Crafting a Winning Business Plan

							 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.