Turning an idea into a business Module 3: Turning an idea into a business 1 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com 1 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Module 3 Goal: Provide the future entrepreneur with an overview of nuts and bolts of starting a business including writing a business plan, obtaining funding and interacting with business-related agencies. 2 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com 2 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Module 3 Objectives: Understand importance of business planning. Understand basics of writing a business plan. Understand funding landscape and options. Become familiar with agencies and their relationship to a business and its owner. 3 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com 3 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Module 3 Objectives: Understand importance of business planning. Understand basics of writing a business plan. Understand funding landscape and options. Become familiar with agencies and their relationship to a business and its owner. 4 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com 4 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Thoughts on goals & planning “Begin with the end in mind.” – Stephen Covey, Author of The 7 Habits of Highly Effective People “Goals determine what you’re going to be.” – Julius Erving “If you don’t know where you are going, how can you expect to get there? – Basil S. Walsh Thoughts on goals & planning 5 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Purpose of a business plan A business plan has 3 primary purposes: 1. Charts course for business owner 2. Provides introduction document for fundraising 3. Drives action Source: DECA exercise by George T. Solomon, The George Washington University’s Center for Entrepreneurial Excellence 6 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Exercise 3-1 Imagine this Friend #1: Friend 1 approaches you and says: “Hey, I’ve got this great idea for selling something to students. Can I borrow $10 to get it started?” 7 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Exercise 3-1 Imagine this Friend #2: Friend 2 approaches you and says: “Hey, I’ve got this great idea. Each year students buy cookies from Organization X…but, the sales do not benefit our students or the school. I can change that. I can sell similarly-priced cookies and donate $1 to a school scholarship fund. We’d make money, and the school would make money. If you give me $10 to help fund the purchase of cookies, I’ll give you back $11 in a month.” 8 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Exercise 3-1 Imagine this 1. Which friend would you be most comfortable entrusting with the money? Why? 2. If you were an employee, which friend would you prefer to work for? Why? 9 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Exercise 3-1 Imagine this – wrap up Choose something you love Do the “work” Sell it 10 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Module 3 Objectives: Understand importance of business planning. Understand basics of writing a business plan. Understand funding landscape and options. Become familiar with agencies and their relationship to a business and its owner. 11 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com 11 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Exercise 3-2 Thinking about “how” Ask yourself “how” in response to three ideas you have. Write down the answer to the “how” question. Discuss in class. Sample: Thought/idea: “Joining the track team.” How I will accomplish: 1. Talk to friends on track team about try outs. 2. Talk to coach about try outs (timing, requirements, etc.). 3. Practice and train until the try out date. 12 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Basics of business plan Overview Typical sections of a typical business plan. I. Executive Summary II. Product or Service Description III. Market Landscape IV. Operational Plan V. Sales and Marketing Plan VI. Financial Plan VII. Appendices 13 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Basics of business plan Exec Summary & Product/Service Description I. Executive Summary - One page description of the business. II. Product or Service Description 14 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Basics of business plan Market Landscape III. Market Landscape: The industry and its characteristics Size – (Units and Dollars) Growth Consumer behavior Other factors Target markets. People Place Preference Competition 15 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Basics of business plan Operational Plan IV. Operational Plan Team and Structure Management team and roles Tip: Present team member bio. Tip: Project needs for staff in the future. Tip: What function in the company will they be handling? Business location Tip: List advantages Form of ownership Sole Proprietorships most common Partnership, Corporation, LLC (click link) 16 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Basics of business plan OWNERSHIP STRUCTURE - SIDE BAR IV. Operational Plan - FORM OF OWNERSHIP Sole Proprietorship Partnership Corporation C Corp S Corp Limited Liability Company (Back to previous slide) 17 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Basics of business plan Operational Plan (cont.) IV. Operational Plan Product/Service Plan Detailed description of product/service Supplier/Manufacturing/Inventory detail Major Year 1 Tasks and Future Goals Year 1 Tasks Tip: List dates and status too Future Goals Tip: Be as specific as possible 18 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Basics of business plan Sales & Marketing IV. Sales & Marketing Strategy - Reality Check Advertising spending: Third largest expenditure Growing favoritism toward online Most important online marketing tactics 69% Web sites 36% Search engine key words 24% E-mail marketing Most important offline marketing tactics 35% Fostering good community relations 27% Public relations/ media coverage Sources: www.emarketer.com, 2005 & www.MarketingPower.com 19 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Basics of business plan Sales & Marketing IV. Sales & Marketing Strategy Product Example: Mature product Example: New/introductory product Place Tip: Sales strategy Price Internal/Cost perspective External/market perspective Promotion (continued….) 20 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Basics of business plan Sales & Marketing (cont.) IV. Sales & Marketing Strategy Promotion Advertising Tip: Advertising value Publicity Tip: Made you look! Personal Selling Tip: Relationships 21 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Basics of business plan Sales & Marketing (cont.) IV. Sales & Marketing Strategy GENERAL TIPS Tip: Go Guerilla Tip: Objective-based promotion Tip: Why is this special? 22 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Basics of business plan Financial plan VI. Financial plan: Revenue Expenses Net income Basic equation: Revenue – expenses = income Important equation: Revenue-ALL expenses=NET income Proposed plan to meet capital needs Capital = “money” 23 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Basics of business plan FINANCE DISCUSSION VI. Financial plan (DISCUSSION) If you could have a $1,000,000 dollar business and make $100,000 in income vs. a $250,000 business where you make the same amount in income ($100,000), which would you choose and why? 24 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Basics of business plan Financial plan (cont.) VI. Financial plan Revenue Defining a unit Critical for scale Financial analysis Defining your market Top down Tip: Avoid overly-aggressive .com-era projections Bottom up 25 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Basics of business plan Financial plan (cont.) VI. Financial plan Expenses Your time Rent Utilities Telephone Car Insurance Machinery Equipment Office Inventory Marketing/Promotion Professional Dues or Fees Other 26 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Basics of business plan Financial plan (cont.) VI. Financial plan Profit Write down your projected income for a month or a year. Write down your projected expenses for a month or a year. Subtract #2 from #1. Example $100-$75=$25 Divide your answer by #1. Example $25/$100= 25%. THIS IS YOUR PROFIT $100 - $75 $25 $25 ÷ $100 = 25% 25% 27 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Basics of business plan Financial plan (cont.) VI. Financial plan Profit What do entrepreneurs do with profit? Invest back in the business Pay back investors Keep it for themselves A combination of the above What would you do with the profits from your business? Make a pie chart. 28 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Basics of business plan Financial plan (cont.) VI. Financial plan Proposed plan to meet your capital needs NOW items LATER items Funding sources “Funding landscape” section…. 29 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Basics of business plan Financial plan (cont.) VI. Financial plan: Projected income and expenses. Projected Income: Revenue – expenses = income Proposed plan to meet capital needs Capital = “money” 30 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Basics of business plan Appendices VII: Appendices Detailed spreadsheets Market research Other ‘bulky’ items 31 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Exercise 3-3 Business plan brainstorm Building a business plan – this exercise Read datasource appendix Fill in business plan outline The general idea – skills you need Gather data Filter it Put it in the right place 32 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Exercise 3-3 Business plan brainstorm I. Executive Summary One page description of the business. II. Product or Service Description III. Market Landscape Industry and characteristics Target markets Competition 33 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Exercise 3-3 Business plan brainstorm IV. Operational Plan Team/roles and organization’s structure Form of ownership (sole proprietorship, etc.) Business location Material sources for product/service Major Year 1 Tasks and Future Goals 34 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Exercise 3-3 Business plan brainstorm V. Sales & Marketing Strategy Product Place Price Promotion 35 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Exercise 3-3 Business plan brainstorm VI. Financial Plan Projected Income: Revenue – expenses = Income Year 1 Year 2 Proposed plan to meet capital needs 36 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Exercise 3-3 Business plan brainstorm VII. Appendix/Appendices 37 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Exercise 3-4 YOUR business plan Consider your passion/interest area PART 1: Fill out business plan outline with YOUR idea PART 2: Financial worksheet – plug back into PART 1 (main outline) 38 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Exercise 3-4 YOUR business plan I. Executive Summary - One page description of the business. II. Product or Service Description III. Market Landscape Industry and characteristics Target markets Competition 39 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Exercise 3-4 YOUR business plan IV. Operational Plan Team/roles and organization’s structure Form of ownership (sole proprietorship, etc.) Business location Material sources for product/service Major Year 1 Tasks and Future Goals 40 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Exercise 3-4 YOUR business plan V. Sales & Marketing Strategy Product Place Price Promotion 41 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Exercise 3-4 YOUR business plan VI. Financial Plan (REFER TO PDF PART 2) Projected Income: Revenue – expenses = Income Year 1 Year 2 Proposed plan to meet capital needs Sources: 3-4 PDF PART II derived from DECA curriculum by Dr. Susan G. Duffy 42 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Exercise 3-4 YOUR business plan VII. Appendix 43 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Module 3 Objectives: Understand importance of business planning. Understand basics of writing a business plan. Understand funding landscape and options. Become familiar with agencies and their relationship to a business and its owner. 44 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com 44 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Funding landscape & options Funding, financing, etc. Pay start up costs. Fund growth Short term cyclical needs Just in case Quick facts about funding Credit Sources of capital/funding Most commonly used 45 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Funding landscape & options What funding options to you have? Debt Equity 46 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Funding landscape & options Four Sources of Funding Financial Institutions FFF: Founder, Friends and Family Angel Investors Private Equity/Venture Capital Funds 47 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Funding landscape & options SOURCE 1 of 4: Financial Institutions Credit card Reality check Community Banks Large banks Small Business Administration (works with banks) Pros & Cons Sources: Four funding sources provided by DECA curriculum by Dr. Susan G. Duffy 48 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Funding landscape & options SOURCE 2 of 4: FFF - Founder, Family & Friends Founder Pros & cons Friends and Family Reality check Sources: Four funding sources provided by DECA curriculum by Dr. Susan G. Duffy 49 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Funding landscape & options SOURCE 3 & 4 of 4: Angel Investors & Private Equity Funds Angel Investors Pros & cons Private Equity/Venture Capital Funds Sources: Four funding sources provided by DECA curriculum by Dr. Susan G. Duffy 50 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Funding landscape & options 5. The “FIFTH ELEMENT”: Advanced Material: GOING PUBLIC / IPO 51 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Exercise 3-5 Your funding options Debt or equity? Further exploration on funding Approach strategy 52 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Module 3 Objectives: Understand importance of business planning. Understand basics of writing a business plan. Understand funding landscape and options. Become familiar with agencies and their relationship to a business and its owner. 53 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com 53 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Agency relationships Establishing a business the right way Different rules for different business sizes 54 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Agency relationships Zoning office Increased vehicular traffic Number of employees Use of a home Selling retail goods Storage Learning more: Search zoning office + town Sources: Start Your Own Business: The Only Start-Up Book You'll Ever Need (Entrepreneur Press) & www.Entrepreneur.com 55 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Agency relationships Internal Revenue Service Do I need to file taxes Federal ID number Payment of employees Learning more: www.IRS.gov Business License. Do I need one? Examples Learning more: Search Business license + town State corporation commission How to incorporate Learning more: Search www.nolo.com 56 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Agency relationships Department of Labor Small Business Administration Wages Health insurance Benefits Work environment Hiring, firing Learning more: www.DOL.gov, www.NFIB.org Small Business Administration Loans Certification Learning more: www.SBA.gov 57 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Associations and membership organizations for the established entrepreneur National Federation of Independent Business www.NFIB.org United States Association for Small Business and Entrepreneurship www.USASBE.org Entrepreneur’s Organization www.EONetwork.org Young Presidents Organization www.YPO.org Women’s Presidents Organization www.WomenPresidentsOrg.com Search local peer forums at Edward Lowe Foundation http://www.lowe.org/index.elf?page=ss&function=pgr 58 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Associations and membership organizations for the emerging entrepreneur Young Entrepreneur Foundation www.NFIB.org/YEF Distributive Education Clubs of America (DECA) www.DECA.org National Foundation for Teaching Entrepreneurship (NFTE) www.nfte.com Junior Achievement www.ja.org Future Business Leaders of America (FBLA) www.fbla.org Students in Free Enterprise (SIFE) www.sife.org Hugh O’Brien Youth Foundation (HOBY) www.HOBY.org 59 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Module 3 Objectives: Understand importance of business planning. Understand basics of writing a business plan. Understand funding landscape and options. Become familiar with agencies and their relationship to a business and its owner. 60 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com 60 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com

Brought to you by: Entrepreneur-in-the-Classroom brought to you by: Co-presenting Sponsor In Conjunction With Curriculum developed by: Katherine Korman Frey Founder, Vision Forward & The Hot Mommas® Project. Associate Director Center & Adjunct Professor, The George Washington University Center for Entrepreneurial Excellence. Contributing content provided by: Dr. George Solomon, Dr. Susan Duffy, Dr. Ayman Tarabishy and Professor Janet Nixdorff. 61 © Copyright Katherine Korman Frey/Vision Forward, LLC www.VisionForward.com