BUSINESS PLAN How do you make a business Plan? Why do you a business plan? What goes into a business plan? How do you create an effective plan?
14.1 Why do you need a business plan? • Explain the purpose of writing a good business plan. • Describe the importance of a business plan
Business Plan Writing a business plan is one of the most difficult and important things you will do as an entrepreneur. A business can make or break your business.
BUSINESS PLAN • A business plan is a written document that describes all the steps necessary to open and operate a successful business. • Writing these details will help you visualize all the parts of your business. • Will help you persuade other people and banks to invest in your business idea.
BUSINESS PLAN CONSIST OF: • Describes what your business will produce, how you will produce it, and who will buy your product or service • Explains who will run your business and who will supply it with goods
BUSINESS PLAN CONSIST OF: • States how your business will win over customers from competitors and what your business will do to keep customers • Provides detailed financial information that shows how your business will succeed in earning a profit
PURPOSE OF A BUSINESS PLAN • A business plan explains the idea behind your business. • Spells our how your product or service will be produced and sold • Persuade people and banks to invest in your business, you need to show that your business idea is a good one • You need to identify who your target customer is and show how your company will be able to get and keep customers
PURPOSE OF A BUSINESS PLAN • A business plan sets specific goals and describes how your business expects to achieve them. • Includes sales estimates for the short term (the first year), the medium term (two to five years), the long term (five years or more) • Describes the products and services that will be introduced over the next five years • Describes future plans, such as expansion of the business
PURPOSE OF A BUSINESS PLAN • A business plan describes the backgrounds and experience of the people who will be running the business. • Lenders make financing decisions based on how well they think a company can meet its goals. • Entrepreneurs that have background related to their business idea are more likely to succeed. • Investors are more likely to invest after you provide good information on the background and experience.
PURPOSE OF A BUSINESS PLAN • What are the three main purposes of a business plan? • A business plan explains the idea behind your business, sets specific goals and describes how you will achieve them, and describes the background and experience of the people running the business.
SEVERAL REASONS WHY A BUSINESS PLAN IS IMPORTANT: • A business plan makes you think about all parts of your business. • A business plan may help you secure financing for your business. • Lenders require a business plan before they will consider financing a business. • Without a business plan, you will not be able to get a business loan.
SEVERAL REASONS WHY A BUSINESS PLAN IS IMPORTANT: • A business plan helps you communicate your ideas to others. • By communicating your ideas on paper, reassures lenders that your business can succeed • A business plan can serve as a tool for managing your business.
SEVERAL REASONS WHY A BUSINESS PLAN IS IMPORTANT: • Why do entrepreneurs need to write business plans? • A business plan helps entrepreneurs think about all parts of their business, secure financing, and communicate their ideas to others. It also can serve as a tool for managing the business.
14.2 WHAT GOES INTO A BUSINESS PLAN? • IDENTIFY THE SEVEN BASIC ELEMENTS OF A BUSINESS PLAN? • DESCRIBE ADDITIONAL ELEMENTS THAT MAY BE NEEDED IN A BUSINESS PLAN.
BASIC ELEMENTS OF A BUSINESS PLAN • History and background of your idea • Goals for your company • Products or services you will offer • Form of ownership • Management and staffing • Marketing • Current and projected financial statements
History and background • Describing how you came up with the idea can help lenders, investors, and others understand how your business will operate.
Goals for your company • Your business plan should outline your short-term, medium-term, and long-term goals. • Describes your vision of where you want your company to be in the future.
Products or services you will offer • Describe the industry in which you will operate. Should include the following: • Outside factors affecting your business, such as high competition or lack of suppliers • Estimates for industry growth • Economic trends of the industry • Technology trends that may affect the industry
Form of ownership • You should have a section describing your form of ownership. • Provide information that relates to your form of business, such as whether you have partners or how many shareholders you have. • This section of the business plan is important because each form of business ownership has a different effect on how the business works and makes profits.
Management and staffing • The management and staffing section of the business plan should show that you and the people who will be working for you have the experience, maturity, and knowledge to operate your business.
Marketing • You will need to identify who your target customers are, how large the market is for your product or service, and how you plan to enter that market. • You also should explain how you plan to deal with competition.
Marketing Cont. • You should list your company’s advantages over the competition. These advantages may include: • Performance • Quality • Reliability • Location • Price • Promotion • Public image or reputation
Current and projected financial statements • Identification of risks • Lenders and investors will want to know what risks your business faces and how you plan to deal with them. • Examples of risks that you could face are competitors lowering prices, costs running higher than estimated, and demand for your product or service declining over time.
Current and projected financial statements • Financial statements. • A new business must include projected financial statements, known as pro forma financial statements, in its business plan. • A business already in operation must include current financial statements as well as projected financial statements.
Current and projected financial statements • Loan request and return on investment. • Must state how much you need to borrow and how you plan to use the money. • Give investors an idea of how much money they could expect to earn on their investment. • How much of your own money you are investing in the business.
Additional Elements • A business that has a Licensing requirements or must meet legal restrictions and regulations, such as a restaurant, would include a section on legal issues in its business plan.
Checkpoint: • List the elements of a business plan and explain why each element is important. • Why should some businesses include additional information in their business plans?
14.03 How do you create an effective plan? • Identify resources to help develop your business plan. • Explain how a business plan should be organized,
Research the Business Plan • Your business plan needs to persuade readers that you have a good, realistic business idea. • You must use resources that provide information and data based on facts rather than opinions. • Most Entrepreneurs spend 50 – 100 hours developing their business plans.
Three Types of Resources • Print Resources • Online Resources • People Resources • Additional Resources
Print Resources • Your public library should have many books on entrepreneurship. • Books on marketing, financing, hiring and managing a staff, purchasing a business, and operating a franchise may be helpful. • Government documents may provide you with useful information.
Online Resources • The Small Business Administration web site contains much of the same information that the SBA provides in print. • There are many web sites specifically for entrepreneurs and small businesses that may offer detailed information. • Several web sites will walk you through writing a business plan step by step.
People Resources • People from many organizations can help you with your business plan. • Counselors from Small Business Development Centers provide free one-on-one assistance in developing a business plan. • Another source of valuable assistance is the Service Corps of Retired Executivies (SCORE).
Additional Resources • Local Chamber of Commerce and Small Business Development Centers have information on trends affecting local business. • Trade associations are organizations that support certain types of business. These associations also can be valuable sources of information.
Additional Resources • Some entrepreneurs hire experts to help them write their business plans. • Professional business consultants can be found in directories at your library or on the Internet.
Organize Your Business Plan • To make the best impression on people who will read your business plan, you will want to create an attractive document that is neat, well organized, and easy to read. • Handwritten business plans are not acceptable.
Introductory Elements of a Business Plan • Every business plan should have the following elements: • Cover letter • Title page • Table of contents • Statement of purpose • Executive summary.
Introductory Elements of a Business Plan • Cover page – is a letter that explains or provides more information about a document or a set of documents. • Title page – indicates the name of your company, the date, the owner(s) of the company, and the address and phone number of the company.
Introductory Elements of a Business Plan Cont. • Table of contents – is a listing of is the material included in a publication. Shows the reader what each page covers. Makes sure that the sections are in the correct order. • Statement of purpose – briefly describes why you are asking for a loan and what you plan to do with the money.
Introductory Elements of a Business Plan Cont. • Executive summary – is a short restatement of a report. It should capture the interest of its readers and make them want to read more. • Executive summary should be no longer than one or two pages. • It should be written in clear, simple style.
Introductory Elements of a Business Plan Cont. • Describe your business idea and communicate what is unique about your idea • Include your estimates for sales, costs, and profits • Identify your needs, such as inventory, land, building, and equipment • State the amount you are interested in borrowing