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  1. Lecture 32: Budgets, Forecasts And Business Plans

  2. Business Plans

  3. Business Plans… …Need to be employed by anyone who is in business …Set a strategy for future growth and can be used to attract investors and loans

  4. They aren’t just used by start-ups… …Business Plans are also kept and developed over time by existing businesses, and even started over when new opportunities arise

  5. Types of Business Plan include: Summary Special Project Feasibility Mini Start-up Presentation Internal Growth

  6. Business Plan Essentials: • Executive Summary • Business Strategy • Marketing Strategy • Team & Management Structure • Financial Budgets & Forecasts

  7. Executive Summary • Introduction to business • Competitive advantages • Brief summary of the plan

  8. Business Strategy • Tactics • Strategic Impact • Business’s core values

  9. Marketing Strategy • SWOT Analysis • Market Research • Distribution Channels • Strategic Alliances • E-commerce & Technology • Marketing Budget • Credibility & Risk Reduction

  10. Team & Management Structure • Skills, Experience, Training & Retention • Advisers • Management Systems

  11. Financial Budgets & Forecasts • Profit & Loss Forecast • Cash Flow Forecast • Balance Sheet Forecast • Capital Expenditure Budget • Break-even Analysis

  12. Building a Business Plan Create a Business Plan as the first step on your path to success

  13. Learning Objectives At the end of this module, you will be able to: • Identify the essential elements of a Business Plan. • Identify how a good Business Plan can create an anchor for continued success. • List additional resources that can help you develop an effective Business Plan. Building a Business Plan

  14. About FDIC Small Business Resource Effort 14 The Federal Deposit Insurance Corporation (“FDIC”) recognizes the important contributions made by small, veteran, and minority and women-owned businesses to our economy. For that reason, we strive to provide small businesses with opportunities to contract with the FDIC. In furtherance of this goal, the FDIC has initiated the FDIC Small Business Resource Effort to assist the small vendors that provide products, services, and solutions to the FDIC. The objective of the Small Business Resource Effort is to provide information and the tools small vendors need to become better positioned to compete for contracts and subcontracts at the FDIC. To achieve this objective, the Small Business Resource Effort references outside resources critical for qualified vendors, leverages technology to provide education according to perceived needs, and offers connectivity through resourcing, accessibility, counseling, coaching, and guidance where applicable. This product was developed by the FDIC Office of Minority and Women Inclusion (OMWI). OMWI has responsibility for oversight of the Small Business Resource Effort.  Building a Business Plan

  15. Executive Summary • A Business Plan identifies key areas of your business so you can maximize the time you spend on generating income. • Key investors will want to look at your Business Plan before providing capital. • A Business Plan helps you start and keep your business on a successful path. • You should prepare a Business Plan, although, in reality, many small business owners do not. Building a Business Plan

  16. What is a Business Plan? • A Business Plan is a written document that defines the goals of your business and describes how you will attain those goals. • A Business Plan is worth your considerable investment of time, effort, and energy. • A Business Plan sets objectives, defines budgets, engages partners, and anticipates problems before they occur. Building a Business Plan

  17. 10 Reasons Why You Need a Strong Business Plan • To attract investors. • To see if your business ideas will work. • To outline each area of the business. • To set up milestones. • To learn about the market. • To secure additional funding or loans. • To determine your financial needs. • To attract top-level people. • To monitor your business. • To devise contingency plans. Building a Business Plan

  18. How Detailed Should Your Plan Be? • Business plans differ widely in their length, appearance, content, and the emphasis placed on different aspects of the business. • Depending on your business and your intended use, you may need a very different type of Business Plan: • Mini-plan: Less emphasis on critical details. Used to test your assumptions, concept, and measure the interest of potential investors. • Working Plan: Almost total emphasis on details. Used continuously to review business operations and progress. • Presentation Plan: Emphasis on marketability of the business concept. Used to give information about the business to bankers, venture capitalists, and other external resources. Building a Business Plan

  19. Assembling a Business Plan Every Business Plan should include some essential components: • Overview of the Business: Describes the business, including its products and services. • The Marketing Plan: Describes the target market for your product and explains how you will reach that market. • The Financial Management Plan: Details the costs associated with operating your business and explains how you will pay for those costs, including the amount of financing you may need. • The Operations and Management Plan: Describes how you will manage the core processes of your business, including use of human resources. Building a Business Plan

  20. Seven Common Parts of a Good Business Plan • Business plans must help investors understand and gain confidence on how you will meet your customers’ needs. • Seven common parts of a good Business Plan are: • Executive Summary • Business Concept • Market Analysis • Management Team • Marketing Plan • Financial Plan • Operations and Management Plan Building a Business Plan

  21. Part 1: Executive Summary • The Executive Summary of a Business Plan is a 3-5 page introduction to your Business Plan. • The Executive Summary is critical, because many individuals (including venture capitalists) only read the summary. • The Executive Summary section includes: • A first paragraph that introduces your business. • Your business name and location. • A brief explanation of customer needs and your products or services. • The ways that the product or service meets or exceeds the customer needs. • An introduction of the team that will execute the Business Plan. • Subsequent paragraphs that provide key details about your business, including projected sales and profits, unit sales, profitability, and keys to success. • Visuals that help the reader see important information, including highlight charts, market share projections, and customer demand charts. Building a Business Plan

  22. Part 2: Business Concept • The business concept shows evidence that a product or service is viable and capable of fulfilling an organization's particular needs. • The Business Concept section: • Articulates the vision of the company, how you plan to meet the unique needs of your customer, and how you plan to make money doing that. • Discusses feasibility studies that you have conducted for your products. • Discusses diagnostics sessions you had with prospective customers for your services. • Captures and highlights the value proposition in your product or service offerings. Building a Business Plan

  23. Part 3: Market Analysis • A Market Analysis defines the target market so that you can position your business to get its share of sales. • A Market Analysis section: • Defines your market. • Segments your customers. • Projects your market share. • Positions your products and services. • Discusses pricing and promotions. • Identifies communication, sales, and distribution channels. Building a Business Plan

  24. Part 4: Management Team The Management Team section outlines: • Organizational Structure: Highlights the hierarchy and outlines responsibilities and decision-making powers. • Management Team: Highlights the track record of the company’s managers. You may also offer details about key employees including qualifications, experiences, or outstanding skills, which could add a competitive edge to the image of the business. • Working Structure: Highlights how your management team will operate within your defined organizational structure. • Expertise: Highlights the business expertise of your management and senior team. You may also include special knowledge of budget control, personnel management, public relations, and strategic planning. • Skills Gap: Highlights plans to improve your company’s overall skills or expertise. In this section, you should discuss opportunities and plans to acquire new information and knowledge that will add value. • Personnel Plan: Highlights current and future staffing requirements and related costs. Building a Business Plan

  25. Part 5: Marketing Plan • The Marketing Plan section details what you propose to accomplish, and is critical in obtaining funding to pursue new initiatives. • The Marketing Plan section: • Explains (from an internal perspective) the impacts and results of past marketing decisions. • Explains the external market in which the business is competing. • Sets goals to direct future marketing efforts. • Sets clear, realistic, and measurable targets. • Includes deadlines for meeting those targets. • Provides a budget for all marketing activities. • Specifies accountability and measures for all activities. Building a Business Plan

  26. Part 6: Financial Plan (Slide 1 of 2) • The Financial Plan translates your company's goals into specific financial targets. • The Financial Plan section: • Clearly defines what a successful outcome entails. The plan isn't merely a prediction; it implies a commitment to making the targeted results happen and establishes milestones for gauging progress. • Provides you with a vital feedback-and-control tool. Variances from projections provide early warnings of problems. When variances occur, the plan can provide a framework for determining the financial impact and the effects of various corrective actions. • Anticipate problems. If rapid growth creates a cash shortage due to investment in receivables and inventory, the forecast should show this. If next year's projections depend on certain milestones this year, the assumptions should spell this out. Building a Business Plan

  27. Part 6: Financial Plan (Slide 2 of 2) • The Financial Plan is the most essential part of your Business Plan. It shows investors the timeframes you have scheduled to make profits. • Some elements of the Financial Plan include: • Important Assumptions • Key Financial Indicators • Break-even Analysis • Projected Profit and Loss • Projected Cash Flow • Projected Balance Sheet • Business Ratios • Long-term Plan Building a Business Plan

  28. Different Financial Planning Options (Slide 1 of 2) • Short-term Forecast: Projects either the current year or a rolling 12-month period by month. This type of forecast should be updated at least monthly and become the main planning and monitoring vehicle. • Budget: Translates goals into detailed actions and interim targets. A budget should provide details, such as specific staffing plans and line-item expenditures. • The size of a company may determine whether the same model used to prepare the 12-month forecast can be appropriate for budgeting. • In any case, unlike the 12-month forecast, a budget should generally be frozen at the time they are approved. Building a Business Plan

  29. Different Financial Planning Options (Slide 2 of 2) • Strategic Forecast: Incorporates the strategic goals of the company into the projections. For startup companies, the initial Business Plan should include a month-by-month projection for the first year, followed by annual projections for a minimum of three years. • Cash Forecast: Breaks down the budget and 12-month forecast into more detail. The focus of these forecasts is on cash flow, rather than accounting profit, and periods may be as short as a week in order to capture fluctuations. Building a Business Plan

  30. Part 7: Operations and Management • The Operations and Management section outlines how your company will operate. • The Operations and Management section includes: • Organizational structure of the company. Provides a basis for projected operating expenses and financial statements. Because these statements are heavily scrutinized by investors, the organizational structure has to be well-defined and realistic within the parameters of the business. • Expense and capital requirements to support the organizational structure. Provides a basis to identify personnel expenses, overhead expenses, and costs of products/services sold. These expenses/costs can then be matched with capital requirements. Building a Business Plan

  31. Key Takeaways From This Module • Business Plans are critical for the success of a company. • Different businesses will require different types of Business Plans. • All Business Plans have some essential sections that explain the core aspects of the company. • In order to help your company have a better chance of gaining interest and investors, a Business Plan should include seven essential sections: • Executive Summary • Business Concept • Market Analysis • Management Team • Marketing Plan • Financial Plan • Operations and Management Plan Building a Business Plan

  32. Sources and Citations • Small Business Administration, Business Planning, How To Prepare a Business Plan • Gary Cadenhead, No Longer Moot • Shirleen Glasin, ProSidian Consulting, Building a Business Plan •, Small Business Encyclopedia, Business Plans • AllBusiness, A D&B Company, 10 Reasons Why You Need a Strong Business Plan • Business Owners Toolkit, Total Know-How for Small Businesses Building a Business Plan


  34. LEARNING OBJECTIVES The process of forecasting helps an organization make decisions; it is necessary for determining information about future markets. This chapter should help you understand: • The importance of forecasting in a firm’s marketing decision support system. • The uses and different categories of sales forecasts. • The two forecasting methods – survey and mathematical – and their different uses. • That the responsibility for approving the final forecast rests at the top management level. • The need for knowledge of computers, because they are used in forecasting and developing sales budgets.

  35. MANAGING SALES INFORMATION “Our charge is to design, build, and implement decision support systems that help our field and marketing managers make business decisions.” Dan McKee Marketing decision support systems manager for Marion Merrell Dow, Inc.

  36. FORECASTING MARKET DEMAND A marketing decision support system (MDSS) is an ongoing, future-oriented structure designed to generate, process, store, and later retrieve information to aid decision making in an organization’s marketing program. It involves problem-solving technology composed of people, knowledge, software, and hardware “wired” into the sales management process.

  37. USES OF SALES FORECASTS A sales forecast is the estimated dollar or unit sales for a specific future time period based on a proposed marketing plan and an assumed market environment.

  38. A sales forecast is important for at least five reasons: • A sales forecast becomes a basis for setting and maintaining a production schedule – manufacturing. • It determines the quantity and timing of needs for labor, equipment, tools, parts, and raw materials – purchasing, personnel. • It influences the amount of borrowed capital needed to finance the production and the necessary cash flow to operate the business – controller. • It provides a basis for sales quota assignments to various segments of the sales force – sales management. • It is the overall base that determines the company’s business and marketing plans, which are further broken down into specific goals – marketing officer.


  40. THE FORECASTING PROCESS The forecasting process refers to a series of procedures used to forecast.

  41. A market factor is an item or element that (1) exists in a market, (2) may be measured quantitatively, and (3) is related to the demand for a product or service. A market index is simply a market factor expressed as a percentage relative to some base figure.



  44. Industry sales forecast, or market potential, is the estimated sales for all sellers. Company sales potential is the maximum estimated or potential sales the company may reach in a defined time period under given conditions. The company’s share of the estimated sales for an entire industry is referred to as market share.

  45. SALES FORECASTING METHODS Two categories of sales forecasting methods exist: • Survey methods are qualitative and include executive opinion, sales force composite, and customer’s intention surveys. • Mathematical methods are test markets, market factors, naïve models, trend analysis, and correlation analysis.


  47. SURVEY FORECASTING METHODS • Four basic survey methods are • Executive Opinion • Sales Force Composite • User’s Expectations • Build-to-Order

  48. Executive Opinion Executive forecasting is done in two ways: • By one seasoned individual (usually in a small company). • By a group of individuals, sometimes called a “jury of executive opinion.”

  49. The group approach uses two methods: • Key executives submit the independent estimates without discussion, and these are averaged into one forecast by the chief executive. • The group meets, each person presents separate estimates, differences are resolved, and a consensus is reached.