Part 2
1.
2.
3.
4.
5.
6.
7.
8.
9.
Executive Summary
Business concept
Products & services description
Target Market
Competitive analysis
Marketing plan
Operations & management plan
Development plan
Financial statements
Situational analysis
• Product & services analysis
• SWOT analysis
• Competitor analysis
Customer analysis
• Market segmentation
• Target market
Marketing goals &
strategies
• Use of the marketing mix
• Advertising plan
Implementation,
Monitoring &
Evaluation
• Budget
• Evaluation of marketing effectiveness
1.
2.
3.
4.
5.
6.
7.
8.
9.
Executive Summary
Business concept
Products & services description
Target Market
Competitive analysis
Marketing plan
Operations & management plan
Development plan
Financial statements
 Organizational
structure
• Organizational chart (span of control & staff levels)
• Staffing plan
• Qualifications for key positions in the organization
• Salaries of staff
• Resumes of key managers
 Highlight special skills
• Use of consultants, boards
• What staff will need to be hired?
 Production and quality control
• Means of producing product/delivering service
 Inventory Control
• How inventory is managed to max. profits
 Equipment & technology
• How it enhances/detracts from the business
 Financial control systems
• Cash handling, billing, system for financial review,
fraud prevention

What are operational strengths?
• Technology
• Low cost production
• Community visibility

What are operational weaknesses?
•
•
•
•
Competition
Poor management
Poor facilities
Contractual agreements
• Develop a plan to address these things…refer to SWOT
analysis
1.
2.
3.
4.
5.
6.
7.
8.
9.
Executive Summary
Business concept
Products & services description
Target Market
Competitive analysis
Marketing plan
Operations & management plan
Development plan
Financial statements
 Business plan is roadmap to the company
• Need to show where you are going
• Investors want to see what they are getting into in the
future
• Demonstrate changes that will be made to an
existing business
 What the business will look like
• # of ees the business will have
• Profit margin
• Market share
• Expansion – facilities, product lines
in 1-5 yrs
1.
2.
3.
4.
5.
6.
7.
8.
9.
Executive Summary
Business concept
Products & services description
Target Market
Competitive analysis
Marketing plan
Operations & management plan
Development plan
Financial statements
 Financial
information
• Sources & uses of funds
• Sales projections
• Budget history
 Statements
• Income statement
• Cash flow projection
• Balance sheet
 Time
periods to cover
• New business
 1-3 years
 First yr monthly projections
 Yr 2 & 3 quarterly projections
• Existing business
 Same as new business
 Add historical financial records from past 3-10 years
 Ask for budget information

Measures profitability over a period of time
◦ i.e. annually, quarterly, or monthly

Income = revenues – expenses

Shows how profitable your company is—how much
money will be made after all expenses are taken out

With a new company…
◦ Typically 1st year you prepare monthly projections
◦ Years 2-3 Quarterly projections (4 times a year)
◦ Years 4-5: Annually (once a year)

Example….
Clear Water Rafting Company
Income Statement as of July 1- 31, 2009
Trips
Concessions
Store receipts
Total revenues
Staff
Supplies
Utilities
Mortgage
Marketing
Maintenance
Total expenditures
Net revenue/(loss)
Revenues
$12,320
$2,486
$3,345
$18,151
Expenditures
$9,562
$527
$452
$2,342
$732
$622
$14,237
$3,914
 Income
statement provides information
about revenues coming in and expenses
going out, but not cash in and cash out
• What’s in the bank
 Eliminates
some of the creative accounting
of the income statement (ex. depreciation)
 Negative
cash flows okay, but not
sustainable forever
Neg. cash flow
comes from savings
A. Net
revenues
B. Expenses
C. Monthly
cash flow (AB)
D.
Cumulative
cash flow
E. Cash
position at
beginning of
month
F. Cash
position at
end of month
(C+E)
Clear Water Rafting Company
Cash Flow Statement - 1st & 2nd Quarters
Matches
income
statement
figures
* Note that the numbers in parenthesis indicate a negative balance
February
March
April
May
June
July
Total
$ 1,276
$ 4,985
$ 8,076
$ 12,486
$ 16,958
$ 18,151
$ 61,932
$ 4,978
$ 6,890
$ 7,013
$ 9,213
$ 11,345
$ 14,237
$ 53,676
$ (3,702)
$ (1,905)
$ 1,063
$ 3,273
$ 5,613
$ 3,914
$ (3,702)
$ (5,607)
$ (4,544)
$ (1,271)
$ 4,342
$ 8,256
$ 12,000
$ 8,298
$ 6,393
$ 7,456
$ 10,729
$ 16,342
$ 8,298
$ 6,393
$ 7,456
$ 10,729
$ 16,342
$ 20,256
 Financial
condition of a business at a single
point in time
• End of month, quarter, year
 Provides
information about a company’s
assets, liabilities, and owner’s equity
(capital)…owes vs. owns
 Assets = liabilities + equity
• Equity = assets – liabilities
 Terms…
or

Current assets
 Cash & assets that can be turned to cash quickly (within a
year)
 Inventory
 Bank deposits
 Accounts receivable
◦ Amts not yet collected from customers but are due

Fixed assets
 Used to produce good & aren’t for sale
 Land, building, machinery, equipment

Depreciation
◦ Declining value of a fixed asset

Current liabilities
 Debts for regular business operations that will come due
within a year)
 Notes, accrued taxes
 Accounts payable
◦ What is owed to suppliers for things bought on credit
◦ Salaries

Long term liabilities
 Due after a year
 Mortgages, bonds, large loans

Net worth (owner’s equity)
 Portion of business owned free and clear of all debts
Clear Water Rafting Company
Balance Sheet as of December 31, 2007
Assets
Current Assets
Cash &
investments
Accounts
Receivable
$3,546,975
Liabilities
Current Liabilities
Accounts
payable
$25,729
$1,243,785
AKA:
Net
worth
Long term debt
Total Current
Assets
Fixed Assets
Store fixtures
$4,790,760
Mortgage
Total
Liabilities
$376,971
$402,700
$243,876
Equity
$5,175,923
Total liabilities &
equities
$5,578,623
Office equipment $7,659
Rafting inventory $543,987
Total fixed assets $787,863
Total assets
$5,578,623
Adjust
equity to
make it
“balance” to
reflect the
remaining
value
“owed” to
the owners
What start up costs do you have
with a new business?
How do you finance a new
business??
 Business
initiation expenses
• Legal & professional consultants
• Insurance
• Incorporation expenses
• Licenses & permits
 Capital
expenses
• Land, building, equipment, fixtures, displays
 Preopening
operations
• Salary of owner/manager; key employees
• Utility deposits & installations
• Staff training
• Supplies & equipment
• Initial inventory purchases
• Maintenance
• Advertising
• 10% or more cash reserves
 Monthly
estimates
 Categories:
• Cost of goods sold
• Personnel (including benefits)
• Contractual services (ie. rent)
• Equipment & supplies
• Taxes & licenses
• Debt services (paying loans)
• Depreciation
Can we
estimate
equally
across 12
months?
 Internal
• Savings
• Property
 2nd mortgage
• Friends/family…caution!
• Need 10-60% of start up costs backed by
personal sources
 External….
 External
debt financing…securing
money through a loan
• Banks
 Multitude of types of loans




Short & long term, balloon payments
Inventory financing
Usually 1-3% over prime
Equity lines of credit for emergencies
 Most conservative source of financing & often turn
down recreation
 External
debt financing…securing money
through a loan
• Commercial finance companies
 Fund ventures turned down by banks…higher interest
rates because of higher risks
 Make loans against:
 Accounts receivable
 Inventories
 Facilities & equipment
• Savings & loan associations
 For real estate up to 75% of the value
 Higher interest rates
 External
debt financing…securing money
through a loan
• Insurance companies
 Borrow against the paid up value of the insurance policy
 Low interest rates because it is low risk
• Trade credit
 Supplier bills co. later – usually 30-60 days
 Low or no interest
• Equipment financing, rentals & leases
 Rent to own equipment
 External
debt financing…securing
money through a loan
• Government loans
 U.S. Small Business Administration
 Guarantees up to 80% of loans made by the bank
 SBA repurchases loan in the case of a default
 Apple, Nike & Godfather’s Pizza used SBA loans
 External
debt financing…securing
money through a loan
• Credit cards
 High interest
 Equity
debt financing
• Requires giving up a portion of ownership in return
for funds to start the business
• Limited partnerships
• Venture capital firms
 Look for companies with high potential ROI (ie. 30%+)
 Want larger projects over $500,000
 Know there are a lot of failures, but bank on the one big
winner to make up for it
 Equity
debt financing
• Public stock offerings
 Sale of stock to the public