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Business Plan Writing

Business Plan Writing . Pre-venture Counseling Business Planning Financial Analysis Franchise Evaluation International Trade. Loan Packaging Market Research New Product Commercialization Strategic Planning Human Resource Mgmt. The Purpose……. Ingredients for Success. QUALIFIED PERSON

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Business Plan Writing

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  1. Business Plan Writing

  2. Pre-venture Counseling Business Planning Financial Analysis Franchise Evaluation International Trade Loan Packaging Market Research New Product Commercialization Strategic Planning Human Resource Mgmt The Purpose……

  3. Ingredients for Success • QUALIFIED PERSON • POTENTIAL BUSINESS OPPORTUNITY • BUSINESS PLAN • SUFFICIENT CAPITAL • LUCK

  4. THE BUSINESS PLAN THE BUSINESS PLAN IS A WRITTEN DOCUMENT WHICH DESCRIBES YOUR BUSINESS IN TERMS OF . . .

  5. THE BUSINESS PLAN • WHO YOU ARE • WHAT YOU DO • WHERE YOU ARE HEADED • HOW AND WHEN YOU EXPECT TO GET THEER • WHY YOU WILL BE SUCCESSFUL

  6. WHY YOU NEED A BUSINESS PLAN

  7. Your First Marketing and Sales Tool A Business Plan is:

  8. Typical Business Plan Outline(First Time Entrepreneurs) • Overview (Summary) • The Opportunity • The Solution • The Business Model • Operations • Financials • Required Capital, Equity Structure and Rate of Return • Management Team

  9. TO ENCOURAGE YOU TO BE SPECIFIC • TO EVALUATE THE FEASIBLITY OF YOUR IDEAS • TO PROVIDE PLANNING, OPERATING, AND POLICY GUIDES • TO IMPROVE DECISION-MAKING, EFFICIENCY, AND CONTROL

  10. TO IMPROVE YOUR CHANCES OF SUCCESS • TO PERSUADE POTENTIAL LENDERS AND INVESTORS YOU WILL SUCCEED NOTE: DO NOT WRITE A BUSINESS PLAN JUST TO OBTAIN FINANCING, WRITE IT FOR YOUR BENEFIT.

  11. COMPONENTS OF A BUSINESS PLAN • NARRATIVE • FINANCIAL DATA • SUPPORTING DOCUMENTS

  12. STATEMENT OF PURPOSE • WHO IS ASKING FOR THE MONEY? • WHAT IS THE BUSINESS STRUCTURE? • HOW MUCH MONEY? • WHAT IS THE MONEY NEEDED FOR? • HOW WILL THE FUNDS BENEFIT THE BUSINESS? • WHY DOES THE LOAN MAKE SENSE? • HOW WILL THE FUNDS BE REPAID?

  13. DESCRIPTION OF BUSINESS • BUSINESS FORM? -PROPIETORSHIP -PARTNERSHIP -CORPORATION • TYPE OF BUSINESS? -MERCHANDISING -MANUFACTURING -SERVICE

  14. DESCRIPTION OF BUSINESS (cont.) • WHAT IS THE PRODUCT AND/OR SERVICE? • IS IT A NEW BUSINESS, TAKEOVER, OR EXPANSION? • WHY WILL THE BUSINESS BE PROFITABLE?

  15. DESCRIPTION OF BUSINESS (cont.) • WHEN WILL YOUR BUSINESS OPEN? • IS IT A SEASONAL BUSINESS? • WHAT HAVE YOU LEARNED ABOUT YOUR BUSINESS FROM OUTSIDE SOURCES?

  16. PRODUCT/SERVICE • WHAT ARE YOU SELLING? • WHAT BENEFITS ARE YOUR CUSTOMERS BUYING? • WHICH PRODUCTS ARE RISING STARS, STEADY CASH COWS, IN DECLINE (INVESTMENT EGOS)? • WHAT IS DIFFERENT ABOUT YOUR GOODS AND SERVICES?

  17. MARKET • WHO BUYS FROM YOU? DEFINE YOUR TARGET MARKETS. • ARE YOUR MARKETS GROWING, STEADY, OR DECLINING? • IS YOUR MARKET SHARE GROWING, STEADY, OR DECLINING?

  18. MARKET (cont.) • HAVE YOU SEGMENTED YOUR MARKETS? HOW? • ARE YOUR MARKETS LARGE ENOUGH FOR EXPANSION? • HOW WILL YOU ATTRACT, HOLD, AND INCREASE YOUR MARKET SHARE?

  19. MARKET (cont.) • ARE YOU PLANNING TO ENTER OR LEAVE ANY MARKETS? • HOW DO YOU PRICE YOUR PRODUCTS?

  20. COMPETITION • WHO ARE YOUR DIRECT COMPETITORS? • WHO ARE YOUR NEAREST INDIRECT COMPETITORS? • HOW ARE THEIR BUSINESSES SIMILAR TO AND DIFFERENT FROM YOURS? • WHAT HAVE YOU LEARNED FROM THEIR OPERATIONS, ADVERTISING?

  21. LOCATION OF BUSINESS • WHERE ARE YOU (OR SHOULD YOU BE) LOCATED? • WHY IS IT A DESIRABLE AREA OR BUILDING? • WHAT KIND OF SPACE DO YOU NEED? • ARE ANY DEMOGRAPHICS OR OTHER MARKET SHIFTS GOING ON?

  22. MANAGEMENT • HOW DOES YOUR BUSINESS EXPERIENCE HELP YOU IN THIS BUSINESS? • WHAT RELATED WORK EXPERIENCE DO YOU HAVE? • WHO IS ON THE MANAGEMENT TEAM?

  23. MANAGEMENT (cont.) • WHAT ARE THEIR STRENGTHS AND WEAKNESSES? • WHAT ARE THEIR DUTIES? • ARE THESE DUTIES CLEARLY DEFINED? HOW? • WHAT ADDITIONAL RESOURCES ARE AVAILABLE TO YOUR BUSINESS?

  24. PERSONNEL • WHAT ARE YOUR CURRENT PERSONNEL NEEDS? • WHAT SKILLS WILL YOUR EMPLOYEES NEED? IN FIVE YEARS? • WHAT ARE YOUR PLANS FOR HIRING AND TRAINING PERSONNEL?

  25. APPLICATION/EXPECTED EFFECT OF THE LOAN (INVENSTMENT) • HOW WILL THE LOAN (INVESTMENT) MAKE YOUR BUSINESS MORE PROFITABLE? • WILL YOU BUY OR LEASE (EQUIPMENT, PLACE OF BUSINESS)? • DO YOU NEED THIS MONEY?

  26. FINANCIAL DATA • SOURCES ANDAPPLICATIONS OF FUNDING • ASSUMPTIONS • WAGE/REVENUE SCHEDULE • BALANCE SHEET • THREE YEAR INCOME STATEMENT • THREE YEAR CASH FLOW STATEMENT

  27. Goal for Session • Quick Introduction to Business Plan Financial Analysis • Help you understand what is important • Not a class in accounting!

  28. What should it be ? • What is the Purpose of Business Plan Financials? • Passing the “Taste Test” • Executive Summary Financials • Detailed (Appendix) Financials

  29. Business Plan Financials

  30. What is the Purpose of Your Business Plan Financials?

  31. Business Plan FinancialsPhase I • Helps you: • test various potential business models • isolate critical assumptions • determine whether this is a viable business opportunity • determine how much money you’ll need

  32. Business Plan FinancialsPhase II • Helps potential investors: • test the viability of your business model • evaluate your critical assumptions • Are they credible? • Do you understand your business? • evaluate you as someone who understands how business works from a financial perspective • determine whether the investment is potentially attractive • evaluate your true financial needs

  33. “The Taste Test”

  34. Job 1: Pass the “Taste Test” Tom Canfield of Equity Catalysts: “Can you taste $25-$50 million in revenues?” Is the revenue scenario credible or will you have to achieve miracles to hit your forecast numbers?

  35. So, how do you convince someone that your revenue scenarios are credible?

  36. Tips for Credibility Show your assumptions and be able to back them up with FACTSbased on market research and/or some compelling rationale

  37. Showing a Potential Market

  38. Mistakes to Avoid • Assumptions you can’t justify • Too high a market share • Too much detail • Too little detail • Not enough growth • Too much profit (in later years)

  39. Summary Financials

  40. Summary Financials • Pro-forma Income Statement • Pro-forma Return to Investors

  41. Income Statement

  42. What is an Income Statement? • Shows financial results of a company over a given period of time • Includes: • Revenues • Cost of Sales (costs directly attributable to the products/services sold) • Other Operating Expenses • Marketing, Sales • Research and Development • General and Administrative • Earnings before TaxOperating Income • Tax • Earnings after Tax

  43. Sample Income Statement

  44. Income Statement Questions • What is Revenue? • How would a magazine account for a subscription? • How would a software company account for a software license? • What is Cost of Goods sold? • What are some of the components of operating expenses? • What is operating profit?

  45. Pro-forma Income Statement • Summary Table showing 3-5 years of • Revenues • Cost of Sales • Other Operating Expenses • Operating Income • Plus: Brief text on how can you support these financials • The key assumptions

  46. Pro-forma Income Statement Income Statement (MM)

  47. Required Capital, Equity Structure and Rate of Return • How much cash will you need? • What is the value of the company? • How much will the management team contribute, if any? • What is the rate of return on capital for the investors?

  48. Rate of Return Assumptions

  49. Rate of Return Calculation

  50. Detailed Financials (“Appendix”)

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