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3. Develop a Business Plan. 3.1 Why a Business Plan is Important 3.2 What Goes into a Business Plan? 3.3 How to Create an Effective Business Plan. Ideas in Action. Turning an Idea into a Business (p.63). Passion for graffiti art turned into a business.

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develop a business plan

3

Develop a Business Plan

3.1 Why a Business Plan is Important

3.2 What Goes into a Business Plan?

3.3 How to Create an Effective Business Plan

ideas in action
Ideas in Action

Turning an Idea into a Business (p.63)

  • Passion for graffiti art turned into a business.
  • Prior to requesting financing from a bank, you should prepare the “five c’s.”
    • Character - are you honest and dependable?
    • Capacity - can you earn enough $ to pay back loans?
    • Capital - do you have enough $ on hand to pay bills?
    • Collateral - do you have values to back up your loans?
    • Conditions - do you have potential to continue earning $?

Chapter 3

lesson 3 1 why a business plan is important
Lesson 3.1Why a Business Plan is Important

Goals

  • Explain the purpose of writing a good business plan.
  • Describe the importance of a business plan.

Chapter 3

the business plan
The Business Plan
  • business plan
    • a written document that describes all the steps necessary for opening and operating a successful business
  • A business plan will:
    • describe your ideas to investors
    • serve as a guide for you as you start your business

Chapter 3

purposes of a business plan
Purposes of a Business Plan
  • A business plan:
    • explains the idea behind your business
      • how your product/service will be produced & sold
    • sets specific objectives and how you will achieve them
    • describes the experience of the people who will run the business

Chapter 3

purposes of a business plan1

3.1

Purposes of a Business Plan
  • A business plan helps obtain finances:
    • Convinces investors that your business idea is solid
      • Products must be newer, better, or less expensive then those previously available
      • Showing how you will retain customers
    • Short-, Medium-, & Long-terms sales projections should show profitability
    • Background & Experience must convince investors that you are capable for running the business.

Chapter 3

importance of a business plan
Importance of a Business Plan
  • A business plan:
    • makes you think about all aspects of your business
    • may help you secure financing
    • helps you communicate your ideas to others
    • can serve as a tool for managing your business

Chapter 3

lesson 3 2 what goes into a business plan
Lesson 3.2What Goes into a Business Plan?

Goals

  • List and describe the basic elements of a business plan.
  • Describe how to pull a business plan together.

Chapter 3

basic elements of a business plan
Basic Elements of a Business Plan
  • The three basic components of a business plan are:
    • introductory materials
    • the main body
    • the appendix
    • All business plans will differ but should contain the same basic information.

Chapter 3

business plan layout
Business Plan Layout
  • Intro Elements
    • Title Page
    • Table of Contents
    • Cover Letter
    • Statement of Purpose
    • Executive Summary
  • Body Elements
    • Introduction
    • Marketing
    • Finances
    • Operations
    • Concluding Statements
  • Appendix

Chapter 3

5 elements of the main body
5 Elements of the Main Body
  • The main body of a business plan contains the bulk of the information about the business idea including:
    • Introduction
    • Marketing
    • Financial Management
    • Operations
    • Concluding Statement

Chapter 3

main body introduction
Main Body - Introduction
  • Introduction should contain following info:
    • A detailed description of business goals
      • short, medium, and long-term goals
    • Legal structure of business, including ownership
      • sole proprietor, partnership, or corporation
    • Your applicable skills and experience
      • paid, volunteer, and hobbies

Chapter 3

main body introduction1
Main Body - Introduction
  • The competitive advantages of your business
    • Performance
    • Quality
    • Reliability
    • Distribution
    • Price
    • Promotion
    • Public image or reputation

Chapter 3

main body marketing
Main Body - Marketing
  • The marketing section of the business plan should describe:
    • Products/Services
    • Market
    • Industry
    • Location
    • Described on next slide

Chapter 3

slide17

3.2

  • Products/Services
    • Describe products/services
    • Explain how they differ from existing products
    • Highlight unique features
    • Explain the customer benefits
  • Market
    • Who is your market?
    • How large is the market?
    • How do you plan to enter the market?
    • How will you deal with competition?

Chapter 3

slide18

3.2

  • Industry
    • Growth potential
    • Economic trends
    • Technology impacts
    • Forecast for the industry growth
    • External factors that affect the business
      • High competitionor lack of suppliers
  • Location
    • Location to competition
    • Location to target market
    • Availability of parking & other shopping

Chapter 3

main body financial management

3.2

Main Body – Financial Management
  • Helps determine your financial needs.
  • Consists of 3 elements
  • Identification of Risks
    • It is reassuring to lenders to know that you have proactively defined risks and that you have a plan for dealing with them.

Chapter 3

main body financial management1

3.2

Main Body – Financial Management
  • Financial Statements
    • pro forma financial statement: a financial statement based on projected revenues and expenses
  • Funding Request and Return on Investment
    • personal investment
    • loan based financing (borrowing)
    • plan for how the funding will be used
    • anticipated return on investment (ROI)

Chapter 3

operations
Operations
  • Daily Business Management
  • Staffing
    • hiring and personnel procedures
  • Facilities
    • buy or lease
  • Equipment
    • production and delivery equipment

Chapter 3

concluding statement
Concluding Statement
  • Summarize goals and objectives.
  • Emphasize your commitment to the success of your business.

Chapter 3

slide23

List the elements of the main body of a business plan and explain why each one is important.

Chapter 3

complete the business plan
Complete the Business Plan
  • Introductory elements
    • Title Page
    • cover letter
      • a letter that introduces and explains an accompanying document or set of documents
    • Table of Contents
    • Statement of Purpose
      • a brief explanation of why you are asking for a loan and what you plan to do with the money

Chapter 3

complete the business plan1
Complete the Business Plan
  • Executive Summary
    • A short restatement of the report
    • An executive summary should:
      • compel the reader to continue reading
      • describe your business concept
      • include financial projections
      • identify physical needs
      • state the requested loan value

Chapter 3

complete the business plan2
Complete the Business Plan
  • Appendix
    • includes supporting documents that provide additional information to support the body of the report
  • Put It All Together
    • The business plan should be:
      • neat
      • attractive
      • well-organized
      • inviting to read

Chapter 3

lesson 3 3 how to create an effective business plan
Lesson 3.3How to Create an Effective Business Plan

Goals

  • Describe resources available for researching your business plan.
  • Name common mistakes to avoid in business planning.

Chapter 3

research the business plan
Research the Business Plan
  • Convince readers you have a practical business idea by including information and data from objective resources and showing solid evidence.
  • Most entrepreneurs spend 50 to 100 hours developing their business plan.
  • Process requires: Patience, Research, Thought, Great Deal of Writing and Editing

Chapter 3

community government professional resources

3.3

Community, Government, & Professional Resources
  • Small Business Administration (SBA)
    • an independent government agency
    • helps Americans develop new businesses
  • Small Business Development Centers(SBDC)
    • a cooperative effort of the private sector, the educational community, and federal, state, and local governments
    • provides free, individualized help for business plan development for those who cannot afford private consultant

Chapter 3

community government professional resources1

3.3

Community, Government, & Professional Resources
  • Service Corps of Retired Executives (SCORE)
    • retired executives provide free, confidential advice to entrepreneurs
      • either in person or over the Internet
      • both short-term and long-term assistance is available
  • Chamber of Commerce
    • provides information on local business trends

Chapter 3

community government professional resources2

3.3

Community, Government, &Professional Resources
  • Trade Associations
    • organizations that are comprised of professionals in a specific industry
    • provide educational and networking opportunities
  • Professional Consultants
    • experts who will provide business assistance for a fee
  • Financial Institutions
    • Bankers and Accountants can provide information about loans and financial statements.

Chapter 3

print resources

3.3

Print Resources
  • library (books on business development)
  • magazines (trade and small business)
  • government documents (publications)

Online Resources

  • Provide information similar to library information
  • Industry specific websites
  • Websites targeted to entrepreneurs and small business owners

Chapter 3

people resources

3.3

People Resources
  • Small Business Development Centers
    • One-on-One Assistance
    • Inexpensive workshops
  • SCORE’s Volunteer Executives
    • Free confidential advice
  • Professional Consultants
    • Confidential advice at a cost

Chapter 3

slide38

What are some of the resources that are available to help you develop your business plan?

Chapter 3

mistakes in business planning
Mistakes in Business Planning
  • Avoid making the following mistakes:
    • Unrealistic financial projections
    • An undefined target market
    • Poor research
    • Ignored competition
    • Inconsistencies in the Business Plan

Chapter 3