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Small Business Planning Workshops

SCORE ® Counselors to America’s Small Business. Service Corps of Retired Executives. Small Business Planning Workshops. Objective. Write an effective plan for your business Learn to use business planning forms Learn to conduct market research Build a cash flow forecast spreadsheet

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Small Business Planning Workshops

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  1. SCORE® Counselors to America’s Small Business Service Corps of Retired Executives Small Business Planning Workshops

  2. Objective • Write an effective plan for your business • Learn to use business planning forms • Learn to conduct market research • Build a cash flow forecast spreadsheet • Write a persuasive executive summary • Learn about financing options • Create a decision-making tool for long-term success

  3. Workshop 1 BUSINESS PLAN Introduction What is a business plan? Who needs it? 3-Step Process Overview of major sections Planning templates Starting Business Checklist Three Workshop Series Workshop 2 • MARKETING • Product or Service Description • Identify Target Market • Understand your Customer • Identify competition and Your advantage • Marketing strategies • Sales and margin forecast Workshop 3 • MANAGING MONEY • Test Financial Feasibility using Cash Flow forecast • Begin with four budgets • Breakeven analysis and fixed costs • Three financial statements • Example • What the lenders want to see, including 5C’s of credit

  4. SCORE® Counselors to America’s Small Business Service Corps of Retired Executives Write a Winning Business Plan • What is a Business Plan? • Who needs it? • Three step process • Overview of major sections • Planning templates from SCORE • Starting Business Checklist

  5. The Business Business is the process of taking materials, goods or services from a beginning point and adding value along the way to the final user

  6. The Entrepreneur • The entrepreneur is a capitalist, an innovator, an employers and an owner… • … who manages the process of adding value, organizes the business, creates jobs and assume the risk for the sake of profit • What does it take to start your own business? • A dream; Belief in yourself; Hard work; and • A Plan • Find an unmet need • Figure out how to add value • Figure out your unique advantage • Organize resources

  7. Starting Business is a Three Step Process • THINKING ABOUT IT • Do you have the right stuff • Choosing your business vs opportunity costs • Do you have the necessary funds • PLANNING FOR IT • Business plan • Marketing plan • Financial plan • DOING IT • Creating your business • Managing and Operating your business • Marketing your business

  8. Step 1Thinking About It

  9. Before you start… Do you have the Right Stuff? • Characteristics of an Entrepreneur • Personal Characteristics • self starter, strong work discipline, finisher, integrity, physical and emotional stamina. • Social Characteristic • ability to communicate, like meeting people, uninhabited talking about your business, honesty • Business Characteristics

  10. … Business Characteristics • Can introduce and implement meaningful managerial policies and directives • Enact strong leadership disciplines • Display good business “common sense”, integrity • Make good decisions under pressure • Good organizer. And who must face and endure the “Entrepreneurial Shock”: The psychological realization by a start-up business person that the “work-for-yourself” idea is accompanied by difficult decisions and disappointments. Entrepreneurial Shock often occurs when a start-up business person has worked in a corporate environment and was not exposed to all the complications of operating a business.

  11. 2. Buy Existing Business Conduct due diligence – ask for 3 years of past performance Know why business is being sold Prepare a business Plan 3. Buy Franchise Carefully investigate franchisor Read FTC Disclosure statement Read and understand franchise agreement Prepare a Business Plan 1.Start New Business Select your new business Define your business and product/service Understand your target market and competition Prepare a business plan Choose The Right BusinessStep 1 Increasing possibility of success

  12. Choose the Right BusinessSteps 2 &3 • Do you have the necessary funds? • First determine what you can afford • Then select an appropriate business • Pick a business that • you know something about • have training or education in or • feel passionate about

  13. Do You Have the Necessary Funds? • Equity from yourself • Own savings • Informal borrowing from family and friends • Refinance your home or home equity loan • Borrow from pension funds (401K or 403B) • Use credit limits on personal credit cards • Equity from Partners or Investors • Debt* Be Cautious * You must have at least 1/3rd of the capital necessary to start the business

  14. Step 2Planning for It

  15. Why Plan? • Many things have to go “right” for a business to succeed • Right Idea • Right Market • Right Place • Right Time • Right Management • Right amount of Capital • Planning doesn’t eliminate risk; takes time now … but avoids costly mistakes • The value lies in the process of researching and thinking; not in producing a finished plan

  16. A Business Plan… • Uncovers every facet of the business being developed • Explores new company’s strengths and weaknesses • Reveals ways to capitalize on the strengths and minimizes the weaknesses • Points to the best method for development • Provides a structure for company’s pursuit of ultimate success

  17. What is a Business Plan?It is a written document that says: • I know why my business exists • I know where I am and where I plan to go • I know my competitive advantage and why I will succeed • I know the strategies that I plan to follow to get from here to there • I know my business generates enough profits to: • Service debt • Provide adequate return to attract investors • Provide adequate return on my investment and sweat equity

  18. Who Needs A Business Plan? • Lenders • Investors • Suppliers • YOU You need a Business Plan as a decision-making tool to start & successfully operate your business over the long term

  19. Business Plan Outline • The Title Form • Table of Contents • Executive Summary (complete last) • Business Section • Marketing Section • Financial Section • Supporting Documents

  20. The Title Page • Company Name and address • Telephone number, Fax number, e-mail address • Name of person preparing Plan • Date Plan prepared • Request return • Mark Confidential

  21. Table of Contents • Reference to major topics in plan • Make it user friendly • Indicates completeness

  22. Business Section • Mission of your business • Unmet need that you will satisfy better than competition • Products / Services • Legal Structure • Ownership Structure; Management Structure • Other topics you may need to cover: • Facility • Technology • Management Information & Control • Manufacturing and Assembling

  23. Marketing Section • Product and/or service (from customer’s view … hopefully addresses an unmet need) • Industry Description: size, growth, trends • Target market (your niche) • Characteristics of target buyer, unmet needs • Competitor Analysis (Strengths and Weaknesses) • Competitive advantage (why will a customer do business with you?) • Strategies (selling, pricing, purchasing, location and advertising) • Goals (sales volume & margins forecast; list key assumptions)

  24. Financial Section • Your Personal Budget (only for lenders and you) • determines “Owners Equity” • Start-up Budget • Land, facilities, capital equipment, inventory, other one-time costs, and “working capital” • How you plan to finance the start-up • Sources of equity and debt • Expense Budget • Sales Volume and Margin Budget • Cash Flow Projections • Break-even analysis and sensitivities • Pro-forma Financials • Income Statement – Balance Sheet

  25. Supporting Documents • Personal resumes and other documents • Owner’s financial statements & credit report • Copy of leases, mortgages, purchase agreements • Contracts and Letters of reference • Key Employee job Descriptions • Licenses and permits required • Attorney/accountants/insurance advisors

  26. Executive Summary • Write this last • 1 page long … 2 max • Include everything that you would cover in a five-minute interview • Make it readable, enthusiastic and complete • Must have What, When, How and Why

  27. Executive Summary • What do you want to do? • Describe your product and/or services • Describe your business and your niche • When do you want to do it? • How are you going to do it? • Start up costs and timing • Funding (equity and debt) • Organization • Facilities and capital items • Why do you think you will succeed? • Mission and Objectives • Competitive advantage • Breakeven point and Risks

  28. Planning is Iterative • At any point you may need to rethink, rework or refine something you’ve already done • Do not get stuck on any section or form – do the best you can, move on and return to that topic later • Go back, review and improve what you wrote previously

  29. Step 3Doing It

  30. Check List • Create legal business • Get Federal Employer Identification Number • Get state employer I.D. or sales tax permit • Obtain a business license or permit • Obtain financing (equity & debt) • Establish a line of credit (if necessary) • Set up a business checking account • Buy insurance

  31. Legal Structure

  32. What Do Lenders Looks For? • 5 C’s • Character • Collateral • Capacity • Conditions • CAPITAL • Management Skills and Experience • A Business Plan demonstrating the debt can be satisfactorily serviced

  33. Doing It Check List (continued) • Establish Credit / Check processing services • Identify Personnel and begin recruiting • Line up suppliers • Set a starting date • Set up physical business • Order business cards and stationary • Order signage (Outside and Point of Sale) • Develop a website • Begin pre-opening advertising

  34. Wrap-up • Think – Write the Plan – then Do it • Choose the Right business, based on: • Knowledge • Training • Experience • Passion • Make sure you’ve got the funds • Be honest with yourself • Plan is for lenders, investors and YOU

  35. Use Free Counseling from • Our mission is to help small businesses succeed. We accomplish this mission by Educating Counseling Mentoring

  36. SCORE® Counselors to America’s Small Business Service Corps of Retired Executives Congratulations&Thank You!Keep in touch.www.scorehouston.org

  37. Back up

  38. Buying a Business • If possible, buy assets not stock • avoids potential liabilities, unknown at the time of purchase. • Describe the existing business • Date business was originally started • List the present owners • Are the present owners the original start-up owners? • Date present owners acquired business • Present Organizational form

  39. Buying a BusinessPrice • Asking price • Appraised value (see due diligence) • Goodwill • (difference between the price and book value) • How and by whom were the assets appraised

  40. Buying a BusinessDue Diligence • Review Business History • 3-year Financial reports • 3-year Income tax reports • Review Operating History by major product lines • 3-year Sales and Operating reports • Forecast sales and margins by major product lines • Appraise the Business Value • Verify Market value of inventory, receivables, capital assets, payables and debt • Determine the value rules in your industry based on similar sales • Compute business value using DCF Analysis based on forecasted sales and margins and compare it to the rules above • Verify Business Goodwill • Business reputation – Positive or Negative • Brand identity – Strong or Weak? • Customer feedback – Positive or Negative • Why is the owner selling the business • Banker; Customers; Supplier; Broker • Attach itemized lists of assets & liabilities at book and appraised values in the Appendix

  41. Buying a FranchiseIs this a repeatable franchise? • Is it listed in SBA Franchise Registry? • How long has the franchisor been in business? • Has the brand/product/service good market acceptance? • What is the reputation and credit-worthiness of the franchisor • How many franchisees are presently operating? • What is the rate of turnover and closings of the franchisees? • Contact several franchisees at random (not from a list the franchisor provides) • Carefully review Uniform Franchise Offering Circular

  42. Buying a FranchiseIs the franchise fee competitive? • How much is the franchise fee and is it competitive and reasonable? • Are the “royalty fees” reasonable and competitive? • Are the following included for these fees? • Training program for franchisee and employers • Assistance in obtaining financing • Assistance in selecting and acquiring the right location • Assistance in facility design and layout • After start-up management assistance and performance evaluation • Co-op advertising, POS and sales promotion programs

  43. Buying a FranchiseLegal Issues • What is the term of the agreement? • Under what conditions can the franchisor terminate this agreement? • Under what conditions can you terminate this agreement? • Can you sell the franchise to others without the franchisors permission? • What are your renewal rights? • Are your outside business activities limited? • Is the franchise territory protected? • Are there other “similar” franchisees located nearby? • Are there limits to the number of franchisees one can own and operate? • Is the investment required all-inclusive? • How is the royalty fee used? • What co-op programs are you required to participate in? • Are there constraints on buying supplies and products from others? • Do you have the original and a copy of the franchise agreement and other required legal documents, signed by both parties Have an attorney carefully review the franchise contract or agreement

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