How To Develop Your Own Business Plan

BusinessPlanningPresentation: 1From Backpacksto Briefcases.How to develop yourown business plan.Hank Jordan,CMCwww.atl.devry.edu/hjordanBusinessPlanningPresentation: 2Outline of a Business PlanI. Executive SummaryII. Company DescriptionA. Legal Form of BusinessB. Company’s MissionC. Names of Top ManagementD. Location and Geographic InformationE. Company’s Development StageF. Company’s Products or ServicesG. Specialty Business InformationBusinessPlanningPresentation: 3Outline of a Business Plan continuedIII. The Industry AnalysisA. Size and Growth TrendsB. Maturity of IndustryC. Vulnerability to Economic FactorsD. Seasonal FactorsE. Technological FactorsF. Regulatory IssuesG. Supply and DistributionH. Financial ConsiderationsBusinessPlanningPresentation: 4Outline of a Business Plan continuedIV. The Target MarketA. Demographics/GeographicsB. Lifestyles and PsychographicsC. Purchasing PatternsD. Buying SensitivitiesE. Size and Trends of MarketBusinessPlanningPresentation: 5Outline of a Business Plan continuedV. The CompetitionA. Competitive PositionB. Market Share DistributionC. Barriers to EntryD. Future CompetitionBusinessPlanningPresentation: 6Outline of a Business Plan continuedVI. Marketing and Sales StrategyA. Company’s MessageB. Marketing VehiclesC. Strategic PartnershipsD. Other Marketing TacticsE. Sales Force and StructureF. Sales AssumptionsBusinessPlanningPresentation: 7Outline of a Business Plan continuedVII. OperationsA. Plant and FacilitiesB. Manufacturing/Production PlanC. Equipment and TechnologyD. Variable Labor RequirementsE. Inventory ManagementF. Supply and DistributionG. Order Fulfillment and Customer ServiceBusinessPlanningPresentation: 8Outline of a Business Plan continuedVII. Operations continuedH. Research and DevelopmentI. Capacity UtilizationJ. Quality ControlK. Safety, Health and Environmental ConcernsL. ShrinkageM. Management Information SystemsBusinessPlanningPresentation: 9Outline of a Business Plan continuedVIII. Management and OrganizationA. Principals/Key EmployeesB. Board of DirectorsC. Consultants/SpecialistsD. Management to Be AddedE. Organizational ChartF. Management Style/Corporate CultureBusinessPlanningPresentation: 10Outline of a Business Plan continuedIX. Development and Exit PlansA. Long-Term Company GoalsB. Growth StrategyC. MilestonesD. Risk EvaluationE. Exit PlanBusinessPlanningPresentation: 11Outline of a Business Plan continuedX. The Financials(grouped by year)A. Sales PlanB. Staffing PlanC. TQM PlanD. Marketing PlanE. Operations PlanF. Capital BudgetG. Cash BudgetBusinessPlanningPresentation: 12Outline of a Business Plan continuedX. The Financials(continued)H. Income StatementI. Balance SheetJ. Cash FlowK. Break Even AnalysisL. Plan AssumptionsM. Use of FundsXI. AppendixBusinessPlanningPresentation: 13Sales PlanProduction PlanStaffing PlanOperations PlanTQM PlanMarketing PlanCash BudgetCapital BudgetIncome StatementBalance SheetCash FlowFinancial Flow ChartBusinessPlanningPresentation: 14BusinessPlanningPresentation: 15Time Saving TipsDevelop a research planPrioritize the most important areasOrganize your documentationUse technologyWhen stuck -get helpBusinessPlanningPresentation: 16Considerations for Your BusinessWhen you sell a service,You sell yourself.BusinessPlanningPresentation: 17Common Factors of Service Businesses1. Intangible product;2. Subjective judgment of Quality;3. Relatively few barriers to entry;4. Perishable product;5. Time lapses between use;6. Quality depends on the actual service provider.BusinessPlanningPresentation: 18Trends in BusinessFaster delivery speedBranching out/franchisesOne stop shopping/personal bankerBusinessPlanningPresentation: 19Strategies for Improving Your Business1. Make your product more tangible;2. Develop a distinct image;3. Cultivate referral sources;4. Stay in touch with your customers;5. Encourage timely purchases;6. Stress quality and employee education;7. Find ways to use excess capacity.BusinessPlanningPresentation: 20BusinessPlanningPresentation: 21Internal Planning for ExistingBusinesses & CorporationsDefine specific objectives such as:Total revenuesSales per employeeRevenues per customerProfit marginInventory levels and Production timeCollection activityBusinessPlanningPresentation: 22Performance ObjectivesMeasurable:objective not subjectiveReasonable:reachable goalTime Specific:by a certain dateMotivational:not too hard, not too easyBusinessPlanningPresentation: 23Problem Solving Plan1.Define the problem2.Assemble the team3.Consider solutions4.Recommend activities5.Implement activities6.Measure activitiesPlan -Do -Check -ActBusinessPlanningPresentation: 24Customer Analysis -current customersProducts/Services purchased?Number of units purchased?Sales $ this year?Sales $ last year?Sales $ prior year?BusinessPlanningPresentation: 25Customer Analysis -new customersReason for purchase?How was sale secured?Sales $ this year?Sales $ last year?Sales $ potential?BusinessPlanningPresentation: 26Customer Analysis -lost customersProducts/Services purchased?Reason for loss?Potential for regain?Last annual purchase $?Previous $ high annual?BusinessPlanningPresentation: 27BusinessPlanningPresentation: 28I -The Executive Summary1. Your basic business concept makes sense;2. Your business had been thoroughly planned;3. That management is capable;4. A clear-cut market exists;5. Your business has competitive advantages;6. Your financial projections are realistic;7. Investors have an excellent chance to get a return.BusinessPlanningPresentation: 29I -The Executive Summary (continued)•Your executive summary is the single most important part of your business plan.•It must motivate the reader to consider your plan.•Prepare your Executive Summary last, only after your entire plan has been completed.BusinessPlanningPresentation: 30BusinessPlanningPresentation: 31II -Company DescriptionNames:Legal or corporate nameDoing business as ...Brand or trade namesSubsidiary companiesBusinessPlanningPresentation: 32Company Description (continued)Legal form:Legal form of businessState incorporatedCounty for business licenseOwners or major stakeholdersBusinessPlanningPresentation: 33Company Description (continued)Management/Leadership:Chairperson of the boardPresidentChief Executive OfficerChief Financial OfficerChief Operating OfficerAdvisory board membersBusinessPlanningPresentation: 34Company Description (continued)Location:Company headquartersPlace of businessBranchesGeographic area servedBusinessPlanningPresentation: 35Company Description (continued)Developmental stage:When company was foundedWhen product or service introducedMilestones reachedSignificant developmental indicatorsBusinessPlanningPresentation: 36Company Description (continued)Financial status:Last year’s total salesLast year’s pretax profitCurrent number of employeesAmount of funds soughtBasic use for funds soughtMajor financial obligationsBusinessPlanningPresentation: 37Company Description (continued)Products and services:General descriptionNumber and type of linesNumber in each linePatents and licenses:Patents held and pendingTrademarks held and pendingLicenses held and pendingBusinessPlanningPresentation: 38BusinessPlanningPresentation: 39III -Industry Analysis•A description of your industry•Current trends in your industry•Strategic opportunities that exist in your industryBusinessPlanningPresentation: 40Your Economic SectorServiceManufacturingRetailDistributionNote: your business may belong to more than oneBusinessPlanningPresentation: 41Size and Growth RateTwo years agoLast yearThis yearNext yearFive years outBusinessPlanningPresentation: 42Industry MaturityIntroductionGrowthMatureDeclineBusinessPlanningPresentation: 43Sensitive to EconomicsWhich of these will affect your business?Little business expansionIncreased unemploymentHigh interest ratesHigh inflationWeakened dollarBusinessPlanningPresentation: 44SeasonalityHow many seasons does your business have?HolidaysSummerWinterSpringFallBusinessPlanningPresentation: 45Technological ChangeHow will changes in technology affect . . .your productsyour servicesyour costsyour businessBusinessPlanningPresentation: 46Regulation and CertificationNationalStateCountyWhat effects will they have on your business?BusinessPlanningPresentation: 47Plan Preparation FormIndustry descriptionIndustry trendsStrategic opportunitiesBusinessPlanningPresentation: 48BusinessPlanningPresentation: 49IV -The Target MarketDemographicGeographicPsychographicBusinessPlanningPresentation: 50Market Size and Trends•What is the current size?•What is the rate of growth?•Are changes occurring in your market?•Are social values affecting your market?•What else is affecting your market?BusinessPlanningPresentation: 51Strategic Opportunities•Alliances with other businesses?•Who makes the decision to buy?•How are these decisions made?•How can you get your message to them?•Compare your business to the competition? BusinessPlanningPresentation: 52BusinessPlanningPresentation: 53V -The CompetitionKnow who your major competitors are?On what basis do you compete?Who are your potential future competitors?What barriers exist for new competitors?BusinessPlanningPresentation: 54Customer Perception Factors•Product or service features•Convenience•Quality•Durability•Image or intangibles•Customer relations•Social imageBusinessPlanningPresentation: 55Internal Operational Factors•Financial resources•Marketing program •Economies of scale•Operational efficiencies•Strategic partnerships•Company esprit de corpsBusinessPlanningPresentation: 56Market Share DistributionList each competitor and show . . .Percent of total revenuesPercent of total units soldTrend of market share (up or down)BusinessPlanningPresentation: 57Barriers to entryPatented processTrademarksHigh start up costsSubstantial expertise requiredLack of suppliers or distributorsMarket already saturatedSophisticated machineryBusinessPlanningPresentation: 58BusinessPlanningPresentation: 59VI -Marketing and Sales StrategyThis section should cover . . .How do you make customers aware of your product?What message are you trying to convey?What methods will you use?How will you get the actual sales?BusinessPlanningPresentation: 60Sales PlanProduction PlanStaffing PlanOperations PlanTQM PlanMarketing PlanCash BudgetCapital BudgetIncome StatementBalance SheetCash FlowFinancial Flow ChartBusinessPlanningPresentation: 61The Four P’s of MarketingProduct:quality, features, style, options, packaging, guarantees, services, sparesPrice:list, discounts, allowances, credit terms, payment terms, rental, leasePlace:numbers and types, locations/availability, inventory levels, transportationPromotion: advertising, personal selling, sales promotion, point-of purchase, publicity BusinessPlanningPresentation: 62The Five F’s of Customer Wants1.Functions:does it work?2.Finances:is it worthwhile?3.Freedom:easy to use? 4.Feelings:do I really feel better?5.Future:will I have support?Am I receiving true benefits?BusinessPlanningPresentation: 63Marketing VehiclesBrochures:leaflets, flyersPrint media:newspapers, magazinesBroadcast media: radio, televisionAdvertising specials:caps, pens, calculatorsDirect mail:brochures, couponsPublic relations:news articles, specialsSampling:free products, couponsBusinessPlanningPresentation: 64Strategic PartnershipsCooperative advertising:two companies mentioned in the advertisement;Licensing:let someone else use your product as part of their product;Distribution agreement:let someone else carry your product;Bundling:let another company include your product as part of a total package.BusinessPlanningPresentation: 65Sales Process and Productivity1. How do you identify potential customers?2. Should you use cold calling?3. How do you qualify potential customers?4. Who should be allowed to contact customers?5. How frequently should you follow up?6. What are your sales goals?7. How do you capture all of this information?BusinessPlanningPresentation: 66Sales PlanProduction PlanStaffing PlanOperations PlanTQM PlanMarketing PlanCash BudgetCapital BudgetIncome StatementBalance SheetCash FlowFinancial Flow ChartBusinessPlanningPresentation: 67BusinessPlanningPresentation: 68VII -OperationsTheory into practice.Master the basics.Define standards of performance.BusinessPlanningPresentation: 69Sales PlanProduction PlanStaffing PlanOperations PlanTQM PlanMarketing PlanCash BudgetCapital BudgetIncome StatementBalance SheetCash FlowFinancial Flow ChartBusinessPlanningPresentation: 70What Your OperationsSection Should CoverIssues that . . .1. Are essential to your business2. Will help you succeed3. Will provide a competitive advantage4. Will overcome frequent problemsBusinessPlanningPresentation: 71Facilities Selection ConsiderationsLocationLease versus PurchaseImprovementsUtilities/MaintenanceExit clausesOther key factorsBusinessPlanningPresentation: 72Inventory Management and Control1.How much is enough?2.How much is too much?3.When and where to purchase supplies?4.What type of system to use?5.Who is responsible for its accuracy?6.Which distribution methods to use?BusinessPlanningPresentation: 73Order Fulfillment and Customer ServiceWho is the best in your industry?Utilize benchmarking.L.L. BeanRitz CarltonFederal ExpressMotorolaWhat makes them the best?BusinessPlanningPresentation: 74Order Fulfillment andCustomer Service continued1. Who specifically processes orders?2. How are orders checked?3. What percent are incorrect?4. How and when do you ship?5. Who is responsible for extra costs?6. What service programs do you offer?7. What is your return policy?8. How do you solicit customer feedback?BusinessPlanningPresentation: 75Assessing your production planWorkforce:level or chase strategy?Productivity:output divided by input.Capacity:time available for work.Quality:cost of quality (Cost of doing it right+ Cost of doing it wrong).BusinessPlanningPresentation: 76Staffing Chart or Plan1.Level or chase strategy?2.How many employees at start-up?3.Skills required?4.How will you attract qualified people?5.How will you keep qualified people?6.Who is going to keep track of payrolls?BusinessPlanningPresentation: 77Research and Development–New products in development?–New services in development?–Who is doing the development?–How much company time is spent on R&D?–What equipment is needed for R&D?–What are the trends in your industry?–What is your competition spending on R&D?BusinessPlanningPresentation: 78Other Operational IssuesHow are you ensuring safe working conditions?How are you protecting the environment?How are you complying with governmental regulations?How are you providing adequate insurance protection?How are you managing start up activities?BusinessPlanningPresentation: 79Start Up CostsFacilities:Initial rent/PurchaseEquipment:Furniture, Equipment, Telephones, Vehicles, OtherMaterials:Initial inventorySupplies:Production materials, Packaging supplies, Brochures, Samples, OtherFees:Permits, Inspections, LicensesOther Costs:Accounting, Legal, Insurance, Marketing, Salaries, Unanticipated costsBusinessPlanningPresentation: 80Sales PlanProduction PlanStaffing PlanOperations PlanTQM PlanMarketing PlanCash BudgetCapital BudgetIncome StatementBalance SheetCash FlowFinancial Flow ChartBusinessPlanningPresentation: 81BusinessPlanningPresentation: 82VIII -Management and OrganizationYour management team:Key employees and PrincipalsBoard of directorsAdvisory committeeConsultants and specialistsKey people to be addedBusinessPlanningPresentation: 83Sales PlanProduction PlanStaffing PlanOperations PlanTQM PlanMarketing PlanCash BudgetCapital BudgetIncome StatementBalance SheetCash FlowFinancial Flow ChartBusinessPlanningPresentation: 84Your Management TeamDo your key players . . .Possess the necessary skillsHave a record of successHave a team member attitudeAs a whole are they effectiveBusinessPlanningPresentation: 85Management Compensationand IncentivesSalaryBonusesCommissionsProfit sharingEquityStockBusinessPlanningPresentation: 86Consultants and other SpecialistsManagement consultantsMarketing consultantsDesigners and EngineersIndustry specialistsAttorneysAccountantsBusinessPlanningPresentation: 87Management Structure and Style1.How will decisions be made?2.What are the lines of authority?3.How much employee involvement do you want?4.Do you believe in empowerment?5.What will be the corporate culture?6.Do you have a clear set of company policies?7.How will you handle sexual harassment?BusinessPlanningPresentation: 88Sales PlanProduction PlanStaffing PlanOperations PlanTQM PlanMarketing PlanCash BudgetCapital BudgetIncome StatementBalance SheetCash FlowFinancial Flow ChartBusinessPlanningPresentation: 89BusinessPlanningPresentation: 90IX -Development and Exit PlansYou can’t reach a goal you haven’t set.What do you want your business to look like in two, three, five years?Your long terms plans should include goals, milestones, risks and an exit plan.BusinessPlanningPresentation: 91Sales PlanProduction PlanStaffing PlanOperations PlanTQM PlanMarketing PlanCash BudgetCapital BudgetIncome StatementBalance SheetCash FlowFinancial Flow ChartBusinessPlanningPresentation: 92What are your goals?1. Steady provider?2. Innovator?3. Quality leader?4. Industry leader?5. Niche leader?6. Exploiter?BusinessPlanningPresentation: 93Growth Strategies1.Market penetration2.Promotion and support3.Expansion4.Increase focus5.Diversify6.RefocusPlan -Do -Check -ActBusinessPlanningPresentation: 94Milestones•How will your investors know you are making sufficient progress towards your goals?•A milestone list focuses on the specific objectives you intend to achieve by date.•Progress comes slowly, be conservative.BusinessPlanningPresentation: 95Risk Evaluation•Work on solving today’s problems and avoiding tomorrows.•Every enterprise involves risk.•Risks include . . .BusinessPlanningPresentation: 96Exit PlanHow do investor’s get their money back?1. Go public5. Buy out2. Acquisition6. Franchise3. Sale7. Hand down4. Merger8. CloseBusinessPlanningPresentation: 97Sales PlanProduction PlanStaffing PlanOperations PlanTQM PlanMarketing PlanCash BudgetCapital BudgetIncome StatementBalance SheetCash FlowFinancial Flow ChartBusinessPlanningPresentation: 98BusinessPlanningPresentation: 99X -The FinancialsNumbers are merely the reflection of . . .the decisions you make.BusinessPlanningPresentation: 100Sales PlanProduction PlanStaffing PlanOperations PlanTQM PlanMarketing PlanCash BudgetCapital BudgetIncome StatementBalance SheetCash FlowFinancial Flow ChartBusinessPlanningPresentation: 101Numbers represent yourdecisionsEvery business decision leads to . . .a number,which taken together form the basis of . . .your financials.BusinessPlanningPresentation: 102Can I use my Visa card topay for my MasterCard bill?BusinessPlanningPresentation: 103What do you mean I’m broke?I still have checks!BusinessPlanningPresentation: 104Getting control of your finances1.Read your statements.2.Set policies and stick with them.3.Use automation where practical.4.Do not be afraid to get help.Remember YOU are making management decisions based on this information.BusinessPlanningPresentation: 105Types of Financial Forms1.Income Statement -are we making a profit?2.Cash Flow Projections -can we pay our bills?3.Balance Sheet -how much are we worth?BusinessPlanningPresentation: 106General Financial Terms you should knowAccounts payableCurrent liabilitiesAccounts receivableDebtAccumulated depreciationDepreciationAssetsEquityAssets currentFixed costsAssets fixedGross profitCashLiabilitiesCost of goodsLong term liabilitiesBusinessPlanningPresentation: 107General Financial Terms continuedNet profitNet worthOther or Intangible assetsProfitPro formaOthers?BusinessPlanningPresentation: 108Guidelines for Preparing Your Financials1.Be conservative2.Be honest3.Use standard terminology4.Get realistic advice5.Follow practices in your industry6.Choose the appropriate accounting method7.Be consistentBusinessPlanningPresentation: 109Income or P & L StatementIncome:Gross Sales -Returns & Allowances = Net Sales-Cost of Goods= Gross ProfitExpenses: -Salaries & wages; Employee benefits; Payroll taxesSales Commissions; Professional Services; Rent;Maintenance; Equipment Rental; Furniture &Equipment; Depreciation and Amortization; Insurance;Interest; Utilities; Telephone; Office supplies; Postage and Shipping; Marketing & Advertising; Travel; Other.Net income before taxes-Provision for taxes on incomeNet Income After Taxes (Net Profit)BusinessPlanningPresentation: 110Cash-Flow ProjectionsWhy is this the single most importantfinancial statement?If you can’t pay your bills, you are not going to stay in business.BusinessPlanningPresentation: 111Cash-Flow ItemsCash salesReserveCollectionsOwner’s drawInterest IncomeNet cash flowLoan proceedsOpening cash balanceCost of goodsOperating expensesBusinessPlanningPresentation: 112The Balance SheetProvides a snapshot of the overall financial worth of the company.It accounts for all the company’s assets minus all the company’s liabilities.The remaining amount is figured to be the net worth of the company.BusinessPlanningPresentation: 113Sources and Use of FundsEquity Financing: selling ownership via . . .Preferred stockCommon StockDebt Financing: taking out loans via . . .Mortgage loansShort and Long Term LoansInvestment from Principals: you or other key individuals will contributeBusinessPlanningPresentation: 114Assumption SheetContains information you have already gathered.Total sales per product lineTotal payroll costsCalculate gross margin per product lineTotal costs and timing for additional expensesChanges in costs or timing of financingOther costs such as . . . BusinessPlanningPresentation: 115Break Even AnalysisWhy do you need to know this?You need to know . . .Fixed expensesandGross profit margin (GPM)BusinessPlanningPresentation: 116Sales PlanProduction PlanStaffing PlanOperations PlanTQM PlanMarketing PlanCash BudgetCapital BudgetIncome StatementBalance SheetCash FlowFinancial Flow ChartBusinessPlanningPresentation: 117BusinessPlanningPresentation: 118XI -AppendixState and Federal formsDrawings and layoutsPhotographsSurveysOtherBusinessPlanningPresentation: 119BusinessPlanningPresentation: 120