The 5 Cs: Building Blocks of Business Planning

If you’ve done research about how to write a business plan, you’re probably wondering what is the best format for creating a comprehensive business plan. There are literally hundreds of business planning books out there, each suggesting a different “right way” to go about it. However, when you take away the fancy headings and the complicated outlines, they all contain basically the same information. Forget about the fancy structure, because business plans are a lot like a box of chocolates, it’s what is inside that counts. No matter what outline you follow (or even if you make up your own), your plan should cover the 5 C’s of business planning: Concept, Capacity, Customers, Competition, and Cashflow.

Concept

Your business plan should include a detailed description of the business you want to start.

  • What is the name of your business?
  • What products and/or services will you offer?
  • What is special, unique, or important about your products and/or services?
  • Why is this business the right business?
  • What are your goals for the business?
  • How will you achieve these goals?
  • Where will your business be located? Why did you choose that location

Tip: Imagine you are sitting on an airplane and the stranger seated next to you asks, “So, what do you do for a living?” You only have about one minute to describe your business before their attention fades. What would you say? Remember to use clear, concise, plain language. After all, the person sitting next to you is not likely to be an expert in your field.

Capacity

Your business plan should demonstrate that you have what it takes to ensure the success of the business.

  • Is your venture appropriately staffed and structured to carry out the goals of the business?
  • Do the members of the management team possess the requisite business skills as well as the industry-specific skills and experience needed to successfully operate the proposed enterprise?
  • Does your plan look realistically at least two years into the future of your business?

Remember: It takes a wide range of skills to run a successful business. If you want to start a plumbing business, of course you (or someone on your team) will need to be a skilled and experienced plumber. However, you’ll also need other skills like management, marketing and bookkeeping.

Customers

A business without customers really isn’t a business at all. Your business plan should demonstrate that you have a solid understanding of who your customers are and what they want and need.

  • Who will your customers be and, more importantly, who will your best customers be? Describe them in terms of where they live, age, gender, approximate income, interests, what drives their buying decisions, and other defining characteristics.
  • Does a sufficient customer base exist? How do you know?
  • What will your customers expect from you?
  • How do you plan to attract, hold, and expand your market share?
  • What national, regional and local industry trends, market trends, and other forces will impact the business?

Tip: An old business adage says that eighty percent of your profits will come from twenty percent of your customers. The key is to figure out who that twenty percent will most likely be, and what will keep them coming back for more.

Competition

A sound business plan demonstrates an understanding of the competition and how they do business.

  • Who will your business be competing against?
  • How does your competition compete?
  • What are the strengths of your competitors?
  • What is your competitive edge?
  • Is there room in the market for a new entrant?

Don’t be fooled: Every business has competition. When analyzing your competition, don’t forget about your indirect competitors: those providing products and services to your markets who may not sell the exact same products or services that you do, but are competing for your customers’ dollar. Delivery services like Federal Express and the U.S. Postal Service, for example, must contend with the Internet, which enables instant electronic document delivery across the globe. While not a delivery service per se, this indirect competitor has a tremendous impact on their bottom line.

Cashflow

Your business plan should take a realistic look at how the money will work in your business.

  • What is your break-even point?
  • Do cash flow projections demonstrate that you can reasonably expect to be financially self-sufficient with income generated from the business venture?
  • Is the business adequately capitalized?
  • What have you personally invested in the business (including money, equipment, and other resources)?

Note: A primary cause of new business failure is under-capitalization (not enough money). A business is undercapitalized if it does not have enough money to cover start-up costs plus operating expenses until the business begins to generate income. Do not open for business unless your cash flow projection demonstrates that you can operate for at least nine months without running out of money. For some businesses, a “cushion” of up to two years is advisable.

If you plan to use your business plan to secure a loan or grant…

If you plan to use your business plan to secure a loan or grant, be sure to also address the following cash-related questions:

  • Exactly how much money are you requesting, and how will it be used?
  • Are the costs reasonable and consistent with business necessity?
  • Are cost estimates based on competitive quotes?
  • If there is more than one source of funds, include letters of commitment.

Tip: It is risky to guess what it will cost to start and run your business. Luckily, there is no need to guess. You can determine your costs with a high degree of accuracy by shopping around for the services, equipment, and supplies you’ll need. Get detailed estimates from multiple vendors, and don’t overlook the possibility of renting, leasing, borrowing or buying second-hand.

Return to the resources page.