Building Your Business Plan
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A Special Thanks to Our Local
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Nice to Meet You!
Briefly tell each other a bit about you:
•
•
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Your name
•
Here’s my background, business
card and brief bio
What is your Business
What you want to learn today
Take about 1 minute!
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Agenda
Importance of Business Planning
SCORE Business Plan
Sample Business Plans
Evolution to Detailed Business Plan
- Content structure (11 sections typical)
- Discussion about each section
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Importance of Business Planning
Detailed Road Map Leading to Success
With formal planning:
• Communication strategy to others
• Those with a plan tend to be more successful than
those without a plan
Without formal planning:
• More of a dream than pursuit of a goal
 Little chance of qualifying for a loan
New Businesses, with >1 employee, Survival Statistics
• 66% of New Businesses Survive after 2 years
• 44% of New Businesses Survive after 4 Years
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Why Build a Business Plan?
• Define business goals, strategies and tactics
• Define priorities for decision making during the first year or
two of operation
• Develop a project plan and agenda of key tasks
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needed to create the business
Create a management guide to run the business
Establish specific marketing activities and goals
(product, pricing, promotions, distribution)
Determine financial requirements to allow profitability,
cash flow, capital expenditures
Obtain financing
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Creating a Draft Business Plan
Using On-Line Training and Templates (www.score.org)
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Business Planning Templates
Provided by SCORE (www.score.org)
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SAMPLE BUSINESS PLANS
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Before starting to write a business plan you might want to see
what an actual business plan looks like.
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Go to http://www.bplans.com/samples/sba.cfm
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If there isn’t a plan similar to your business, pick one of interest
and read all of it.
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Another source is “Business Plan Handbook” in the library
658.4012. There are 13 volumes of actual business plans.
Of the hundreds shown pick one that looks a bit like your
business and read all of it.
Result
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You’ll have an idea what your business plan might look like when
completed, and you may get some good ideas for your business
plan.
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Review Existing Business Plans
Palo Alto’s Sample Business Plans
http://www.bplans.com/samples/sba.cfm
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SCORE
Roadmap
Simple Steps
Roadmap
To
ToAccelerate
Accelerateyour
YourSuccess
Success
Session 1:
Start-up
Basics
PERSONAL MENTORING
Decide
to
Continue
Session 2:
Business
Concept
Session 3:
Marketing
Plan
Session 4:
Financial
Projections
“GO OR NO GO” DECISION &
NEXT STEPS WITH MENTOR
Session 5:
Funding
Sources
With your Mentor
Build Your
Business Plan
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Evolution of Business Plan
Simple Steps
Startup
Workshops
Business
Feasibility Plan
Original Text or
Edited Text
Using Sample
Plans
Transfer to
SCORE
Business
Plan Format
Develop Remaining
Information
to Complete
First Draft
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Updates &
Revisions
Ready for
Business
Startup!
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Understand the Operating Levers
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Target Markets
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Channels
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Determine the best way to use them to reach customers
Competitive Intelligence
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•
Determine who will be your customer
Indentify and know your competitors
Product Differentiation
–
Determine your competitive advantage Understand and
monitor the market, economy, and your industry
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Understand the Operating Levers
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•
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Understand and monitor the market, economy, and your
industry
Define your products and a way to track their life cycle
Determine reports needed to track performance,
profitability, customer satisfaction and quality of products or
services
MOST IMPORTANTLY…
• Decide if you have enough experience in this type of
business
• Know what commitments you must make to run this
business
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Engage Professional Advisors
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Accountant
- Bookkeeper vs. Certified Public Accountant?
- Tactical daily transactions vs.
strategic tax implications
Attorney
- Limited startup funds: Why do I need an
attorney?
- Finding one with multi-specialties
Insurance Agent
- Handle business insurance
- Provide advice for business owners
- Represent multiple carriers
Banker
• Financing
• Setup business account
• Credit card processing
Your SCORE Mentor
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Business Plan Outline (Typical)
From Template
Found on SCORE
Website and
Workshop CD
1.
Table of Contents (Easy Reference)
2.
Executive Summary (Objectives & Goals)
3.
Business Description and Mission Plan
4.
Products and Services
5.
Marketing Plan
6.
Operational Plan
7.
Management and Organization
8.
Personal Financial Statement
9.
Financial Plan (Projected Statements, P&Ls,
Cash Flows)
10. Start-up Funding (Expenses & Capitalization)
11. Appendices
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2. Executive Summary
Brief – 1 to 2 pages long - developed after all other parts of the
plan are done
Business Plan Overview
Product or Service (Niche)
Customers / Targeted Markets and Channels
Projections for Business & Industry
Objectives and Goals
Starting Size and Location
What Makes your Products or Services Unique in the Market
Applying for Loan
- How much is needed
- How loan dollars to lead to profit
- Build confidence about repayment
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Objectives & Goals Examples
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Measurable, quantitative, obtainable
Typically 3 to 4 major goals
What are you providing
Impact on community and environment
Goal Examples:
“Increase profits 20 % in 3 calendar years”
“Pay off bank loan within 4 years”
“Be a contributor to the community”
“Respect the environment”
“Produce the best widgets money can buy”
Strategies and actions planned to achieve goals:
“Add 3 sales reps next year”
“Increase sales by 20% per year”
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3. Business Description and Plan
• Describe the Business
• What will be your role?
• Mission Statement** /Guiding Principles- One paragraph
• Business Philosophy: How will you conduct business?
• Customers: Who will be buying product or service?
• Industry Overview: Growth industry? Forecast the future
• Strengths & Core Competencies
- Critical factors that will lead to success
• Goals & Objectives: What will happen and when?
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**Example - Ann’s Nursery Mission
Ann’s Nursery will be a producer of
ornamental vines, shrubs and trees and will
sell to both retail nurseries and end
consumers, offering ornamental plants
suitable for most of the United States except
the far southern climes. Focuses on the hardto-grow-from-seedling plants that other
nurseries do not grow themselves.
Additionally, we offer considerable “best
practices” information in growing and
maintaining these plants free of cost to our
customers.
(from Simple Steps for Starting Your Business)
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Business Description
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Ownership and Legal Structure
Organizational Structure
History
Services or Products offered
Intellectual Property
Location
Facilities and other fixed assets
Sources of supply
Manufacturing or Service process descriptions (appendix)
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4. Products and Services
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What specific items or services will be sold?
Describe your products and or services
Focus on benefits rather than features
Competitive advantages expected
Product Differentiation / Price / Service
Pricing strategy, fees and leasing plans
Brand names, trademarks, proprietary features
Product Positioning
Detailed support such as drawings, process maps,
photos, and brochures should go in the Appendix
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5. Marketing Plan
• Must be based on good research – not fuzzy ideas
• Primary Research: collect your own data
• Secondary Research: published information
- Internet, libraries, Chambers of Commerce,
trade journals, Government agencies, etc
Apply research findings to your plan
Basic marketing strategy to beat competition
How product/service will be offered to customers?
How will you get customers to purchase your
offering rather than go to competitor?
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5.1 Advertising & Sales Promotion
Most appropriate promotions for your business
Yes
Possible
No
Direct Personal Contacts and Networking
Internet Website
Handbills and Flyers
Ads in Newspapers & Periodicals
Handout Brochures and Business Cards
Direct Mailing
Telephone Solicitation
Social Media - Internet
Others . . . .
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5.2 Offering Characteristics – Exercise 1
•
What is your primary Product Line or
Service?
• Where is it in terms of product life cycle?
• What are the primary Competitive
Advantage characteristics that describe
your Product / Service?
• Based on these characteristics:
– What Marketing techniques will you
–
•
plan to use?
Why do you think these will be
successful?
15 minutes – 5 minutes to share
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5.3 Pricing Products & Services
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Rationale for Prices
- Market Price or Cost + Expenses and Profit
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Pricing Strategy
- Hourly Rate, Day Rate, Delivery Charges
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Channels of Distribution
- Wholesalers, retailers, mail order
•
Sales Force
- Own sales people or independent reps
•
After Sale Service Plan
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5.4 Perform Market Research
• Business Periodicals and Newspapers
• Trade and Professional Publications
• Library (Selby Library best in the area)
• Government Documents
• Census Reports
• Local County Records web sites (extension .org)
• Company Annual Reports
• Chambers of Commerce
• Databases & the Internet
• Look for Market and Industry Trends
• Risk Management Association (RMA) Annual Statement
Studies for similar business financial comparisons
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5.5 Competitive Analysis
Gathering and analyzing competitor data
is important to your business success.
Compare your planned offerings to those
of the competition. Potential Comparisons:
• Products and
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services
Location
Size
Yrs in business
Ownership
Financial strength
Importance of
business
• Pricing
• Terms of Sale
• Advertising and
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promotion
Image
Sales approach
Distribution
Customer profile
Mfg process & cost
Patents & copyrights
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5.6 Competitive Comparison Method
Ann’s
Comp. A
Comp. B
Comp. C
Benefits
Features
5
3
2
3
Pricing
3
4
3
3
Sales
Size/Mix
3
2
3
5
Market
Strategy
4
3
5
4
Business
Model
3
3
3
4
Excellent method for ranking your planned business compared to your competition!
This is a relative comparison, from Ann’s perspective, that her target CUSTOMERS
might see about several facets of her proposed nursery business
1-Much Worse
2-Worse
3-Equal
4-Better
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6. Operational Plan
Content Examples
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•
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Inventory control
Production technology
Transportation and delivery
Quality control
Customer Service
Handling variations in demand
Product development
Employee training
Receivables / Credit / Collections
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6.1 Inventory Considerations
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Use Inventory Management systems
for both Retail Inventory and Service
Consumable Inventory
Manage inventory on hand
- Keep costs down but avoid
outages
Lead times needed for ordering
Value of inventory
- New models
- Freshness
Seasonal buildup
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6.2 Supplier Considerations
•
Data Base of Suppliers
Names, addresses, phone
numbers
•
Previous supplier experiences
Supplies delivered and when
History and reliability
Credit and delivery policies
History and Reliability
•
Projections of supply costs
Dealing with changing costs
Extended Terms
Consignment – with effective
financial controls in place
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6.3 Other Operational
Considerations
•
Credit policies and terms
- Discounts offered
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Employees
- Full-time, Part-time, Contractors
• Locations & space needed
- Square feet & storage areas
- Parking
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Environmental requirements
Security needs
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6.4 Action Planning
• How will strategy be accomplished?
• Who will be responsible each item?
• What results will be expected?
• When will results be achieved?
• Detailed Actions Plans are usually found in Appendix
A detailed action plan / task list is included on your Workshop CD –
It will not be complete for your business, but it is an excellent
starting point for you and your mentor to use and develop!
SW1 - Building Your Business Plan - Implementation of the Business Startup Activity Plan.doc
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7. Management & Organization
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•
Day-to-Day management plus other planned personnel
Brief resumes of key management personnel including
related management experience and formal education
- Full resumes go in Appendix
•
Professional advisors identified:
- Attorney, Accountant, Banker, Insurance
•
Support needed
- Subject Matter expertise and experience
• Organization Chart and a list showing each position’s job
responsibilities
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8. Personal Finance Statement
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Personal Finances (independent of
Business)
- Monthly income and expenses
- Annual income and expenses
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•
Personal Assets and Liabilities
•
May be required to use Personal
Assets as collateral for repayment
Personal assets required to finance
a portion of the business startup
and continuation
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9. Start Up Expenses & Capitalization
• Financial Statements can be developed using the Excel SCORE
Financial Model on the Workshop CD (examples follow)
SW1 - Financial Projections Template with RMA Data.xls
• Itemize all expenses anticipated before “doors open”
- List must be exhaustive and accurate
• Do not run risk of being asked “ What about X”?
• Add contingency for each expense item
- Separate item called contingency (typical is 20%)
• Identify each capital item to be purchased
- Cost plus some contingency
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9.1 Required Start-Up Funds
How much do you need? What will it be used for?
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10. Financial Plan
• Use SCORE Financial Projections Template – Excel Spreadsheet on
the Workshop CD
SW1 - Financial Projections Template with RMA Data.xls
• Make two projections:
- “best guess” & “worst case”
• Accounting method used
- Cash or Accrual What’s the difference???
• Project sales, expenses and capital needs
• Prepare monthly Income, Cash Flow and Balance Sheet statements
and assumptions used
- First 12 months
- 2nd year and 3rd year
• Loan expectations including permanent and seasonal Working Capital
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Financial Projection Model Template
Common Concerns:
•
The spreadsheets look
complicated. I don’t think I can do
this on my own.
•
I don’t understand all the figures
and math.
•
•
This is overwhelming.
Can I start my business without a
financial projection model?
Businesses don’t plan to fail – they often fail to plan!
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Financial Projection Model
• Your work is SIMPLIFIED:
1 - Provide the INPUTS and update when
required
2 –The RESULTS that are CALCULATED
AUTOMATICALLY, so you need to learn
where to look
3 – Determine if calculated forecast of
cash flow, profit and loss and balance
sheet information are acceptable for
startup.
• You DON’T need to know all the math
Work with your mentor on the forecasts
Your accountant can provide ongoing
advice
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Financial Model Template
The seven input worksheets are:
1. Required Start-Up Funds
2. Salaries and Wages
3. Fixed Operating Expenses
4. Projected Sales Forecast
5. Projected Sales Forecast (2)
6. Cash Receipts – Disbursements
22. “RMA Compare Yr1”
The remaining worksheets are
calculated financial statements
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Cash Flow
CASH
- Initial Investment
- Sales Income
- Startup Expenses
- Cost of Goods Sold
- Operating Expenses
- Personal Living Cost?
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Sources of Funding
What are your expected sources of capital?
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Salaries and Wages
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Operating Expense Examples
• Advertising
• Freight costs
• Insurance
• Inventory
• Loan repayments & Interest
• Maintenance
• Materials
• Rent
• Salaries
• Taxes
• Utilities
• Non-Cash Items – Depreciation / Amortization
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Using Financial Ratios
• The Risk Management
Association (RMA) publishes
average financial ratios for actual
business results of thousands of
different companies. You can
find ratios in the Sarasota Selby
library’s business section, your
bank or from your SCORE
mentor.
• Ratios help estimate both your
first income statement and
balance sheet.
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Key Financial Comparisons - RMA
•
•
•
Gives you a quick check—
and a reality check—on
how you stack up against
your peer companies in
your industry, based on
Sales $.
Used by the bankers to test
whether your business plan
estimates are valid for your
type of business.
Tab - RMA Compare Yr1
added to standard SCORE
spreadsheet
ASSETS
RATIOS
Cash & Equivalents
Current (CA/CL)
Trade Receivables Net
Quick (CA -Cur Inv)/CL
Inventory
Sales/Receivables
All Other Current
Cost of Sales/Inventory
Total Current
Cost of Sales/Payables
Fixed Assets Net
Sales/Working Capital
Intangibles Net
EBIT/Interest
All Other Non-Current
Net Profit + Depr., Dep,.Amort./Cur. Mat.L/T/D
Total Assets
Fixed/Worth
Debt/Worth
LIABILITIES
% Profit Before Taxes/Net Worth
Notes Payable Short Term
% Profit Before Taxes/Total Assets
Trade Payables
Sales/Net Fixed Assets
All Other Current
Sales/Total Assets
Total Current
% Depr., Dep., Amort/Sales
Long Term Debt
% Officiers, Owners, Directors Comp/Sales
All Other Non-Current
Net Worth
CASH FLOW MEASURES
Total Liabilities & Net Worth
Debt Service P&I Coverge
Funded Debt / EBITDA
INCOME DATA
Net Sales
Gross Profit
Operating Expenses
Operating Profit
All Other Expenses Net
Profit Before Taxes
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11. Appendices
Keep details out of main body of Plan
•
•
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Photos
Detailed resumes
Brochures
Floor plans and layouts
Location maps
Etc.
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Important Factors - Presenting
To Banker or Investor
• Cover Letter that provides a “customized” summary and key points of
your plan – based on your audience
• Complete Business Plan, in a binder, with a copy for each person in
the meeting
• Presentation clarity and organization
• Prepared to support Business Plan Data
• Make loan approval as easy as possible
- Anticipate questions
- Be prepared and confident
• Most terms and conditions are negotiable
• Dress appropriately and be prompt for your appointment
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Finally . .
Important Factors for Planning
• Be flexible early in the process. Don't commit too early. Expect your first
•
•
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•
•
•
•
plan to be subject to revision.
Ask yourself if your experience or expertise gives you the right to an
opinion on your specific opportunity.
Identify your potential deal killers: variables that are likely to prove fatal
to the venture.
Clearly identify what you see as the key drivers of success.
At some point, take the plunge and test your product or service on a
small scale in the real world through customer research, test marketing,
or prototypes.
Test and refine your business model before expanding your operations.
Detail your strategies on how you intend to handle adversities.
Spell out the strengths and weaknesses of your management team.
Freely and frequently modify your business plans to account for
changing conditions
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Wrap-up
•
Importance of Business Planning
•
SCORE Business Plan
•
Sample Business Plans
•
Detailed Discussion of Business Plan
– Review of each section
– Important points to cover
– Financial Model Requirements
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Do You Have A SCORE Mentor?
•
•
•
Fill out the online request for free, one-onone mentoring.
– Right after this session!
– manasota.score.org – click the
Mentoring tab
– A mentor will be assigned in about a
week
– Mentor will call you to setup a
mentoring appointment
Ongoing phone and/or face-to-face
guidance to aid completion improvement
plans
Mentor will be available for an ongoing
relationship
Take advantage of this free service to help you make the
best decisions as you grow and improve your business!
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SCORE Workshops
Simple Steps
for Starting Your Business
• Start-up Basics
• Business Concept
• Marketing Plan
• Financial Projections
• Funding Sources & Next
Steps
Specialized Workshops
• Building Your Business Plan
• Web Site Basics
• Web Marketing and Social Media
Visit manasota.score.org for Schedules and Registration
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Help Us, Help You
Please fill out the
workshop evaluation
form
Your feedback is
important to help us
improve our
programs!
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