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Chapter 3. Step One: Create a Business Plan > How to Create a Business Plan

How to Create a Business Plan

You may think that a business plan has to be a complex document, full of long sentences, overly technical terms, convoluted legalese, and detailed financial data. Nothing could be further from the truth. If you can talk about your business—and you no doubt can, at length—then you can create an effective business plan.

The best business plans are conversational in tone, are easy to read and understand, avoid as much legalese as possible, and only include enough financial data that is necessary to paint an accurate picture of your business's potential. In fact, you could probably dictate the bulk of your business plan in a single sitting, based on your inherent knowledge of what it is that you're trying to accomplish and why.

Imagine you're sitting in a restaurant or a coffeehouse, and someone you know comes up and asks you what you're up to these days. You answer that you're in the process of starting up a new eBay business, and then you start to tell a little story. You tell this person what your business is all about, why you've decided to get into this eBay thing, what kind of opportunity you see, and how you intend to exploit that opportunity. If you're on good terms with the person you're talking to, you might even share the revenues and profits you hope to generate.

Here's the type of story you tell:

“Let me tell you about what I plan to do. You see, there's a big market out there for gift baskets. They're very popular with women, especially older women, who buy them for gifts. They're so popular, eBay has created a dedicated gift basket category on their site.

“I did a search on eBay and found that the average gift basket sells for about $20, and in a typical week there were more than 500 auctions for these items. I've found a source for gift baskets that are better than what you typically find online, and think I can provide eBay's buyers with a better product than they're currently getting, but for a similar price.

“My source will sell me these gift baskets for $5 apiece. If I sell them for $20, on average, I think I can take 10% of the sales in the category. That means I'll be selling close to 50 gift baskets a week. Taking all my costs into account, that should generate about $30,000 in profit a year.

“To handle this volume of sales, I plan to set up kind of an assembly line in my spare bedroom. I'll buy the gift baskets in bulk and store them in my garage. I can purchase shipping boxes from my local box store, and ship the baskets via Priority Mail. The buyers will pay all shipping costs, which I'll inflate a little to cover the cost of the box and packing material.

“In addition, I'm going to subscribe to one of those auction management services, which will make it easier to manage all my customer communication and keep track of who's paid and what needs to be shipped. And I'll sign up for PayPal, so I can accept credit card payments.

“At the start, I think I can manage the entire business myself—which is what I'm quitting my job to do. If things really take off, I can hire my cousin Helen to help me out with the packing and shipping. But that's probably down the road; for now, it'll be just me, which is all I'm planning for. If I can hit my numbers, I'll be very happy to take home $30,000 a year for my efforts.”

As you can see, this short story (a little more than 300 words) tells your audience everything they need to know about your planned eBay business. They know why you're starting the business, they see the opportunity presented, they understand how you expect to profit from that opportunity, they sense the unique things that you intend to do, and they learn how much money you expect to make. It's all there, presented in a logical order; everything important is included, with nothing extraneous added.

In short, you've just created your business plan—orally. Now all you have to do is put it down on paper.

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