KuratkoCH12Instructor'sManual

CHAPTER 12

BUSINESS PLAN PREPARATION FOR NEW VENTURES

CHAPTER OUTLINE I. II.

III. IV.

V.

What is a business plan? Pitfalls to Avoid in Planning A. Pitfall 1: No realistic goals B. Pitfall 2: Failure to anticipate roadblocks C. Pitfall 3: No commitment or dedication D. Pitfall 4: Lack of demonstrated experience (business or technical) E. Pitfall 5: No market niche (segment) Benefits of a Business Plan Developing a Well-Conceived Business Plan A. Who reads the plan? B. Putting the package together C. Guidelines to remember 1. Keep the plan respectably short 2. Organize and package the plan appropriately 3. Orient the plan toward the future 4. Avoid exaggeration 5. Highlight critical risks 6. Give evidence of an effective entrepreneurial team 7. Do not over-diversify 8. Identify the target market 9. Keep the plan written in the third person 10. Capture the reader’s interest D. Questions to be answered Elements of a Plan A. Executive summary B. Business description C. Marketing segment D. Market niche and market share 1. Competitive analysis 2. Marketing strategy 3. Advertising plan E. Research, design, and development segment (applicable only if R & D is involved) F. Operations segment G. Management support H. Financial segment 1. The pro forma balance sheet 2. The income statement 3. The cash-flow statement I. Critical-risks segment J. Harvest strategy segment K. Milestone schedule segment

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VI. VII.

VIII.

L. Appendix and/or bibliography segment Updating the Business Plan A. A practical example of a business plan Presentation of the Business Plan: “The Pitch” A. Suggestions for preparation B. Suggestions for presentation C. What to expect Summary

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CHAPTER OBJECTIVES 1. 2. 3. 4. 5. 6. 7. 8. 9.

To define a business plan and demonstrate its value To explore the planning pitfalls that plague many new ventures To describe the benefits of a business plan To set forth the viewpoints of those who read a business plan To emphasize the importance of coordinating the business plan segments To review key recommendations by venture capital experts regarding a plan To present a complete outline of an effective business plan To present some helpful hints for writing an effective business plan To highlight points to remember in the presentation of a business plan

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CHAPTER SUMMARY This chapter provided a thorough definition and examination of an effective business plan. The critical factors in planning and the pitfalls to be avoided were discussed. Indicators of these pitfalls and ways to avoid them were also presented. Next, the benefits for both entrepreneurs and financial sources were discussed. Developing a well-conceived plan was presented from the point of view of the audience for whom the plan is written. The typical six-step reading process of a business plan was presented to help entrepreneurs better understand how to put the business plan together. Ten guidelines in developing a business plan were provided, collated from the advice of experts in venture capital and new-business development. The next section illustrated some of the major questions that must be answered in a complete and thorough business plan. The business plan was outlined with every major segment addressed and explained. The chapter then presented some helpful hints for preparing a business plan, along with a self-analysis checklist for doing a careful critique of the plan before it is presented to investors. Finally, the chapter closed with a review of how to present a business plan to an audience of venture capital sources. Some basic presentation tips were listed, together with a discussion of what to expect from the plan evaluators.

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LECTURE NOTES BUSINESS PLAN PREPARATION FOR NEW VENTURES I.

II.

III.

What is a business plan? A business plan is the written document that details the proposed venture. It must describe current status, expected needs, and projected results of the new business. Every aspect of the business needs to be covered. Pitfalls to Avoid in Planning A. No realistic goals 1. Lack of attainable goals 2. Lack of time frame to accomplish things 3. Lack of priorities 4. Lack of action steps B. Failure to anticipate roadblocks 1. No recognition of future problems 2. No admission of possible flaws or weaknesses in the plan 3. No contingency or alternative plans C. No commitment or dedication 1. Excessive procrastination 2. Missed appointments 3. No desire to invest personal money 4. Appearance to make a “fast buck” from a hobby or a “whim” D. Lack of demonstrated experience (business or technical) 1. No experience in business 2. No experience in the specific area of the business 3. Lack of understanding of the industry in which the venture fits 4. Failure to convey a clear picture of how and why the venture will work and who will accept it E. No market niche (segment) 1. Uncertainty about who will buy the basic idea(s) behind the venture 2. No proof of need or desire for the good or product being proposed 3. Assumption that there will be customers or clients just because the entrepreneur thinks so Benefits of a Business Plan A. Benefits for the entrepreneur 1. Forces the entrepreneur to view venture critically and objectively 2. Subjects the entrepreneur to close scrutiny of his or her assumptions about the success of the venture 3. Causes the entrepreneur to develop and examine operating strategies and expected results for outside evaluators 4. Quantifies goals and objectives by providing measurable benchmarks for comparing forecasts with actual results 5. Provides the entrepreneur with a communication tool for outside financial sources as well as an operational tool for guiding the venture towards success

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B.

IV.

V.

VI.

Benefits for financial sources 1. Provides details of the market potential and plans for securing a share of that market 2. Illustrates the venture’s ability to service debt or provide an adequate return on investment 3. Identifies critical risks and crucial events with a discussion of contingency plans 4. Gives financial sources a clear, concise document that contains the necessary information for a thorough business and financial evaluation Developing a Well-Conceived Business Plan A. Who reads the plan? B. Putting the package together C. Guidelines to remember 1. Keep the plan respectably short 2. Organize and package the plan appropriately 3. Orient the plan toward the future 4. Avoid exaggeration 5. Highlight critical risks 6. Give evidence of an effective entrepreneurial team 7. Do not over-diversify 8. Identify the target market 9. Keep the plan written in the third person 10. Capture the reader’s interest D. Questions to be answered Elements of a Plan A. Executive summary B. Business description C. Marketing segment D. Market niche and market share 1. Competitive analysis 2. Marketing strategy 3. Advertising plan E. Research, design, and development segment (applicable only if R & D is involved) F. Operations segment G. Management support H. Financial segment 1. The pro forma balance sheet 2. The income statement 3. The cash-flow statement I. Critical-risks segment J. Harvest strategy segment K. Milestone schedule segment L. Appendix and/or bibliography segment Updating the Business Plan A. A practical example of a business plan

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VII.

VIII.

Presentation of the Business Plan: “The Pitch” A. Suggestions for preparation B. Suggestions for presentation C. What to expect Summary

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SUGGESTED ANSWERS FOR DISCUSSION QUESTIONS (END-OF-CHAPTER) 1. What is a business plan? A business plan is the written document that details the proposed venture. It must describe the current status, expected needs, and projected results of the new business. It is the company’s roadmap for where it wants to. 2. Describe each of the five planning pitfalls entrepreneurs often encounter. Five planning pitfalls: (1) No realistic goals (2) Failure to anticipate roadblocks⎯The entrepreneur is so immersed in his or her own idea that objectivity goes out the window. (3) No commitment or dedication⎯Too many entrepreneurs appear to lack real commitment to their venture. (4) Lack of demonstrated experience (business or technical) ⎯Since many investors weight very heavily the entrepreneur’s actual experience in a venture, it is important to demonstrate what background the entrepreneur possesses. (5) No market niche⎯Many entrepreneurs propose an idea without really finding out who the potential customers are going to be. 3. Identify an indicator of each pitfall named in question 2. What would you do about each? (1) No realistic goals: Lack of attainable goals. A way to avoid this pitfall is to set up a realistic time table with specific steps to be accomplished during a specific time period. (2) Failure to anticipate roadblocks: No recognition of future problems. The best way to avoid this is to list the possible obstacles that may arise, and the alternatives that state what might have to be done to overcome the obstacles. (3) No commitment or dedication: Excessive procrastination. Act quickly and be sure to follow up all professional appointments. Also, be ready and willing to demonstrate financial commitment to the venture. (4) Lack of demonstrated experience (business or technical): No experience in business. To avoid this pitfall, the entrepreneur needs to give evidence of personal experience and background for this venture. If there is a lack of specific knowledge or skills, the individual should obtain assistance from those who possess this knowledge or these skills. Demonstration of a “team” concept of those who will be helping out may be useful. (5) No market niche: Uncertainty about who will buy the basic ideas behind the venture. Have a market segment specifically targeted and be able to demonstrate why and how the specific product or service will meet the needs or desires of this target group. 4. Identify the benefits of a business plan (a) for an entrepreneur and (b) for financial sources. Entrepreneur: (1) The time, effort, research, and discipline needed to put together a formal business plan force the entrepreneur to view the venture critically and objectively. (2) The competitive, economic and financial analysis that is included in the business plan subjects the entrepreneur to close scrutiny of his/her assumptions about the success of the venture.

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(3)

Since all the aspects of the business venture must be addressed in the plan, the entrepreneur develops and examines operating strategies and expected results for outside evaluators. (4) The business plan quantifies goals and objectives, which provides measurable benchmarks for comparing forecasts with actual results. (5) The completed business plan provides the entrepreneur with a communication tool for outside financial sources as well as an operational tool for guiding the venture toward success. Financial Sources: (1) The business plan provides for financial sources the details of the market potential and plans for securing a share of that market. (2) Through prospective financial statements, the business plan illustrates the venture’s ability to service debt or provide an adequate return on equity. (3) The plan identifies critical risks and crucial events with a discussion of contingency plans that provide opportunity for the venture’s success. (4) By providing a comprehensive overview of the entire operation, the business plan gives financial sources a clear, concise document that contains the necessary information for a thorough business and financial evaluation. (5) For a financial source with no prior knowledge of the entrepreneur or the venture, the business plan provides a useful guide to assessing the individual entrepreneur’s planning and managerial ability. 5. What are the three major viewpoints to be considered when developing a business plan? The first viewpoint is the entrepreneur’s since he or she is the one developing the venture and clearly has the most in-depth knowledge of the technology or creativity involved. This is the most common viewpoint in business plans and it is essential. More important than high technology or creative flair is the marketability of a new venture. Referred to as “market driven,” this type of enterprise convincingly demonstrates the benefits to users, the particular group of customers it is aiming for, and the existence of a substantial market. This viewpoint, that of the marketplace, is the second critical emphasis with which a business plan must be written. The third viewpoint is related to the marketing emphasis just discussed. The investor’s point of view is concentrated on the financial forecast. Sound financial projections are necessary if investors are to evaluate the worth of their investment. 6. Describe the six-step process venture capitalists follow when reading a business plan. (1) Determine the characteristics of the venture and its industry. (2) Determine the financial structure of the plan (amount of debt or equity investment required). (3) Read the latest balance sheet (to determine liquidity, net worth, and debt/equity). (4) Determine the quality of entrepreneurs in the venture (sometimes the most important step). (5) Establish the unique feature in this venture (find out what is different). (6) Read the entire plan over lightly (this is where the entire package is paged through for a casual look at graphs, charts, exhibits, etc.). 7. What are some components to consider in the proper packaging of a plan? (1) Appearance⎯the binding and printing must not be sloppy, nor should the presentation

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be too lavish. A plastic spiral binding holding together a pair of cover sheets of a single color provides both a neat appearance and sufficient strength to withstand handling by a number of people without damage. (2) Length⎯a business plan should be no more than 40 pages long. Adherence to this length forces entrepreneurs to sharpen their ideas and results in a document likely to hold investor’s attention. (3) The cover and the title page⎯the cover should bear the name of the company, its address and phone number, and the month and year in which the plan is issued. An interested investor wants to be able to contact a company easily and to request further information or express an interest either in the company or in some aspect of the plan. Inside the front cover should be a well-designed title page on which the cover information is repeated and in an upper and lower corner, the legend “copy number” should be provided. Besides helping entrepreneurs keep track of plans in circulation, holding down the number of copies outstanding (usually to no more than 20) has a psychological advantage. After all, no investor likes to think that the prospective investment is shopworn. (4) The executive summary⎯the two pages immediately following the title page should concisely explain the company’s current status, its products or services, the benefits to customers, the financial forecasts, the venture’s objectives in three to seven years, the amount of financing needed, and how investors will benefit. This is a tall order for a two-page summary, but it will either sell investors on reading the rest of the plan or convince them to forget the whole thing. (5) The table of contents⎯after the executive summary, include a well-designed table of contents. List each of the business plan’s sections and mark the pages for each section. 8. Identify five of the ten guidelines to be used for preparing a business plan. (1) Keep the plan respectably short. Readers of business plans are important people who refuse to waste time. Therefore, entrepreneurs should explain the venture not only carefully and clearly, but concisely as well. (2) Organize and package the plan appropriately. A table of contents, an executive summary, an appendix, exhibits, graphs, proper grammar, a logical arrangement of segments, and overall neatness are critical elements in the effective presentation of a business plan. (3) Orient the plan toward the future. Entrepreneurs should attempt to create an air of excitement in the plan by developing trends and forecasts that describe what the venture intends to do and what the opportunities are for the use of the product or service. (4) Avoid exaggeration. Sales potentials, revenue estimates, and the venture’s growth should not be inflated. Many times a best case, worst case, and probable case scenario should be developed for the plan. Documentation and research are vital to the credibility of the plan. (5) Highlight critical risks. The critical risks segment of the business plan is important in that it demonstrates the entrepreneur’s ability to analyze potential problems and develop alternative courses of action. 9. Briefly describe each of the major segments to be covered in a business plan. (1) The Summary: Many people who read business plans (bankers, venture capitalists,

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investors) like to see a summary of the plan that features its most important parts. Such a summary gives a brief overview of what is to follow and helps put all of the information into perspective and should be no longer than three pages. (2) Business description: The name of the venture should be identified, with any special significance related (e.g., family name, technical name, etc.). The industry background should also be presented. The new venture should be thoroughly described along with its proposed potential. Also, the potential advantages the new venture possesses over the competition should be discussed at length. (3) Market segment: In this segment of the report the entrepreneur must convince investors that there is a market, that sales projections can be achieved, and that the competition can be beaten. (4) Research, design, and development segment: The extent of any research, design, and development in regard to cost, time, and special testing should be covered in this segment. Investors need to know the status of the project in terms of prototypes, lab tests, and scheduling delays. (5) The location segment: This segment should always begin by describing the location of the new venture. The chosen site should be appropriate in terms of labor availability, wage rate, proximity to suppliers and customers, and community support. In addition, local taxes and zoning requirements should be sorted out, and the support of area banks for new ventures should be touched upon. (6) The management segment: This segment should identify the key personnel, their positions and responsibilities, and the career experiences that qualify them for those particular roles. Complete resumes should be presented for each member of the management team. (7) The financial segment: The financial segment of a business plan must demonstrate the potential viability of the undertaking. (8) The harvest strategy segment (9) The milestone schedule segment: This segment provides investors with a timetable for the various activities to be accomplished. It is important to demonstrate that realistic time frames have been planned and that the interrelationship of events within these time boundaries are understood. (10) The appendix and/or bibliography segment: The final segment is not mandatory, but it allows for additional documentation that is not appropriate in the main parts of the plan. Diagrams, blueprints, financial data, vitae of management team members, or bibliographical information that supports the other segments of the plan are examples of material that can be included. 10. Why is the summary segment of a business plan written last? Why not first? The summary should be written only after the entire business plan has been completed. In this way, particular phases or descriptions from each segment can be identified for inclusion in the summary. Since the summary is the first, and sometimes the only part of a plan that is read, it must present the quality of the entire report. 11. What are five elements included in the marketing segment of a business plan? Market niche and market share, competition analysis, pricing policy, advertising plan, and market strategy. 12. What is the meaning of the term critical risks?

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This means that potential risks such as the following should be identified: effect of unfavorable trends in the industry, design or manufacturing costs that have gone over estimates, difficulties on long lead times encountered in purchasing parts or materials, or new competition that was not planned for. 13. Describe each of the three financial statements that are mandatory for the financial segment of a business plan. (1) The pro forma balance sheet⎯pro forma means projected, as opposed to actual. The pro forma balance sheet projects what the financial condition of the venture will be at a particular point in time. Pro forma balance sheets should be prepared at start-up, semiannually for the first years, and at the end of the first three years. (2) The income statement⎯the income statement illustrates the projected operating results based on profit and loss. The sales forecast, which was developed in the marketing segment is essential to this document. (3) The cash flow statement⎯in new-venture creation, the cash flow statement may be the most important document since it sets forth the amount and timing of expected cash inflows and outflows. This section of the business plan should be constructed carefully. 14. Why update a business plan? There are several reasons for updating a business plan; for example, financial needs may change, additional financing may be needed, markets may change, new products or services may be considered for launching, new members may be added to the management team, and due to the general changing nature of the business the reality the entrepreneur faces may change. 15. Outline some of the critical points to capture in an elevator pitch. (1) Focus on the “pain” your venture will address. (2) Demonstrate the “reachable market.” (3) Explain the business model. (4) Tout the management team. (5) Explain your metrics that were used in generating your revenue projections. (6) Motivate the audience. (7) Explain why you are the right venture and why this the right time to be launched.

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TEACHING NOTES FOR END-OF-CHAPTER EXERCISE EXPERIENTIAL EXERCISE: PUTTING TOGETHER A BUSINESS PLAN The reader is provided with the ten segments of a business plan, but they are not in order. In order to develop an understanding of the flow and structure of a business plan, the reader is asked to number where each segment falls in place in the business plan. After the numbering exercise, twenty activities in the business plan are given, and the reader is to decide which section it would be a part of. Answers are provided at the end of the exercise.

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TEACHING NOTE FOR END-OF-CHAPTER CASE CASE 12.1: IT’S JUST A MATTER OF TIME 1. In addition to financial questions, what other questions is the venture capitalist likely to ask Pedro? He will likely ask questions about recognition of future problems. The few testimonies that Pedro received do not guarantee his success. Therefore, he must give consideration to potential roadblocks. Pedro needs to give evidence of personal experience and background for this venture. If he lacks specific knowledge or skills, he should seek assistance from those who possess them. The venture capitalist will probably want to know about Pedro’s goals. Pedro will need to set up a timetable with specific steps to be accomplished during a specific time period. He should also be willing to demonstrate his commitment to the venture. The venture capitalist will need to see that Pedro is taking this venture seriously and not trying to make a fast buck on a whim. 2. Would a business plan be of any value to Pedro? Why or why not? Yes it would be especially valuable to Pedro who seems to have an idea that could turn into something successful, but at this point in time lacks a plan to see his idea through to fruition. In his efforts preparing a business plan he will be able to view his venture objectively. He will be able to scrutinize his assumptions about the venture through competitive, economic, and financial analysis. A business plan will also provide Pedro with a communication tool for outside financial sources who will read the plan. If he does a thorough job investigating and provides a comprehensive overview of the entire operation, it will enhance his chances of making a successful presentation to the venture capitalist. 3. How would you recommend Pedro get ready for his meeting with the venture capitalist? Be complete in your answer. He should prepare a business plan and know it thoroughly before the meeting. He should rehearse his presentation and then be able to answer any potential questions by the venture capitalist. Pedro should expect and prepare for a critical and skeptical response to his business plan. He will be pressured in order to test the venture as well as his own commitment to the venture. Pedro should have a strong enough belief in his plan that even if he is turned down his commitment will be to improve the business plan for future use. The ultimate goal is to succeed and if his desire is strong enough he can revise, rework, and improve the business plan. CASE 12.2: THE INCOMPLETE PLAN 1. What should Joan put in the marketing segment? What types of information will she need? She should include a market niche and market share. The niche will define all of the people who have a need for the new monthly magazine. When describing this niche, Joan should address what these potential customers base their decisions on: price, quality, service, or a combination of these factors. Joan should include a list of people who have expressed interest in the magazine, together with an explanation for their interest. Sales projections should be made for at least three years, and there should be a review of previous market trends. She also needs to assess the strengths and weaknesses of competing

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magazines. A number of pricing strategies should be examined and one should be convincingly presented. A discussion of the advertising and promotional campaign that is contemplated to introduce the product and the kind of sales aids that will be provided should be included. Finally, Joan should include the general marketing philosophy and strategy of the company. This includes the features that will be emphasized to sell the magazine as well as any unusual marketing concepts that will enhance customer acceptance. 2. For the critical risks assessment segment, what key areas does Joan have to address? Discuss two of these. One area is new competition that was not planned for. A magazine directed toward women in the work place may be a product with a definite market. If Joan’s magazine is successful, other magazines directed toward women in the work place will hit the market. One of these magazines may be run by a publisher with unlimited resources. These magazines could afford to have larger budgets and more people on their staff than Joan does and therefore make it difficult for her to compete. Another area that she needs to consider is an unfavorable trend in the industry. In the last few months many business magazines have devoted sections of their magazine to women in the work place. It is possible that with the trend of magazines devoting more space to women, a magazine specifically for women in the work place is not needed in the market. 3. For the financial segment, what suggestions would you make to Joan regarding the kinds of information to include? Be as specific as possible. She should include three financial statements: the pro forma balance sheet, the income statement, and the cash flow statement. The balance sheet details the assets required to support the projected level of operations and shows how these assets are to be financed. Investors will want to look at the projected balance sheets to determine if ratios, working capital, and inventory turnover are within the acceptable limits required to justify the future financings projected for the venture. The cash flow statement may be the most important document since it sets forth the amount and timing of expected cash inflows and outflows. In the financial segment it is important to mention any assumptions that were used in preparing the figures. Joan should also include a break-even chart, which shows the level of sales needed to cover all costs.

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SMALL BUSINESS AND ENTREPRENEURSHIP RESOURCE CENTER Sources: Question 1: Marketing & Sales--10 Danger Signs of Short-Term Thinking. John Graham. American Salesman 53.4 (April 2008): p23(5). Question 2: Virtual Vision.(SAVVY SOLUTIONS)(Brief article).Tennille M. Robinson. Black Enterprise 38.6 (Jan 2008): p43(1). Questions: 1. What are ten indicators of poor long-term planning presented in this article? A. If you're interested in attempting to evaluate your company in terms of its short-term orientation, here are ten indicators that the longer term may be suffering. 1. No planning or plan. It seems as if what passes as planning is often nothing more than talk. Little gets actually nailed down. Meetings end with an aura of vagueness in the room. Even if assignments are made, there's often little follow up. Everyone knows that nothing has changed and nothing is going to happen. The clearest, easiest way to understand good planning may go something like this: "Who's going to do what to whom, why and when?" 2. Scrambling for sales. "We've got to get sales up" is the common cry. Throw together a quick "sales contest." Offer a discount. Somehow the word "discount" is less offensive than cutting the price. Yet, these same companies are short on consistent prospecting programs. Their sales reporting systems focus on what's happened last week and what's coming next week, not on thinking about the far more demanding task of finding ways to grow the business. Developing, implementing and managing a carefully crafted prospecting program that has management's support is the ultimate answer to increasing sales. Yet, we find quick fixes more attractive than the hard work involved in program management. 3. Jumping from one activity to another. Broken field running is a fine art in many companies. Everyone dashes around zigging and zagging, looking for an opening. Unfortunately, they aren't as agile as they like to think they are. First it's a sales contest, next comes a newsletter, then it's an email blitz, a broadcast fax or signing up for a trade show booth. "It's only three weeks away. What are we going to do?" "Oh, we can go through the store room and see what we can find." Then we come back from the event and say that was a waste of time. As a matter of fact, it was exactly that because there was no plan. 4. Constant crises. Periodic crises occur, of course. It's the pattern that's the problem. One 16 This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be resold, copied, or distributed without the prior consent of the publisher.

business executive said, "I think something's wrong if we're not having a crisis." Even if there is marketing and sales planning, the programs are often derailed by one crisis or another. It happens in every company because no one says that staying on track is essential. The prospect database wasn't completed because something else intervened. The telephone follow-ups weren't made because Sally had to fill in for someone who was out sick. The prospect calls didn't get made because someone was "putting out a fire." 5. Focus on competitors. It often appears that companies lacking good planning may be taking their cues--their direction--from the competition. While competitive intelligence is essential, companies make decisions based on unsubstantiated rumors picked up on the street. Because they lack adequate planning, they leave themselves vulnerable to reacting in capricious and costly ways. The tendency to play "follow the competitor" may be a major error since competitors make mistakes, too. 6. An unclear image. The image inside a company may be quite different from the way it is perceived on the outside. One financial services firm has a very clear picture of itself. A customer survey, however, revealed what the company viewed as its strengths were perceived as less than adequate. Another company's sales force takes great pride in building personal relationships with customers; yet, a customer survey revealed that personal relationships were at the bottom of the list of customer priorities. One of the essential objectives of good planning is shaping and protecting the brand. 7. A lack of anticipatory thinking. Good planning is the result of anticipating the results of an idea, program, activity or project. A lack of planning generally produces half-baked action. What does this mean? At one company, there were endless meetings about an upcoming trade show event. There was plenty of interest and excitement, but no focus. No one asked, "Why are we going? What do we want to accomplish?" Fun took precedence over business objectives. Thinking about the outcome of actions is the essence of planning. 8. Confusion between strategy and tactics. To put the issue in as few words as possible, tactics are fun but strategy is tough. It's easy to get interested in what the direct mail piece will look like. The question of why it's being done and who should receive it sounds like work. It is. Far too many ads and brochures are designed with the idea of winning awards rather than figuring out how to meet a clearly defined objective. 9. Difficulty in understanding branding. It's almost impossible to escape a new book, article or seminar on branding. Yet, for all the talk, it's amazing that there is so little translation into making certain every aspect of a business coheres to the company's brand concept. Branding doesn't begin and end with a great logo and a glitzy tagline. Planning makes branding possible.

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10. Mistakes. The best has been saved for the last. Errors are one of the clearest indicators of poor planning. Mistakes in marketing and sales programs generally come about because of a lack of serious thought or, as we call it, anticipatory thinking. Try this and then jump to the next idea. Run ads this quarter and then switch to email blitzing. Drop that and rush to direct mail. Throw in a "special offer" for the month. Without a plan, it's one mistake after another. We all make them, of course. But good planning keeps us from making them all the time. If it isn't down (on paper) in black-and-white and if it isn't reviewed regularly and updated often, it isn't a plan. It's just another exciting idea that will waste time and turn out poorly. 2. How might you respond to the following question? "I'm looking to start an online business. I already have a business plan, but I have no clue how online businesses work. Are there any Websites that will guide me step-by-step? Should I hire professionals, or just do it myself?" A. It is important for students to appreciate that the process of writing the business plan will allow for a detailed understanding of the business model and industry. A thorough business plan cannot be written if you don't know the business, if the person wants to participate in ecommerce, they will have to spend ample time researching and educating them so that they can identify their market, choose the right payment options and build a competitive Website, among other key responsibilities. Start by reading tutorial books such as Starting an Online Business For Dummies (For Dummies; $24.99) by Greg Holden. Also. see if there are any colleges or organizations in your area offering training courses. The New Jersey Small Business Development Centers (www.njsbdc.com) is a network that helps small businesses. It also provides comprehensive e-commerce counseling services. And SCORE (www.score.org), another organization helping entrepreneurs, teamed with Verizon to offer free online business training workshops (www.score.org/online_courses.html). In learning how online businesses work, you'll become familiar with what you'll need to function properly, the types of professionals you should seek, and how best to carve out a space on the Internet.

18 This edition is intended for use outside of the U.S. only, with content that may be different from the U.S. Edition. This may not be resold, copied, or distributed without the prior consent of the publisher.