PREPARING A BUSINESS PLAN

What is a Business Plan? Written documentWritten document Describes steps in opening and operating a successful businessDescribes steps in opening and operating a successful business –Describes the Product or Service What you will produce/provideWhat you will produce/provide How you will produce the product or provide the serviceHow you will produce the product or provide the service Who will buy your product or serviceWho will buy your product or service –Explains who will run the business and provide it with goods –States how your business will win customers from competitors and what you will do to keep customers –Provides detailed financial information that shows how your business will succeed in earning a profit

PURPOSE OF A BUSINESS PLAN 1)Explains the idea behind your business –How your product or service will be produced and sold –Used to convince investors that your business idea is solid Completely new product or service or one that is better or less expensive than one that already existsCompletely new product or service or one that is better or less expensive than one that already exists –Identifies who your target customer is and shows how your company will keep customers

PURPOSE OF A BUSINESS PLAN 2)Sets specific objectives and describes how your business expects to achieve them –Sales projections for: The short term—the first yearThe short term—the first year The medium term—two to five years after start-upThe medium term—two to five years after start-up The long term—five years in the futureThe long term—five years in the future –Describes what products and services will be introduced over the next five years –Discusses future business plans Expansion of the businessExpansion of the business

PURPOSE OF A BUSINESS PLAN 3)Describes the background and experience of the people who will be running the business –Business loans are approved when lenders believe a company can meet its objectives –Banks or investors will be more likely to invest money if good information on background and experience of the people who will be running the company is provided Business classes, work experienceBusiness classes, work experience

7 ELEMENTS OF A BUSINESS PLAN 1)History & Background of your idea 2)Goals and Objectives for your company 3)Products or Services you will offer 4)Form of Ownership 5)Management and Staffing 6)Marketing 7)Current and Projected Financial Statements

History and Background Describe how you came up with the ideaDescribe how you came up with the idea –Helps others understand how your business will operate “Starting my own business was an idea that came to me when I just felt the need to control my own destiny. So, that’s what I did.” --Clara Taylor Reed, founder of Mid-Delta Home Health, Inc., the first home healthcare business in Mississippi

Goals and Objectives Describes your vision of where you want your company to be in the futureDescribes your vision of where you want your company to be in the future Outline your short-term, medium term, and long-term goalsOutline your short-term, medium term, and long-term goals –Short-term: reach within 1 year Get financing to lease/buy a facility, equip the facility, and staff employeesGet financing to lease/buy a facility, equip the facility, and staff employees –Medium-term: reach in years 2 – 3 Invest in more equipment, expand current locationInvest in more equipment, expand current location –Long-term: up to 10 years Remain one location or expand into a chainRemain one location or expand into a chain

Products and Services Describe the product or service you will provide or sellDescribe the product or service you will provide or sell –Explain how these will differ than those currently available Highlight unique featuresHighlight unique features Explain benefits customers will receive by doing business with youExplain benefits customers will receive by doing business with you 1.Industry—describe the industry you will work in 2.Location—describe the location of your business

Products or Services IndustryIndustry –Things you should include in this section External factors affecting your businessExternal factors affecting your business –High competition –Lack of certain suppliers Growth potential of the industryGrowth potential of the industry Economic trends of the industryEconomic trends of the industry Technology trends that may affect the industryTechnology trends that may affect the industry Forecasts for industry growthForecasts for industry growth –Research Government documents, articles and books on industry leaders, InternetGovernment documents, articles and books on industry leaders, Internet –Cite sources used to make business plan more convincing

Products or Services LocationLocation –Critical factor in success –Research sites –Choose a site where there is a need for your business or where a need can be created Hall of Fame Fitness CenterHall of Fame Fitness Center –Added a restaurant to fitness club »Also available to outside pool customers

Form of Ownership Each legal form of business has an effect on how the business works and makes profitEach legal form of business has an effect on how the business works and makes profit Describe who partners are or number of shareholdersDescribe who partners are or number of shareholders –Sole proprietorship: 1 owner –Partnership: 2 or more owners –Corporation: board of directors and stockholders

Management and Staffing Show that you and the people who will be working for you are capable to manage your business wellShow that you and the people who will be working for you are capable to manage your business well –Experience –Maturity –Common sense Can includeCan include –Resumes –Letters of reference

MarketingMarketing Explain who your prospective customers areExplain who your prospective customers are How large the market is for your product or serviceHow large the market is for your product or service How you plan to enter that marketHow you plan to enter that market How you will deal with competitionHow you will deal with competition –List your advantages over the competition PerformanceReliabilityPerformanceReliability QualityDistributionQualityDistribution PricePublic image orPricePublic image or Promotion reputationPromotion reputation

Current & Projected Financial Statements Financial section of your plan consists of three elementsFinancial section of your plan consists of three elements 1.Identification of risks List potential problems and how you will solve themList potential problems and how you will solve them 2.Financial statements Projected revenues and expenses (pro forma financial statements)Projected revenues and expenses (pro forma financial statements) 3.Funding request and return on investment Indicate how much you need to borrowIndicate how much you need to borrow How you plan to use the moneyHow you plan to use the money How much investors can expect to earn on their investmentHow much investors can expect to earn on their investment How much money you are investingHow much money you are investing

ResearchResearch Pulling together information needed to write a business plan involves researching all aspects of your businessPulling together information needed to write a business plan involves researching all aspects of your business –Leasing space/buying property –What you will charge –Dealing with competitors Provides specific ideas for starting up your company and running a businessProvides specific ideas for starting up your company and running a business

ResearchResearch LibraryLibrary –Books EntrepreneurshipEntrepreneurship MarketingMarketing FinancingFinancing Hiring and managing a staffHiring and managing a staff Purchasing a businessPurchasing a business Operating a franchiseOperating a franchise –Magazines Small business ownershipSmall business ownership Industry magazinesIndustry magazines –Government documents Issued by Small Business Administration (SBA)Issued by Small Business Administration (SBA) Online ResourcesOnline Resources People ResourcesPeople Resources

ResearchResearch Additional ResourcesAdditional Resources –Trade associations Organizations that promote certain types of businessesOrganizations that promote certain types of businesses –Local Chamber of Commerce –Local Small Business Development Centers Each will have information on trends affecting local businesses

ResearchResearch SBA Small Business Administration