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3 Purposes for Business Plan. Explains idea behind it and how you will get and sell the product/service Sets goals and outlines how you plan to achieve those goals Describes the background and experience of those interested in starting business.
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3 Purposes for Business Plan • Explains idea behind it and how you will get and sell the product/service • Sets goals and outlines how you plan to achieve those goals • Describes the background and experience of those interested in starting business
How 3 Purposes of Plan Apply to Getting Financing • Show that there’s a demand for your product/service and that you can get and keep customers • New • Better • Less Expensive • Show that your business will make money • Show that you and your staff are capable of running the business
Why is Plan Important? • Makes you think about all parts of the business—getting started, what the future will be, and solving problems. • Helps to get additional money you need • Use as a tool to look back it as you go from year to year to make sure you’re sticking with plan or whether you need to make some adjustments.
7 Basic Elements of Business Plan What gave you the idea for your business (background) Ex. Your daughter likes the baby dolls that wet. These dolls simply have a hole in the mouth and one in their bottoms so liquid goes in and immediately comes out…not practical. Your idea is to create a doll that has a simple feature to close the bottom hole and release it at your convenience. Explain this and give reasons why you thought of the idea.
7 Basic Elements of Business Plan • Outline goals for your business—what you want to achieve in 1 year, 3-5 years, and after 5 years Ex. The 1st year I want to secure funding to get patent and find a company willing to produce doll. In years 3-5, I want to expand to rent a building for the purpose of marketing children’s toys. After 5 years I’d like to expand my product line to include specialty, educational toys.
7 Basic Elements of Business Plan • Explain the products and services you plan on offering. Ex. How will these products/services benefit customers and entice them into purchasing them. (unique) Needs to include competitors, future for growth in your business, technology in your business, economic trends as well as location of business including present population and forecasted. THIS REQUIRES RESEARCH
7 Basic Elements of Business Plan • Business form—sole proprietorship, partnership, corporation, S corporation, LLC, etc. Provide information that pertains to the business form you chose. Ex. If partnership, who are the partners or if a corporate setup, how many stockholders will be involved initially and plans for the future.
7 Basic Elements of Business Plan • Who’s going to manage and work at business. Ex. I am a mother who cares about children’s developmental, creative, and social needs. I also want to provide toys that are safe for children and that are practical. My employees will be mature men and women who have children and can relate to my concerns.
7 Basic Elements of Business Plan • How will you be able to sell your products/services. Ex. My customers will be parents who wish to provide entertaining and practical toys for their children. My prices will be comparable to similar businesses, however, with mature employees who share the same concerns as other parents, customers will respect the products offered and seek advice from employees. I will not offer toys that are not both durable and practical. Initial promotion will be handled with flyers in local businesses as well as advertisements in local papers.
7 Basic Elements of Business Plan • Financial Statements, how much money you are investing in the business, and how much you need to borrow or get from others and, list potential problems/risks and how you’ll resolve them. Ex. of money needs & how money will be used This is a new business so I will include as estimate of what I think, based upon my research, my sales (revenue) will be as well as my costs (expenses). I am investing $40,000 and based upon my research will need to borrow an additional $100,000 to secure a building, equipment and inventory.
Who Needs the Business Plan? • Investors • Lenders • Suppliers
Why should you know what risks your business could face? • Those who are going to give you money will want to know that you’ve given these things thought and have a plan to solve problems.
PUT YOUR BUSINESS PLAN TOGETHER • Introductory elements • Cover letter • Title page • Table of contents • Statement of purpose • Executive summary • Main body of your plan • 7 Basic Elements Above • Appendix
Why research for a business plan? • Need to know about competition • Need to know about possible changes in the demand for your product • Using facts show that you are serious about this and have given it a lot of thought
Why should business plan look good? • Professional is more convincing
Purpose of Cover Letter? • Describe business • Describe businesses potential for success • Inform reader how much money (capital) you need
Purpose for Statement of Purpose • Briefly describes why you need a loan and what you plan to do with the money • 1-2 paragraphs maximum
Purpose of Executive Summary? • Interesting otherwise the reader may not bother to go through the entire plan and you won’t get what you need. 3 Things Executive Summary Should Accomplish • Describe business concept and what’s unique about it • Include projected sales, costs, profits • Identify what you need (inventory, equipment, etc) and amount you need to borrow
Purpose of Appendix? Includes support like: • Resume • Personal Income Taxes • Letters of Recommendation • Any Legal Documents