Building Your Business Plan MANASOTA.SCORE.ORG 941.955.1029 v.20140904 WWW.SCORE.ORG 1 A Special Thanks to Our Local Sponsors www.score.org 2 Classroom Safety – Argosy U Emergency Exits Restrooms Please do not wander around the building! You are HERE MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 3 Classroom Safety–ComCenter Emergency Exits Restrooms You are HERE MANASOTA.SCORE.ORG 941.955.1029 Please do not wander around the building! WWW.SCORE.ORG 4 Nice to Meet You! Briefly tell each other a bit about you: • • • • 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! MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 5 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 6 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 7 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 • • • • 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 8 Creating a Draft Business Plan Using On-Line Training and Templates (www.score.org) MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 9 Business Planning Templates Provided by SCORE (www.score.org) MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 10 SAMPLE BUSINESS PLANS • Before starting to write a business plan you might want to see what an actual business plan looks like. • • Go to http://www.bplans.com/samples/sba.cfm • If there isn’t a plan similar to your business, pick one of interest and read all of it. • 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 • 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. MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 11 Review Existing Business Plans Palo Alto’s Sample Business Plans http://www.bplans.com/samples/sba.cfm MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 12 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 www.score.org 13 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 MANASOTA.SCORE.ORG 941.955.1029 Updates & Revisions Ready for Business Startup! WWW.SCORE.ORG 14 Understand the Operating Levers • Target Markets – • Channels – • Determine the best way to use them to reach customers Competitive Intelligence – • 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 15 Understand the Operating Levers • • • 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 16 Engage Professional Advisors • • • • • 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 17 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 18 • • • • • 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 19 Objectives & Goals Examples • • • • • • 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” MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 20 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? MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 21 **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) MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 22 Business Description • • • • • • • • • 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) MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 23 4. Products and Services • • • • • • • • 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 24 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? MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 25 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 . . . . MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 26 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 27 5.3 Pricing Products & Services • Rationale for Prices - Market Price or Cost + Expenses and Profit • Pricing Strategy - Hourly Rate, Day Rate, Delivery Charges • Channels of Distribution - Wholesalers, retailers, mail order • Sales Force - Own sales people or independent reps • After Sale Service Plan MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 28 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 29 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 • • • • • • services Location Size Yrs in business Ownership Financial strength Importance of business • Pricing • Terms of Sale • Advertising and • • • • • • promotion Image Sales approach Distribution Customer profile Mfg process & cost Patents & copyrights MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 30 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 MANASOTA.SCORE.ORG 941.955.1029 5-Much Better WWW.SCORE.ORG 31 6. Operational Plan Content Examples • • • • • • • • • Inventory control Production technology Transportation and delivery Quality control Customer Service Handling variations in demand Product development Employee training Receivables / Credit / Collections MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 32 6.1 Inventory Considerations • • • • 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 33 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 34 6.3 Other Operational Considerations • Credit policies and terms - Discounts offered • Employees - Full-time, Part-time, Contractors • Locations & space needed - Square feet & storage areas - Parking • • Environmental requirements Security needs MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 35 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 36 7. Management & Organization • • 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 37 8. Personal Finance Statement • Personal Finances (independent of Business) - Monthly income and expenses - Annual income and expenses • • 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 38 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 39 9.1 Required Start-Up Funds How much do you need? What will it be used for? MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 40 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 41 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! MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 42 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 43 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 44 Cash Flow CASH - Initial Investment - Sales Income - Startup Expenses - Cost of Goods Sold - Operating Expenses - Personal Living Cost? MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 45 Sources of Funding What are your expected sources of capital? MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 46 Salaries and Wages MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 47 Operating Expense Examples • Advertising • Freight costs • Insurance • Inventory • Loan repayments & Interest • Maintenance • Materials • Rent • Salaries • Taxes • Utilities • Non-Cash Items – Depreciation / Amortization MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 48 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. MANASOTA.SCORE.ORG 941.955.1029 www.score.org 49 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 50 11. Appendices Keep details out of main body of Plan • • • • • • Photos Detailed resumes Brochures Floor plans and layouts Location maps Etc. MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 51 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 52 Finally . . Important Factors for Planning • Be flexible early in the process. Don't commit too early. Expect your first • • • • • • • • 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 53 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 54 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! MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 55 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 MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 56 Help Us, Help You Please fill out the workshop evaluation form Your feedback is important to help us improve our programs! MANASOTA.SCORE.ORG 941.955.1029 WWW.SCORE.ORG 57