1

The Business The Business Planning ProcessPlanning Process

How to Develop a How to Develop a Business PlanBusiness Plan

2

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

A Venture Plan is:A Venture Plan is:

• A road map for running a business A road map for running a business ventureventure

• A written summary of what the business A written summary of what the business venture can accomplish and howventure can accomplish and how

• A tool you can use to communicate with A tool you can use to communicate with potential investors, bankers, partners, potential investors, bankers, partners, and employeesand employees

3

Why Prepare a Business Why Prepare a Business Plan?Plan?

• Planning and Organization are vital to Planning and Organization are vital to the success of any venturethe success of any venture

• Preparing a venture plan helps you Preparing a venture plan helps you assess potential risks and problemsassess potential risks and problems

• Venture Planning provides a framework Venture Planning provides a framework to measure successto measure success

4

Why Prepare a Business Why Prepare a Business Plan?Plan?

• A plan forces you to take a A plan forces you to take a realistic viewrealistic view of your idea and logically of your idea and logically assess your assess your goalsgoals

• Introduces you to others as a Introduces you to others as a careful careful plannerplanner (First impressions are important) (First impressions are important)

• A plan identifies benchmarks that help A plan identifies benchmarks that help you you evaluate and improveevaluate and improve the the performance of the ventureperformance of the venture

5

Why Prepare a Business Why Prepare a Business Plan?Plan?

• Putting your plan in writing provides a Putting your plan in writing provides a record of what has been decidedrecord of what has been decided

• A written plan makes day-to-day A written plan makes day-to-day management easier as management easier as procedures can be procedures can be reviewed and adjustedreviewed and adjusted as necessary as necessary

• Helps Helps identify your marketidentify your market, understand your , understand your customerscustomers, choose the best , choose the best pricing strategypricing strategy, , and get to know the and get to know the competitioncompetition

6

Information Included Information Included in Business Plansin Business Plans

Executive Summary Market Analysis

Resource Analysis Operating Strategy Financial Strategy

7

Business Plans Should Include:

• A Mission Statement that describes your vision for the venture, including your aims and objectives

• The Marketing Research you have done, and s detailed description of your target market

• A list of the Financial, Material and Human Resources you need to make your plan work

• An explanation of How the Business will Operate

• A Plan for Raising the Money you need to start the venture

8

Executive Summary- Section 1

• An executive summary is a summary of the most important points in your plan.

• It is intended to introduce the venture and capture the attention of the reader

• It should be flawless and to the point to create a good first impression!

• Cannot be written until all other sections of the plan are complete

9

A Great Executive Summary:

• Opens with a Mission Statement• Includes an accurate description of the Business• Includes the names of the contact person and

management team members and how these people can be reached

• The name of the venture and a description of its nature and objectives

• Information about the goods and services offered, what makes this venture unique, the location of the business, and the proposed timelines for its development

10

Executive Summary also includes:

• Information about security that can be offered to investors in exchange for the investment

• Information about business loans required

• Key highlights of the Business plan

11

Market Analysis- Section 2

• The Marketing Analysis section describes the marketing research conducted and the conclusions you drew from the research

• A Market Analysis (Needs Assessment) can help you identify potential customers, analyze competition, set prices, and plan ways to advertise the venture

12

A Market Analysis Should Include:

• Demographics of potential customers (age, gender, location, buying habits, etc.)

• The types of Products or Services you think your customers will buy and how you know

• Description of trends that suggest this is the right time to introduce your product or service

• Who your competitors are, where they are, and how successful they are

13

Market Analysis (cont.)

• How you plan to make your product or service better than or different from your competitors’

• How much you will charge for your product or service

• How you plan to advertise your product or service to your target market

14

Pricing• Pricing is an important

part of the market analysis that can make or break a new venture.

• Price too high may discourage sales

• Price too low, customers may perceive product or service as low quality

• How can my price be competitive and still provide a suitable profit margin?

15

An Advertising Plan should include:

• An assessment of the various forms of advertising available

• The types of customers you hope to reach

• The costs involved• Registration of the

venture name

16

Registering a Company Name:• First determine the type of ownership: sole

proprietorship, partnership, or corporation• If you use your own name as a company name

and you are a sole proprietor, you are not required to register (Deb Rice)

• If you add any words to the name (Deb Rice Café) it is necessary to register the business name and pay a fee before you use it

• Registering your business name ensures that only you can use this name for advertising and legal purposes in the province of registration

17

RESOURCE ANALYSIS- Section 3

• All good venture ideas need resources to make them work

• All business plans must have a resource analysis section

• The entrepreneur needs to consider the following types of resources needed for the venture:

• Material Resources• Human Resources• Financial Resources

18

Material Resources

• Includes all materials needed to operate the venture, both raw materials and finished products (equipment such as: storage bins,paper, computers, delivery trucks, etc.)

• Some of theses are consumable resources while others are fixed resources which can be used over and over

19

Human Resources

• The people needed to operate the venture

• Look for people whose skills complement your own and fill in the gaps

• How many people will you need to start your business? to help it grow?

20

Financial Resources

• The money needed to start and operate your venture

• This includes money to buy equipment, materials, pay staff, rent, electricity, advertising costs, etc.

21

Resource Section of Plan Needs to Consider:

• What tools and equipment is needed and where you will get them

• What human resources you will need• Where your venture will be located• How much space you will require• Whether you plan to buy or rent your

facility or whether your business can be operated without a bricks-and-mortar site

22

Resource Section of Plan Needs to Consider (cont.)

• Whether you will manufacture your products yourself or hire a contract organization to do it for you

• Which sources of raw materials you intend to use and how much these will cost

• How often your suppliers will deliver materials and what return and refund policies they offer on their products

• The total cost of all resources you need to start and operate your business

23

OPERATING STRATEGY- Section 4

• The Operating Strategy tells you how you will manage the material and human resources in the day-to-day operation of the business

24

ACCOUNTING:Jeff MacKinnonbudgetingaccounts payableaccounts receivablepayroll and benefitstax

ASSISTANT MANAGER:Janis Richardsonrecruiting/hiringstaff trainingstaff scheduling/ sales supervision

SHIPPING/ RECEIVINGMatt Hardimancustomer servicescheduling pickups and deliveriesorder checkingparts inventorymaintenance

OWNER / MANAGER:Mrs. D Richardson

ORGANIZATIONAL CHART: Human resources

25

Operating Strategy (cont.)• An organizational chart is a good way to present a visual

plan for Human Resources• Operating Strategy also deals with the production

process and how necessary supplies will be obtained• It describes how the facility will be set up, including its

size, location(s), special needs, the ownership terms, or the lease terms

• The plan also describes the facility’s present and potential production capacity, minimum levels of production needed to sustain the operation, and any overhead operating costs.

• This section includes inventory needs, record keeping and contingency plans if regular suppliers cannot fill your orders

26

The Operating Strategy should include:

• Who will do each job and how the work will be supervised

• How the people will work together

• What the operating facility will be like

• How the production process will be organized

• Where the supplies will come from and who will be in charge of ordering them

• What records must be kept and who will keep them

• How the venture can keep its cost to a minimum

• What rules and regulations, including environmental ones apply to the venture

27

FINANCIAL STRATEGY: Section 5

• A Financial Strategy is based on projected results

• The financial plan involves research

• Possible sources of capital for a venture include: bankers, government agencies, credit unions, friends, family

28

The Financial Strategy will explain:

• How much it will cost to start the venture• How much it will cost to keep the venture

going after startup• The expected costs and revenue for the

venture (give best and worst-case scenarios)- give high and low estimate for the future

• How much capital will be required and when it will be needed

• What sources of capital are available

29

Financial Details to include:

• Detailed cash-flow projections

• Sales forecasts• Anticipated selling

costs• Expected gross

profits• Administrative costs

30

Financial plans also include:

• Expected pretax profit• Balance sheet• Rate of return on

investment• Working capital• Repayment proposal• Collateral

31

Mentorship

• Mentorship occurs whenever an experienced person, the mentor, offers advice and support to a less experienced person

• In the business world, mentorship can be an invaluable help to an entrepreneur in early stages of a venture