2 A Special Thanks to Our Local Sponsors BE SURE TO ACKNOWLEDGE MANASOTA AREA SPONSORS WHO HAVE PROVIDED FUNDS OR IN-KIND DONATIONS TO DEFRAY SOME OF THE EXPENSES OF PUTTING ON THESE WORKSHOPS. THE BANK SPONSORS ARE ALSO WILLING TO WORK WITH OUR CLIENTS TO OBTAIN SMALL BUSINESS LOANS THAT ARE SUPPORTED BY THE SBA (SMALL BUSINESS ADMINISTRATION).22
3 Please do not wander around the building! Classroom Safety – Argosy UEmergency ExitsRestroomsPlease do not wander around the building!Cover the safety emergency exits and restrooms. The door in the classroom MAY be locked.You are HERE3
4 Please do not wander around the building! Classroom Safety–ComCenterEmergency ExitsRestroomsPlease do not wander around the building!Note: Add your counseling locations slideYou are HERE4
5 Nice to Meet You! Briefly tell each other a bit about you: Your name What is your BusinessWhat you want to learn todayTake about 1 minute!Here’s my background, business card and brief bioConduct brief introductions with students—a maximum of one minute each.Remind students that throughout the entire series, they will have many opportunities to interact and get to know each other.Total Time: 25 minutes
6 Agenda Importance of Business Planning SCORE Business Plan Sample Business PlansEvolution to Detailed Business Plan - Content structure (11 sections typical) - Discussion about each section
7 Importance of Business Planning Detailed Road Map Leading to SuccessWith formal planning:Communication strategy to othersThose with a plan tend to be more successful than those without a planWithout formal planning:More of a dream than pursuit of a goal Little chance of qualifying for a loanNew Businesses, with >1 employee, Survival Statistics66% of New Businesses Survive after 2 years44% of New Businesses Survive after 4 Years
8 Why Build a Business Plan? Define business goals, strategies and tacticsDefine priorities for decision making during the first year or two of operationDevelop a project plan and agenda of key tasksneeded to create the businessCreate a management guide to run the businessEstablish specific marketing activities and goals(product, pricing, promotions, distribution)Determine financial requirements to allow profitability, cash flow, capital expendituresObtain financing
9 Creating a Draft Business Plan Using On-Line Training and Templates (www.score.org)
10 Business Planning Templates Provided by SCORE (www.score.org)
11 SAMPLE BUSINESS PLANSBefore starting to write a business plan you might want to see what an actual business plan looks like.Go toOf the hundreds shown pick one that looks a bit like your business and read all of it.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 There are 13 volumes of actual business plans.ResultYou’ll have an idea what your business plan might look like when completed, and you may get some good ideas for your business plan.
12 Review Existing Business Plans Palo Alto’s Sample Business Plans
13 SCORE Roadmap To Accelerate your Success Simple Steps RoadmapTo Accelerate Your SuccessSCORE Roadmap To Accelerate your SuccessSession 1:Start-up BasicsPERSONAL MENTORINGDecidetoContinueSession 2:Business ConceptSession 3:Marketing PlanSession 4:Financial ProjectionsSession 5:Funding SourcesTaking this workshop series can save you time in your efforts to get your business up and running SUCESSFULLY. The process is designed to help you make initial decisions about your new business – before you jump in a make errors that will need to be fixed.“GO OR NO GO” DECISION & NEXT STEPS WITH MENTORWith your MentorBuild Your Business Plan1313
14 Evolution of Business Plan Simple StepsStartupWorkshopsBusinessFeasibility PlanTransfer toSCOREBusinessPlan FormatOriginal Text orEdited Text Using Sample PlansDevelop RemainingInformationto CompleteFirst DraftReady forBusinessStartup!Updates & RevisionsBuild on the experience that was gained in QuickSTART by doing the Feasibility Plan. If participants did not go to QuickSTART, they are starting in the third box – or from a prior plan, if they have one.
15 Understand the Operating Levers Target MarketsDetermine who will be your customerChannelsDetermine the best way to use them to reach customersCompetitive IntelligenceIndentify and know your competitorsProduct DifferentiationDetermine your competitive advantage Understand and monitor the market, economy, and your industry
16 Understand the Operating Levers Understand and monitor the market, economy, and your industryDefine your products and a way to track their life cycleDetermine reports needed to track performance, profitability, customer satisfaction and quality of products or servicesMOST IMPORTANTLY…Decide if you have enough experience in this type of businessKnow what commitments you must make to run this business
17 Engage Professional Advisors Accountant - Bookkeeper vs. Certified Public Accountant? - Tactical daily transactions vs. strategic tax implicationsAttorney - Limited startup funds: Why do I need an attorney? Finding one with multi-specialtiesInsurance Agent Handle business insurance Provide advice for business owners Represent multiple carriersBankerFinancingSetup business accountCredit card processingYour SCORE Mentor
18 Business Plan Outline (Typical) Table of Contents (Easy Reference)Executive Summary (Objectives & Goals)Business Description and Mission PlanProducts and ServicesMarketing PlanOperational PlanManagement and OrganizationPersonal Financial StatementFinancial Plan (Projected Statements, P&Ls, Cash Flows)Start-up Funding (Expenses & Capitalization)AppendicesFrom TemplateFound on SCORE Website and Workshop CDOpen the Word document and show them what it look like – use the one with the hidden text – explanation of how it works is on the first page. The one without the hidden text is also on the CD, and it matches the one on the SCORE web site.
19 2. Executive SummaryBrief – 1 to 2 pages long - developed after all other parts of the plan are doneBusiness Plan OverviewProduct or Service (Niche)Customers / Targeted Markets and ChannelsProjections for Business & IndustryObjectives and GoalsStarting Size and LocationWhat Makes your Products or Services Unique in the MarketApplying for Loan - How much is needed - How loan dollars to lead to profit - Build confidence about repayment
20 Objectives & Goals Examples Measurable, quantitative, obtainableTypically 3 to 4 major goalsWhat are you providingImpact on community and environmentGoal 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”
21 3. Business Description and Plan Describe the BusinessWhat will be your role?Mission Statement** /Guiding Principles- One paragraphBusiness Philosophy: How will you conduct business?Customers: Who will be buying product or service?Industry Overview: Growth industry? Forecast the futureStrengths & Core Competencies Critical factors that will lead to successGoals & Objectives: What will happen and when?
22 **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 hard- to-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)
23 Business Description Ownership and Legal Structure Organizational StructureHistoryServices or Products offeredIntellectual PropertyLocationFacilities and other fixed assetsSources of supplyManufacturing or Service process descriptions (appendix)
24 4. Products and Services What specific items or services will be sold? Describe your products and or servicesFocus on benefits rather than featuresCompetitive advantages expectedProduct Differentiation / Price / ServicePricing strategy, fees and leasing plansBrand names, trademarks, proprietary featuresProduct PositioningDetailed support such as drawings, process maps, photos, and brochures should go in the Appendix
25 5. Marketing Plan How will you get customers to purchase your Must be based on good research – not fuzzy ideasPrimary Research: collect your own dataSecondary Research: published information Internet, libraries, Chambers of Commerce, trade journals, Government agencies, etcApply research findings to your planBasic marketing strategy to beat competitionHow product/service will be offered to customers?How will you get customers to purchase youroffering rather than go to competitor?
26 5.1 Advertising & Sales Promotion Most appropriate promotions for your businessYesPossibleNoDirect Personal Contacts and NetworkingInternet WebsiteHandbills and FlyersAds in Newspapers & PeriodicalsHandout Brochures and Business CardsDirect MailingTelephone SolicitationSocial Media - InternetOthers
27 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
28 5.3 Pricing Products & Services Rationale for Prices Market Price or Cost + Expenses and ProfitPricing Strategy - Hourly Rate, Day Rate, Delivery ChargesChannels of Distribution - Wholesalers, retailers, mail orderSales Force - Own sales people or independent repsAfter Sale Service Plan
29 5.4 Perform Market Research Business Periodicals and NewspapersTrade and Professional PublicationsLibrary (Selby Library best in the area)Government DocumentsCensus ReportsLocal County Records web sites (extension .org)Company Annual ReportsChambers of CommerceDatabases & the InternetLook for Market and Industry TrendsRisk Management Association (RMA) Annual Statement Studies for similar business financial comparisons
30 5.5 Competitive AnalysisGathering and analyzing competitor data is important to your business success. Compare your planned offerings to those of the competition. Potential Comparisons:Products and servicesLocationSizeYrs in businessOwnershipFinancial strengthImportance of businessPricingTerms of SaleAdvertising and promotionImageSales approachDistributionCustomer profileMfg process & costPatents & copyrights
31 5.6 Competitive Comparison Method Ann’sComp. AComp. BComp. CBenefits Features532Pricing4Sales Size/MixMarket StrategyBusiness ModelExcellent 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 business1-Much Worse Worse Equal Better Much BetterThis chart is a method for clients to analyze and display their competitive information. It is basically a strengths and weaknesses chart where Ann’s is compared to her major competitors using the information that she has collected. The ratings of 1-Much Worse, 2-Worse, 3-Equal, 4-Better, 5-Much Better, are seen form the perceptive of her target customers.She thinks her target customers will see her business as having superior benefits/features, pricing that is neutral to two competitors with one competitor offering lower pricing, a sales size and mix that is in generally neutral but with one competitor offering a much large variety of products, and a marketing strategy in reaching customers that is strong, with only one competitor being worse. Her business model (how Ann’s Nursery efficiently produces and delivers her product) is essentially equal to all but one competitor, who has a slight cost advantage.
32 6. Operational Plan Content Examples Inventory control Production technologyTransportation and deliveryQuality controlCustomer ServiceHandling variations in demandProduct developmentEmployee trainingReceivables / Credit / Collections
33 6.1 Inventory Considerations Use Inventory Management systems for both Retail Inventory and Service Consumable InventoryManage inventory on hand - Keep costs down but avoid outages Lead times needed for orderingValue of inventory New models FreshnessSeasonal buildup
34 6.2 Supplier Considerations Data Base of SuppliersNames, addresses, phone numbersPrevious supplier experiences Supplies delivered and when History and reliability Credit and delivery policies History and ReliabilityProjections of supply costsDealing with changing costsExtended TermsConsignment – with effective financial controls in place
35 6.3 Other Operational Considerations Credit policies and terms - Discounts offeredEmployees - Full-time, Part-time, ContractorsLocations & space needed Square feet & storage areas ParkingEnvironmental requirementsSecurity needsBe careful contracting with sub contractors. This is an area the IRS is looking for abuse and they have a test to determine if the sub contractor is really an employee.
36 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 AppendixA 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.docIf time permits, open the
37 7. Management & Organization Day-to-Day management plus other planned personnelBrief resumes of key management personnel including related management experience and formal education - Full resumes go in AppendixProfessional advisors identified: - Attorney, Accountant, Banker, InsuranceSupport needed Subject Matter expertise and experienceOrganization Chart and a list showing each position’s job responsibilities
38 8. Personal Finance Statement Personal Finances (independent of Business) Monthly income and expenses - Annual income and expensesPersonal Assets and LiabilitiesPersonal assets required to finance a portion of the business startup and continuationMay be required to use Personal Assets as collateral for repayment
39 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.xlsItemize all expenses anticipated before “doors open” - List must be exhaustive and accurateDo 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
40 9.1 Required Start-Up Funds How much do you need? What will it be used for?
41 10. Financial PlanUse SCORE Financial Projections Template – Excel Spreadsheet on the Workshop CDSW1 - Financial Projections Template with RMA Data.xlsMake two projections: - “best guess” & “worst case”Accounting method used - Cash or Accrual What’s the difference???Project sales, expenses and capital needsPrepare monthly Income, Cash Flow and Balance Sheet statements and assumptions used - First 12 months nd year and 3rd yearLoan expectations including permanent and seasonal Working Capital
42 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?SCORE knows that you may not understand accounting so we simplified the process for you. All you need to do is:Input the data into the spreadsheets and update when required.The financial results are automatically calculated so you need to know where to look for the results.Determine if your automatically calculated forecast of cash flow, profit and loss and balance sheet information are acceptable for start-up.You do NOT need to understand all the math here. SCORE recommends that you work with your mentor for help in completing forecasts, and that you work with an accountant for ongoing business needs and advice.It’s important to note that these projects can have a big impact on your Go or No Go decision. You can start a business without a financial projection, but SCORE recommends that knowing the value of financial planning is an important part of your overall business start-up work.Businesses don’t plan to fail – they often fail to plan!
43 Financial Projection Model Your work is SIMPLIFIED:1 - Provide the INPUTS and update when required2 –The RESULTS that are CALCULATED AUTOMATICALLY, so you need to learn where to look3 – 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 mathWork with your mentor on the forecastsYour accountant can provide ongoing adviceSCORE knows that you may not understand accounting so we simplified the process for you. All you need to do is:Input the data into the spreadsheets and update when required.The financial results are automatically calculated so you need to know where to look for the results.Determine if your automatically calculated forecast of cash flow, profit and loss and balance sheet information are acceptable for start-up.You do NOT need to understand all the math here. SCORE recommends that you work with your mentor for help in completing forecasts, and that you work with an accountant for ongoing business needs and advice.43
44 Financial Model Template The seven input worksheets are:Required Start-Up FundsSalaries and WagesFixed Operating ExpensesProjected Sales ForecastProjected Sales Forecast (2)Cash Receipts – Disbursements22. “RMA Compare Yr1”The remaining worksheets are calculated financial statementsFinancial statements can be overwhelming to clients. We understand their concerns and will guide them through this exercise. As clients start filling in the model, they will be making up numbers that they will change later. They will not finish this model in this workshop but will finish it with their SCORE mentor.The SCORE Forecast was programmed to be used by people who are not accountants. Remember that financial forecasting is not accounting. It enables clients to create financial projections in the format that professional reviewers find acceptable.They should answer questions (identified by BLUE type) and to fill in blank CELLS (shown in WHITE typeface) on Excel spreadsheets with those numbers which represent their current assumptions about what is the correct course for them to follow. They should input their estimates of what will lead to financial success --- with given amounts of equity and loan funds at their disposal --- with the products or services which they will offer --- marketed as they intend, over the next three years.The SCORE financial projections template will use those assumptions to model the core financial numbers and financial statements which would result were those assumptions put into play. This is an enormous help to anyone trying to create a winning business plan.* Group Exercise: Hand out the Estimated Startup Costs worksheet. Instruct client to estimate their startup expenditures and expense costs. These costs will need to be funded to start operation.Total Time: 10 minutes
45 Cash Flow CASH - Initial Investment - Sales Income - Startup Expenses - Cost of Goods Sold- Operating Expenses- Personal Living Cost?
46 Sources of FundingWhat are your expected sources of capital?
49 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.- RMA –RISK MANAGEMENT ASSOCIATION Annual Statement Studies“As you have already learned in 1,2, and 3 there are many resources you’ll need to consider in researching and building your Business Plan: your industry, competition, demographics, etc. The Financial Ratios published by the RMA are another resource that is specific to financial modeling. …. The RMA analyzes and consolidates data for thousand of businesses …..”Financial ratios have many different uses for a startup business. They can help estimate both the first few years of Income Statements and Balance Sheets, and they can provide a quick check on how a business stacks up against peer companies in the industry and they will be used by the bankers to test whether your business plan estimates are valid for your type of business.Bankers or investors will be comparing the ratios between certain line items on the P&L and Balance Sheet projections with standards for a particular industry. That is one way to measure the credibility of projections, a measure of credit worthiness and the safety of invested or borrowed funds. Such data is supplied by RMA and is usually available in a library’s reference section.
50 Key Financial Comparisons - RMA ASSETSCash & EquivalentsTrade Receivables NetInventoryAll Other CurrentTotal CurrentFixed Assets NetIntangibles NetAll Other Non-CurrentTotal AssetsLIABILITIESNotes Payable Short TermTrade PayablesLong Term DebtNet WorthTotal Liabilities & Net WorthINCOME DATANet SalesGross ProfitOperating ExpensesOperating ProfitAll Other Expenses NetProfit Before TaxesRATIOSCurrent (CA/CL)Quick (CA -Cur Inv)/CLSales/ReceivablesCost of Sales/InventoryCost of Sales/PayablesSales/Working CapitalEBIT/InterestNet Profit + Depr., Dep,.Amort./Cur. Mat.L/T/DFixed/WorthDebt/Worth% Profit Before Taxes/Net Worth% Profit Before Taxes/Total AssetsSales/Net Fixed AssetsSales/Total Assets% Depr., Dep., Amort/Sales% Officiers, Owners, Directors Comp/SalesCASH FLOW MEASURESDebt Service P&I CovergeFunded Debt / EBITDAGives 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 spreadsheet50
51 Keep details out of main body of Plan 11. AppendicesKeep details out of main body of PlanPhotosDetailed resumesBrochuresFloor plans and layoutsLocation mapsEtc.
52 Important Factors - Presenting To Banker or Investor Cover Letter that provides a “customized” summary and key points of your plan – based on your audienceComplete Business Plan, in a binder, with a copy for each person in the meetingPresentation clarity and organizationPrepared to support Business Plan DataMake loan approval as easy as possible - Anticipate questions - Be prepared and confidentMost terms and conditions are negotiableDress appropriately and be prompt for your appointment
53 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
54 Wrap-up Importance of Business Planning SCORE Business Plan Sample Business PlansDetailed Discussion of Business PlanReview of each sectionImportant points to coverFinancial Model Requirements
55 Do You Have A SCORE Mentor? Fill out the online request for free, one-on- one mentoring.Right after this session!manasota.score.org – click the Mentoring tabA mentor will be assigned in about a weekMentor will call you to setup a mentoring appointmentOngoing phone and/or face-to-face guidance to aid completion improvement plansMentor will be available for an ongoing relationshipNote: Chapter follow-through, you committed to assign a mentor and have them contact the client within 48 hours.Note: Chapter Add your SCORE chapter phone number to this slide.Take advantage of this free service to help you make the best decisions as you grow and improve your business!
56 SCORE Workshops Simple Steps for Starting Your Business Start-up BasicsBusiness ConceptMarketing PlanFinancial ProjectionsFunding Sources & Next StepsSpecialized WorkshopsBuilding Your Business PlanWeb Site BasicsWeb Marketing and Social MediaSCORE WORKSHOPSVisit manasota.score.org for Schedules and Registration
57 Help Us, Help You Please fill out the workshop evaluation form Your feedback is important to help us improve our programs!Hand out the evaluation sheet.57
Your consent to our cookies if you continue to use this website.