Creating a Growth-Oriented Business Plan

Brenda Hopper, director of New Jersey's Small Business Development Center program, sees a common shortcoming in many plans she's reviewed — haste and brevity. “A lot of people just draft a document to get the money they need. They have bullet points that could be built out to develop sound strategies.”

Getting Started

Sometimes getting started is the hardest part. Early on Joanne Eglash offered some sage advice to the PoopBags team."Try starting the process off by just describing your business in one to two pages so that someone who's never heard of your company can easily grasp what your product is, who your intended customer is, and how you will sell."

Following another piece of Eglash advice, Cannella initially sought out sample business plans at AllBusiness.com and the SBA and picked one to use as a template. "I started following it and revising it and definitely found it useful," he says.

Cannella's template followed the same basic formula as most business plans: an overview of the business (products or services offered; the market, currently and in the future; the state of competition; opportunities and risks; management structure; and personnel) and detailed financial projections (sources of funding; balance sheet; break-even analysis; income and cash-flow projections).  

It was a lot of information to organize and write, and the first draft was not easy to complete. "I think they may have been a bit aggressive in their original estimate of the time needed to do their first rough draft," says Eglash.

After weeks of hard work, Cannella and his team finished the first draft, and it was, indeed, a bit rough. It lacked some key sections, including a full discussion of the competition, known in business plan parlance as the "competitive analysis." The team described their company's competitive advantage as "PoopBags.com's unique URL and the marketing advantages that come with it."

Eglash replied, "You need a much stronger competitive advantage statement than a URL and the vague phrase 'marketing advantages.' There are thousands of unique URLs. The focus needs to be on the competitive advantage that your product has over the other contenders in your industry."

This, it turns out, is a common business plan mistake. Entrepreneurs, says Eglash, need to "take the time to analyze the competition and focus on what makes their product unique and gives them an edge over the competition."

Soon the PoopBags team was back at their desks working on a second draft. Says Eglash, "They were very good at taking the time needed to conduct research, resulting in a much better document and end result."

They expanded the competitive analysis to include a detailed look at how PoopBags's products differed from its four main competitors. "The business plan helped us understand the differences between our competitors. We knew it, but to write it formally was a whole new ball game," says Penningroth.

Predicting the Future

Cannella and Penningroth found one area particularly challenging: making forecasts on sales, budgets, and personnel, given the company's young age (its Web site was only launched in 2005). In early drafts, Eglash asked for a detailed personnel plan (who would be hired in the next two years?). She wanted a startup budget and sales forecast through 2008.

By the final draft, the personnel plan included five new hires by 2008 for a total payroll of $114,400. PoopBags's startup budget, or what Cannella eventually called "Growth Investment Budget," contained 11 line items including rent, salaries, printing, and postage. The sales forecasts included a detailed look at the company's products and the potential revenue each product could produce.

In all, it took three months, five drafts, and plenty of sweat equity before Cannella and his cohorts at PoopBags.com were finally done with their eight-page business plan. "They have done a great job," says Eglash.

While initially Cannella wanted to put together a business plan as the first step toward acquiring a bank loan, that goal has now changed. His major supplier has contacted him to become its national rep for biodegradable dog bags and a regional rep for its other product lines.

"This," says Cannella, "would eliminate my need for packaging, building a brand name, and more. If I can land this, it will change my focus and it could be huge!" All that work on the business plan is not for naught, however. Cannella is using a portion of it in his proposal to the supplier.

“A business plan needs to be fluid," says Brenda Hopper, director of New Jersey's Small Business Development Center program. "It isn't something you write and put on the shelf. It's a working, living document.”

"Remain flexible and open-minded at all times," says Cannella. "You never know what will happen."