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Building Your Business Plan

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1 Building Your Business Plan
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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). 2 2

3 Please do not wander around the building!
Classroom Safety – Argosy U Emergency Exits Restrooms Please do not wander around the building! Cover the safety emergency exits and restrooms. The door in the classroom MAY be locked. You are HERE 3

4 Please do not wander around the building!
Classroom Safety–ComCenter Emergency Exits Restrooms Please do not wander around the building! Note: Add your counseling locations slide You are HERE 4

5 Nice to Meet You! Briefly tell each other a bit about you: Your name
What is your Business What you want to learn today Take about 1 minute! Here’s my background, business card and brief bio Conduct 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 Plans Evolution to Detailed Business Plan - Content structure (11 sections typical) - Discussion about each section

7 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

8 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

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 PLANS Before starting to write a business plan you might want to see what an actual business plan looks like. Go to Of 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. 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.

12 Review Existing Business Plans
Palo Alto’s Sample Business Plans

13 SCORE Roadmap To Accelerate your Success
Simple Steps Roadmap To Accelerate Your Success SCORE Roadmap To Accelerate your Success Session 1: Start-up Basics PERSONAL MENTORING Decide to Continue Session 2: Business Concept Session 3: Marketing Plan Session 4: Financial Projections Session 5: Funding Sources Taking 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 MENTOR With your Mentor Build Your Business Plan 13 13

14 Evolution of Business Plan
Simple Steps Startup Workshops Business Feasibility Plan Transfer to SCORE Business Plan Format Original Text or Edited Text Using Sample Plans Develop Remaining Information to Complete First Draft Ready for Business Startup! Updates & Revisions Build 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 Markets Determine who will be your customer Channels Determine the best way to use them to reach customers Competitive Intelligence Indentify and know your competitors Product Differentiation Determine 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 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

17 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

18 Business Plan Outline (Typical)
Table of Contents (Easy Reference) Executive Summary (Objectives & Goals) Business Description and Mission Plan Products and Services Marketing Plan Operational Plan Management and Organization Personal Financial Statement Financial Plan (Projected Statements, P&Ls, Cash Flows) Start-up Funding (Expenses & Capitalization) Appendices From Template Found on SCORE Website and Workshop CD Open 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 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

20 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”

21 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?

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 Structure History Services or Products offered Intellectual Property Location Facilities and other fixed assets Sources of supply Manufacturing or Service process descriptions (appendix)

24 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

25 5. Marketing Plan How will you get customers to purchase your
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?

26 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

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 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

29 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

30 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

31 5.6 Competitive Comparison Method
Ann’s Comp. A Comp. B Comp. C Benefits Features 5 3 2 Pricing 4 Sales Size/Mix Market Strategy Business Model 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 Worse Equal Better Much Better This 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 technology Transportation and delivery Quality control Customer Service Handling variations in demand Product development Employee training Receivables / Credit / Collections

33 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

34 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

35 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 Be 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 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 If time permits, open the

37 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

38 8. Personal Finance Statement
Personal Finances (independent of Business) Monthly income and expenses - Annual income and expenses Personal Assets and Liabilities Personal assets required to finance a portion of the business startup and continuation May 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.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

40 9.1 Required Start-Up Funds
How much do you need? What will it be used for?

41 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 nd year and 3rd year Loan 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 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 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. 43

44 Financial Model Template
The seven input worksheets are: Required Start-Up Funds Salaries and Wages Fixed Operating Expenses Projected Sales Forecast Projected Sales Forecast (2) Cash Receipts – Disbursements 22. “RMA Compare Yr1” The remaining worksheets are calculated financial statements Financial 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 Funding What are your expected sources of capital?

47 Salaries and Wages

48 Operating Expense Examples
Advertising Freight costs Insurance Inventory Loan repayments & Interest Maintenance Materials Rent Salaries Taxes Utilities Non-Cash Items – Depreciation / Amortization

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
ASSETS Cash & Equivalents Trade Receivables Net Inventory All Other Current Total Current Fixed Assets Net Intangibles Net All Other Non-Current Total Assets LIABILITIES Notes Payable Short Term Trade Payables Long Term Debt Net Worth Total Liabilities & Net Worth INCOME DATA Net Sales Gross Profit Operating Expenses Operating Profit All Other Expenses Net Profit Before Taxes RATIOS Current (CA/CL) Quick (CA -Cur Inv)/CL Sales/Receivables Cost of Sales/Inventory Cost of Sales/Payables Sales/Working Capital EBIT/Interest Net Profit + Depr., Dep,.Amort./Cur. Mat.L/T/D Fixed/Worth Debt/Worth % Profit Before Taxes/Net Worth % Profit Before Taxes/Total Assets Sales/Net Fixed Assets Sales/Total Assets % Depr., Dep., Amort/Sales % Officiers, Owners, Directors Comp/Sales CASH FLOW MEASURES Debt Service P&I Coverge Funded Debt / EBITDA 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 50

51 Keep details out of main body of Plan
11. Appendices Keep details out of main body of Plan Photos Detailed resumes Brochures Floor plans and layouts Location maps Etc.

52 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

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 Plans Detailed Discussion of Business Plan Review of each section Important points to cover Financial 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 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 Note: 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 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 SCORE WORKSHOPS Visit 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


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