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Step by Step Startup GuidesGuide No.1800Entrepreneur Media Inc.Publishers of: Entrepreneur magazine,Entrepreneur’s StartUps magazine, Entrepreneur.comEverything You Need to Know to Start a Successful Business!File:1800v2 04.pdfCreating aSuccessfulBusiness Plan

Dear Entrepreneur:Congratulations! By selecting this guide, you’ve taken a very significant step onthe road to starting and running your own business. We thank you for yourpurchase, and wish you every success in your new business venture.For over 20 years, Entrepreneur Magazine has been helping people just like yousuccessfully start, run and grow their businesses. This startup guide representshundreds of hours of interviews and research performed by our expert businessstaff. Inside you’ll find practical, step-by-step advice that clearly outlines the basiccomponents of developing a successful business.To get the most out of the guide, start by reviewing the table of contents, whichis a good place to start to find chapters dedicated to any subject you’re lookingfor: raising capital, writing the executive summary, preparing financial statements,and much more.Plus, we’ve included a number of resource listings in the appendices in the backof the book. These easy-to-use sections will give you names, addresses andphone numbers for a variety of associations, publications and service providers.We’re sure this guide offers a wealth of information that will be valuable for youtoday and in the years to come. Thanks again for your purchase, and good luckfrom all of us at Entrepreneur Magazine.Sincerely,Rieva LesonskyEditor-in-Chief2445 McCabe Way, Suite 400, Irvine, CA 92614-6244 Tel: (949) 261-2325 Fax: (949) 261-0234

Other Startup Guide Titles Available From Entrepreneur Media Inc.Step by Step Startup Guides#1146 Automobile DetailingBusiness#1186 Bar/Club#1278 Bed & Breakfast#1136 Business Support Service#1076 Car Wash#1058 Child-Care Service#1816 Cleaning Service#1817 Clothing Store#1162 Coin-Operated Laundry#1151 Consulting Service#1304 Crafts Business#1824 eBay Business#1819 e-Business#1313 Event Planning Service#1228 Executive Recruiting Service#1328 Freight Brokerage Business#1306 Gift Basket Service#1282 Growing & SellingHerbs & Herbal Products#1170 Hair Salon & Day Spa#1334 Home Inspection Service#1092 Import/Export Business#1237 Information Consultant#1198 Lawn Care Service#1015 Mail Order Business#1345 Medical Claims Billing 71#1825#1386#1189#1375#1330#1391Medical Transcription ServiceNetwork Marketing BusinessOnline Learning BusinessPersonal Concierge ServicePersonal Training BusinessRestaurant And 5 OtherFood BusinessesRetail StoreSelf-Publishing BusinessSeminar Production Business6 Senior Care ServicesSpecialty Travel & ToursBusinessStaffing ServiceVending BusinessWedding ConsultantWholesale DistributionBusinessStartup Essentials Series#1800 Creating A SuccessfulBusiness Plan#1806 Financing Your SmallBusiness#1809 Marketing Your SmallBusiness#1813 Selling Your Products#1811 Starting Your Own BusinessOrder by Fax: (845) 457-5029 Call Toll Free: (800) 421-2300Visit Our Website: www.smallbizbooks.comPlease Refer to Source Code: ZZMM

From the Editors of Entrepreneur MagazineThis publication has been developed with the intent toprovide an accurate portrayal of the general informationrequired to start a business on the subject matter covered.Recognizing that all business opportunities containinherent risks, we suggest that the prospective investorconsult an attorney and/or accountant with regard topersonal investment criteria. This report is sold with theunderstanding that the publisher is not rendering legal,accounting or other professional advice. If legal or otherexpert assistance is required, it is suggested that the services of a reputable attorney, accountant or professionalconsultant be sought.The editors of Entrepreneur Magazine have thoroughlyinvestigated and researched all sources, verifying as muchdata as possible to ensure the accuracy and completenessof the information in this book; however, we assume noresponsibility for errors, inaccuracies, omissions or anyother inconsistencies herein. Quoted financial informationand operation data are strictly hypothetical. Your localsituation may differ.Each report is accurate and current at the time it ispublished. However, certain information changes quickly,so make sure you do your research.Any people or organizations mentioned herein arebelieved to be reputable, but neither Entrepreneur MediaInc. nor any of its employees accept any responsibility forthe activities of those mentioned or endorse their productsor services.Business ProductsDivisionAuthorMark Henrickswith John RiddleManagingEditorMarla MarkmanProductionDirectorDaryl HoopesProductionDesignerCurtis TravisIllustratorJohn McKinleyIndexerTed McLellanCREATING A SUCCESSFUL BUSINESS PLAN 2004 by Entrepreneur Media Inc.Printed and bound in the United States of America. All rights reserved. No part of thisreport may be reproduced or transmitted in any form or by any means withoutpermission in writing from the publisher, except by a reviewer, who may quote briefpassages. This book is the Fifth edition of Creating A Successful Business Plan and isa completely revised and expanded version. Published by Entrepreneur Media Inc.,Business Products Division, 2445 McCabe Way, Suite 400, Irvine, CA 92614.

Entrepreneur Magazine’sCreating A Successful Business PlanTABLE OF CONTENTSIntroduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . viiChapter 1Business Plan Basics:Why you absolutely need a business planHOW LONG SHOULD IT BE?. . . . . . . . . .WHEN SHOULD I WRITE IT? . . . . . . . . . .WHO NEEDS A BUSINESS PLAN? . . . . . . .Start-Ups . . . . . . . . . . . . . . . . . . . . .Corporate Managers . . . . . . . . . . . . . .Established Firms Seeking Help . . . . . .HOW IMPORTANT IS A BUSINESS PLAN? .1.2.2.3.3.3.3.4Chapter 2Money Hunt:Using your plan to raise capital.9VENTURE CAPITALISTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9What Venture Capitalists Want . . . . . . . . . . . . . . . . . . . . . . . . . 10RATES OF RETURN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Cashing Out Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Going Public . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Being Acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Management Control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12When Venture Capital Is An Option . . . . . . . . . . . . . . . . . . . . . 12BANKERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14What Bankers Want . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15When Bank Financing Is Appropriate . . . . . . . . . . . . . . . . . . . . 16Borrowing When You Really Need It . . . . . . . . . . . . . . . . . . . . 16SMALL BUSINESS ADMINISTRATION. . . . . . . . . . . . . . . . . . . . . . . 17Other Ways To Borrow Money . . . . . . . . . . . . . . . . . . . . . . . . 18Corporate Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18Trade Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18OTHER INVESTORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Family And Friends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Angel Investors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Chapter 3The Big Picture:Now that you have a plan, what do you do with it? . . 23i

Entrepreneur Magazine’sCreating A Successful Business PlanDo The Numbers Add Up? . . . . . . . . . . . . . . . . . .Where Are You Going? . . . . . . . . . . . . . . . . . . . . .MONITOR YOUR PERFORMANCE. . . . . . . . . . . . . . . .Spotting Trouble Early . . . . . . . . . . . . . . . . . . . . .Understanding Pressure Points . . . . . . . . . . . . . . . .ATTRACTING GOOD PEOPLE . . . . . . . . . . . . . . . . . .Prospective Partner. . . . . . . . . . . . . . . . . . . . . . . .Prospective Employees . . . . . . . . . . . . . . . . . . . . .Suppliers And Customers . . . . . . . . . . . . . . . . . . .Customer And Business Plans . . . . . . . . . . . . . . . .WHAT A BUSINESS PLAN CAN’T DO FOR YOU. . . . . .Predict The Future . . . . . . . . . . . . . . . . . . . . . . . .Guarantee Funding. . . . . . . . . . . . . . . . . . . . . . . .Raise All The Money You’ll Need . . . . . . . . . . . . . .Fool People . . . . . . . . . . . . . . . . . . . . . . . . . . . . .BUSINESS PLANNING RISKS. . . . . . . . . . . . . . . . . . . .Too Much Detail . . . . . . . . . . . . . . . . . . . . . . . . .Too Much Time . . . . . . . . . . . . . . . . . . . . . . . . . .It’s A Plan, Not A Prophecy . . . . . . . . . . . . . . . . . .You Are Your Plan (So Be Careful How You PresentUSING YOUR BUSINESS PLAN . . . . . . . . . . . . . . . . . .Finding Funding With Your Plan . . . . . . . . . . . . . .Selling With Your Plan . . . . . . . . . . . . . . . . . . . . .Managing With Your Plan . . . . . . . . . . . . . . . . . . .Updating Your Plan . . . . . . . . . . . . . . . . . . . . . . 23333343435Chapter 4Set Your Course:Before you start, answer these basic questions. . . . . . . . 37DETERMINE YOUR GOALS AND OBJECTIVES . .FINANCING . . . . . . . . . . . . . . . . . . . . . . . . . .PLANNING . . . . . . . . . . . . . . . . . . . . . . . . . . .HIRING . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ACCESS YOUR COMPANY’S POTENTIAL . . . . . .Financial Potential . . . . . . . . . . . . . . . . . . .Lifestyle Concerns . . . . . . . . . . . . . . . . . . .A QUICK LOOK AT COMMON PLAN ELEMENTSExecutive Summary . . . . . . . . . . . . . . . . . .Management . . . . . . . . . . . . . . . . . . . . . . .Product Or Service . . . . . . . . . . . . . . . . . . .Marketing . . . . . . . . . . . . . . . . . . . . . . . . .Operations. . . . . . . . . . . . . . . . . . . . . . . . .Financial Data . . . . . . . . . . . . . . . . . . . . . .TIPS TO HELP YOU WIN FUNDING . . . . . . . . .ii.383943454646485252525253535354