Topic 2 :: Business Strategies Mrs. Schroeder What Do We Plan? Topic 2 :: Business Strategies Mrs. Schroeder

The Nature of Business Plans What is a business plan? The business plan (or strategic plan) is the document that methodically illustrates the company’s strategic direction, its main operating and financial targets, the actions it will take to achieve those objectives, the new initiatives and investments planned, and their impact on the company’s performance

The Need for Business Plans When you start a new business Apply for a business loan Promoting an existing business Operational purposes

Components Title page Executive Summary - should be concise, should tell what you’re asking for Mission statement Date business began Name of founders and functions they perform

Components Company description Products or services Market analysis Number of employees Locations of businesses and branches Products or services Describe what you’re selling; focus on customer benefits Market analysis Know your market, customer needs, where they are how to reach them, etc.

Components Strategy and implementation Management team Include management responsibilities with dates and budgets Management team Describe the organization and key management team members

Components Financial analysis Cash flow analysis The main aspect of your business Cash revenues and cash outlays over a given period of time The desirable outcome is to prove that you can maintain a positive cash flow while you pay financing and interest Pro forma balance sheet Pro forma statements summarize specific financial activities using a layout approved under the generally accepted accounting principles (GAAP)

Components Break even analysis Sales forecast Ratio analysis profitability ratios gross margin return on sales return on investment liquidity ratios such as current ratio, debt to equity and working capital

Performance Activity

The Mission Statement Reasons for creating a mission statement: Increases efficiency Increases productivity Increases profitability Strategic and marketing plans built on the foundation provided by the mission statement

Mission Statement Helps to keep your company on course Helps to define your purpose and goals Fundamental in defining where the business is going and how it intends to get there

Mission Statement Characteristics It should be feasible It should be precise It should be clear It should be motivating It should be distinctive It should indicate major components of strategy It should indicate how objectives are to be accomplished

Procedures for Defining a Mission Statement What is the purpose of our company? What needs or opportunities exist? What are we doing to address these needs or opportunities? What beliefs or values guide our work?

Performance Activity

Company Goals/Objectives Company goals and objectives are important because: They define your destination They shape what your business will become Goals and objectives are critical to the success of any business

Goals/Objectives Uses Set a goal for your business first Then set S.M.A.R.T. objectives that help to accomplish your goal S – Smart M – Measurable A – Attainable R – Realistic T – Timely

Uses Areas that goals/objectives can be defined: Market standing Productivity Profitability Innovation Manager performance Worker performance and attitude

How to Develop Goals/Objectives First, develop a list of short-term, mid-term, and long-term goals Short-term – first 6 months Mid-term – 6 months to 1 year Long-term – 1 year and longer Determine what steps need to be taken to accomplish each goal and beak it into manageable sections

How to Develop Goals/Objectives Determine if there is a cost associated with your goal If there is, ensure that the amount appears in the appropriate chart in your financial section

Performance Activity