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PLANNING FOR BUSINESS SUCCESS. Temple University Innovation & Entrepreneurship Institute Presented by Amy Michelle Yom, Associate Director of IEI. THE BUSINESS PLAN & FREQUENTLY ASKED QUESTIONS. What is a Business Plan? What is the purpose of a business plan? Who needs a business plan?
PLANNING FOR BUSINESS SUCCESS Temple University Innovation & Entrepreneurship Institute Presented by Amy Michelle Yom, Associate Director of IEI
THE BUSINESS PLAN & FREQUENTLY ASKED QUESTIONS • What is a Business Plan? • What is the purpose of a business plan? • Who needs a business plan? • Are there disadvantages to a business plan? • How does one create a successful business plan?
WHAT IS A BUSINESS PLAN? • A roadmap for success • Future oriented: What you WILL do, how you WILL do it • All business plans should address • Business concept (product service description, business structure, how you will take the concept to market, industry trends, etc.) • Marketplace (competition, customers, purchasing behaviors, sales cycles, value prop, positioning, etc.) • Financial (income and cash flow statements, break even analysis, balance sheet, financial ratios, funding needs, etc.)
WHY DEVELOP A BUSINESS PLAN? • A well developed plan provides: • Focus to the entrepreneur • Vision to management team, potential funders, suppliers and other stakeholders • Organizes ideas and examines feasibility • Increases the chances of success • Helps attract key employees • Maximizes chance of success • Helps avoid and eliminate waste • The business needs funding! Entrepreneur without business plan
A GOOD BUSINESS PLAN… • Formalizes goals and intentions • Communicates value to stakeholders • Plans for financial support and stability • Identifies target markets • Effectively allocates resources and time • Creates a timeline to achieve the company’s main goals
ALWAYS REMEMBER TO… Plan Your Work… Then Work Your Plan
WHO NEEDS A BUSINESS PLAN? • Anyone running or thinking about running a business • Entrepreneurs with solid business ideas • Any current successful business • Start-up companies • Companies seeking financial backing • Businesses in both pre-launch and post-launch stages • Businesses going through periods of intense change and/or stress
ARE THERE DISADVANTAGES TO A BUSINESS PLAN? • Inflexibility – Sticking to the plan no matter what, even when it’s failing or market or industry conditions change • Discouragement – There are so many unknown aspects of a business, some find it difficult to write a solid plan or “guesstimate” • Tunnel Vision – A narrow plan may result in overlooking beneficial opportunities • Time Consuming – Takes time away from business operations, customer meetings, etc.
DO IT RIGHT… According to a Belmont University survey, “many plans fail because those involved do not spend the time or energy, or have the expertise, necessary to make the plan comprehensive enough to have true value.”
CREATING A SUCCESSFUL BUSINESS PLAN • Successful business plans include: • Executive Summary • Company Mission/Objectives • Company Overview • Product/Service Description • Management Team • The Marketplace
CREATING A SUCCESSFUL BUSINESS PLAN (cont.) • Sales and Marketing Strategy • Competition • Business Risks • Implementation Plan • Capital Requirements/Use of Funding • Financial Projections and Plan • Supporting Exhibits
MISSION STATEMENT • Consists of three parts: • Business operations • Customers and target markets • Value proposition • States the purpose for existence • Addresses goals and priorities of the firm
MISSION STATEMENTS • All successful businesses, for profit, not for profit and social innovation ventures, must have a solid mission statement • The mission statement should convey the company’s purpose clearly to customers • Create a tone and “voice” that is consistent with the company’s culture (Exxon vs. Nike)
MISSION STATEMENTS • Some examples: • Google: to organize the world’s information and make it universally accessible • eBay: to provide a global trading platform where practically anyone can trade practically anything • Dell: to be the most successful computer company in the world at delivering the best customer experience in markets we serve
MCDONALD’S MISSION STATEMENT • "McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile."
TEMPLE UNIVERSITY’S MISSION STATEMENT “Temple University is a national center of excellence in teaching and research with an international presence.” (http://www.temple.edu/about/mission.htm)
$ AND THE BUSINESS PLAN • Angels and venture capitalists demand it • No bank will loan you money without one • Prerequisite to apply for government grants
MONEY AND THE BUSINESS PLAN • Don’t borrow family money and don’t ask for their advice – if at all possible • Network with other business owners in similar industries – where did their funding come from? • Become highly informed of traditional and nontraditional funding sources
THINKING AHEAD…FROM IDEA TO PLAN • Thinking ahead includes identifying the end goal of the company • Will the business: • Develop technology, then sell or license it? • Grow business, then sell or merge? • Grow business into mega corporation, go public? • Grow business, and continue to operate it?
THE SWOT ANALYSIS Strength Weakness Opportunity Threat
THE SWOT ANALYSIS • The SWOT Analysis Should… • Examine your business and its performance relative to competitors and prospects • Be undertaken at the start of any business or marketing planning process • Look at internal strengths and weaknesses and external threats and opportunities
SWOT – INTERNAL CONSIDERATIONS • The internal review should outline your business position relative to your industry • Critical factors: • Management team/Human resources • Business structure • Financial position • Products/Innovation/R&D • Sales and marketing • Productivity
SWOT – EXTERNAL CONSIDERATIONS • The external review should address the “Big Picture Level” and “The Industry Level.” • Big Picture Level • Economic trends • Political • Society/environmental/ consumer • International • Industry Level • Competition • Technology • Demand patterns • Supply and suppliers • Industrial relations • Skills
BUSINESS FAILURE “People don’t plan to fail. They fail to plan.”
FAILURE STATISTICS • 99.9% of all US businesses are “small businesses” (< 500 employees, < $500K sales) • 0.1% or 17,000 businesses are “large businesses” • Small business failures have increased every year since 2004. As noted by Small biz loan, failure rates grew from 2.4 percent in 2004 to 11.9 percent in 2008. (Almost 12%) (www.strategicmarketsegmentation.com)
THE TOP TEN REASONS FOR BUSINESS FAILURE #10 – Over expansion # 9 – Poor capital structure # 8 – Failure to control the controllable costs # 7 – Failure to prepare for volatility of uncontrollable costs # 6 – Add new products or divisions that reduce the profitable ones * Waller/Lansden, Nashville, TN
THE TOP TEN REASONS FOR BUSINESS FAILURE # 5 – Poor internal controls and execution # 4 – Poorly designed business model # 3 – Reliance on critical financing that dries up #2 – Failure to adapt to a changing market, and . . . * Waller/Lansden, Nashville, TN
THE #1 REASON FOR BUSINESS FAILURE IS… Management in complete denial! According to Dun & Bradstreet, 88.7% of business failures are due to management mistakes.
MORE REASONS FOR FAILURE • Dun & Bradstreet also claim that business failure results from • Lack of market awareness • Entrepreneur falls in love with product • Lack of financial responsibility and awareness • Lack of clear focus • Insufficient capital • Optimistic/realistic/pessimistic
IMPROVING CHANCES OF SUCCESS • Development of a business plan • Current and accurate profile of the competition • Current and accurate profile of the target customer • Go into business for the right reasons • Hire the right people • Obtaining accurate financial information in a timely manner
Additional Resources (Available in A 503g, IEI Resource Center) • Write a Business Plan… In no TimeFrank F. Fiore • Business Plan in a DayRhonda Abrams • Preparing Effective Business PlansBruce R. Barringer • The Ernst & Young Business Plan Guide Brian R. Ford, Jay M. Bornstein, Patrick T. Pruitt
ONLINE RESOURCES • Entrepreneur.com – gr8 tutorials • Small Business Administration: sba.gov/smallbusinessplanner • Bplans.com – all kinds of goodies • businessplans.org – MOOT Corp b-plan competition & b-plan samples • myownbusiness.org
IEI BUSINESS PLAN RESOURCES • Ten workshops per semester • Resource Center • Coaching and counseling on all aspects of new venture creation • Executives and Entrepreneur in residence • IEI staff • Mentors: industry, subject matter and discipline experts
BE YOUR OWN BOSS BOWL • Info sessions in November and January, plans due in March • Free book, Write a Business Plan in No Time by Frank Fiore • BYOBB template keyed to book • Formal one-on-one mentoring program with GPSEG • Scoring sheet showing emphasis on various aspects of the plan