways to pay expenses and to ensure your financial sustainability. Among them are grants, fund-raisers, membership dues, and in-kind support. Your decision about going into business should depend upon what funding you need, what you have on hand, what funding options are available to you, and what your prospects for success are in each case.

To plan for your overall financial sustainability requires an overall financial plan, and if business operations are part of what sustains you, then you will also need a business plan.

What is a business plan?

A business plan is a written document that describes in detail what kind of business you intend to operate, how you intend to operate it, and why you believe it will succeed. It is backed with logical, factual and financial documentation.

Why should you have a business plan?

• Setting your thoughts down on paper, and forming a plan, will clarify your own thinking
• Your business plan will raise confidence in your business ventures among members of your own group and among potential outside backers
• A business plan will increase your likelihood of business success

When should you make a business plan?

• When you are seriously thinking about embarking on a particular business venture
• When you need clarity on the details
• When you want expert feedback or advice on the specifics of your ideas
• When you need to attract outside grants, gifts, loans, supplies, other materials or moral support

How should I make a business plan?

We'll cover three main elements:

• What should the plan contain?
• How should the plan be written?
• How should the plan be packaged?

What Should the Plan Contain?

Successful business plans vary in format, but all contain some basic components. Don't hesitate to adapt them to your own situation, but try to stay fairly close to the mark.

Cover page

This should include a title, your organization name, and accessible contact information (phone/fax/e-mail). The title should reflect the nature of your plan, and it should be phrased for maximum appeal to your intended audience. You want to capture audience attention and interest right from the beginning.

Table of contents

List each section of your plan, with appropriate page numbers.Tabs attached to the first page of each section can make it easier for the reader to find a specific section. This table should be a maximum of one page.

Executive summary

This summary is usually the most important section of your plan. It should not be more than two pages long, and normally should be written last. Your executive summary will be a condensed version of your entire business plan. A reader of the executive summary should be able to understand what your business purpose is, what your plan contains, what your organization wants, and why it wants it.

If your executive summary is effectively written, it will:

• Communicate your organization's vision of the future
• Establish your organization's credibility
• Describe your product or service, and how it will be sold
• Explain and document the need for your product or service
• Inform the reader of key steps you plan to take
• Make the reader want to read the entire plan
• If money is being asked for: Request an appropriate amount of money, and present a defensible case for such a request

Description of your organization Or, in other words, "Who are you?" This should include:

• What your organization does
• Where it is located
• How long it has been in operation
• Its goals and objectives
• What it has accomplished
• What financial support (if any) it receives at the moment
• What specific background it has in selling products or services
• What is distinctive about your organization that sets it apart from everybody else

Description of your management

If you are looking for outside support, this will be a vital element of your plan, because potential supporters will be investing in your organization's management and its ability to perform. Briefly describe your key officers and staff, including their qualifications relevant to this plan. If you have a board of directors, advisory board, or other professional or technical advisors, they can be listed here too.

This section of your plan, together with the previous one describing your organization, is the equivalent of your organizational resume. It should convince potential supporters that the current leadership can carry out the plan.

Description of your product or service

Here's where you describe the product or service you want to sell. What exactly is it? What are the "product specifications?" Give the details, but don't overload the reader with technical jargon.

Try to present some clear examples. If it's a physical product, try to include photographs, drawings, or brochures. If there are any special permits or licenses that you need, or regulations you must comply with, cite these too.

Point out any particular beneficial features your product might have. And if you can document previous customer support, provide endorsements, or cite experts who recommend its use, such testimonials should certainly be included.

Information about your market

Your reader will want to know what your market is, what research you have done to determine that market, and how you plan to reach that market.

This will frequently be your most detailed section, because it spells out precisely how you intend to carry out your business plan. So let's take the above points in order:

• Your market means who your customers are. How many potential customers are there? Are they likely to grow in number; if so, why? What distinguishing characteristics do they have, demographic or otherwise? Where are they located? Your plan should answer these questions concretely. What you want to show here is that there are enough customers for your product or service to justify the sales levels you are projecting. (Those sales levels will be detailed later, but can be previewed here.) If there is a particular part of the market you want to capture, say so.
• Your market research means documenting why you believe your potential customers will become actual buyers. Here you need evidence. For example, what do you really know about the habits of your market? Have you gathered data on sales off similar products? Have you observed consumers, or done a survey, or conducted interviews? And have you tested out some prototype designs, and measured consumer reaction? This is the type of evidence we mean.
• Your market plan means how you plan to reach your intended market. How can customers find your product or service? Where will it be sold - in stores (which ones?); by advertisements (where? when? how often?); at special events; by mail; by local or toll-free phone line; over the Internet; or through some combination of the above? Will there be discounts, contests, free samples, or tie-ins with other local happenings? Are there contingency plans, in case one marketing strategy fails?

Information about your competition

It's rare that a totally new product or service comes onto the scene; often, your product or service has been sold before, and there may even be others nearby who are selling it now.

Your plan should profile these competitors, briefly describing what they provide. Then, if you can, you should give reasons why your product or service is superior to your competition's. If you can't justifiably claim superiority, then at minimum you should document that there is enough customer demand for a new competitor on the scene - that is, you.

Details of your operating plan

Somewhere along the line, your product will have to be manufactured or acquired; if it's a service, someone will need to provide it. Your operating plan describes just how this will be done.

An operating plan should answer the following questions:

• What is the production process?
• Who produces it, and where?
• How many employees are needed?
• Is production occurring right now, or are matters simply in the "research and development" stage?
• Is production machinery involved?
• Is there a specific production location?
• How will production be scheduled? (If you acquire the product from somewhere else - coffee mugs, for example - who are your suppliers, and what are the precise supply arrangements?)
• What about outside production regulations?
• What about labor and maintenance considerations?
• How will items get to the customers?
• What about quality control?
• What contingencies exist in case things go wrong?
• How will customer satisfaction be assessed and assured?
• Is there a flow chart that summarizes and diagrams your operational steps?

If you can't answer all of these questions right away, it will stimulate you to think about the questions, and come up with your best responses.

Financial information

This is where you present the actual financial information to show how you will make a profit selling your product or service.

The specifics here include:

• Historical data from selling the product or service (if such data exist)
• Projections of how much income you will take in from selling your product or service; this is done for several different points of time in the future
• Projected sales costs, broken down by category, and covering the same multiple points in time as your income projections. (Your total projected income minus total projected costs will yield your projected profits for each time point.)
• Financial assumptions which underlie and justify your projections
• Cash on hand, and other assets available
• Additional cash needed, if any, to put the business into operation at your desired level

If you are seeking a loan, this last item of course requires special attention. You need to demonstrate precisely what the loaned funds will be used for, justify your ability to repay them, and suggest and how and when they will be repaid.

There are two common forms used in presenting financial information, which respond to the points above. These are a Balance Sheet and an Income Forecast, and blank samples of each are provided under Tools.

Timelines

You should have a timeline or chart that specifies each action step in your plan and when it will be completed.Creating a timeline is an excellent planning discipline and can be persuasive to potential supporters.

Appendices

Lastly, you may have other supporting information to present which strengthens your business plan, but which does not fit easily into the main text. Such information can be placed in an appendix to your plan. Examples here could include more specifics of management qualifications, letters of endorsement, or details of your market research. What other information might apply to your own situation?

These are your basic business plan ingredients. Now let's move on to how the plan should be written, and then presented.

How should the plan be written?

Your plan should be written simply, clearly, persuasively, honestly, and to the point.

Adapted from "Guide to Writing a Business Plan" here are some of the most common writing mistakes:

• The writing is unclear. It's difficult to understand.
• The plan is too long. The writer does not get to the point, support it with facts, and move on.
• The layout is poor, and/or illogical. Illustrations, product descriptions, and graphs are missing.
• An executive summary is omitted.
• There is too much technical jargon. The writer does not clearly demonstrate what the benefits are and why someone would want to use the product or service
• There is insufficient detail on the qualifications of the proposers to implement the plan.
• The market is not defined. And/or: Market research is not cited. And/or: A marketing plan is missing.
• No mention, or sketchy mention, is made of the market competition.
• The financial information given is not straightforward.
• The reader is given no compelling reason to invest in the plan, or to otherwise support it.

Remember these pitfalls before putting your plan onto paper!

How should the plan be packaged?

Your reader will see your plan before reading it, and will form an impression without having scanned a single page.

Make sure your plan looks professional. To be specific:

• It should be printed on high-quality paper, by a high-quality printer.
• As a guideline, its overall length should be about 20 pages, plus-or-minus ten. (Sometimes a shortened version of the plan can be created for other promotional purposes.)
• Color printing, when thoughtfully employed, can give you an edge; so can tasteful presentation graphics.
• The completed plan should be bound according to the standards of your readers. Seek the advice of your local print shop - or get hold of some comparable finished plans.
• Have several people read over the plan before it is printed to make sure it's totally error-free.

To enhance your persuasive content and your clear writing, your plan should have an attractive and professional appearance, without being unnecessarily flashy.