Business plans for new or small businesses: paving the path to success

Amir M. Hormozi College of Business, Texas A&M University-Corpus Christi, Texas, USA Gail S. Sutton Center for Coastal Studies, Texas A&M University-Corpus Christi, Texas, USA Robert D. McMinn College of Business, Texas A&M University-Corpus Christi, Texas, USA Wendy Lucio Halt, Thrasher & Buzas, LLP, Alexandria, Virginia, USA

Keywords

Business plan, Entrepreneurship, Marketing planning, Small firms, New product development

Introduction
``If you don't know where you are going, any path will get you there''. This quotation illustrates the important role planning plays in determining the degree of success realized by a business. Essential elements to business success are identification of goals, followed by development of strategies to meet those goals. A business plan is an effective tool used by businesses to organize these goals and objectives into a coherent format especially for new or small businesses. It can be defined as operating a company on paper. No matter the size or stage of development, companies use business plans to improve internal operations and to describe and market the business to potential outside financiers. This paper seeks to address that utilizing business planning as a tool will allow new or small businesses to achieve and even surpass their goals.

Abstract

Planning plays an important role in determining the degree of success realized by a new or small business. Essential elements to business success are identification of goals, followed by development of strategies to meet those goals. A business plan is an effective tool used by businesses to organize these goals and objectives into a coherent format. It can be defined as operating a company on paper. No matter the size or stage of development, companies use business plans to improve internal operations and to describe and market the business to potential outside financiers. A business plan should not only reflect the individuality of the new business but should also follow a standard format. This format is comprised of four major sections: introductory elements, business section, financial statements, and the appendix. This paper seeks to address that utilizing business planning as a tool will allow new or small businesses to achieve and even surpass their goals.

Purpose of a business plan

Who should write a business plan? . new business owners; . new business owner seeking outside financing for start-up; . existing business owner seeking outside financing for expansion; and . any business owner who wants to increase the success of their business. The purpose of a business plan is to define the business and explain in as much detail as possible how the venture will operate in the current market. Most business owners are apprehensive about writing a business plan, but a well-developed plan provides unlimited benefits (Arkebauer, 1995). Operating the company on paper first provides an opportunity to identify potential problem
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The authors thank their research assistant, Stacy McGee, for her valuable assistance in gathering information for this paper.

areas and work out solutions without real world consequences (O'Connor, 1998). A business plan also communicates goals throughout the organization and helps the business stay focused on its objectives. After implementing the proposed strategies, the owner or manager can use the plan as a benchmark to identify both achievements of goals and areas that need improvement. However, a business plan should not be limited to a start-up tool but, instead, used as a working document to continually re-evaluate progress and clarify goals for the future. While a good business plan will not guarantee success, it can go a long way toward reducing the odds of failure (Crawford-Lucas, 1992). The presence of a business plan is highly correlated with the performance of the business and contributes to the growth of the firm (Orser et al., 2000). Despite the internal benefits, most entrepreneurs begin to develop a business plan because of its external function. Such a plan is a virtual requirement if the business is attempting to obtain outside financing. When approached about potential funding, either for a start-up business or for expansion of an existing business, the first thing a prospective investor or lender will ask to see is a business plan. It is the primary tool used by financiers to evaluate the potential of a business. Information investors are looking to obtain include specific and organized information about the company, an in-depth analysis of the business opportunity, and most importantly, the amount of money requested and how the money will be paid back (Hodges, 1997).

The writing of a business plan

Business plans tend to contain similar sections and follow an accepted format, but the length of the plan varies depending on the enterprise. A business plan should be long enough to contain the pertinent information, but not so long as to overwhelm the reader.

Management Decision 40/8 [2002] 755763 # MCB UP Limited [ISSN 0025-1747] [DOI 10.1108/00251740210437725]

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While Arkebauer (1995) suggests that the average recommended length is 40 pages and can often take six months to a year to complete, the Small Business Administration (SBA) (1993) points out that there is no set length to a business plan. However, the SBA indicates that the average length seems to be 30 to 40 pages, including the supporting documents section. When determining who will do the writing of the business plan, either writing the plan oneself or having a consultant do the writing, the benefits and drawbacks of each option must be considered. The American Woman's Economic Development Corporation advises that although it is beneficial to have an expert review your completed business plan, it is wise to write the plan yourself. By becoming an expert in your own business, you will know all of the industry trends, all about your customers, and all about your business as a whole (SBA, 1997). The opportunity for learning that writing your own business plan provides is worth the time spent on its development. While the benefits of writing your own business plan are numerous, it is definitely wise to have a consultant examine the business plan. An expert will be able to identify areas in the business plan that may need improvement before attempting to obtain outside financing. A common drawback of having a consultant write the business plan is the expense, since many new or small businesses do not have the funds necessary to cover such expenditures.

Table of contents

The table of contents provides the reader with a convenient way to find specific sections of the plan. All business plan pages should be numbered, and the table of contents needs to include page numbers for major sections and important subsections. While the cover page and table of contents may seem inconsequential relative to other portions of the plan, their significance should not be underestimated. Lenders and investors are inundated with business plans and if important sections cannot be found easily, or if there is contact information missing, the venture may not receive the attention it deserves.

Executive summary

The executive summary is the first main section of the business plan. It is designed to provide a summary for the reader of what they are about to read. It should first identify the amount and type of funding sought (either debt or equity) and then summarize company objectives, history, and financial information. The executive summary is typically between two and three pages long and should aggressively sell the business (Arkebauer, 1995). The executive summary is where many investors start reading. If their interest is not peaked, they may not read any further. The goal of the executive summary is to have the reader, ``read on'' (Brown, 1996). This section is also the place to note that back-up information is included in an appendix. Subsequent sections of the business plan provide more details on areas hi-lighted in the executive summary.

Sections of a business plan

Introductory elements
The introductory elements of a business plan include the cover page, table of contents, and executive summary. These sections provide the reader with important preliminary information about the company and where to locate relevant data within the plan (see the Appendix for an overview of a business plan format).

The business section

Cover page

The purpose of a cover page is to inform the reader what they are about to read and provide information about how to contact the business. The cover page is the first contact a potential financier will have with the business, so it is important to include all the necessary elements. The cover page should say the words ``business plan'' and should list the name of the person submitting the plan, name of the business, company logo, address, telephone number, fax number, and e-mail address.

Three main sections remain in the plan following the introductory elements: business information, financial statements, and the appendix. The business section should provide the reader with information about the industry, including status and trends, detailed product and development information, a description of the management team, and overall marketing strategy. This section describes in as much detail as possible how the business will actually operate.

Industry

The first portion of the business section should provide an overview of the industry the firm is entering. According to Sahlman (1997), the information investors want from this section is whether or not the total market for the venture's product or service is large or rapidly growing and whether the industry is structurally attractive. Investors look for large or rapidly growing markets

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because it is easier to break into a growing market than it is to struggle against competitors in a stationary market. Ideally, financiers would like to invest early in a market that has high growth potential. If the industry has high potential, the business plan should state explicitly how and why this is the case. Negative information about the industry should not be excluded. Discussing possible future challenges indicates a realistic view of the market. However, if the market is not growing, the business plan needs to convince the reader that the venture will still be able to make sufficient profit, making it beneficial for investors to participate (Sahlman, 1997).

product or service be successful in the marketplace?''.

Pricing

The company

Specific information about the company follows industry information. This section should begin with the overall company vision or mission statement. A mission statement is a one to two sentence description of the type and purpose of the business (O'Hara, 1995). A precise mission statement should show a clear purpose, because a business that is focused has a higher probability of success in the marketplace. Also included in this section is the overall business objective: either to purchase an existing business, start a new company, or expand existing operations. A period for completion of the objective is included, as well as the planned legal structure. Legal structure options include a sole proprietorship, partnership, corporation, and other hybrid combinations.

Pricing is another subject addressed in the business section: how much will be charged for a product or service and how that price was derived (American Express Website for Small Businesses, 1998). Investors will naturally look for opportunities in markets with value pricing; i.e. markets where the costs of production are low and consumers will still pay a lot for it (Sahlman, 1997). However, if value pricing is not evident in the product or service described in the business plan, this does not mean financing is unattainable. Value pricing is rare and profits are still attainable in low margin industries. The most important characteristic of the pricing section is where the pricing strategy realistically places the business in comparison to the competition. Business owners should not determine pricing to impress investors. For example, plans that describe a product or service as higher in quality than the competition but lower in price are unrealistic and damage credibility. Making it clear to investors that pricing has been well thought through can be more important than actual figures.

The market

The product or service

The next aspect to address in-depth is the actual product or service to be marketed. To succeed in obtaining capital the entrepreneur must be able to clearly and succinctly describe the product or service with the prospective audience in mind (Crawford-Lucas, 1992). This is especially necessary if the product is highly technical, and the reader needs a background to understand industry jargon. Also in the product/service section, investors look for identification of a core competency, which is the characteristic that sets the business apart from the competition. For example, IBM is not known by their users for technical superiority or low prices. Their core competency is ``customer service'' (Arkebauer, 1995). Because the business environment is constantly changing, the business plan should address how the business will retain its unique advantage if competitors begin offering products with the same features. The essential question for financiers in this section is: ``Why will the

The section on market description expands on the points mentioned in the industry portion and includes an evaluation of target customers and competition. The central question in customer evaluation is: ``Who is the market?'' (Arkebauer, 1995). Investors are looking for businesses that know their customers and the problems they are solving for them (Elkins, 1996). Important customer data includes, target market, economic make-up of customers, where they live or work, and why and where they purchase. Regardless of industry, all businesses will have competitors. The competitor section indicates where the product or service fits in the current environment. An analysis of this environment indicates to investors that the entrepreneur has a solid understanding of the industry and is realistic about the obstacles the business will face in the marketplace. Competitor information includes annual sales, market share, and how the competitors are or are not meeting customer needs (American Express Website for Small Businesses, 1998).

Marketing plan

After defining the product, pricing, competition, and customers it is necessary to incorporate aspects of each category into a marketing plan. Marketing is, ``the process of planning and executing the conception,

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pricing, promotion and distribution of ideas, goods and service to create exchanges that satisfy individual and organizational objectives'' (Hisrich, 1992). A marketing plan explains to the reader how the business plans to attract, educate, and retain customers. Attracting customers or advertising includes detailing how the target market will be informed about the product. A business plan includes the selected medium; for example, direct marketing, advertising, or special promotions (Brown, 1996). Educating customers is the content of the information provided through advertising and includes the core competency of the product or service.

Management team

then substantiated with financial statements including an income statement, balance sheet, statement of cash flows, and breakeven analysis. Typically, five-year projections are used, with month-to-month projections for the first year, quarterly for the second and third year, and annual projections for the fourth and fifth years. Readers of business plans realize that projections are a ``best guess'' but similar to the pricing of products or services. If the assumptions are realistic and logically developed they are more believable. Before presenting a business plan to a prospective financier, it is recommended that the owner have the financials reviewed by a certified accountant.

The most important section of the business plan is the section describing the management team, since most investors feel that without the right team none of the other parts of the business plan really matter (Sahlman, 1997). Even a mediocre product can make a successful company if there is excellent management. Conversely, bad management can make the best product a failure (Elkins, 1996). Investors prefer to deal with a management team that has proven industry experience because it is considered a lower risk investment when compared to a less experienced management team. A typical professional venture capital firm receives over 2,000 business plans a year, filled with new and innovative ideas that the majority of venture capitalists believe are a dime a dozen (Sahlman, 1997). They are more concerned about execution skills than product. According to notable venture capitalist Arthur Rock, who was involved with the formation of companies including Apple, Intel, and Teledyne, ``I invest in people, not ideas''. Important factors about these people include where they are from, the level and place of education, work history, and special skills.

Income statement

Financial statements

Essential to the success of any new or small business enterprise is the management of resources. According to the SBA, each year thousands of potentially successful businesses fail because of poor financial management. Providing financial data in a business plan is necessary for all businesses, including start-ups and just-formed companies that have not processed any transactions. The financial section of a business plan begins with a brief narrative summarizing the projections, addressing key figures including those for sales, expenses, net income, and total growth in assets and net worth (Arkebauer, 1995). The narrative is

The principal purpose of the income statement is to report whether or not the entity operated at a profit for the reporting period. The income statement begins by stating revenues from operating activities. Revenues are measured by the amount of cash received or expected to be received from a transaction. To calculate net income, the costs and expenses incurred in generating those revenues are subtracted. Gains and losses are also included in an income statement. These items result from nonoperating rather than the day-to-day operating activities that generate revenues and expenses. Because of the importance of the net income figure to potential financiers, it is important to focus on presenting the appropriate form and content of this statement. The income statement is also valuable as a planning tool to control business operations (Brown, 1996). Using sales and expense estimates, target monthly income can be forecasted. After calculation, projections are useful as goals for business operations and later for comparison purposes. Examining any large differences between estimated and actual income can help identify problem areas and assist in future budget development.

Balance sheet

A balance sheet reports what assets, liabilities, and owners' equity an entity has at a given point in time. The definition of an asset is anything of value owned or legally due the business. Assets are further classified as current assets, long-term assets, and fixed assets. Current assets are those assets the company intends to liquidate within the next 12 months and include cash, accounts receivable, inventory, and short-term investments (SBA, 1998). Long-term investments or long-term assets

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are those holdings the business intends to keep for longer than one year and typically include stocks, bonds, and savings accounts. Fixed assets, the final category, are those assets that the business owns or has acquired for use in operations and do not intend to resell. These include land, buildings, improvements, equipment, and automobiles (SBA, 1998). The liability portion of the balance sheet lists debts and other outstanding obligations. Similar to assets, liabilities are divided into current and long-term liabilities. Current liabilities are those liabilities due within the next 12 months. Long-term liabilities, such as long-term debt, are obligations that extend longer than 12 months. The final component of the balance sheet is owner's equity or net worth. Net worth is the claim of the owners on the assets of the business (SBA, 1998). The business plan should include a current balance sheet in addition to a projected balance sheet showing the expected growth. In writing a business plan for a start-up business a personal balance sheet for the owner, outlining personal assets and liabilities, is also included (Arkebauer, 1995).

Appendix of a business plan

Statement of cash flows

Writing a business plan requires an entrepreneur to use a variety of assumptions in order to forecast future events. These assumptions range from how fast the market will grow, to how the competition will react to a new entrant into the marketplace. Assumptions contained in the business plan must be documented and explained. This will provide a common frame of reference for the management team and an audit trail for use in future planning (Meloy, 1998). Challenging the assumptions and providing information on contingency plans should the assumptions prove false, enhances a business plan. Formulating plans for what-if scenarios indicates to investors that the business has a realistic view of the market and will be more prepared when the reality differs from projections. Substantiation for assumptions is included in the final sections of the business plan, the appendix. The appendix also includes any information to supplement important references in the business plan. Appendix information typically includes research data, additional financial information, diagrams, and personal testimonials.

The statement of cash flows is the most important of the financial statements because the single thing that distinguishes a business that is going to make it from one that is not is the capacity of the entrepreneur to manage the cash flow (Gracie, 1997). This is because one of the greatest threats to startup businesses is lack of liquidity. Using expected cash inflows and outflows can help management determine when additional cash will be needed throughout the year and plan accordingly. It is possible for businesses, especially new or expanding businesses, to be profitable on paper but not have enough cash to pay suppliers or employees. The need for cash can start a downward spiral of having to borrow additional money to meet current expenses, which then leads to greater interest payments. A larger interest payment further restricts cash flow and puts the owner in a position where they would need to borrow again. When drafting a cash flow statement, this scenario can be avoided by not underestimating costs and overstating cash flow. In addition to benefits received by the business, the cash flow statement is also critical because of its importance to the readers of business plans. Bankers use it to determine how the loan will be repaid, and an equity investor uses it to determine the compensation expected from the investment (O'Hara, 1995).

Additional information for investors

A good business plan will address two additional concerns of investors, the risks associated with investment and those with harvesting. While the future is difficult to predict, it is possible to give investors a sense of the type of risk and reward they would be assuming in the venture (Sahlman, 1997). No business is without risks and when owners identify what these risks are along with possible solutions, it increases the credibility of the writer. The opposite is also true. If an investor discovers negative information that the owner did not disclose, credibility is lost (American Express Website for Small Businesses, 1998). Prospective financiers will also be interested in harvesting. Harvesting is the ultimate objective of the business and the point where investors get money out of the business (Sahlman, 1997). Harvesting can include development and sale of the business or making a public stock offering. Harvesting is a particular concern to venture capitalists in determination of return on investment.

Sources of capital
One of the biggest challenges of starting and operating a business is financing. Financing options vary, depending on the current stage of the business and the entrepreneur's

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acceptable level of external involvement. New business owners rarely have many financing options. Most start with ``bootstrap financing'': launching ventures with modest personal funds (Bhide, 1992). Personal funds typically include personal savings, investment by family and friends, second mortgages, and credit cards. According to a survey conducted by Winborg and Landstrom (2000), six other methods of bootstrap financing are acknowledged. These methods include: 1 buying used equipment as an alternative to buying it new; 2 seeking out the best possible conditions with suppliers; 3 withholding the salary of the manager; 4 delaying payments made to suppliers; 5 developing a routine to speed up invoicing; and 6 finding other businesses that will lend their equipment. The advantages of bootstrap financing include not having to answer to a creditor or outside investor, and it can help new businesses increase their efficiency. Working with lower levels of cash flow will reveal hidden problems and force the company to find solutions. When external financing is used and problems arise, the solution tends to be ``more money'' rather than addressing the underlying problem (Bhide, 1992). For existing firms that have proven their viability, external financing is often sought to fund company expansions. There are two broad categories of external financing: debt financing and equity financing. Debt financing is money borrowed from a creditor that is paid back over a period with interest. Equity financing is capital permanently invested in the business. While the business has no legal obligation to repay the money, the investor shares ownership and risk in the business (O'Hara, 1995). Debt financing for small businesses typically consists of bank loans. To ensure protection in case of default, banks will generally require collateral for loan approval. The collateral requirement excludes most start-up businesses from bank loans because the business is not operational and has not accumulated sufficient equity for the bank to consider making the loan. However, banks will loan to start-up businesses if the loan is guaranteed by the SBA. The SBA guarantees loans for small firms that meet certain financial and documentation criteria. SBA loans usually require at least one third of the required capital be supplied by the owner (Hodges,

1997). SBA loans are typically administered by the lending bank. Two of the largest sources of equity financing are venture capital firms and financing ``angels''. Venture capital is money invested by a professional management group or individual, seeking a higher than average rate of investment return (Arkebauer, 1995). They invest in young liquid high-growth companies expecting to provide a 25 per cent to 50 per cent annual return on investment (O'Hara, 1995). Because of these requirements, this source of funding is usually not appropriate or available to start-up businesses. Instead, firms fund a small per cent of projects considered, provide guidance and management advice and hope to have one or two highly profitable ventures to meet their expectations (O'Hara, 1995). Venture Economics, Inc. found that only 7 per cent of (its?) investments accounted for 60 per cent of (its?) total profit (Bhide, 1992). Obviously, in order to find that one success, venture capitalists must be very selective about the businesses they fund. The necessary criteria include a distinct product that targets hundred million-dollar markets, well-defined plans and an experienced management team. These characteristics are rarely present in the majority of smaller start-up businesses. According to the Global Entrepreneurship Monitor (GEM), 1999 was an incredible year for the venture capital industry. In the USA, $46 billion in ``classic'' venture capital was invested (classic venture capital excludes investments in acquisitions and buyouts), which is a 150 per cent increase over the 1998 investments and more than eight times the amount invested in 1995 (Ewing Marion Kauffman Foundation, 2000). The other common types of equity investors are private investors, known as financing ``angels''. Angels do not have the same strict profit producing criteria as venture capitalists but still target higher than average risk investments. Angels typically require at least a 20 per cent or greater compounded annual return on investment (O'Hara, 1995). Angels are less concerned with total return than venture capitalists because angels are typically wealthy enough that the investment returns are not critical to their income. Any losses are tax deductible and will not significantly affect their lifestyle (Mason and Harrison, 1996). Investments are often made for personal reasons; for example, continued involvement in the business community and entrepreneurial process, or financing a business that produces socially useful products or brings economic benefits to a local community. Studies have indicated that

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business angels are willing to trade some financial returns for other non-financial benefits (Mason and Harrison, 1996). Angels also tend to be experienced investors and when selecting investments rely more on personal instinct rather than extensive business evaluation (Mason and Harrison, 1996). Because the evaluation is less thorough, angels assume more risk and usually make faster investment decisions than venture capitalists. According to the SBA (2001), lenders often evaluate the ``six C's'' when considering a request for a loan: 1 Character resumes and references are checked to see if management has the experience and determination necessary to successfully run the business. 2 Credit personal and business credit reports are reviewed to see if the individuals are willing to repay debts. This is also an indication of an individual's character. 3 Capital how much money are you putting into the deal? Lenders will not finance 100 per cent of your business. You should expect to put in 20-40 per cent of the project. 4 Capacity the ability of the business and management to operate at a level sufficient to make debt payments. 5 Collateral assets pledged to secure the loan. This will include personal as well as business assets. 6 Conditions refers to outside influences that will affect the business such as the local economy and competitors.

According to Mills (2001), venture capitalists, investment banks, and brokerage houses share in the blame for the dot-com crash. By offering so much money to the dot-coms and being impatient for large returns, entrepreneurs were tempted to disregard fiscal responsibility. The article advises investors to resist the temptation to search for traditional business plans, clearly identified customers, and foreseeable cash flows and profits because e-commerce remains a new area where flexibility, imagination, and patience will be rewarded.

Conclusion
As research by Crawford-Lucas (1992) and Orser et al. (2000) indicate, businesses that utilize business plans are typically more successful than others. Crawford-Lucas (1992) mention that while a good business plan will not guarantee success, it can go a long way toward reducing the odds of failure, and Orser et al. (2000) comment that the presence of a business plan is highly correlated with the performance of the business and contributes to the growth of the firm. Therefore, for future research, we challenge practitioners and academicians to get together and create practical documents that can be used as guidelines for entrepreneurs, managers, as well as executive MBA students, to improve the understanding of how a business should operate. The purpose of a business plan is to define the business and explain in as much detail as possible how the venture will operate in the current market. A business plan is used for both internal and external purposes. For external purposes, a business plan is a requirement if a new or small business hopes to obtain external financing. It is the primary tool used by financiers to evaluate the potential of a business. For internal operations, a business plan will help the entrepreneur to clarify short and long-term objectives and the means by which to achieve those objectives. A business plan should reflect the individuality of the new business but follow a standard format. Business plans are comprised of four major sections: 1 introductory elements; 2 business section; 3 financial statements; and 4 the appendix. First, the introductory elements provide the reader with important preliminary information about the business and where to locate relevant data within the plan. Second,

Online businesses

Financing has become an important issue for online businesses in the dot-com era. Investors for online businesses have become more cautious following the dot-com crash, which is making it more difficult for these businesses to obtain financing. Michael Linnert, a general partner at Technology Crossover Ventures, a venture capital firm, comments that companies which are unable to obtain financing are left with the challenge of either shutting their doors, finding a buyer, or taking cash at any price (Hamilton, 2000). Inc. (2001) reports that the number of dot-coms which submitted business plans to venture capitalists between 1994 and the first quarter of 2000 was 500,000. During this time, 3,000 to 5,000 dot-coms actually received venture capital funding and only 600 went public or were acquired. However, the amount of venture capital investment in Internet companies went from $19.9 billion in 1999 to $35.2 billion in 2000.

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the business section describes in as much detail as possible how the business will actually operate. Third, according to the SBA, each year thousands of potentially successful businesses fail because of poor financial management, therefore, timely and accurate financial statements can improve the chances of success for a business. Fourth, the appendix includes substantiation for assumptions along with any information to supplement important references contained in the business plan. To ensure business success, a business plan serves as a comprehensive road map that focuses the business on both the destination and the consequent path.

American Express Website for Small Businesses, available at: www.americanexpress.com/ smallbusiness/resources/starting/biz_plan (accessed 28 May 1998). Arkebauer, J.B. (1995), Guide to Writing a High-Impact Business Plan, McGraw-Hill, New York, NY. Bhide, A. (1992), ``Bootstrap finance, the art of start-ups'', Harvard Business Review, November-December, pp. 109-17. Brown, C. (1996), ``The do's & don'ts of writing a winning business plan'', Black Enterprise, April, pp. 114-22. Crawford-Lucas, P.A. (1992), ``Providing business plan assistance to small manufacturing companies'', Economic Development Review, Winter, pp. 54-8. Elkins, L. (1996), ``Tips for preparing a business plan'', Nations Business, June, pp. 60R-61R. Ewing Marion Kauffman Foundation (2000), ``Global entrepreneurship monitor 2000'', available at: www.emkf.org (accessed 13 July, 2001). Gracie, S. (1997), ``Don't underestimate costs and overstate cash flow'', Management Today, October, pp. 108-9. Hamilton, D.P. (2000), ``Angels of death: reality bites hard as string of dot-coms sees funding dry up . . .'', Wall Street Journal, 25 May. Hisrich, R.D. (1992), ``The need for marketing in entrepreneurship'', Journal of Consumer Marketing, Summer, pp. 43-7. Hodges, S. (1997), ``One giant step toward a loan'', Nations Business, August, pp. 34-6. Inc. (2001), ``The dot-com riches-to-rags index'', Inc., Vol. 23, 29 May, pp. 30-1. Mason, C. and Harrison, R. (1996), ``Why `business angels' say no: a case study of opportunities rejected by an informal investor syndicate'', International Small Business Journal, January-March, pp. 35-51. Meloy, R.G. (1998), ``Business planning'', The CPA Journal, March, pp. 74-5.

References

Mills, D.Q. (2001), ``Who's to blame for the bubble?'', Harvard Business Review, Vol. 79 No. 5, May, p. 22. O'Connor, T. (1998), ``Take the initiative to write a viable business plan'', Denver Business Journal, February, p. 21A. O'Hara, P. (1995), The Total Business Plan, John Wiley & Sons, New York, NY. Orser, B.J., Hogarth-Scott, S. and Riding, A.L. (2000), ``Performance, firm size, and management problem solving'', Journal of Small Business Management, October, pp. 42-58. Sahlman, W.A. ( 1997) ``How to write a great business plan'', Harvard Business Review, July/August, pp. 98-108. SBA (1993), ``How to write a business plan'', Small Business Administration, available at: www.sba.gov/library/pubs/mp-32.doc (accessed 7 March 2002). SBA (1998), ``Financial management'', Small Business Administration available at: gopher://www.sba.gov:70/00/business . . . onTraining/Business-Plan (accessed 25 June, 1998). SBA (2001), ``North Dakota small business resource guide'', Small Business Administration available at: www.sba.gov/ nd/ndguide11.html (accessed 5 July, 2001). SBA Online Women's Center American Woman's Economic Development Corporation (1997), ``General guidelines for developing your business plan'', Small Business Administration, June, available at: www.onlinewbc.gov/DOCS/starting/ bp_sample.html (accessed 7 March, 2002). Winborg, J. and Landstrom, H. (2000), ``Financial bootstrapping in small businesses'', Journal of Business Venturing, December, pp. 235-54.

Appendix: summary of business plan sections

1. Introductory elements
This should include the cover page, table of contents, and executive summary. Provides the reader with preliminary information. . Cover page contains information on how to contact the business. . Table of contents shows the reader where to find specific information. . Executive summary provides a summary of the business and is designed to create reader interest.

2. The business section

This should describe in detail how the business will actually operate. . Industry provides information on market growth stage and industry potential.

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Amir M. Hormozi, Gail S. Sutton, Robert D. McMinn and Wendy Lucio Business plans for new or small businesses: paving the path to success Management Decision 40/8 [2002] 755763

Company includes company mission statement and comprehensive business objective. Product or service describes the product or service in depth including identification of a core competency. Pricing includes the price of the product/service and how the price was derived. The market evaluates target customers and competitors. Marketing plan explains how the business plans to attract, educate and retain customers. Management team description of management team includes level and place of education, work history and years of experience in the industry.

3. Financial statements

This should outline the present financial situation and outlook for the future. Current financial data is provided in addition to five year projections. . Income statement provides a summary of revenues and expenses. . Balance sheet contains information on the company's assets and liabilities. . Statement of cash flows shows the reader how the business plans to manage cash flow.

4. Appendix

This section is where the writer can supplement portions of the business plan with additional material if necessary.

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