Format and topics to cover in a business plan?

August 30, 2007 10:21 AM

I'm looking for ~$10,000 to start a simple business and need to write a business plan. Essentially, I have the best price and the best quality for a new tech gadget than no one is seriously marketing in the US. I'm trying to figure out the business plan's formatting, what topics to cover, questions to answer, information to include. Any samples or suggestions are much appreciated.

The funding would pay for an initial order of 100 units from the manufacturer, some sales & marketing, packaging, and administrative/legal overhead. I'm trying to figure out how long my document should be, what it should and shouldn't talk about, what sections it should have, etc. Thanks!

posted by ac to work & money (13 answers total)

The SBA has lots of info.
posted by notyou at 10:30 AM on August 30, 2007

Business Plan Pro is a $99 software utility that will help you write your entire business plan. Comes with lots of sample plans and good information.
posted by fusinski at 10:36 AM on August 30, 2007

There's no shortage of books out there, but the guiding principle here is "who is your audience" and "what are you trying to accomplish."

You sound like you're more concerned about the acquiring funding, so you need to contain sufficient information to convince someone that they're likely to get some return on their investment. That means covering, soup to nuts, how you go from 1. Cool idea to 3. Profit!

What's the product? What's already out there? How is this better? More importantly, how is this better in a way that will make people buy it instead of what they're already familiar with? List your proof.

What are the expenses involved in manufacturing your product? What licensing fees will need to be paid? What patents are out there in this area that you need to be aware of? What's similar and could cause you a headache?

What are the marketing methods you're going to use? What will they cost? Who will they reach, including their demographic information.

If this idea's so great, why isn't anyone else doing it? Just as importantly, what will keep them from coming along and doing it better than you, particularly the people already in that market space

If you can really do this for $10,000 - and remember that a huge killer of new businesses is under-capitalization - then you don't need an excessively long document, so long as you can "show your work." However the question almost everyone is going to ask you is "for $10,000, why aren't you funding this out of your own pocket?" Which includes the pockets of your friends and family.
posted by phearlez at 10:44 AM on August 30, 2007 [1 favorite]

phearlez gives some great advice. I just wanted to add that your tag for venture capital isn't really in play here. At $10K, or even $100K, you're very much in the realm of friends-and-family fundraising, or maybe an angel investor... but not approaching the world of VC yet. Venture firms like to come in with $1M - $10M, and for companies already founded, with a solid track record, talented management team, and ground-breaking product that is poised on the edge of explosive market growth but for lack of resources. They also like to turn their money around quickly with firm exit strategies (such as "company will be purchased by one of five Huge Industry Giant Cos. as a subsidiary in 3 - 5 years"), and guaranteed return rates.

Not saying that your Big Idea can't eventually land you in VC territory... but your first step on this well-tread path is likely going to be a credit card, rich uncle or SBA loan. (The general feeling is that if you won't risk your own money on it up front, why should anyone else?)
posted by pineapple at 11:37 AM on August 30, 2007

he/she might be putting in some money from their own pocket and only need 10,000 do finalize a budget...so family and friends funding might already have been secured.
posted by spacefire at 12:14 PM on August 30, 2007

As for general specifics I would say that phearlez is on the mark. But asking $10K to start a business is probably going to raise some eyebrows and hint that you might not know what you are doing.

Think about this... say this thing takes off and you sell out your inventory of 100, lets say it takes a week to make 100 more but this time retail wants 1000 because it is a hot seller, you now have a month of work and no money because retail won't pay for a minimum of 30 days. See where this is going?
posted by bkeene12 at 12:14 PM on August 30, 2007

A good resource I recently used.

Business Plan for a startup.

This is via score.org
posted by imjosh at 12:27 PM on August 30, 2007

The funding would pay for an initial order of 100 units from the manufacturer, some sales & marketing, packaging, and administrative/legal overhead.

Are you really asking for enough money? Do you already have cash reserves? How long are you sustainable for 10k?

There are plenty of good resources in this thread, so I wont' retread. You also asked what to include. If I was reading your business plan, I'd want to know how this is a sustainable business for so little. A proposed statement of cash flows would be important to me as an investor. Small businesses tank all the time because they don't have enough cash on hand - plenty of money coming in AR but no cash.
posted by 26.2 at 12:36 PM on August 30, 2007

Thanks everyone for the excellent feedback - I'm working my way through the SBA site and the "Business Plan for a startup"

My thinking is that I would use only 10K to get this off the ground, because that is the absolute least I could do with to get this going and see if it will sell like I think it will. I don't have that much cash myself or through friends/family.

I was thinking that I would not want to commit to / ask for more, in case the initial 100 didn't sell; but it seems like people are saying that it's better to ask for enough cash so that I could continue growing and operating, working on the assumption that this will be a big hit?

This is a gizmo that no one really realizes is available out there, especially for under $100.. an item for perhaps Brookstone, Sharper Image, etc. I may say I am "creating the need", if that makes sense...

An angel investor would be the ideal situation.
posted by ac at 12:43 PM on August 30, 2007

I was thinking that I would not want to commit to / ask for more, in case the initial 100 didn't sell; but it seems like people are saying that it's better to ask for enough cash so that I could continue growing and operating, working on the assumption that this will be a big hit?

To be blunt, nobody is going to give you 10k or 100k when you don't have that much of your own money invested. As with all absolute statements, there's times that's not true. However for the most part investment money like this comes in VC form after you've already been in business and shown some success in the form of sales, if not profitability.

The kind of thing you're talking about is something that would usually get funded by loans against your home, or financed on your credit cards, a la Kevin Smith and the movie Clerks. Not that I'm saying it's a good idea, but there's a reason people do things that way or take home equity loans.
posted by phearlez at 1:35 PM on August 30, 2007

The real problem is that you dont own the patent for this nor do you manufacture this. It sounds like someone else owns this and they are going to customize the ID and punch a few of these out of their factory. At 100, its sample territory. Sounds like you dont even have exclusivity.

This makes you a middle man who easily can be cut out. This is a pretty big risk for investors. Why should I give my money to whats essentially a b2b operation on a fad product? I think these kinds of business are best self-funded through loans.
posted by damn dirty ape at 2:51 PM on August 30, 2007

Good advice all above and I'm reading the same thing damn dirty ape is: is your source the sole manufacturer of this product? Are there any competitors in their market (I'm going to guess yes because anything worth making and selling is worth copying.) If so, try to nail exclusivity for a geographic region. If that doesn't work, get exclusivity for a method of marketing and delivery, like internet in X countries and/or mail order (I normally wouldn't try retail for new-to-the-market products.) In either case, if someone else owns these designs, your goal is to recoup your investment as fast as is legal because competitors can smell success and your exclusivity contract won't last forever.

You can try to pitch it to Hammacher Schlemmer/Brookstone/Sharper Image and QVC, but they're the top tier direct marketing catalogs. They'll usually demand proof that your product is already selling well. That means working with a smaller mail order company or starting a small one of your own and running the ads or generating the PR yourself.

I heard of a guy who sold his mail order doohickey just great on his own but QVC wasn't sure about his product meeting their market, so they invested as little as they could and gave him something like a Sunday 2am timeslot. If he pulled more than the normal dollars per minute, he gets moved up to the 2nd worst timeslot, and so on. QVC tracks their revenue by the minute and poor performers are dropped fast. Direct marketing is a brutal business.

If this product is indeed mindblowing and completely unique to your geographic or demographic market, do whatever you can to get some sort of exclusivity because, whether you get it or not, there WILL be knockoffs and competitors. Exclusivity just buys you time, is all.

And I don't mean this lightly, but $10k is an amount you shouldn't be asking anyone outside of your private circle for. If you truly believe, after going over your numbers until you can recite them in your sleep, that $10k is all you need, then get a second job or borrow money from relatives. Heck, just open a few credit cards and have at it. I wouldn't recommend this method at all because if the project fails you truly will need a second job but asking for $10k even from the littlest angel or VC firm will get you round filed before you're out the building.

I'm a marketing, publicity and all-around business dude and have done the vc shuffle. I prefer bootstrapping wherever possible but that's probably because I love the accountability of direct marketing and getting free publicity for my products. If you want to chat or want any books recommended, my email's in my profile. Good luck and knock 'em dead.
posted by Tacodog at 9:50 PM on August 30, 2007

You can try to pitch it to Hammacher Schlemmer/Brookstone/Sharper Image and QVC, but they're the top tier direct marketing catalogs. They'll usually demand proof that your product is already selling well.

They and other chains like them will also likely insist you produce enough to provide a certain quantity to their stores. My darling girlfriend and I once wondered about selling some of our work in a local mini-chain. When we consulted their website they indicated you had to commit to enough to provide N number for each of their stores, as well as verify to them that you could provide M more in P time if they sell well.

Retailers are not interested in accommodating your plans to minimize your risk with a small run.
posted by phearlez at 9:43 AM on August 31, 2007