PREPARING YOUR BUSINESS PLAN

Business Plan - a written document that describes all aspects of your business venture. Including your: product or service customers competition production and marketing methods management team financing

Overview of Your Business Plan - an ending result of all the ideas, goals, objectives, research, analysis, thoughts, and schemes that you have put into production, that represent your intentions and all aspects of your business venture.

Why Develop a Business Plan? 1. For the internal evaluation of your business - as a checklist to see that you have covered all the important bases and as a timetable for accomplishing your stated objectives 2. For external use - in attracting resources and obtaining support for your venture

Cont’d Why develop a business plan? Internal Perspective 1. Can be used to inform employees about the goals and direction of your business 2. Lets everyone know how they fit into the organization, and your expectations of them 3. Helps you develop as a manager 4. Requires you to deal with problems like competitive conditions, promotional opportunities, and other situations that you will be confronted with External Perspective 1. Can serve as an effective sales document as part of the capital-raising process 2. Allows external views such as bankers suppliers, customers, and investors see if you can pay back their loans (principle plus interest) and if they can meet their expected return on investment.

Who Should Write Your Business Plan Do not under any circumstances hire someone else to write the final plan for you. Its is quite difficult to defend someone else’s work You have a better understanding and feel for the business Should be a personal expression written in a unique style, but also professionally done.

How Long Does it Take? - Actual time to create a business plan will vary in respect to the nature of your venture. Anywhere between a few weeks to a few months. - see table 10.1 and figure 10.1

What Should Your Plan Contain? - Plans require a formal, structured presentation so that they are easy to read and follow, and avoids confusion. There are 6 components that a business plan should contain: 1. Letter of Transmittal 2. Title Page 3. Table of Contents 4. Executive Summary & Fact Sheet 5. Body 6. Appendixes

1. Letter of Transmittal - Officially introduces your business plan to the reader. - Explains reasoning to writing your plan - Gives title of plan, or name of business - Outlines major features of plan

2. Title Page - provides information that identifies you and your proposed business. Should include: Name Address Date ( when finalized or submitted) Telephone Number (business and personal)

3. Table of Contents - lists major headings and subheadings enclosed in plan. - provides readers with quick overview of the contents of your plan, and allows them to quickly be able to retrieve information that may be of particular interest to them.

4. Executive Summary and Fact Sheet - must capture readers attention, stimulate interest - approximately 2-3 pages in length Summary Sheet 1. Explains business status 2. Describes products / services and their benefits to customers 3. provides overview of ventures objectives, market prospects, and financial forecasts 4. indicates amount of financing needed, how money is used 5. benefits to the lender / investor Fact Sheet 1. Company name 2. Location and telephone 3. Type of business & industry 4. Form of business organization (proprietorship, partnership, corporation) 5. Principle product or service line 6. Registered patents or trademarks 7. Number and name of founders/partners/shareholders 8. Length of time in business 9. Current and/or projected market share 10. Funds invested business to date and their source 11. Additional financing required 12. Proposed terms and payback period 13. Total value or net worth of business 14. Name of business advisors (legal counsel, accountants, etc)

5. Body - Longest component; detailed story of business proposition - broken into major divisions using headings, and subheadings Material that should be included in the body of plan: 1. Your Company 2. The Industry 3. Your product / service offering 4. Market Analysis 5. Your Marketing Plan 6. Your Development Plan 7. Your Production / Operations Plan 8. Your Management Team 9. Implementation Schedule and Risks Associated with the Venture 10. Your Financial Plan 11. Appendixes 12. Conclusion

Your Company Background - date business started, form of organization, location, historical information. - name founders, other key people - explain how products/services are chosen and developed - achievements of business Current Situation – discuss how you identified market opportunity, assessed competition, and developed some unique factor Future Plans – discuss goals and ambitions of business, and how you achieved them

The Industry Principle Characteristics – Describe status and prospects for industry - How big is industry? Total sales and units ($)? - What are the industry standards? Gross margins? Seasonal patterns and similar factors? Major Participants - identify the role market share and performance measures, strengths and weaknesses of major industry participants Industry Trends - Discuss how you feel the industry will evolve in the future. Growing? Stable? - How will industry be affected by economic, social, technological, environmental and regulatory trends?

Product / Service Offering Description - in detail describe product / service. Its characteristics, and advantages over competitors. Indicate what stage of development product is currently at. Prototypes? Working models? Finished units available? Photographs available? Proprietary Position – describe patents, trademarks, licensing agreements, legal contracts, that you have or applied for. Lists regulatory or government standards product must meet, and if you have how or when you will obtain this Potential – Outline market opportunity, and your advantages of it List and explain how you plan to exploit key success factors of business to your advantage

Market Analysis - describe total market and how you feel it can be broken down into segments. Indicate segment you plan to concentrate on, and what share the business will obtain. 1. Market studies available from private research firms and government departments and agencies 2. Statistics Canada or U.S. Bureau of the Census data 3. Information from trade associations and trade publications 4. Surveys or informal discussions with dealers, distributors, sales representatives, customers, or competitors

Cont’d Market Analysis Target Market and Customers -Who represents your primary target markets? i.e. individuals, consumers, companies, health care, educational institutions, government departments, etc - Can these markets be broken down into characteristics such as: geographic location, age, size, industry type, etc. - Describe profile of principal target customers - Identify major buyers

Cont’d Market Analysis Market Size and Trends - Estimate size of the current total market for your product or service in both units and dollars - Describe how market size of segments has changed over the past 3 or 4 years in units and dollars - Include major factors that affected past market growth i.e. socioeconomic trends, industry trends, regulatory changes, government policy, populations shifts, etc.

Cont’d Market Analysis Competition - Identify each of principle competitors, and compare competing product or services on the basis of price, quality, performance, service support, warranties, etc. - Evaluate the market share of each segment by each competitor, their relative profitability, sales, marketing, distribution, and production capabilities

Cont’d Market Analysis Estimated Sales and Market Share - Estimate share of each segment of market in sales in units and dollars, that you believe that you will acquire in next 3 to 5 yrs. - Should be developed by month for next year, and annually for each year thereafter. - Best presented in tabular form. Indicated any assumptions you may have made

Your Marketing Plan Pricing - describes what, when, and how sale projections will be achieved, and who will be responsible for sales strategy, advertising, and promotion, pricing policy, and channels of distribution. Pricing - Summarize financial characteristics of your business and industry - Discuss the prices you plan to charge for your product - Detail the markups your product will provide to the various members of your channel of distribution. - Indicate normal terms of sale, and how long it will take you to break even.

Cont’d Your Marketing Plan Sales and Distribution - Indicate methods you will use to sell and distribute product or service - If using your own sales force, describe how large it will be and how it will be structured - If using distributors, or wholesales, indicate how they have been or will be selected, who they are, territories they cover, their compensation, credit and collection policies, and any special policies such as rights, discounts, and cooperative advertising programs - Indicate any plans for export sales, and international marketing arrangements

Cont’d Your Marketing Plan Advertising and Promotion - Describe program you plan to use to make consumers aware of your product or service. Ie advertising, media - Outline any plans to obtain free publicity for your product or company

Cont’d Your Marketing Plan Service and Warranty Program - Indicate your service arrangements, warranty terms, and methods of handling service problems. - Describe how you will handle customers complaints and other problems Will service be handled by company, dealers and distribution or independent service centres?

Your Development Plan Development Status - Describe current status of product and what remains to be done to make it marketable Costs - indicate the amount of money that has been spent on products development to date, and what areas it has been spent in. - Present a development budget indicated funds required, how it will be spent, and timing involved Proprietary Issues - Indicate any patents or trademarks acquired or applied for. - Indicate regulatory requirements needed to product or market product - Has standardized testing been done through Underwriters Laboratory, Canadian Standards Association (CSA) or other agencies?

Your Production / Operations Plan Outlines operating side of business. Location - Describe planned location of business, and any advantages or disadvantages of this location in terms of cost, labour, proximity to customers, access to transportation, energy and natural resources, zoning, etc - Describe location in reference to market size, traffic flows, local and regional growth rates, income levels, and similar market-related factors

Cont’d Your Production/Operations Plan Facilities and Equipment - Describe property and facilities currently used or that will be required. i.e. factory, storage space, selling space, property size, etc. - List machinery and equipment required for manufacturing - Draw physical layout of plant and other facilities, if possible

Cont’d Your Production/Operations Plan Manufacturing Plans and Costs - List manufacturing costs that show standard production costs at various levels of production. i.e. raw materials, work in process, finished goods, component parts, labour and overhead - Indicate suppliers, or subcontractors for raw materials and components - What are the quality control procedures used to minimize service problems - Indicate production capacity

Cont’d Your Production/Operations Plan Labour - Describe the number of employees you have and their qualifications i.e. Full/part-time, hours of training, labour costs/hour, pension plan, fringe benefits, profit-sharing - Indicate whether your employees will be union or non-union. i.e. terms and expiration date

Cont’d Your Production/Operations Plan Environmental and Other issues - Indicate approvals necessary for you to obtain related zoning requirements, permits, licences, health and safety requirements, environmental approvals, etc.

Your Management Team Description of Management Team Directors - Outline exact duties and responsibilities of each key member of management team…Include brief resume of each, including age martial status, education, professional qualifications employment experiences, etc. Directors - Indicate size and composition of board of directors -Include brief statement of each member indicating what he/she will bring to the company Management and Directors’ Compensation - List names of all members of management team, and board of directors and compensation they will receive in fees or salary.

Cont’d Your Management Team Shareholders - Indicate name of each of the individual shareholders (or partners) in business, and then number of shares each owns, the percentage of ownership and the price paid. - Describe any investors other than your management team and member s of your board. How many shares to they own? When were they acquired? What price did they pay? - Indicate employment contracts/agreements made with members of management team

Cont’d Your Management Team Professional Advisors - Indicate the name and complete address of each or your professional advisors. i.e. lawyer, accountant, banker, etc - Disclose any fees or retainers that have been paid to them

Implementation Schedule and Risks Associated with the Venture Milestones - Summarize significant goals you, and your business have already reached and hope to accomplish. Schedule - Develop a schedule of significant events and their priority for completion. i.e. strategic planning, contingency positions Risks and Problems - Summarize major problems dealt with and how they were resolved. - Identify risks associated with business, now, and in the future. - Summarize downside risk

Your Financial Plan Funding Requested Illustrates current financial status, and represent your best estimate of its future operations Funding Requested - Indicate amount and type (debt or equity) of funding needed - Give an overview of current financial structure of business, levels of investments made, and where they came from -Outline proposed terms of investment. i.e. payback period, ROI, tax benefits, etc.

Cont’d Your Financial Plan Current Financial Statements - provide copies of financial statements (profit and loss statement and balance sheet), for current and previous 2 years.

Cont’d Your Financial Plan Financial Projections Should be developed on a monthly basis for 1st yr and quarterly or annual for next 2 to 4 yrs 1. Profit and Loss Forecasts – indicates profit expectations for next few years of operation of business. 2. Pro forma balance sheets - indicates assets to be required to support projected level of operations, and how to financing 3. Cash Flows Statements – indicate amount of cash in and out flows. Helps to predict cash needs and avoid insolvency. 4. Breakeven Analysis – indicates the level of sales and production needed to cover all fixed and variable costs.

6. Appendixes Explains, supports, and supplements the material in the body of the business plan. Some inclusions are: 1. Product specifications, and photographs 2. Detailed resumes of the management team 3. Lists of prospective customers 4. Names of possible suppliers 5. Job descriptions for the management team 6. Consulting reports and market surveys 7. Copies of legal documents i.e. leases, franchise & licencing agreements, contracts, licences, patent or trademark registrations, articles of incorporation 8. Letters of reference 9. Relevant magazine, trade journal, newspapers articles

CONCLUSION Make a good impression. Demonstrate that you have done significant amount of thinking and work on your venture. Ensure your material is presented to prospective investors, lenders, and others in an attractive, readable, and understandable fashion.