In This Chapter

Failing to plan is planning to fail. This is an old adage that is as true in business as it is in every aspect of our lives. A business plan is your roadmap to success. A well-thought-out plan includes where you want to go, how you plan to get there, the obstacles you expect to face, and how you plan to overcome them.

You need a business plan for yourself, the banks, your landlord, and any investors you might approach for money. In this chapter, I explore the key elements that should be part of your business plan and introduce you to the resources available to help you build one.

You probably know the basic premise of how retail works. You buy an item at wholesale and sell it for more than you paid for it. Sound simple? Well there’s more involved. They are what retailers call the “six rights of retail.”

To be successful, you must have: the right item, in the right place, at the right time, in the right quantity, at the right price, with the right service.

Remember these six rights as you build your business, and your business plan and you will be on the road to success.

You’ve articulated your vision and your strategy (see Chapter 6), you’ve evaluated your ideas (see Chapter 3), you’ve evaluated your competition (see Chapter 4), and you know the industry in which you plan to work (Chapter 5). Now it’s time to put all those pieces together into a business plan that will give you a roadmap to building your successful store.

Writing a business plan is not just a fruitless exercise so you have something to show the bank, your landlord, or potential investors. Don’t just buy a fill-in-the-blanks business plan off the shelf. Take the time to really own this plan by writing it from scratch so it reflects your vision, your goals, and your dreams for the future.

Most business plans are developed for a five-year period, but you should review your plans at least annually and update them based on your store’s actual performance and any changes in the marketplace.

The first page of your business plan should be a cover page that gives your audience an overview of your business. You should include:

Your second page should be a table of contents that gives your audience a list of what is included in the document and on what page the item can be found. You need to make it as easy for your readers to use the document as possible. Most bankers or investors have very little time to spend on your business plan, so make it easy for them to jump to the information that is most crucial for them to make a decision.

Your executive summary is where you want to introduce yourself and your vision to your reader in a concise manner. Whether or not your reader will go any further in reading your plan will be determined by how well you present the concept in this brief summary.

I’m sure you are aware that many people make up their mind about you in the first few seconds that they meet you. Well that’s true for a business plan as well. A potential investor or lender will decide whether or not they are interested in pursuing a relationship with you based on the minute or two it takes them to read your executive summary.

You need to excite your audience about both you and your vision for the business. Your executive summary should include a brief discussion of these items:

End your executive summary with a few sentences that summarize very briefly what you just said, but be sure to get across why you think your business idea is a great opportunity. This will be your last chance to get the reader to want to read further.

Hopefully by this point you’ve got the reader on the hook and she will take the time to read more about your business in detail and how you plan to build that business. In the next section of the report, you’ll take the reader through the structure and vision for your business, review your target customer base, discuss your service and price levels, explore the industry in which you’ll operate and its trends, and review your competition.

First you should discuss how you will structure your business—as a sole proprietorship, partnership, limited liability company, or corporation. This information is critical for any financial institution or individual investor who may be thinking about funding a portion of your business start-up or ongoing cash needs. In Chapter 9, I talk about the different business structures and help you sort out the possibilities.

You also want to take the reader further into the vision you have for your store. In Chapter 6, you complete a Developing a Clear Vision Worksheet. Pick the information on that worksheet that you think will help you make the case for your store. Explain why your store concept is unique and how it will draw customers.

Your next section should talk about your target customer. In Chapter 3, I talk about the type of customers you might decide to target based on key demographics, such as age, ethnicity, and economic status. Describe the demographics for your target customers and how you will design and market your store to meet the needs of these customers. Also discuss how your marketing plan will attract these customers to your store.

After discussing your target customers, you must talk about the level of service you plan to give your customers, such as self-service or full-service. Give the reader of your business plan some idea of what the customer experience will be like when he walks into your store.

You also need to discuss how you will price your goods, such as discount pricing or full retail pricing. Be sure your price levels match the service you plan to give. For example, don’t state that your customers will serve themselves, if you expect to charge full retail prices. That’s not a logical business model. Customers expect a much higher level of service if they pay full retail prices.

Explore the industry in which you plan to operate. Talk about your industry’s trends and how you will develop your store to take advantage of these trends. In Chapter 5, I discuss how to research your industry and its trends. Use those resources to develop your industry section and talk about the trends you see developing in your industry and how you plan to use them to beat your competition.

Review the assessment you completed regarding your competition. I give you the tools to do a competitive analysis in Chapter 4. Talk about both your direct competition and your indirect competition in the area.

Give a more detailed assessment of the three direct competitors you identified. Use the information from your SWOT analysis developed in Chapter 4 to give your readers a good overview of your store’s strengths, weaknesses, opportunities, and threats.

Discuss how you will use your strengths and overcome your weaknesses to compete head on. Also discuss the opportunities you identified to help make your store successful and beat your competitors.

After discussing your SWOT analysis, you are ready to discuss how you plan to penetrate the existing marketplace and implement your strategy. In this section of your business plan, you discuss how you plan to position your store against your competitors and how you plan to market it. In Chapter 15, I discuss how to develop and implement a marketing strategy. Use the key points you develop after reading that chapter to write the marketing section of your business plan.

Positioning your store in the minds of your customers is one of the most difficult things you can do. Essentially you want to discuss how you will get your customers to think about your store as the best place to get the type of products you sell. For instance, one of the best examples of product positioning was done by Xerox. How often do you say you will “Xerox” something rather than “copy” it?

Whatever products you sell, you want to position your store so customers think to come to you first. For example, if you are opening a candle shop called Lucy’s Candles, you want your customers to think of Lucy’s Candles any time they need to buy candles. Discuss what you will do to position your store successfully in the minds of your customers.

All vendors, financial institutions, and investors that read your report will want to know how you plan to make money and how much you plan to make. In fact, don’t be surprised if your readers jump to the financial section immediately after reading your executive summary. At least you’ve got them hooked and now they want to see if your financial planning is feasible and sound.

In Chapter 20, I show you how to develop profit and loss statements and balance sheets. For a start-up business plan, you won’t have any existing accounting records from which to develop these key statements, so you’ll need to project the numbers based on the sales you expect to generate, the prices you expect to charge, and the costs you expect to incur.

Remember all businesses take time to develop their customer base. You need to realistically sit down and think about (your best guess) how many customers you expect will enter your store in the first month and how quickly you think you can grow that customer base. Your cash flow projections and financial statements should be based on the growth you expect to see in the first five years of operation. Plan it month to month though in the first year or two, because growth will likely vary greatly each month as word-of-mouth spreads for your store.

Try to make this as realistic a projection as you can, because you will be using the business plan to raise capital. You don’t want to be too optimistic, which means you will project more cash inflow than you actually receive and you will not seek to raise enough capital and fall short. You may even have to close the store because of lack of funds before you have a chance to grow the business.

You don’t want to be too pessimistic with your numbers either. If financial institutions and investors think your store will take too long to be self-sustaining because you were too pessimistic in your projections, you may not be able to raise any capital at all.

After developing your financial statements, calculate the key financial ratios or profitability and liquidity. If your ratios don’t look good, you do need to review your financial statements and determine what you can do to make them look better. But don’t fabricate the numbers just so you’ll look good on paper. You will need to perform close to those numbers to satisfy the financial institutions and your investors or they may cut off your funding down the road.

Your final section should give your readers a good overview of the people on your team. Include biographies (three to four paragraphs) for each of your key players, such as your partners, the store manager, key sales or technical personnel, marketing director or consultant, and any key advisors. Also, you want to include background and contact information for your lawyer and your accountant.

If you’ve never run a business or developed a business plan before, don’t try to go it alone. You can get free help from SCORE volunteers (www.score.org). SCORE is America’s premier source for free and confidential advice for small business owners. Since it was formed in 1964, SCORE has assisted over 7.5 million small business owners with counseling, training, and advice.

You probably will be able to find a SCORE chapter close to you because there are over 375 SCORE offices nationwide. You’ll also find a lot of helpful “how to” articles and business templates on SCORE’s website. If no chapter is near you, contact SCORE through its website. Volunteers also help small business owners by e-mail and phone.

SCORE volunteers, who are primarily retired business owners and corporate executives, share their business acumen and lessons they’ve learned over the years in business. You can get help developing your business plan, improving your marketing plans, managing your cash flow, and many other critical issues you will face as you try to start your business and keep it alive.

Another great resource to help you develop your business plan and then when your store is up and running is www.allexperts.com. I am a member of this service and a volunteer expert and I regularly answer questions and provide advice to retailers on concept development, business planning, and operational issues.

After you’ve got your business plan in hand, you can start to raise capital for your store. In Chapter 8, I talk about ways to raise money.