PREPARING A BUSINESS PLANPREPARING A BUSINESS PLANPREPARING A BUSINESS PLANPREPARING A BUSINESS PLAN

What is a Business Plan?What is a Business Plan?What is a Business Plan?What is a Business Plan?

• Written documentWritten document• Describes steps in opening and operating a Describes steps in opening and operating a

successful businesssuccessful business– Describes the Product or ServiceDescribes 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 Explains who will run the business and provide it with goodsgoods

– States how your business will win customers from States how your business will win customers from competitors and what you will do to keep customerscompetitors and what you will do to keep customers

– Provides detailed financial information that shows Provides detailed financial information that shows how your business will succeed in earning a profithow your business will succeed in earning a profit

PURPOSE OF A BUSINESS PLANPURPOSE OF A BUSINESS PLANPURPOSE OF A BUSINESS PLANPURPOSE OF A BUSINESS PLAN

1)1) Explains the idea behind your business Explains the idea behind your business – How your product or service will be How your product or service will be

produced and soldproduced and sold– Used to convince investors that your Used to convince investors that your

business idea is solidbusiness idea is solid• Completely new product or service or one that Completely new product or service or one that

is better or less expensive than one that is better or less expensive than one that already existsalready exists

– Identifies who your target customer is and Identifies who your target customer is and shows how your company will keep shows how your company will keep customerscustomers

PURPOSE OF A BUSINESS PLANPURPOSE OF A BUSINESS PLANPURPOSE OF A BUSINESS PLANPURPOSE OF A BUSINESS PLAN

2)2) Sets specific objectives and describes Sets specific objectives and describes how your business expects to achieve how your business expects to achieve themthem

– Sales projections for:Sales projections for:• The short term—the first yearThe short term—the first year• The medium term—two to five years after start-The medium term—two to five years after start-

upup• The long term—five years in the futureThe long term—five years in the future

– Describes what products and services will Describes what products and services will be introduced over the next five yearsbe introduced over the next five years

– Discusses future business plansDiscusses future business plans• Expansion of the businessExpansion of the business

PURPOSE OF A BUSINESS PLANPURPOSE OF A BUSINESS PLANPURPOSE OF A BUSINESS PLANPURPOSE OF A BUSINESS PLAN

3)3) Describes the background and Describes the background and experience of the people who will be experience of the people who will be running the businessrunning the business

– Business loans are approved when lenders Business loans are approved when lenders believe a company can meet its objectivesbelieve a company can meet its objectives

– Banks or investors will be more likely to Banks or investors will be more likely to invest money if good information on invest money if good information on background and experience of the people background and experience of the people who will be running the company is who will be running the company is providedprovided• Business classes, work experienceBusiness classes, work experience

7 ELEMENTS OF A BUSINESS PLAN7 ELEMENTS OF A BUSINESS PLAN7 ELEMENTS OF A BUSINESS PLAN7 ELEMENTS OF A BUSINESS PLAN

1)1) History & Background of your ideaHistory & Background of your idea

2)2) Goals and Objectives for your companyGoals and Objectives for your company

3)3) Products or Services you will offerProducts or Services you will offer

4)4) Form of OwnershipForm of Ownership

5)5) Management and StaffingManagement and Staffing

6)6) MarketingMarketing

7)7) Current and Projected Financial StatementsCurrent and Projected Financial Statements

History and BackgroundHistory and BackgroundHistory and BackgroundHistory and Background

• Describe how you came up with the ideaDescribe how you came up with the idea– Helps others understand how your business will Helps others understand how your business will

operateoperate

““Starting my own business was an idea that Starting my own business was an idea that came to me when I just felt the need to came to me when I just felt the need to control my own destiny. So, that’s what I control my own destiny. So, that’s what I did.”did.”

--Clara Taylor Reed, founder of Mid-Delta --Clara Taylor Reed, founder of Mid-Delta Home Health, Inc., the first home Home Health, Inc., the first home healthcare business in Mississippihealthcare business in Mississippi

Goals and ObjectivesGoals and ObjectivesGoals and ObjectivesGoals and Objectives

• Describes your vision of where you want Describes your vision of where you want your company to be in the futureyour company to be in the future

• Outline your short-term, medium term, and Outline your short-term, medium term, and long-term goalslong-term goals– Short-term: reach within 1 yearShort-term: reach within 1 year

• Get financing to lease/buy a facility, equip the facility, Get financing to lease/buy a facility, equip the facility, and staff employeesand staff employees

– Medium-term: reach in years 2 – 3Medium-term: reach in years 2 – 3• Invest in more equipment, expand current locationInvest in more equipment, expand current location

– Long-term: up to 10 yearsLong-term: up to 10 years• Remain one location or expand into a chainRemain one location or expand into a chain

Products and ServicesProducts and ServicesProducts and ServicesProducts and Services

• Describe the product or service you will Describe the product or service you will provide or sellprovide or sell– Explain how these will differ than those Explain how these will differ than those

currently availablecurrently available• Highlight unique featuresHighlight unique features• Explain benefits customers will receive by doing Explain benefits customers will receive by doing

business with youbusiness with you

1.1. Industry—describe the industry you will Industry—describe the industry you will work inwork in

2.2. Location—describe the location of your Location—describe the location of your businessbusiness

Products or ServicesProducts or ServicesProducts or ServicesProducts or Services

• IndustryIndustry– Things you should include in this sectionThings you should include in this section

• External factors affecting your businessExternal factors affecting your business– High competition High competition – Lack of certain suppliersLack 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

– ResearchResearch• Government documents, articles and books on industry Government documents, articles and books on industry

leaders, Internetleaders, Internet– Cite sources used to make business plan more convincingCite sources used to make business plan more convincing

Products or ServicesProducts or ServicesProducts or ServicesProducts or Services

• LocationLocation– Critical factor in successCritical factor in success– Research sitesResearch sites– Choose a site where there is a need for Choose a site where there is a need for

your business or where a need can be your business or where a need can be createdcreated• Hall of Fame Fitness CenterHall of Fame Fitness Center

– Added a restaurant to fitness clubAdded a restaurant to fitness club» Also available to outside pool customers Also available to outside pool customers

Form of OwnershipForm of OwnershipForm of OwnershipForm of Ownership

• Each legal form of business has an Each legal form of business has an effect on how the business works and effect on how the business works and makes profitmakes profit

• Describe who partners are or number Describe who partners are or number of shareholdersof shareholders– Sole proprietorship: 1 ownerSole proprietorship: 1 owner– Partnership: 2 or more ownersPartnership: 2 or more owners– Corporation: board of directors and Corporation: board of directors and

stockholdersstockholders

Management and StaffingManagement and StaffingManagement and StaffingManagement and Staffing

• Show that you and the people who Show that you and the people who will be working for you are capable to will be working for you are capable to manage your business wellmanage your business well– ExperienceExperience– MaturityMaturity– Common senseCommon sense

• Can includeCan include– ResumesResumes– Letters of referenceLetters of reference

MarketingMarketingMarketingMarketing

• Explain who your prospective Explain who your prospective customers arecustomers are

• How large the market is for your How large the market is for your product or serviceproduct 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 competitionList your advantages over the competition• PerformancePerformance ReliabilityReliability• QualityQuality DistributionDistribution• PricePrice Public image or Public image or • PromotionPromotion reputation reputation

Current & Projected Financial Current & Projected Financial StatementsStatements

Current & Projected Financial Current & Projected Financial StatementsStatements

• Financial section of your plan consists of three Financial section of your plan consists of three elementselements

1.1. Identification of risksIdentification of risks• List potential problems and how you will solve themList potential problems and how you will solve them

2.2. Financial statementsFinancial statements• Projected revenues and expenses (pro forma financial Projected revenues and expenses (pro forma financial

statements)statements)

3.3. Funding request and return on investmentFunding 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 How much investors can expect to earn on their

investmentinvestment• How much money you are investingHow much money you are investing

ResearchResearchResearchResearch

• Pulling together information needed to Pulling together information needed to write a business plan involves write a business plan involves researching all aspects of your businessresearching all aspects of your business– Leasing space/buying propertyLeasing space/buying property– What you will chargeWhat you will charge– Dealing with competitorsDealing with competitors

• Provides specific ideas for starting up Provides specific ideas for starting up your company and running a businessyour company and running a business

ResearchResearchResearchResearch• LibraryLibrary

– BooksBooks• EntrepreneurshipEntrepreneurship• MarketingMarketing• FinancingFinancing• Hiring and managing a staffHiring and managing a staff• Purchasing a businessPurchasing a business• Operating a franchiseOperating a franchise

– MagazinesMagazines• Small business ownershipSmall business ownership• Industry magazinesIndustry magazines

– Government documentsGovernment documents• Issued by Small Business Administration (SBA)Issued by Small Business Administration (SBA)

• Online ResourcesOnline Resources• People ResourcesPeople Resources

ResearchResearchResearchResearch

• Additional ResourcesAdditional Resources– Trade associationsTrade associations

• Organizations that promote certain types of Organizations that promote certain types of businessesbusinesses

– Local Chamber of CommerceLocal Chamber of Commerce– Local Small Business Development Local Small Business Development

CentersCenters

Each will have information on trends Each will have information on trends affecting local businessesaffecting local businesses

ResearchResearchResearchResearch

http://http://www.sba.govwww.sba.gov//

SBASBASmall Business AdministrationSmall Business Administration