Business plan


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Presentation made at the ASQ Career Development Conference 2/25/2011

Published in: Business

Business plan

  1. 1. Business Plan Development February 25, 2011 Dr. Dawn G. Gregg Interim Administrative Director & Associate Professor Bard Center for Entrepreneurship
  2. 2. Agenda <ul><li>Importance of Planning </li></ul><ul><li>Value of the Business Plan </li></ul><ul><li>Information Needs </li></ul><ul><li>Business Plan Structure </li></ul><ul><li>Implementing the Plan </li></ul><ul><li>Why Business Plans Fail </li></ul>
  3. 3. Importance of Planning <ul><li>Plans: provide guidance and structure to management in a rapidly changing market environment. </li></ul><ul><ul><li>Extremely important in early stages of a new venture. </li></ul></ul>
  4. 4. Importance of Planning <ul><li>Become finalized as entrepreneur has a better sense of: </li></ul><ul><ul><li>Market. </li></ul></ul><ul><ul><li>Product or services to be marketed. </li></ul></ul><ul><ul><li>Management team. </li></ul></ul><ul><ul><li>Financial needs of the venture. </li></ul></ul><ul><li>Helps meet short-term or long-term business goals. </li></ul>
  5. 5. The Business Plan <ul><li>Written document describing all relevant internal and external elements, and strategies for starting a new venture. </li></ul><ul><ul><li>A road map for the business. </li></ul></ul><ul><ul><li>An integration of functional plans. </li></ul></ul><ul><ul><li>Addresses short-term and long-term decision making for the first three years. </li></ul></ul>
  6. 6. Value of the Business Plan <ul><li>Valuable to the entrepreneur, potential investors, or even new personnel. </li></ul><ul><li>It is important to these people because: </li></ul><ul><ul><li>Helps determine viability of the venture in a designated market. </li></ul></ul><ul><ul><li>Provides guidance to the entrepreneur in organizing his or her planning activities. </li></ul></ul><ul><ul><li>Serves as an important tool in helping to obtain financing. </li></ul></ul>
  7. 7. Value of the Business Plan <ul><li>The thinking process required to complete the plan is a valuable experience for the entrepreneur. </li></ul><ul><ul><li>Provides a self-assessment by the entrepreneur. </li></ul></ul><ul><ul><li>Forces the entrepreneur to bring objectivity to the idea. </li></ul></ul><ul><ul><li>Helps consider obstacles that might prevent the venture from succeeding. </li></ul></ul><ul><ul><li>Similar to role playing. </li></ul></ul><ul><ul><li>Allows to plan ways to avoid such obstacles. </li></ul></ul>
  8. 8. Evaluating the Plan <ul><li>The business plan must address: </li></ul><ul><ul><li>Strengths of management and personnel. </li></ul></ul><ul><ul><li>Product or service. </li></ul></ul><ul><ul><li>Available resources. </li></ul></ul><ul><li>Entrepreneur prepares a first draft of the business plan from a personal viewpoint but also consider Lenders & Investors </li></ul>
  9. 9. Lenders and Investors <ul><li>Lenders: </li></ul><ul><ul><li>Primarily interested ability of the new venture to pay back the debt. </li></ul></ul><ul><li>Banks: </li></ul><ul><ul><li>Want facts with an objective analysis. </li></ul></ul>
  10. 10. Lenders and Investors <ul><li>Investors, particularly venture capitalists, have different needs: </li></ul><ul><ul><li>Place more emphasis on the entrepreneur’s character </li></ul></ul><ul><ul><li>Spend much time conducting background checks. </li></ul></ul><ul><ul><li>Investors will also demand high rates of return. </li></ul></ul>
  11. 11. Information Needs <ul><li>Before you begin writing your plan, consider four questions: </li></ul><ul><ul><li>What service or product does your business provide and what needs does it fill? </li></ul></ul><ul><ul><li>Who are the potential customers for your product or service and why will they purchase it from you? </li></ul></ul><ul><ul><li>How will you reach your potential customers? </li></ul></ul><ul><ul><li>Where will you get the financial resources to start or run your business. </li></ul></ul>
  12. 12. Feasibility Study <ul><ul><li>Information for a feasibility study should focus on: </li></ul></ul><ul><ul><ul><li>Marketing. </li></ul></ul></ul><ul><ul><ul><li>Finance. </li></ul></ul></ul><ul><ul><ul><li>Production. </li></ul></ul></ul>
  13. 13. Operations Information Needs <ul><li>Entrepreneur may need information on: </li></ul><ul><ul><li>Location </li></ul></ul><ul><ul><li>Manufacturing operations </li></ul></ul><ul><ul><li>Raw materials </li></ul></ul><ul><ul><li>Equipment </li></ul></ul><ul><ul><li>Labor skills </li></ul></ul><ul><ul><li>Space </li></ul></ul><ul><ul><li>Overhead </li></ul></ul>
  14. 14. Business Plan Sections <ul><li>Table of Contents </li></ul><ul><li>Executive Summary </li></ul><ul><li>Business Description & Vision </li></ul><ul><li>Competitive Analysis </li></ul><ul><li>Description of Products and Services </li></ul><ul><li>Marketing & Sales Strategy </li></ul><ul><li>Organization & Management </li></ul><ul><li>Financial Management </li></ul><ul><li>Appendices </li></ul>
  15. 15. Executive Summary <ul><li>Most important section of the plan. </li></ul><ul><li>Should be written last. </li></ul><ul><li>Provides an enthusiastic snapshot of your company, explaining who you are, what you do and why. </li></ul><ul><li>Should be less than 2 pages. </li></ul>
  16. 16. Description of Venture <ul><li>Provides complete overview of the product(s), service(s), and operations: </li></ul><ul><ul><li>Mission statement. </li></ul></ul><ul><ul><li>Important factors that provide a clear description and understanding of the business venture. </li></ul></ul><ul><ul><ul><li>Product(s) or service(s). </li></ul></ul></ul><ul><ul><ul><li>Location and size of the business. </li></ul></ul></ul><ul><ul><ul><li>Personnel and office equipment needed. </li></ul></ul></ul><ul><ul><ul><li>Background of the entrepreneur(s). </li></ul></ul></ul><ul><ul><ul><li>History of the venture. </li></ul></ul></ul>
  17. 17. Competitive Analysis <ul><li>Environmental analysis: assessment of external uncontrollable variables that may impact the business plan. </li></ul><ul><ul><li>Examples: Economy, culture, technology, legal concerns, </li></ul></ul><ul><li>Industry analysis: reviews industry trends and competitive strategies. </li></ul><ul><ul><li>Examples: Industry demand, competition </li></ul></ul>
  18. 18. Critical Issues for Competitive Analysis <ul><li>How will your business operation be better than this? </li></ul><ul><li>Are the sales of each of your major competitors growing, declining, or steady? </li></ul><ul><li>What are the strengths and weaknesses of each of your competitors? </li></ul><ul><li>What trends are occurring in your specific market area? </li></ul><ul><li>What is the profile of your customers? </li></ul><ul><li>How does your customer profile differ from that of your competition? </li></ul>
  19. 19. Critical Issues for Competitive Analysis <ul><li>What are the major economic, technological, legal, and political trends on a national and an international level? </li></ul><ul><li>What are total industry sales over the past five years? </li></ul><ul><li>What is anticipated growth in this industry? </li></ul><ul><li>How many new firms have entered this industry in the past three years? </li></ul><ul><li>What new products have been recently introduced in this industry? </li></ul><ul><li>Who are the nearest competitors? </li></ul>
  20. 20. Description of Products & Services <ul><li>Identify and describe all products and services. </li></ul><ul><li>Identify and explain product pricing. </li></ul><ul><li>Describe how your products and services are competitive. </li></ul><ul><li>Reference applicable graphics and brochures (in Appendix). </li></ul>
  21. 21. Marketing & Sales Strategy <ul><li>Research is the foundation of marketing. </li></ul><ul><ul><li>Who are my customers and potential customers? </li></ul></ul><ul><ul><li>Where do they live? </li></ul></ul><ul><ul><li>Am I offering the kinds of goods or services they want at the best place, at the best time, and in the right amounts? </li></ul></ul><ul><ul><li>Are my prices consistent with what buyers view as the product's value? </li></ul></ul>
  22. 22. Marketing & Sales Strategy <ul><li>Describes market conditions and strategy related to how the product(s) and service(s) will be distributed, priced, and promoted. </li></ul><ul><li>Describes: </li></ul><ul><ul><li>Marketing research evidence. </li></ul></ul><ul><ul><li>Specific forecasts for a product(s) or service(s). </li></ul></ul><ul><ul><li>Budget and appropriate controls needed for marketing strategy decisions. </li></ul></ul>
  23. 23. Marketing & Sales Strategy <ul><li>This section of the plan could include a SWOT analysis to summarize your Strengths, Weaknesses, Opportunities and Threats that could influence your marketing strategy. </li></ul>Strengths Weaknesses Opportunities Threats
  24. 24. Marketing & Sales Strategy <ul><li>A marketing strategy built with the marketing mix -- 4Ps : </li></ul><ul><ul><li>pricing </li></ul></ul><ul><ul><li>promotion </li></ul></ul><ul><ul><li>products </li></ul></ul><ul><ul><li>place </li></ul></ul><ul><li>Potential investors regard the marketing plan as critical to the success of the new venture. </li></ul>
  25. 25. Organization & Management <ul><li>Description of how the company is organized. </li></ul><ul><li>Legal form of ownership. </li></ul><ul><li>Explanation of how things get done. </li></ul><ul><li>Required licenses and permits. </li></ul><ul><li>Bio description of key company managers. </li></ul>
  26. 26. Assessment of Risk <ul><li>Identifies potential hazards and alternative strategies to meet business plan goals and objectives. </li></ul><ul><li>Assessment of risk should be based on: </li></ul><ul><ul><li>Potential risks to the new venture. </li></ul></ul><ul><ul><li>Discussion of what might happen if risks become reality. </li></ul></ul><ul><ul><li>Strategy employed to prevent, minimize, or respond. </li></ul></ul>
  27. 27. Assessment of Risk <ul><li>Major risks for a new venture could result from: </li></ul><ul><ul><li>Competitor’s reaction. </li></ul></ul><ul><ul><li>Weaknesses in marketing/ production/ management team. </li></ul></ul><ul><ul><li>New advances in technology. </li></ul></ul>
  28. 28. Financial Plan <ul><li>Projections of key financial data that determine economic feasibility and necessary financial investment commitment. </li></ul><ul><li>Three financial areas: </li></ul><ul><ul><li>Summarize the forecasted sales and the appropriate expenses for at least the first three years. </li></ul></ul><ul><ul><li>Cash flow figures for three years. </li></ul></ul><ul><ul><li>Projected balance sheet. </li></ul></ul>
  29. 29. Financial Plan <ul><li>Balance Sheet </li></ul><ul><ul><li>Assets - Liabilities = Net Worth </li></ul></ul><ul><ul><li>Measures business value </li></ul></ul><ul><ul><li>Snapshot in time </li></ul></ul>
  30. 30. Financial Plan <ul><li>Income Statement </li></ul><ul><ul><li>Revenue – Expenses = Profit/Loss </li></ul></ul><ul><ul><li>Measures how a business has performed over a specific period of time </li></ul></ul>
  31. 31. Financial Plan <ul><li>Cash Flow Statement </li></ul><ul><ul><li>Monthly statement of cash on hand, incoming cash and expenses. </li></ul></ul><ul><ul><li>Used to determine projected working capital availability and shortages. </li></ul></ul>
  32. 32. Financial Plan <ul><li>For a New Business </li></ul><ul><ul><li>Estimate of start-up costs </li></ul></ul><ul><ul><li>Projected balance sheet (1 year forward) </li></ul></ul><ul><ul><li>Projected income statement (1 year forward) </li></ul></ul><ul><ul><li>Projected cash flow statement (12 months forward) </li></ul></ul>
  33. 33. Financial Plan <ul><li>For an Existing Business </li></ul><ul><ul><li>Balance sheets (last 3 years) </li></ul></ul><ul><ul><li>Income statements (last 3 years) </li></ul></ul><ul><ul><li>Cash flow statement (12 months) </li></ul></ul>
  34. 34. Appendix <ul><li>Company brochures </li></ul><ul><li>Resumes of key employees </li></ul><ul><li>List of business equipment </li></ul><ul><li>Copies of press articles and advertisements (if available) </li></ul><ul><li>Pictures of your business location and products </li></ul><ul><li>Information and/or data supporting the growth of your industry and/or products </li></ul><ul><li>Key business agreements, such as lease, contracts, etc. </li></ul>
  35. 35. Implementing the Business Plan <ul><li>Implementation of the strategy contain control points to: </li></ul><ul><ul><li>Ascertain progress. </li></ul></ul><ul><ul><li>Initiate contingency plans if necessary. </li></ul></ul>
  36. 36. Implementing the Business Plan <ul><li>Without good planning: </li></ul><ul><ul><li>Entrepreneur is likely to pay an enormous price. </li></ul></ul><ul><ul><li>Employees will not understand the company’s goals. </li></ul></ul><ul><li>Businesses fail due to entrepreneur’s inability to plan effectively. </li></ul>
  37. 37. Measuring Plan Progress <ul><li>Entrepreneur should frequently check on: </li></ul><ul><ul><li>Profit and loss statement. </li></ul></ul><ul><ul><li>Cash flow projections. </li></ul></ul><ul><ul><li>Inventory control. </li></ul></ul><ul><ul><li>Production control. </li></ul></ul><ul><ul><li>Quality control. </li></ul></ul><ul><ul><li>Sales control. </li></ul></ul><ul><ul><li>Disbursements. </li></ul></ul><ul><ul><li>Web site control. </li></ul></ul>
  38. 38. Updating the Plan <ul><li>Entrepreneurs must: </li></ul><ul><ul><li>Be sensitive to changes in the company, industry, and market. </li></ul></ul><ul><ul><li>Determine what revisions are needed If changes are likely to affect the business plan. </li></ul></ul><ul><li>Helps entrepreneurs: </li></ul><ul><ul><li>Maintain reasonable targets and goals </li></ul></ul><ul><ul><li>Keep the new venture on a course to high probability of success. </li></ul></ul>
  39. 39. Why Business Plans Fail <ul><li>Goals set by the entrepreneur are unreasonable. </li></ul><ul><li>Goals are not measurable. </li></ul><ul><li>Entrepreneur has not made a total commitment to the business. </li></ul><ul><li>Entrepreneur has no experience in the planned business. </li></ul><ul><li>Entrepreneur has no sense of potential threats or weaknesses to the business. </li></ul><ul><li>No customer need was established for the proposed product or service. </li></ul>
  40. 40. Sources <ul><li>Hisrich, Robert, Peters, Michael and Shepherd, Dean (2007). Entrepreneurship , 7th edition, Irwin/McGraw-Hill, New York, New York. </li></ul><ul><li>FDIC Small Business Resources, “Developing a Marketing Plan” available at: </li></ul><ul><li>Small Business Administration, “How To Write A Business Plan” available at: </li></ul>