1. Purdue University is an Equal Opportunity/Equal Access institution. Business Plan Basics Stephen J. Swain, ATP National AgrAbility Project/Indiana AgrAbility Project Breaking New Ground Resource Center, Purdue University Purdue University Extension New Ventures Team

2. A Business Plan Is… a systematic evaluation of a venture’s chances for success. a way to determine the risks facing a venture. a game plan for managing a business successfully. a tool for comparing actual and target results. an important tool for attracting capital.

3. Overview What is a business plan? What are the key elements of a business plan? What are the three tests must it pass? What are some free resources? Working with clients on a business plan An example of an actual business plan

4. A Business Plan Business plan – a written summary of: –an entrepreneur’s proposed business venture. –its operational and financial details. –its marketing opportunities and strategy. –its managers’ skills and abilities. It is a reflection of it’s creator Realization that a business idea just won’t work The real value is in the process of creating it.

5. Two Essential Functions –Guiding the company by charting its future course and defining its strategy for following it. –Attracting lenders and investors who will provide needed capital. Purdue University is an Equal Opportunity/Equal Access institution.

6. Why Take the Time to Build a Business Plan? Although building a plan does not guarantee success, it does increase your chances of succeeding in business. A plan is like a road map.

7. Key Elements of a Business Plan Purdue University is an Equal Opportunity/Equal Access institution.

8. The Executive Summary Summary of all the relevant parts of the business. Maximum of 2 pages. Anyone should be able to understand the entire business concept and the company’s competitive advantage. “the elevator pitch”

9. Mission Statement Entrepreneur’s vision of what the company is, what it is to become, and what it stands for. Broadest expression of a company’s purpose and defines the direction in which it will move.

10. Business and Industry Profile Company’s general business goals and its immediate objectives. Industry Analysis Ease of entry and exit, economies of scale/scope, economic trends –Summary of Commentary on Current Economic Conditions. Provide information on the existing and anticipated profitability of competing firms.

11. Business Strategy Explain how you plan to gain a competitive edge in the market and what sets your business apart from the competition. How you plan to meet goals and objectives in the face of competition and government regulations. Identify the image the business will project.

12. Description of Product/Service Explain how customers will use product or service. Indicate product’s position in the product life cycle. Summary of patents, trademarks, or copyrights protecting the product/service. Focus on customer benefit, not just a detailed list of the product’s features.

13. Competitor Analysis Provide information on competitors’ market shares, products, and strategies. Demonstrate that your company has an advantage over its competitors.

14. Owners’ and Managers’ Resumes Should include resume’ of anyone with at least a 20% ownership in the company. Show that the company has the right people organized in the right way. Ideally, lenders look for managers with at least 2 years of operating experience.

15. Plan of Operation Construct an organizational chart. Describe incentives to keep key personnel. Describe firm’s form of ownership and any leases, contracts, and other relevant agreements pertaining to the operation.

16. Financial Forecasts Monthly pro forma financial statements for one year and by quarter for each of the next 2-3 years. –Income statement –Cash flow statement –Balance sheet Three sets of forecasts: optimistic, most likely, and pessimistic. Include break-even analysis.

17. The Request for Funds State the purpose of the loan or investment, the amount requested, and the plans for repayment or cash-out. Financial projection must reflect the firm’s ability to repay loans to lenders and to produce adequate yields for investors. Include an evaluation of the risks of the business.

18. Rid your plan of all spelling and grammatical errors. Make your plan visually appealing. Leave ample “white space” in margins. Make sure your plan has an attractive cover. Include a table of contents. Write in a conversational style and use “bullets.” Tips on Preparing a Business Plan

19. Support claims with facts and avoid generalizations. Avoid overusing industry jargon. Make it interesting!

20. Tips on Preparing a Business Plan Use spreadsheets to generate financial forecasts. Always include cash flow projections. Keep your plan “crisp” Purdue University is an Equal Opportunity/Equal Access institution.

21. A Plan Must Pass Three Tests The Reality Test - proving that: –a market really does exist for your product or service. –you can actually build it for the cost estimates in the plan. The Competitive Test - evaluates: –a company’s position relative to its key competitors. –management’s ability to create a company that will gain an edge over its rivals. The Value Test - proving that: –it offers investors or lenders an attractive rate of return or a high probability of repayment.

22. Available Free Resources AICC Business Planner INVenture –www.agecon.purdue.edu/plannerwww.agecon.purdue.edu/planner Indiana Secretary of State –An Entrepreneur's Guide to Starting A Business in Indiana –www.in.gov/sos/business/corps/guidewww.in.gov/sos/business/corps/guide AccessIndiana –www.in.gov/ai/business/www.in.gov/ai/business/ Small Business Administration –www.sba.govwww.sba.gov

23. Available Free Resources Small Business Development Center –www.isbdc.orgwww.isbdc.org New Ventures Team (Purdue University) –www.agecon.purdue.edu/newventures/www.agecon.purdue.edu/newventures/ U.S. Business Advisor –http://www.business.gov/http://www.business.gov/ Agricultural Marketing and Resource Center: http://www.agmrc.org/ http://www.agmrc.org/ Purdue University is an Equal Opportunity/Equal Access institution.

24. “ONE-STOP SHOPPING” for Business Planning

25. Purdue University is an Equal Opportunity/Equal Access institution.

39. Working with Clients Provide templates and documents Start with a simple feasibility study They produce information not you Ask questions for information needed Help format and wordsmith document Be honest Purdue University is an Equal Opportunity/Equal Access institution.

40. Business Plan Example Purdue University is an Equal Opportunity/Equal Access institution.

41. Table of Contents Title page Table of Contents Introduction –Executive Summary –Purpose of the Business Plan –Statement of Goals and Objectives Purdue University is an Equal Opportunity/Equal Access institution.

42. Table of Contents Operating Plan –Ownership and Management –Other Staffing –Location –Operating Schedule –Operating Procedures –Tools and Equipment Purdue University is an Equal Opportunity/Equal Access institution.

43. Table of Contents Operating Plan (continued) –Raw Materials/Product Inventory Needs and Suppliers –Purchased and Contracted Services –Family, Community, and Professional Supports –Inventory Control Purdue University is an Equal Opportunity/Equal Access institution.

44. Table of Contents Marketing Plan –Target Market and Demand –Assessment of the Competition –Identify the Market Niche that the Business will Occupy –Product/Service Pricing –Advertising Strategies –Distribution/Delivery Methods Purdue University is an Equal Opportunity/Equal Access institution.

45. Table of Contents Legal Issues Cost Projections –For Establishment of the Business –Projected Revenues, Expenses, and Net Income Statements for First Two Years Monitoring Plan Attachments Purdue University is an Equal Opportunity/Equal Access institution.

46. Organic Variety Garden, LLC Year: 2006 3/26/2013 JanFebMarAprilMayJuneJulyAugSeptOctNovDecTotal Gross Sales Sweet corn $3,748 Strawberries $14,250 $28,500 Purple raspberries $3,600 $7,200 Red Raspberries $5,130 $10,260 Tomatoes $21,284 $12,642$8,642$1,000 $65,852 Cauliflower $588 $5,880 Broccoli $588 $5,880 Lettuce $170 $1,700 Eggplant $147 $1,470 Mustard $208 $2,080 Spinach $208 $2,080 Kale $208 $2,080 Bell pepper $333 $1,665 Cucumber $333 $666 Zucchini $333 $999 Other $0 TOTAL SALES$0 $2,117$11,180$17,033$26,096$27,815$23,734$15,092$10,759$3,117 $140,060 Variable Expenses Hired Labor $6,120 $18,360 Supplies-soil, pots, etc.$1,123 Sweet corn $100 Strawberries $824 Purple raspberries $1,200 Red Raspberries $850 Tomatoes$1,451 Cauliflower$1,254 Basil$150 Broccoli$768 Lettuce$315 Eggplant$216 Mustard$150 Spinach$150 Kale$450 Bell pepper$221 Cucumber$76 Zucchini$76 Fertilizer$765 Water from city$35 $40 $60$70$80 $70$40 $630 LP Gas $167 $117 $802 Total Variable Expenses$7,200$35$307$207$9,171$6,307$6,317$197$70$40 $29,931 GROSS PROFIT MARGIN($7,200)($35)$1,810$10,973$7,862$19,789$21,498$23,537$15,022$10,719$3,077 $110,129

47. Purdue University is an Equal Opportunity/Equal Access institution. GROSS PROFIT MARGIN($7,200)($35)$1,810$10,973$7,862$19,789$21,498$23,537$15,022$10,719$3,077 $110,129 Fixed Expenses Advertising$50 $50.00$50 $600 Insurance-Liability$25 $300 Insurance - Property$25 $300 Accountant/tax preparation$900$720 $900$720 $900$720$900$720 $9,360 Maintenance/Repair$25 $300 Miscellaneous$25 $300 Office Supplies$10 $120 Printing$30 $360 Chamber Membership$50 Mortgage$370 $4,440 Licenses/Permits $50 $100 Telephone$100 $1,200 Fuel$63 $756 Internet - DSL$30 $360 $0 TOTAL FIXED EXPENSES$1,703$1,473 $1,523$1,653$1,473 $1,653$1,523$1,653$1,473 $18,546 NET PROFIT MARGIN($8,903)($1,508)$337$9,450$6,209$18,316$20,025$21,884$13,499$9,066$1,604 $91,583 Beginning Cash ($10,903)($14,411)($16,074)($8,624)($4,415)$11,901$29,926$49,810$61,309$68,375$67,979$0 PLUS: Net Profit($8,903)($1,508)$337$9,450$6,209$18,316$20,025$21,884$13,499$9,066$1,604 $91,583 Subtotal($8,903)($1,508)$337$9,450$6,209$18,316$20,025$21,884$13,499$9,066$1,604 $91,583 LESS: Income Tax$500 $6,000 Owener's Draw$1,500 $18,000 Subtotal$2,000 $24,000 Surplus (Deficit)($10,903)($3,508)($1,663)$7,450$4,209$16,316$18,025$19,884$11,499$7,066($396) $67,583 Ending Cash($10,903)($14,411)($16,074)($8,624)($4,415)$11,901$29,926$49,810$61,309$68,375$67,979$67,583

48. Purdue University is an Equal Opportunity/Equal Access institution. Cost Projections for Establishment of Randy Martin and The Organic Variety Garden, LLC Item Total Equipment and Inventory for Start-up Randy Martin Contribution Needed Services from Vocational Rehabilitation Services Advertising / Web Design and upkeep$2,000.00 Property and Liability Insurance$300.00 USDA Organic Certification$575.00 Desk/chair$250.00 Computer/software$1,143.79 Camera$400.00 Copier/copier$500.00 Office supplies$1,123.00 Garden hoses and parts$50.00 6-hoes @ $9.99 each$59.94 6-Rack w/wooden handles @ $9.99 each$59.94 6-shovels w/wooden handles @ $9.99 each$59.94 2-garden shovels @ $12.50 each$25.00 Hand wrenches, tools, socket sets$550.00 Kubota tractor and equipment$20,200.00 1-5 foot Woods tiller$1,900.00 1-5 foot Woods rotary cutter$2,150.00 John Deere Gator$5,000.00 Roto-Tiller for cultivation$500.00 2 - 20'x48' greenhouses w/equipment$8,413.34 10 24" turbo fans$2,150.00 Irrigation drip line$1,478.40 $1,478.00 Telephone - $100 per month$1,200.00$100.00 Electric - $200 per month$2,400.00$200.00 LP gas - $700 per year$700.00 1997 Ford F150 pickup truck$9,675.00 Fertilizer -7 ton @ $216.00 per ton$765.00 Sweet corn seed$100.00 Strawberry plants$824.00 Purple raspberry plants$1,200.00 Red raspberry plants$850.00 Vegetable plants and seeds$5,277.00 14 acres of pasture$55,000.00 City water - base rate of $30 per month for 12 months$360.00 Total Start-up Costs$127,239.35$74,646.61$49,292.34