1. Part 2

2. 1. Executive Summary 2. Business concept 3. Products & services description 4. Target Market 5. Competitive analysis 6. Marketing plan 7. Operations & management plan 8. Development plan 9. Financial statements

4. 1. Executive Summary 2. Business concept 3. Products & services description 4. Target Market 5. Competitive analysis 6. Marketing plan 7. Operations & management plan 8. Development plan 9. Financial statements

5.  Organizational structure Organizational chart (span of control & staff levels) Staffing plan Qualifications for key positions in the organization Salaries of staff Resumes of key managers  Highlight special skills Use of consultants, boards What staff will need to be hired?

6.  Production and quality control Means of producing product/delivering service  Inventory Control How inventory is managed to max. profits  Equipment & technology How it enhances/detracts from the business  Financial control systems Cash handling, billing, system for financial review, fraud prevention

7.  What are operational strengths? Technology Low cost production Community visibility  What are operational weaknesses? Competition Poor management Poor facilities Contractual agreements Develop a plan to address these things…refer to SWOT analysis

8. 1. Executive Summary 2. Business concept 3. Products & services description 4. Target Market 5. Competitive analysis 6. Marketing plan 7. Operations & management plan 8. Development plan 9. Financial statements

9.  Business plan is roadmap to the company Need to show where you are going Investors want to see what they are getting into in the future Demonstrate changes that will be made to an existing business  What the business will look like in 1-5 yrs # of ees the business will have Profit margin Market share Expansion – facilities, product lines

10. 1. Executive Summary 2. Business concept 3. Products & services description 4. Target Market 5. Competitive analysis 6. Marketing plan 7. Operations & management plan 8. Development plan 9. Financial statements

11.  Financial information Sources & uses of funds Sales projections Budget history  Statements Income statement Cash flow projection Balance sheet

12.  Time periods to cover New business  1-3 years  First yr monthly projections  Yr 2 & 3 quarterly projections Existing business  Same as new business  Add historical financial records from past 3-10 years  Ask for budget information

13. Measures profitability over a period of time ◦ i.e. annually, quarterly, or monthly Income = revenues – expenses Shows how profitable your company is—how much money will be made after all expenses are taken out With a new company… ◦ Typically 1 st year you prepare monthly projections ◦ Years 2-3 Quarterly projections (4 times a year) ◦ Years 4-5: Annually (once a year) Example….

14. Revenues Trips$12,320 Concessions$2,486 Store receipts$3,345 Total revenues $18,151 Expenditures Staff$9,562 Supplies$527 Utilities$452 Mortgage$2,342 Marketing$732 Maintenance$622 Total expenditures $14,237 Net revenue/(loss) $3,914 Clear Water Rafting Company Income Statement as of July 1- 31, 2009

15.  Income statement provides information about revenues coming in and expenses going out, but not cash in and cash out What’s in the bank  Eliminates some of the creative accounting of the income statement (ex. depreciation)  Negative cash flows okay, but not sustainable forever

16. FebruaryMarchAprilMayJuneJulyTotal A. Net revenues $ 1,276 $ 4,985 $ 8,076 $ 12,486 $ 16,958 $ 18,151 $ 61,932 B. Expenses $ 4,978 $ 6,890 $ 7,013 $ 9,213 $ 11,345 $ 14,237 $ 53,676 C. Monthly cash flow (A- B) $ (3,702) $ (1,905) $ 1,063 $ 3,273 $ 5,613 $ 3,914 D. Cumulative cash flow $ (3,702) $ (5,607) $ (4,544) $ (1,271) $ 4,342 $ 8,256 E. Cash position at beginning of month $ 12,000 $ 8,298 $ 6,393 $ 7,456 $ 10,729 $ 16,342 F. Cash position at end of month (C+E) $ 8,298 $ 6,393 $ 7,456 $ 10,729 $ 16,342 $ 20,256 Clear Water Rafting Company Cash Flow Statement - 1st & 2nd Quarters * Note that the numbers in parenthesis indicate a negative balance Matches income statement figures Neg. cash flow comes from savings

17.  Financial condition of a business at a single point in time End of month, quarter, year  Provides information about a company’s assets, liabilities, and owner’s equity (capital)…owes vs. owns  Assets = liabilities + equity or Equity = assets – liabilities  Terms…

18. Current assets Cash & assets that can be turned to cash quickly (within a year) Inventory Bank deposits Accounts receivable ◦ Amts not yet collected from customers but are due Fixed assets Used to produce good & aren’t for sale Land, building, machinery, equipment Depreciation ◦ Declining value of a fixed asset

19. Current liabilities Debts for regular business operations that will come due within a year) Notes, accrued taxes Accounts payable ◦ What is owed to suppliers for things bought on credit ◦ Salaries Long term liabilities Due after a year Mortgages, bonds, large loans Net worth (owner’s equity) Portion of business owned free and clear of all debts

20. AssetsLiabilities Current AssetsCurrent Liabilities Cash & investments$3,546,975 Accounts payable$25,729 Accounts Receivable$1,243,785 Long term debt Total Current Assets$4,790,760Mortgage$376,971 Fixed Assets Total Liabilities$402,700 Store fixtures$243,876 Office equipment$7,659 Equity$5,175,923 Rafting inventory$543,987 Total fixed assets $787,863 Total assets$5,578,623Total liabilities & equities $5,578,623 Clear Water Rafting Company Balance Sheet as of December 31, 2007 Adjust equity to make it “balance” to reflect the remaining value “owed” to the owners AKA: Net worth

21. What start up costs do you have with a new business? How do you finance a new business??

22.  Business initiation expenses Legal & professional consultants Insurance Incorporation expenses Licenses & permits  Capital expenses Land, building, equipment, fixtures, displays

23.  Preopening operations Salary of owner/manager; key employees Utility deposits & installations Staff training Supplies & equipment Initial inventory purchases Maintenance Advertising 10% or more cash reserves

24.  Monthly estimates  Categories: Cost of goods sold Personnel (including benefits) Contractual services (ie. rent) Equipment & supplies Taxes & licenses Debt services (paying loans) Depreciation Can we estimate equally across 12 months?

25.  Internal Savings Property  2 nd mortgage Friends/family…caution! Need 10-60% of start up costs backed by personal sources  External….

26.  External debt financing…securing money through a loan Banks  Multitude of types of loans  Short & long term, balloon payments  Inventory financing  Usually 1-3% over prime  Equity lines of credit for emergencies  Most conservative source of financing & often turn down recreation

27.  External debt financing…securing money through a loan Commercial finance companies  Fund ventures turned down by banks…higher interest rates because of higher risks  Make loans against:  Accounts receivable  Inventories  Facilities & equipment Savings & loan associations  For real estate up to 75% of the value  Higher interest rates

28.  External debt financing…securing money through a loan Insurance companies  Borrow against the paid up value of the insurance policy  Low interest rates because it is low risk Trade credit  Supplier bills co. later – usually 30-60 days  Low or no interest Equipment financing, rentals & leases  Rent to own equipment

29.  External debt financing…securing money through a loan Government loans  U.S. Small Business Administration  Guarantees up to 80% of loans made by the bank  SBA repurchases loan in the case of a default  Apple, Nike & Godfather’s Pizza used SBA loans

30.  External debt financing…securing money through a loan Credit cards  High interest

31.  Equity debt financing Requires giving up a portion of ownership in return for funds to start the business Limited partnerships Venture capital firms  Look for companies with high potential ROI (ie. 30%+)  Want larger projects over $500,000  Know there are a lot of failures, but bank on the one big winner to make up for it

32.  Equity debt financing Public stock offerings  Sale of stock to the public