Crafting a Winning Business Plan
Shared by: bdr85067
Crafting a Crafting a Winning Winning Business Plan Business Plan The Business Plan: Two Essential Functions n Business plan – a written summary of: w An entrepreneur’s proposed business venture w Its operational and financial details w Its marketing opportunities and strategy w Its managers’ skills and abilities n It serves two essential functions: w Guiding the company by charting its future course and defining its strategy for following it w Attracting lenders and investors who will provide needed capital Why Take the Time to Build a Business Plan? n Although building a plan does not guarantee success, it does increase your chances of succeeding in business. n A plan is like a road map that serves as a guide on a journey through unfamiliar, harsh, and dangerous territory. Don’t attempt the trip without a map! Start With an Executive Summary n Company name, address, phone n Names, addresses, phones of key people n Brief description of business n Brief overview of market for product n Brief overview of strategy n Brief description of management team n Brief statement of financial needs Key Elements of a Business Plan (continued) n Industry Analysis n Background of your Business n Entrepreneurial Vision n Strategic Analysis n Market Analysis n Loan or Investment Proposal n Competitor Analysis n Organization and Mgmt. n Financial Plan Industry Analysis n Industry background and overview n Trends n Growth rate n Outlook for the future Background of Your Business n Brief history of the business n Current situation Entrepreneurial Vision n Your company’s mission statement n Performance goals and objectives n Your competitive advantages n Control procedures for keeping on track Strategic Analysis n Core competincies n Market positioning and image n SWOT analysis w Strengths w Weaknesses w Opportunities w Threats Marketing Plan n Your company’s target market n Market size and potential sales n Nature of the buying cycle n Pricing strategies n Advertising and promotion strategies n Distribution strategy Distribution Strategy n Channels of distribution n How to get product or svc. to customer n Sales techniques and incentives External Market Influences n Economic w Inflation/recession w Unemployment levels w Interest rates n Social (demographics) n Technological factors w WWW w Hardware and software Competitor Analysis n Existing competitors n Future competitors n Strengths and weaknesses of competitors Organization and Management n Proposed legal organization w Sole proprietorship w Partnership w Corporation n Key people in organization w Backgrounds w Resumes n Organizational chart Financial Plan n Sources and uses of capital (initial and projected) n Cash flow projections for three years n Balance sheets for three years n Profit and loss statements for three years n Breakeven analysis The Sources and Uses of Funds Worksheet Source of Funds: Debt: Term loans $__________ Refinancing of old debt $__________ Lines of credit Line 1 $__________ Line 2 $__________ Mortgage $__________ Equity: Investment $__________ Total Sources: $_______ Uses of Funds: Property $__________ Inventory $__________ Equipment (itemize) $__________ $__________ Working capital $__________ Cash reserve $__________ Total Uses: $__________ Balance Sheet (1 of 2) YEAR 1 YEAR 2 YEAR 3 Current Assets Cash $_______ $_______ $_______ Accounts receivable _______ _______ _______ Inventory _______ _______ _______ Supplies _______ _______ _______ Prepaid expenses _______ _______ _______ Fixed Assets Real estate _______ _______ _______ Equipment _______ _______ _______ Fixtures and leasehold improvements _______ _______ _______ Vehicles _______ _______ _______ Other Assets License _______ _______ _______ Goodwill _______ _______ _______ TOTAL ASSETS $_______ $_______ $_______ Balance Sheet (2 of 2) YEAR 1 YEAR 2 YEAR 3 Current Liabilities Accounts payable $_______ $_______ $_______ Notes payable _______ _______ _______ (due within 1 year) Accrued expenses _______ _______ _______ Taxes owed _______ _______ _______ Long-term Liabilities Notes payable _______ _______ _______ (due after 1 year) Bank loans _______ _______ _______ TOTAL LIABILITIES $_______ $_______ $_______ NET WORTH $_______ $_______ $_______ (ASSETS MINUS LIABILITIES) Profit and Loss Projection (1 of 2) MOST LOW LIKELY HIGH SALES: Product/service line 1 _______ _______ _______ Product/service line 2 _______ _______ _______ Product/service line 3 _______ _______ _______ Product/service line 4 _______ _______ _______ TOTAL SALES REVENUE _______ _______ _______ Cost of Goods Sold: Product/service line 1 _______ _______ _______ Product/service line 2 _______ _______ _______ Product/service line 3 _______ _______ _______ Product/service line 4 _______ _______ _______ TOTAL COST OF GOODS SOLD _______ _______ _______ GROSS PROFIT _______ _______ _______ Profit and Loss Projection (2 of 2) MOST EXPENSES: LOW LIKELY HIGH Variable: _______ _______ _______ Payroll _______ _______ _______ Sales commission _______ _______ _______ Freight and delivery _______ _______ _______ Travel and entertainment Semivariable: _______ _______ _______ Advertising/promotion _______ _______ _______ FICA/payroll tax _______ _______ _______ Supplies _______ _______ _______ Telephone Fixed: _______ _______ _______ Rent _______ _______ _______ Utilities _______ _______ _______ Property taxes _______ _______ _______ Dues and subscriptions _______ _______ _______ TOTAL EXPENSES _______ _______ _______ Profit before depreciation _______ _______ _______ Depreciation _______ _______ _______ NET PROFIT _______ _______ _______ Breakeven Analysis 1. Total sales $__________ 2. Fixed costs $__________ 3. Gross margin $__________ 4. Gross margin as a percent of sales _________% (line 3 / line 1) 5. Breakeven sales $__________ (line 2 / line 4) 6. Profit goal $__________ 7. Sales required to achieve profit goal $__________ [(line 2 + line 6) / line 4] Manufacturing and Operations Plan n Geographic Location w describe the planned location n Facilities w what is needed? n Make or Buy Policy w what will be produced and what will be purchased as components? n Control Systems w what is the approach to controlling quality, inventory, and production? n Labor Force w is there a sufficient quantity of skilled people in the local labor force? Guidelines for Writing a Business Plan n Consider your audience. w Show the benefit of your business to your reader. n Keep it brief. w Just long enough to cover all major issues facing the business. n Point of view. w Try to write your business plan in the third person. n Create a professional image. w The overall appearance should be professional and attractive but not extravagant. Guidelines for Preparing a Business Plan n Remember: No one can create your plan for you. n Potential lenders want to see financial projections, but they are more interested in the strategies for reaching those projections. n Show how you plan to set your business apart from competitors; don't fall into the “me too” trap. n Identify your target market, and offer evidence that customers for your product or service exist. Tips on Preparing a Business Plan (continued) n Make sure your plan has an attractive cover. (First impressions are crucial.) n Rid your plan of all spelling and grammatical errors. n Make your plan visually appealing. n Include a table of contents to allow readers to navigate your plan easily. n Make it interesting. Tips on Preparing a Business Plan (continued) n Your plan must prove that the business will make money (not necessarily immediately, but eventually). n Use spreadsheets to generate financial forecasts. n Always include cash flow projections. n Keep your plan “crisp” – between 25 and 50 pages long. n Tell the truth – always. A Plan Must Pass Three Tests n The Reality Test - proving that: w a market really does exist for your product or service. w you can actually build or provide it for the cost estimates in the plan. n The Competitive Test - evaluates: w a company’s position relative to its customers. w management’s ability to create a company that will gain an edge over its rivals. n The Value Test – proving that: w a venture offers investors or lenders an attractive rate of return or a high probability of repayment. Presenting the Plan n Demonstrate enthusiasm, but don’t be overemotional. n Know your audience thoroughly. n “Hook” investors quickly with an up-front explanation of the venture, its opportunities, and its benefits to them. n Hit the highlights; focus on the details later. n Keep your presentation simple – 2 or 3 major points. Presenting the Plan (continued) n Avoid overloading your audience with technological jargon. n Use visual aids. n Close by reinforcing the nature of the opportunity. n Be prepared (with details) for potential investors’ questions. n Follow up with every investor to whom you make your presentation.