What is a Business Plan? An Immigration Attorney's Primer on Business Plan Development
Governmental agencies and private financial institutions and organizations have long required formal business plans for purposes ranging from considering investor visa applications to granting loans. This we all know. But, why exactly is a business plan important, and even more importantly, how can it be truly useful to an immigration attorney or alien investor?
A mission statement is important because it sets the tone and often the character of the business. The more thought put into a mission statement, the greater the potential for cohesiveness and purpose in the rest of the plan and business.
The statement can be obvious as in National Semiconductors; "Our mission is to excel in serving chosen markets by delivering semi-conductor-intensive products and services of the highest quality and value, thereby providing a competitive advantage to our customers worldwide."
It can be more specific as in Safety-Kleen Corporations; "To maximize the value of the Company's unique marketing, distribution, and recycling capabilities by becoming the world's leading specialty reclaimer of hazardous and quasi-hazardous automotive and industrial fluids, with primary emphasis on serving the needs of the small quantity generator of these fluids."
It can be unique and powerful as in the U.S. Air Forces'; "To defend the United States through control and exploitation of air and space."
A correctly developed mission statement will not be more than a few sentences. It will contain a definition of the corporation's reason for being, its competitive advantage or uniqueness, and, at its very best, the set of beliefs or values that the entrepreneur intends to communicate as a driving force for his development through the years.
The corporate definition follows the mission statement. It is in this section of the business plan that the product or service and the organizations location and form of organization are defined. It is also here where the background of the founder and the company history or conception is expanded upon.
It is important here that there be consistency between the type of business the alien investor wishes to develop and his or her skill set in performing the organizations functions. In cases where the individual has limited skills as in the example where, for instance, the individual wishes to create a chain of barbershops but has no skill set in cutting hair, he must demonstrate the ability to manage and hire U.S. citizens who are qualified.
Market and Competitive Analysis
Obviously, the business has a reason for being and a market to serve. It is here, in the market analysis, that the entrepreneur will identify his target market, define his industry, identify competitors, and describe how the organization will promote its product(s) or service(s). It is here that the potential new alien investor can show that he knows his market.
The target market defines the end user of the service or product in as much detail as possible. It is critical to properly identify this target market so that pricing, promotional strategies, distribution, and even sales methods can be determined. A useful tool in defining this target market is a method of questioning known as the five W's and consists of the following five questions:
A very important yet frequently overlooked area of the business plan is the competitive analysis. By defining others within the organization's industry and reviewing their strengths and weaknesses, the entrepreneur is able to identify costs, price elasticity, risks, opportunities, and potential markets. Often the complete lack of competition is an indication that the product or service may not have a market.
A competitive analysis also allows the DHS to identify whether or not the potential investor alien has a clear idea of how difficult it may be to enter into business in his specific category, and helps identify organizational strengths, weaknesses, opportunities, or threats.
No business operates in a vacuum. It is extremely important to the reader of a business plan to see that the business investor thoroughly understands this. It is also extremely helpful for the new business owner to know if other companies are making money, how much, and what works or doesn't work with promotions or sales.
If the investor wants to start a video retail store, it's important to see that he has a clear understanding that video retailing is not something new, and that he is planning on beginning his venture with a clear understanding of what he intends to do to successfully compete with other video retail stores. Perhaps, for example, he can offer that he is investing in an area with no other immediate outlets, or that he can offer videos in Korean or Vietnamese, if this will be the case, or other similar unique strategy allowing him a competitive edge in the marketplace.
Another similar category essential to the market plan is the industry analysis. This section will give an overall picture on how a certain industry in functioning. For instance, the housing market has been extremely active in this decade. This realization, and therefore mention in the business plan, can go a long way in explaining the rationale of a new property management business. It is equally important to the aspiring investor alien, because research in this area allows her to determine costing and pricing information that will be necessary in projecting future financial feasibility.
Once the market, the competition, and the industry have been observed, the potential new investor can focus on what her strategy is going to be to promote her service or product.
This is where the famous, at least to marketers and MBA's, four P's come in. Exactly what is the product or service? What will the price be? Where will the product be sold and what is the promotional strategy?
Strategy comes fully into play here. Based upon the information gathered so far, how does the alien investor think she will get the word out? Some options include publicity, media campaigns, coupons and discounts, employment of a direct sales force, and advertising. You can see how this is crucial information not only for the reader of the plan but for the entrepreneur who will have to actively go out and implement her plan in order to make business happen.
Mission and marketing can do only a little if the organization does not have a clear definition of who its staff will be, and an idea of how logistically their product or service will be created and delivered to their customer.
It is here that the alien investor has the opportunity to define the function of his critical employees and present an organizational chart. By accurately defining the functions of his employees, the new business owner will demonstrate his capacity to delegate authority, manage staff, and hire personnel appropriate to the functions necessitated by his new business.
This section also can include a discussion of how the business intends to facilitate the flow of goods or services from procurement to distribution. Where will the business be located? How does the business expect to service its clients? This may well be one of the biggest areas of hidden cost that can come out to bite the struggling entrepreneur when he needs it least.
Another particularly important area of the plan for the attorney, DHS, and alien investor, is the milestone section. When does the new owner plan on opening that first store? When does she plan on rolling out that marketing promotional strategy that she considered so well? How long will it take before those employees are added to the roster? Milestones are important not only for planning purposes, but as tools once the business starts to roll and for the entrepreneur to gage progress and the allocation of funds.
The financial strategy is placed in the final section of the business plan partially because it is important to have reviewed all the other considerations of market, operations, staffing, etc. before the investor can detail these expenses and determine what profit he forecasts. It is here that forecasted information can be gathered from the, often neglected, competitive and industry analysis. It is here that, given little actual data, the use of other similar business data will come in handy.
Two essential components of every financial analysis are the Projected Income Statement and the Start-Up Cost Summary. Other possible components include Break-Even Calculations, Cash Flow Analysis and Balance Sheets.
The projected income statement basically outlines exactly how much the investor hopes to sell and what specifically the cost of those products or services will be. It then details other costs associated with doing business including employee salaries, the salary of the investor himself (it is important to show that the investor hopes to make a living at his business), and the costs of renting or buying an office or manufacturing facility. Details such as utilities and rent are assessed here. The bottom line is reflected monthly or quarterly, and yearly.
Will the company make money? This really is the bottom line. It is actually in this, the last section of the business plan, that many an entrepreneur actually gets cold feet. It is also here that the new business owner can go back and take another serious hard look at the price he is charging, the costs associated with doing business, and whether or not he really wants to get into this business in the first place. It is not unusual that the answer to going into business in the first place is NO, and the time and money invested in the business plan also pays off.
If the investor alien's answer to the results of the financial analysis and what the process of business planning has created is YES, this is for me, this is what I want to do, and this is what I intend to do, then the Executive Summary can be developed and placed at the beginning of the business plan.
The executive summary will, in no more than one page, highlight the following:
The new immigrant or non-immigrant, wishing to invest a potentially large amount of his savings into this country will certainly need all the additional help she can get in making the best decision for herself and in having a truly beneficial experience in her new business. Not to mention the fact that the United States will also greatly benefit by well run and managed new businesses that have the potential of employing U.S. workers.
Robert N. Reincke, MBA is a writer and instructor. His background includes extensive work with immigration attorneys, immigrants, entrepreneurs and small businesses, and over fifteen years of professional business plan writing.
The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.