From Backpacks to Briefcases. How to develop your own business plan. Hank Jordan, CMC www.atl.devry.edu/hjordan. Outline of a Business Plan. I. Executive Summary II. Company Description A. Legal Form of Business B. Company’s Mission C. Names of Top Management
I. Executive Summary
II. Company Description
A. Legal Form of Business
B. Company’s Mission
C. Names of Top Management
D. Location and Geographic Information
E. Company’s Development Stage
F. Company’s Products or Services
G. Specialty Business Information
III. The Industry Analysis
A. Size and Growth Trends
B. Maturity of Industry
C. Vulnerability to Economic Factors
D. Seasonal Factors
E. Technological Factors
F. Regulatory Issues
G. Supply and Distribution
H. Financial Considerations
IV. The Target Market
B. Lifestyles and Psychographics
C. Purchasing Patterns
D. Buying Sensitivities
E. Size and Trends of Market
V. The Competition
A. Competitive Position
B. Market Share Distribution
C. Barriers to Entry
D. Future Competition
VI. Marketing and Sales Strategy
A. Company’s Message
B. Marketing Vehicles
C. Strategic Partnerships
D. Other Marketing Tactics
E. Sales Force and Structure
F. Sales Assumptions
A. Plant and Facilities
B. Manufacturing/Production Plan
C. Equipment and Technology
D. Variable Labor Requirements
E. Inventory Management
F. Supply and Distribution
G. Order Fulfillment and Customer Service
VII. Operations continued
H. Research and Development
I. Capacity Utilization
J. Quality Control
K. Safety, Health and Environmental Concerns
M. Management Information Systems
VIII. Management and Organization
A. Principals/Key Employees
B. Board of Directors
D. Management to Be Added
E. Organizational Chart
F. Management Style/Corporate Culture
IX. Development and Exit Plans
A. Long-Term Company Goals
B. Growth Strategy
D. Risk Evaluation
E. Exit Plan
X. The Financials (grouped by year)
A. Sales Plan
B. Staffing Plan
C. TQM Plan
D. Marketing Plan
E. Operations Plan
F. Capital Budget
G. Cash Budget
X. The Financials (continued)
H. Income Statement
I. Balance Sheet
J. Cash Flow
K. Break Even Analysis
L. Plan Assumptions
M. Use of Funds
When you sell a service,
You sell yourself.
1. Intangible product;
2. Subjective judgment of Quality;
3. Relatively few barriers to entry;
4. Perishable product;
5. Time lapses between use;
6. Quality depends on the actual service provider.
Faster delivery speed
One stop shopping/personal banker
1. Make your product more tangible;
2. Develop a distinct image;
3. Cultivate referral sources;
4. Stay in touch with your customers;
5. Encourage timely purchases;
6. Stress quality and employee education;
7. Find ways to use excess capacity.
Define specific objectives such as:
Sales per employee
Revenues per customer
Inventory levels and Production time
Measurable: objective not subjective
Reasonable: reachable goal
Time Specific: by a certain date
Motivational: not too hard, not too easy
1. Define the problem
2. Assemble the team
3. Consider solutions
4. Recommend activities
5. Implement activities
6. Measure activities
Plan - Do - Check - Act
Number of units purchased?
Sales $ this year?
Sales $ last year?
Sales $ prior year?
Reason for purchase?
How was sale secured?
Sales $ this year?
Sales $ last year?
Sales $ potential?
Reason for loss?
Potential for regain?
Last annual purchase $?
Previous $ high annual?
1. Your basic business concept makes sense;
2. Your business had been thoroughly planned;
3. That management is capable;
4. A clear-cut market exists;
5. Your business has competitive advantages;
6. Your financial projections are realistic;
7. Investors have an excellent chance to get a return.
Legal or corporate name
Doing business as ...
Brand or trade names
Legal form of business
County for business license
Owners or major stakeholders
Chairperson of the board
Chief Executive Officer
Chief Financial Officer
Chief Operating Officer
Advisory board members
Place of business
Geographic area served
When company was founded
When product or service introduced
Significant developmental indicators
Last year’s total sales
Last year’s pretax profit
Current number of employees
Amount of funds sought
Basic use for funds sought
Major financial obligations
Products and services:
Number and type of lines
Number in each line
Patents and licenses:
Patents held and pending
Trademarks held and pending
Licenses held and pending
Note: your business may belong to more than one
Two years ago
Five years out
Which of these will affect your business?
Little business expansion
High interest rates
How many seasons does your business have?
How will changes in technology affect . . .
What effects will they have on your business?
Know who your major competitors are?
On what basis do you compete?
Who are your potential future competitors?
What barriers exist for new competitors?
List each competitor and show . . .
Percent of total revenues
Percent of total units sold
Trend of market share (up or down)
High start up costs
Substantial expertise required
Lack of suppliers or distributors
Market already saturated
This section should cover . . .
How do you make customers aware of your product?
What message are you trying to convey?
What methods will you use?
How will you get the actual sales?
Product: quality, features, style, options, packaging, guarantees, services, spares
Price: list, discounts, allowances, credit terms, payment terms, rental, lease
Place: numbers and types, locations/availability, inventory levels, transportation
Promotion: advertising, personal selling, sales promotion, point-of purchase, publicity
1. Functions: does it work?
2. Finances: is it worthwhile?
3. Freedom: easy to use?
4. Feelings: do I really feel better?
5. Future: will I have support?
Am I receiving true benefits?
Brochures: leaflets, flyers
Print media: newspapers, magazines
Broadcast media: radio, television
Advertising specials: caps, pens, calculators
Direct mail: brochures, coupons
Public relations: news articles, specials
Sampling: free products, coupons
Cooperative advertising: two companies mentioned in the advertisement;
Licensing: let someone else use your product as part of their product;
Distribution agreement: let someone else carry your product;
Bundling: let another company include your product as part of a total package.
1. How do you identify potential customers?
2. Should you use cold calling?
3. How do you qualify potential customers?
4. Who should be allowed to contact customers?
5. How frequently should you follow up?
6. What are your sales goals?
7. How do you capture all of this information?
Theory into practice.
Master the basics.
Define standards of performance.
Issues that . . .
1. Are essential to your business
2. Will help you succeed
3. Will provide a competitive advantage
4. Will overcome frequent problems
Lease versus Purchase
Other key factors
1. How much is enough?
2. How much is too much?
3. When and where to purchase supplies?
4. What type of system to use?
5. Who is responsible for its accuracy?
6. Which distribution methods to use?
Who is the best in your industry?
What makes them the best?
1. Who specifically processes orders?
2. How are orders checked?
3. What percent are incorrect?
4. How and when do you ship?
5. Who is responsible for extra costs?
6. What service programs do you offer?
7. What is your return policy?
8. How do you solicit customer feedback?
Workforce: level or chase strategy?
Productivity: output divided by input.
Capacity: time available for work.
Quality: cost of quality (Cost of doing it right
+ Cost of doing it wrong).
1. Level or chase strategy?
2. How many employees at start-up?
3. Skills required?
4. How will you attract qualified people?
5. How will you keep qualified people?
6. Who is going to keep track of payrolls?
How are you ensuring safe working conditions?
How are you protecting the environment?
How are you complying with governmental regulations?
How are you providing adequate insurance protection?
How are you managing start up activities?
Facilities: Initial rent/Purchase
Equipment: Furniture, Equipment, Telephones, Vehicles, Other
Materials: Initial inventory
Supplies: Production materials, Packaging supplies, Brochures, Samples, Other
Fees: Permits, Inspections, Licenses
Other Costs: Accounting, Legal, Insurance, Marketing, Salaries, Unanticipated costs
Your management team:
Key employees and Principals
Board of directors
Consultants and specialists
Key people to be added
Do your key players . . .
Possess the necessary skills
Have a record of success
Have a team member attitude
As a whole are they effective
Designers and Engineers
1. How will decisions be made?
2. What are the lines of authority?
3. How much employee involvement do you want?
4. Do you believe in empowerment?
5. What will be the corporate culture?
6. Do you have a clear set of company policies?
7. How will you handle sexual harassment?
You can’t reach a goal you haven’t set.
What do you want your business to look like in two, three, five years?
Your long terms plans should include goals, milestones, risks and an exit plan.
1. Steady provider?
3. Quality leader?
4. Industry leader?
5. Niche leader?
1. Market penetration
2. Promotion and support
4. Increase focus
Plan - Do - Check - Act
How do investor’s get their money back?
1. Go public 5. Buy out
2. Acquisition 6. Franchise
3. Sale 7. Hand down
4. Merger 8. Close
Numbers are merely the reflection of . . .
the decisions you make.
Every business decision leads to . . .
which taken together form the basis of . . .
I still have checks!
1. Read your statements.
2. Set policies and stick with them.
3. Use automation where practical.
4. Do not be afraid to get help.
Remember YOU are making management decisions based on this information.
1. Income Statement - are we making a profit?
2. Cash Flow Projections - can we pay our bills?
3. Balance Sheet - how much are we worth?
Accounts payable Current liabilities
Accounts receivable Debt
Accumulated depreciation Depreciation
Assets current Fixed costs
Assets fixed Gross profit
Cost of goods Long term liabilities
Other or Intangible assets
1. Be conservative
2. Be honest
3. Use standard terminology
4. Get realistic advice
5. Follow practices in your industry
6. Choose the appropriate accounting method
7. Be consistent
Gross Sales - Returns & Allowances = Net Sales
- Cost of Goods = Gross Profit
Salaries & wages; Employee benefits; Payroll taxes
Sales Commissions; Professional Services; Rent;
Maintenance; Equipment Rental; Furniture &
Equipment; Depreciation and Amortization; Insurance;
Interest; Utilities; Telephone; Office supplies; Postage and Shipping; Marketing & Advertising; Travel; Other.
Net income before taxes
- Provision for taxes on income
Net Income After Taxes (Net Profit)
Why is this the single most important financial statement?
If you can’t pay your bills, you are not going to stay in business.
Cash sales Reserve
Collections Owner’s draw
Interest Income Net cash flow
Loan proceeds Opening cash balance
Cost of goods
Provides a snapshot of the overall financial worth of the company.
It accounts for all the company’s assets minus all the company’s liabilities.
The remaining amount is figured to be the net worth of the company.
Equity Financing: selling ownership via . . .
Debt Financing: taking out loans via . . .
Short and Long Term Loans
Investment from Principals: you or other key individuals will contribute
Contains information you have already gathered.
Total sales per product line
Total payroll costs
Calculate gross margin per product line
Total costs and timing for additional expenses
Changes in costs or timing of financing
Other costs such as . . .
Why do you need to know this?
You need to know . . .
Gross profit margin (GPM)
State and Federal forms
Drawings and layouts