THE FULL BUSINESS PLAN GUIDE THE FULL BUSINESS PLAN GUIDE

AND TEMPLATE for ArtistsAND TEMPLATE for Artists

Art Industry LawPresents

© Daniel Friedson & Meredith Calfe, 2010

IntroductionIntroductionThis is a guide to writing a business plan. Some areas

of this guide are very general, some areas are very specific.

If you don't know the answers to some of these

questions, or if the questions don't seem applicable, that's okay.

Knowledge is empowering. Articulate your process as best you can: so you understand yourself and to help others understand it before you work together.

ArtistsArtists Need Business Plans Need Business Plans

TooTooA business plan sets goals for the proprietor to accomplish in the

market place. Then the business plan answers the questions of how to reach these goals.

Often, artists fail to maintain a viable art-business because they fail to consider the needs of grant-makers or galleries, or what other artists like themselves are offering the market place.

Backers want a real value for their dollars: Collectors, foundations, managers, curators, etc.

The grant-making sector has moved toward autonomy characterized by the double-bottom line, which means paying heed to both (1) the mission of the grant-maker and (2) the future sustainability of the proposal.

Good intentions and raw talent are not enough. Accountability and plan execution are requisites to market-place survival.

Follow Up with Public Follow Up with Public Resources and Qualified Resources and Qualified

ProfessionalsProfessionalsWhen you are all done with this plan, go over it and

compare it to resource books commonly found at your local SBA (Small Business Administration) or library.

You can change the titles and organization around and cut out what doesn’t work for you.

You should consult a professional Certified Public Accountant (CPA) to review and help prepare your Finances section.

What is the Purpose of a Business Plan?What is the Purpose of a Business Plan?A business plan is a selling document that conveys the excitement and

promise of your business to any potential backers or stakeholders.

To convince yourself about the business, and refine the concept to yourself.

To convince family, or any other institution to make a financial commitment.

To illustrate the benefits/costs of strategic goals.

To obtain large contracts that will reach far into the future by demonstrating that your art will be relevant in 3‑5 years, bigger and stronger than it is now.

To attract talent and key collaborators.

To enable you to better understand your art work's industry, culture and rationale for doing business (it’s “mission statement”).

To help you stand apart from the crowd for a foundation, collector or gallery.

To motivate and focus yourself and your team with clear goals.

A Quick Note on Writer's Block: A Quick Note on Writer's Block:

II

A business plan requires a large amount of information and creativity. But the truth is, most of the information you need to write your business plan is already in your head. The purpose of this guide is to help you extract and organize it.

Work on this project a day at a time, for 2‑3 hours a day. Get a notebook, answer the questions as you go along and be sure to LABEL each section of your answers. Use the Table of Contents provided.

TABLE OF CONTENTSTABLE OF CONTENTS1. EXECUTIVE SUMMARY2. THE PROPOSED ARTS VENTURE A. Business Strategy

i. Introductionii. Analysis of the Artist's Past Successes and

Problemsiii. Description of Artist's Current Status v. Outline of Artist's Future

Goals B. Description of the Management Team

i. What the Management Team Can Provide ii. Management Team Members

3. THE MARKET A. The Consumers B. The Benefits of the Venture C. Market Research D. Assessment of the Competition

i. Analysis of the Competitors ii. Lessons Learned from Competitors

E. Pricing

4. THE PRODUCTS & SERVICESA. Product/Service FeaturesB. Delivery ScheduleC. Ongoing Services

5. SALES AND PROMOTIONSA. Selling ApproachB. Motivation Strategies for the Sales ForceC. Venture Promotion

6. FINANCESA. Profit/Loss StatementB. The Balance SheetC. Cash Flow Statement

7. APPENDIX

A Quick Note on Writer's Block: IIA Quick Note on Writer's Block: II

• You will be tempted to procrastinate. Do not procrastinate! Procrastination is a form of fear. There's nothing to fear here. It may be tedious at times, but never scary.

• Ready? Aim? Fire! Be sure your goals are properly and realistically aimed. Ready, fire, aim gets you shot in the foot . . .

A Quick Note on Writer's Block: IIIA Quick Note on Writer's Block: III

You will be writing, and therefore, you will get a case or two of writer’s block. The following is a makeshift remedy for writer's block:

1) Pose the right questions to yourself before you conclude that you have nothing to say,

2) Provide bite‑sized answers to those questions (you can always go back later and elaborate), and

3) Keep a little notepad or voice recorder on you at all times!

I. TITLE PAGEI. TITLE PAGE Include the following: (1) the name of the Proposed Arts Venture, (2) the

contact person and his/her title, (3) address, (4) phone number, (5) a copy number, and (6) this warning: “The material in this plan is private information and is not to be copied or transmitted.”

Copy # 01 Name of the Proposed Art Venture Artist’s Name 123 Easy Street Small Town, PA 45678 Phone: (910) 123‑4567

Include a different copy number for each copy that you hand out so you can keep track of who has what copy. Always ask for the business plan to be returned to you. Give your reader 2‑3 weeks to read it. If they want to hold on to your plan because they are going to fund the plan, no problem. Otherwise, ask why they want to keep it? Decide for yourself. There are risks of theft in the arts’ industry, as any.

II.II. TABLE OF CONTENTS TABLE OF CONTENTS Use the example below as a general guide. Your table of contents should be as detailed as possible. Design it so a very busy person can flip to the exact page for a specific subsection.

1. Executive Summary. . . 2. The Proposed Arts Venture. . . 3. The Market. . . 4. The Products & Services. . . 5. Sales and Promotion. . . 6. Finances. . . 7. Appendix. . .

1.1. EXECUTIVE SUMMARYEXECUTIVE SUMMARYThe executive summary is the business plan in

miniature. At most this section should be one page.This section should be able to stand alone while

capturing the excitement and the essence of the business. This is not an easy task, so allow for awkward first‑drafts. Get it all out, then edit later.

Our personal preference is to write this section last because the essential highlights of a business tend to become more obvious as the rest of the plan is written.

The reader should be able to read this and say, "So that's what these people are up to!"

What are you up to?

2.2. THE PROPOSED ARTS THE PROPOSED ARTS VENTUREVENTURE

A. Business Strategy i. Introductionii. Analysis of the Artist's Past Successes and

Problemsiii. Description of the Artist's Current Statusiv. Outline of the Artist's Future Goals

B. Description of the Management Teami. What the Management Team Can Provideii. Management Team Members

2.2. THE PROPOSED ARTS THE PROPOSED ARTS VENTUREVENTURE

Primarily, this section discusses your business strategy and your management team. Your strategy and your team should be evaluated from the perspectives of the Artist's history and the Artist's current situation.

Introduce the Proposed Arts Venture. How old is it? Is it a new endeavor? How many employees or planners? Where is it located? Where is it seeking to be located? Is it seeking to become part of an existing organization?

Now let's move on to the first subsection, Business Strategy.

A. Business StrategyA. Business Strategyi. Introductioni. Introduction

What is the Proposed Arts Venture’s overall approach to producing and selling its products or services? What are its goals for maximizing success?

•Maintain a consistency between what you plan to do and what your plan will support.

•Explain how your Proposed Arts Venture is going to change patterns. If your venture has a marketing problem, are you going to hire new management with a proven track record in marketing an analogous venture?

ii.ii. Analysis of the Artist's Past Analysis of the Artist's Past Successes and ProblemsSuccesses and Problems

Address these events directly and honestly.Include both the positives and the negatives.For start‑up ventures, the past can only be dealt with in

terms of individual managers.◦ What have these individuals accomplished in managerial terms?◦ Do they have analogous start‑up skills? ◦ Are those skills transferable to this venture?

iii.iii. Description of the Artist's Description of the Artist's Current StatuCurrent Statuss

Start‑ups can use analogous ventures for this section if this information is available and relevant to your goals for this plan.

Is the Artist operating at a profit or a loss?· What have been the recent sales and earning trends?· What recent important changes have taken place in the product or service mix?· Are there any other significant changes?

Here you may touch on areas considered in greater detail later in the plan. Simply make a footnote which indicates (1) why all the detail isn't supplied here and (2) where exactly (section, subsection, and page number) the issue is discussed further.

iv.iv. Outline of the Artist's Future Outline of the Artist's Future GoalsGoals

Try to keep the description of future strategy and goals in keeping with what has happened before, for example:

o Past successes and current successes with evidence that you have learned from your past mistakes and the mistakes of others who are similarly situated.

o If there will be significant deviations from the norm, explain clearly and strongly how they will occur.

B. Description of the B. Description of the Management Team Management Team

i. What the Management Team Can ProvideExplain how the people running the proposed venture

have what it takes to enable you to fulfill the strategy.◦ Describe individual decision‑makers' past accomplishments and

explain how these accomplishments are relevant to strategy fulfillment.

◦ If there is a management need missing from the management team either:

a) explain why it is not needed or b) explain your plan for filling the need, for example,

bringing‑aboard an individual with a proven track‑record in that area or other organization strengths.

Avoid common management team Avoid common management team traps, for example:traps, for example:

1) The One‑Man‑Band Syndrome: putting too much responsibility into the hands of a single leader.

2) Lack of Diversity: choosing managers who all have the same background.

a) Talk about the diversity of the management team and how it is relevant to strategy fulfillment, for example,

- technical expertise (engineers)- marketing expertise- financial expertise

ii.ii. Management Team MembersManagement Team Members

• Describe the management team members in just a paragraph each.

• Demonstrate that you are making the most of your resources‑‑‑ use everyone's expertise and capabilities to their fullest in your descriptions; this includes listing consultants or part‑timers who are key players.

3.3. THE MARKET THE MARKET This is the longest part of the plan.

A. The ConsumersB. The Benefits of the VentureC. Market ResearchD. Assessment of the Competition i. Analysis of the Competitors ii. Lessons Learned from the Competitors

E. Pricing

A.A. The ConsumersThe ConsumersWho are the buyers?

◦ Demographics explain the parameters of your potential consumers, for example, sex, age, annual income, geographic locations.

◦ Once you understand these parameters, your choices about trying to reach them become clearer.

CAVEAT: "Marketing" does not equal "selling”

◦ Marketing is identifying your customer‑prospects and determining how to best reach them.

◦ Selling is convincing those prospects to buy from you (selling will be treated in part 5 of this plan, do not analyze it here.)

B. The Benefits of the B. The Benefits of the VentureVenture

You may want to organize this subsection of the plan by benefit‑categories, i.e., financial benefits, life‑style benefits, health benefits, time benefits, etc. Be creative.

You must identify what your Proposed Arts Venture is really selling, for example, you do NOT sell pottery classes to kids, you sell benefits to customers, such as: after school solutions to double-income families which result in benefits such as lower child-care costs and safety.

The best benefits are those that help directors of foundations and galleries, even individuals who buy your art or services.

Make money Feel goodFulfill their mission Save timeEnhance their reputations Save money Capture history or culture HealthEducation Convenience

As much as possible, try to quantify the amount of money made or saved. Ex: If a couple pays $400 a month for their neighbor to watch their children after school,

and your Proposed Art Venture will cost them $200 for a month of pottery classes, then you are selling them a $200 saving’s benefit, plus their children are learning a skill, that will likely result in a holiday present from them later.

C.C. Market ResearchMarket ResearchAnswer the following questions:

a)What is the market precisely? The more specific you can be here, the better, for example,

If you are selling printed fabric: Is your market independent clothing designers, or upholsterers? Mid-sized production houses? Larger companies who will buy your fabric wholesale and redistribute it?

What benefits you provide depends on what the niche is, or what the precise market needs are.

b) Is the market growing or shrinking?

Is the fish you're about to catch too small?Is the fish you're about to catch too small?

c)Is this niche market worth your while?

Remember, no matter how good your product or service is and no matter how excellent your management team, you are unlikely to ever capture more than a significant minority. (External forces and competitors see to that.) However, more often than not, a loyal significant minority is all one needs to be successful in business.

D.D. Assessment of the Assessment of the CompetitionCompetition

i. Analysis of the CompetitorsCompetitors should thought of broadly. I.e., past award and grant recipients are competitors. Analyze competitors objectively. Try to include evaluations that are relevant to the “call” for artists from the gallery or foundation. For example, sustainability, number of lives impacted, number of people hired to do the venture, desirability, and future plans.

What are their weaknesses? And

What are their strengths? If competitors are attracting customers, it is probably for a good reason.

ii. Lessons Learned from the CompetitorsEffective proposals demonstrate a willingness to learn from competitors.

E.E. PricingPricingIt's time to face the pricing dilemma!

The pricing decision should be presented as the outcome of your marketing research and testing of what your target market (niche) is willing to pay for your art work.

Pricing is also partly a function of what your competitors are charging, as well as what your costs and profit margins are.

While your business plan should have a well‑articulated rationale for your overall pricing strategy, remember, these prices are not set in stone‑‑‑ you can raise and lower them as long as you weigh the negatives and positives of doing so.

4.4. THE PRODUCTS & THE PRODUCTS & SERVICESSERVICES

This section usually should be ½ as long as the Market section.

What are you selling?◦ In this section of the business plan, all important aspects of the art work

should be dealt with in detail. Be sure to include the following:

A. Product/Service Features

B. Delivery Schedule

C. Ongoing Services

A.A. Product/Service FeaturesProduct/Service Features• How many Bells and Whistles?

o Brain‑storm: As a preliminary matter (and in the spirit of awkward first‑drafts) make a list of all the features you expect your product or service to include.

• Then, go through the list with an eye to costs and benefits. Be resourceful to keep your costs down.

• Now justify the existence of each feature! If you are doing something special to keep costs down, share them here.

B.B. Delivery ScheduleDelivery ScheduleCan you deliver?

◦There are at least 2 delivery pitfalls to avoid: Committing to a due date and missing it. Providing a faulty product or service. (This is especially a

problem for new technologies.)◦ "Delivery" problems can become "marketing" problems because

customers may develop an image of the Artist as having uneven quality or as being unable to keep your word. Demonstrate that you are sensitive to this principle.

Provide the following:1) A schedule of events.

2) An explanation of steps that will be taken to ensure that proper care will be taken at each step so deadlines are met.

C.C. Ongoing ServicesOngoing Services

• Who will provide ongoing services?• How will guarantees and warranties be administered and

who will pay for them?o Explain the rationale behind your decision.

5.5. SALES AND SALES AND PROMOTIONSPROMOTIONS

A. Selling Approach

B. Motivation Strategies for the Sales Force

C. Product/Service Promotion

5.5. SALES AND SALES AND PROMOTIONSPROMOTIONS

Imagine what the consumer experience will be like.o How do you sell?

• This is the make‑or‑break issue for any business ‑‑‑ how are you going to convince prospective customers to buy?

o Enlightened artists understand that salespeople bring in the sales and don't mind if they earn more than the artist does.

A.A. Selling ApproachSelling ApproachWhat is your selling approach?

1) Sales People: Agents, Grant Writers or some such professional? DIY?

2) Intellectual Property Differences: Are you selling the copyright or just a license?

3) A service? A product? Both?

4) Sales Channels: Retail galleries? Fine Art Galleries? Flea- Markets? Commissions? Contests? Federal Grants? Local Grants?

5) Will it be a mix of approaches? Why? Why not?

Explain and justify your selling approach or approaches.

Address competitive pressures:◦Can you rely on a single approach?◦Can you rely on the approaches you've chosen? For how

long?◦What kinds of approaches do your competitors use? What

worked? What didn't work? Why?

Assess the costs of your selling approach(es).Passive income vs. earned income. I.e., royalties vs.

commissions.Be sure you will make enough to cover ALL of your

expenses. What is your time worth an hour?

B. Motivation Strategies for B. Motivation Strategies for the Sales Forcethe Sales Force

How will you motivate your sellers? Explain how salespeople will be trained, supported and, ABOVE ALL, motivated.◦ Include plans for sales literature.◦ Include plans for administrative support to send out promotional

materials and presentation graphics.◦ What kind of Incentive Programs are you considering? For example:

Commissions Prizes/vacations Free art Whatever else you might dream up.

What do you plan for the future to upgrade your selling efforts?◦ Describe plans that you observed to be successful, i.e., from competitors.◦ The best salespeople should earn top dollar: Make it a policy.

C.C. Venture PromotionVenture Promotion

How will you promote your Proposed Art Venture?How will you identify prospective customers?Include a sales force that writes to bloggers or press on

your behalf, or people who will write testimonials for your website, but think beyond that:◦ Base your strategy on modern and industry-specific advertising

and/or public relations strategies.

Public Relations: Public Relations: Convincing media to cover your art venture. Specialized news and culture sources are best because:

1) These media sources are most likely to be read by your market niche

2) You are more likely to be newsworthy to a specialized publication than the New York Times,

3) News articles and interviews have more credibility than

advertising, generally speaking. The more specialized publications are seen as "authorities," and

4) It’s free, but beware of bad press.

News is contagious. Use the fact that you got a small story in an authoritative publication to convince larger media that you are "hot;" this is called "leveraging media exposure."

6.6. FINANCESFINANCES

A. Profit/Loss Statement

B. The Balance Sheet

C. Cash Flow Statement

6.6. FINANCESFINANCESThe financial section should be tailored to your audience.

This section can be written for a specific proposal or in the event someone needs to see your financial picture before bestowing a large grant.

There are “3- 5 year” suggestions herein, which do not make sense for a proposal for a one-time project. For a proposal, just include information for the relevant venture and for the period of time to complete the project. For that, all you need is the Profit/Loss Statement.

To transform from an individual artist to a 501(c)(3) arts organization, you may need to complete this entire section.

How are you doing? Go get a calculator. If you want to be your own boss and make your own money, this is the most important section.

• This part of the business plan should conform to generally accepted accounting principles (GAAP.) • Certified public accountants (CPAs) are strongly

recommended. Ideally, you should look back and ahead between 3‑5 years.

• When using programs like QuickBooks or Excel, demonstrate that you DID NOT just plug‑in numbers. Instead, show that you have seriously analyzed the numbers.

• To speak intelligently about your financial history and projections, use 3 different types of financial analyses:1) profit/loss statement, 2) balance sheet, and3) cash flow statement.

A.A. Profit/Loss StatementProfit/Loss StatementThis section may also be called, "The Income Statement"

1) Start with the Venture's GROSS REVENUES (a/k/a Gross Sales.)2) less any planned payments for commissions.3) From this, subtract labor and materials (a/k/a Cost of Goods Sold or

COGS.)4) This subtotal is your GROSS PROFIT OR LOSS.5) Next, subtract from the “gross profit or loss” the cost of accountants,

lawyers and administrative labor, marketing and other expenses, and depreciation (a/k/a Operating Expenses.) Your CPA will help you with this.

6) The result of this calculation is another subtotal: the Venture's PRETAX NET PROFIT OR LOSS (a/k/a NPbT, net profit before taxes.)

NPbT, net profit before taxesNPbT, net profit before taxes

7) From this net profit or loss before taxes, subtract a provision for taxes. Your CPA will help you figure out your tax bracket. Most people pay somewhere between 15% - 25%.

8) After the taxes are accounted for, the result is (finally!): NET INCOME, a.k.a. the net increase/decrease in retained earnings.

B. Balance SheetB. Balance Sheet(Not needed for grants or galleries)(Not needed for grants or galleries)

This section is a statement of Business Health.The purpose of the balance sheet is to highlight the state of

assets and liabilities at particular points in time (i.e. when the balance sheet was tallied).

a) One side of the balance sheet has the assets1) in terms of CURRENT ASSETS, i.e., cash and accounts receivable2) and in terms of FIXED ASSETS, i.e., real estate, inventions, furniture and computers.

b) On the other side of the balance sheet are the liabilities1) in terms of CURRENT LIABILITIES, i.e., accounts payable and notes payable2) and in terms of LONG‑TERM LIABILITIES, i.e., mortgages and equity held by investors.

The TOTAL ASSETS add up to the same number as the The TOTAL ASSETS add up to the same number as the sum of TOTAL LIABILITIES and NET WORTH, for example:sum of TOTAL LIABILITIES and NET WORTH, for example:

BALANCE SHEET

ASSETS LIABILITIES & NET WORTH

Current Assets Current Liabilities100 95Fixed Assets Long-Term Liabilities100 100

TOTAL ASSETS TOTAL LIABILITIES200 = 195

NET WORTH5

200 = 200

C. Cash Flow:C. Cash Flow: (Not needed for grants or galleries) (Not needed for grants or galleries)

Technically, it is a record of cash available at different points in time. It is usually monitored on a monthly basis.

1) Start with the cash on hand at the beginning of the month.2) Then, add to that the received payments during the month from

customer payments and any other sources.3) From this sum, you subtract the actual disbursements ‑‑‑ the cash

going out each month. Disbursements include fixed and variable expenses.◦ Fixed Expenses: Recurring items that can't easily be changed, such as

rent, debt, salaries, etc.◦ Variable Expenses: Expenses that can more easily be increased or

decreased from month to month, such as advertising, office supplies, promotion, consulting, etc.

The result is the amount of cash available at the end of the month.The CASH FLOW is the difference between what the business started and ended with each month.

7.7. APPENDIXAPPENDIX• If you have any items that don't fit well into the other

areas of the business plan, put them here. For example:o Artist Curriculum Vitaeo Artist Statemento Art work literatureo Endorsement letters or media clippings.

Now you can write an EXECUTIVE SUMMARYNow you can write an EXECUTIVE SUMMARY

The executive summary is the business plan in miniature. AT MOST THIS SECTION SHOULD BE ONE PAGE. This section should be able to stand alone while capturing the excitement and the essence of the business. This is not an easy task, so allow for awkward first‑drafts.

Get it all out and edit later. As previously stated, the Executive Summary is not placed last in the business plan, but our personal preference is to write this section last because the essential highlights of a business tend to become more obvious as the rest of the plan is written.

The reader should be able to finish this section and say, "So that's what these people are up to!“

Answer this question: What are you up to?