Developing a business plan Chapter 2

Why a business plan is important Lesson 2.1

What is a Business Plan? describes all the steps necessary to open and operate a successful business. Describes your product/service, how you will produce it, and who will buy it Explains who is going to run the business States how it will win over customers & keep them Provides detailed financial information (earning a profit)

Why a business plan? Three Purposes: To explain the idea behind your business and how your product or service will be sold, To set specific objectives and describe how your business expects to achieve them, To describe the backgrounds and experiences of the people running the business. *Remember to anticipate questions potential investors will want to have answered.

Prewriting/Brainstorming What is my product/service? Why is my product/service unique? Who are my customers? Where will future customers come from? Who is on my business team? How will I finance my business?

Importance of a Business Plan Makes you think about all aspects of your business Giving you more confidence in your idea May help to secure financing Cannot get a loan without it Helps communicate your ideas to others You know your business in and out which allows you to explain it properly Serves as a tool to manage your business Can guide you in decision making

Homework: Describe the importance of a business plan in your own words. Answer the who, what, where, when, why, and how of your business. (1-2 sentences to answer each)

What goes into a business plan Lesson 2.2

Business Plan NOT all the same Retailer focuses on inventory vs. Consulting focuses on employee credentials Small, home-based, sole-owner vs. Large corporation with numerous offices all over

Three Basic Components Introductory Elements Main Body Bulk of info with details Written first and used to write the other two parts Appendix

Main Body has 5 Sections: Introduction Marketing Financial Management Operations Concluding Statement Where the inspiration came from, your vision, and the goals of the business

1. Introduction Detailed Description & Goals Inspiration, vision, and direction Ownership and Legal Structure Number of owners effects business operations Skills and Experience Paid, volunteer, hobbies Competitive Advantage Performance, quality, reliability, distribution, price, promotion, public image/reputation

2. Marketing Products and Services Market Industry Location How is it different? Unique? Market Prospective customers and size of market Industry Research: external factors, growth potential, economic trends, and technology trends Location Critical for success

3. Financial Management Identify Risks How will you deal with these risks? Financial Statements (current & pro-forma) Funding Request and Return on Investment How much will you borrow? How will you use the money? Return on investment. Who is managing financial records?

4. Operations Day-to-day operations Hiring and personnel procedures Insurance and lease or rental agreements Equipment necessary to run your business

5. Concluding Statement Summary of goals and objectives Emphasize your commitment to success of business

Introductory Elements Cover Letter Title Page Table of Contents Statement of Purpose Why are you asking for a loan and what will you do with the money? Executive Summary Short restatement of the report

Appendix Supporting Documents What would you want to know about a business before lending it money? Personal tax returns Personal financial statement Copy of lease or purchase agreement Copy of Business license Copy of resume Letters of recommendation Copies of letters of intent from suppliers Copies of contracts

Putting It All Together Best opportunity to convince people of: Your idea Your talent Ability to make it successful Attractive, neat, organized document

How to Create an Effective Business Plan Lesson 2.3

Research your industry Community Government Professional Printed Online SBA SBDC SCORE Chamber of Commerce Trade Associations Professional Consultants Financial Institutions

Mistakes to look at Unrealistic Financial Projections Undefined Target Market Poor Research Ignored Competition Inconsistencies in the Business Plan