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Is Doing a Business Plan Worth the Time?

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When starting a small business, developing a business plan can save you time and aggravation. Learn what type of plan is right for your company and how to write.

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Is Doing a Business Plan Worth the Time?

  1. 2. Is Doing a Business Plan Worth the Time for a Startup?
  2. 3. Agenda <ul><li>Preparation </li></ul><ul><li>Gathering information </li></ul><ul><li>What to cover and how to organize </li></ul><ul><li>Success factors </li></ul><ul><li>Something extra </li></ul>
  3. 4. Preparing
  4. 5. Why Undertake Writing a Business Plan <ul><li>Provides a road map for where you are going </li></ul><ul><li>Provides a framework for making decisions </li></ul><ul><li>Develops and tests assumptions and alternatives before committing resources </li></ul><ul><li>Helps determine the number and amount of resources (both money and people) needed </li></ul><ul><li>Challenges and refines strategies </li></ul><ul><li>Clarifies company focus and aligns resources </li></ul><ul><li>Sales tool for investors and partners </li></ul><ul><li>Gets buy in from the team </li></ul><ul><li>Tool for getting feedback </li></ul><ul><li>Builds in mechanism for staying on track and evaluate success </li></ul>
  5. 6. How In Depth Does It Need to Be: That Depends <ul><li>The longer the plan: </li></ul><ul><li>The more sophisticated the lender </li></ul><ul><li>The more money you’re raising </li></ul><ul><li>The bigger the company at the start </li></ul><ul><li>The faster the growth trajectory </li></ul><ul><li>The more spread out the staff </li></ul><ul><li>The more frequently the staff turns over </li></ul><ul><li>The more outsiders and the more important their role (funders, vendors, partners, strategic alliances ) </li></ul>
  6. 7. Time Span 3 years sometimes 5 depending on need
  7. 8. Who Will Be Involved and How Name/Title Responsibility Task Timing Comments Jane Doe, President <ul><li>Oversight </li></ul><ul><li>Overall task master </li></ul><ul><li>Legal issues </li></ul><ul><li>Management /staff plan </li></ul><ul><li>Strategic Partnerships </li></ul>Jim Johnson, VP Product Development <ul><li>Information gathering </li></ul><ul><li>Marketplace analysis </li></ul><ul><li>Product description </li></ul><ul><li>Operations </li></ul>Maria Garcia, VP Marketing <ul><li>Marketing </li></ul><ul><li>Note taking </li></ul><ul><li>Market definition </li></ul><ul><li>Positioning </li></ul><ul><li>Marketing tactics </li></ul>John Smith, Accountant <ul><li>Financials </li></ul><ul><li>Budget, startup funds separated </li></ul><ul><li>P&L </li></ul><ul><li>Balance Sheet </li></ul><ul><li>Cash Flow </li></ul><ul><li>Breakeven Analysis </li></ul><ul><li>Assumption write up </li></ul>
  8. 9. Questions
  9. 10. Gathering Information
  10. 11. Why Research the Feasibility of Your Business <ul><li>Determine your idea’s potential </li></ul><ul><li>Define customer </li></ul><ul><li>Size up the competition </li></ul><ul><li>Test product and positioning </li></ul>
  11. 12. Where to Look for Information <ul><li>Internet search engines by competitors’ names or key words </li></ul><ul><li>Trade associations and publications </li></ul><ul><li>Business and general press as well as press releases </li></ul><ul><li>Government agencies </li></ul><ul><li>Corporate annual reports </li></ul><ul><li>Investment firm research </li></ul><ul><li>Private research firms such as IDC, Forrester, Jupiter </li></ul><ul><li>Online computer databases, Nexis, Factiva </li></ul><ul><li>Shop the competition </li></ul><ul><li>Conduct your own research </li></ul>
  12. 13. What to Look for <ul><li>Market size </li></ul><ul><li>Market needs and characteristics </li></ul><ul><li>Market segments and underserved niches </li></ul><ul><li>Market trends </li></ul><ul><li>Competition </li></ul><ul><li>Data to help make budget assumptions/ financial projections </li></ul><ul><ul><li>Industry </li></ul></ul><ul><ul><li>Regulatory </li></ul></ul><ul><ul><li>Technology </li></ul></ul><ul><ul><li>Political </li></ul></ul><ul><ul><li>Sociological </li></ul></ul><ul><ul><li>Economic </li></ul></ul>
  13. 14. Compare Yourself to the Competition <ul><li>Been around a long time </li></ul><ul><li>Quality </li></ul><ul><li>Exclusivity </li></ul><ul><li>Pricing </li></ul><ul><li>Extent of features </li></ul><ul><li>Service </li></ul><ul><li>Reliability </li></ul><ul><li>Delivery </li></ul><ul><li>Location </li></ul><ul><li>Information </li></ul><ul><li>Availability </li></ul><ul><li>Credit card </li></ul><ul><li>Credit line </li></ul><ul><li>Warranty </li></ul><ul><li>Accessories </li></ul><ul><li>Positioning </li></ul><ul><li>Amount and location of advertising </li></ul>
  14. 15. Questions
  15. 16. Structure of the Business Plan
  16. 17. Business Plan Sections <ul><li>Executive summary (written last) </li></ul><ul><li>Company summary / Description of business </li></ul><ul><ul><li>Contributions and milestones* </li></ul></ul><ul><li>Market opportunity </li></ul><ul><ul><li>Competition* </li></ul></ul><ul><li>Marketing strategy </li></ul><ul><li>Operations </li></ul><ul><li>Organizational plan </li></ul><ul><li>Financial information </li></ul><ul><li>Risk factors </li></ul>
  17. 18. Company/Business Description Section <ul><li>Description of product/service emphasizing uniqueness </li></ul><ul><li>Location </li></ul><ul><li>Legal Issues – Legal form – Ownership – IP – Loans, leases, obligations </li></ul><ul><li>– Contracts, Agreements </li></ul><ul><li>Mission and vision </li></ul><ul><li>Business Model: describes what you are selling, how you will make money and why you will be successful </li></ul><ul><li>Development stage </li></ul><ul><li>Financial status </li></ul><ul><li>Contributions & milestones </li></ul>
  18. 19. Vision/Mission Together they provide direction and focus on where your heading long term and where you need to be today. If you get into a bind, check your vision and mission for direction.
  19. 20. Vision <ul><li>The dream </li></ul><ul><li>This is about what could be </li></ul><ul><li>It’s squishy, subjective </li></ul><ul><li>It’s your rallying cry </li></ul><ul><li>Use powerful, simple yet memorable phrases that capture the essence of your vision </li></ul>
  20. 21. Examples of Great Vision Statements <ul><li>John Kennedy: land a man on the moon and safely return him to earth by the end of this decade </li></ul><ul><li>Coca Cola: benefits and refreshes everyone it touches </li></ul><ul><li>Avon: to be the company that best understands and satisfies the product, service and self-fulfillment needs of women – globally. </li></ul><ul><li>Microsoft: a personal computer in every desk top running Microsoft software </li></ul><ul><li>Dell: listens to customers and delivers innovative technology and services they trust and value </li></ul><ul><li>Amazon: to be earth's most customer centric company; to build a place where people can come to find and discover anything they might want to buy online </li></ul><ul><li>Google: we provide access to the worlds’ information in one click </li></ul>
  21. 22. Mission Answers
  22. 23. Example of Great Mission Statements <ul><li>American Red Cross: to improve the quality of human life; to enhance self-reliance and concern for others; and to help people avoid, prepare for, and cope with emergencies </li></ul><ul><li>Avis: We will ensure a stress-free car rental experience by providing superior services that cater to our customers’ individual needs…always conveying the ‘We Try Harder ® ’ spirit with knowledge, caring and a passion for excellence </li></ul><ul><li>Long John Silver: to be America’s best quick service restaurant chain. We will provide each guest great tasting, healthful, reasonably priced fish, seafood, and chicken in a fast, friendly manner on every visit. </li></ul><ul><li>Blockbuster: mission to become the complete source for movies and games – rental and retail </li></ul><ul><li>Patagonia: Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis </li></ul>
  23. 24. Developing Your Mission and Vision <ul><li>Create an overall picture of your company. </li></ul><ul><li>Describe the purpose of the company. </li></ul><ul><li>Who are your company’s customers and how do you segment the market? </li></ul><ul><li>What differentiates your company from its competitors? </li></ul><ul><li>What’s the legacy you want to create? </li></ul><ul><li>What are the strengths and opportunities revealed in the SWOT analysis to be conveyed? </li></ul><ul><li>What are the subjective words and terms that describe your company? </li></ul>
  24. 25. Marketplace Analysis <ul><li>Demonstrates both need and demand and shows your understanding of the market’s demographics and factors that will influence customers to buy </li></ul><ul><li>External environment </li></ul><ul><ul><li>Market description: size, growth and demand </li></ul></ul><ul><ul><li>Customers: segments, purchasing power and buying </li></ul></ul><ul><li>Industry </li></ul><ul><li>Regulatory </li></ul><ul><li>Technology </li></ul><ul><li>Political </li></ul><ul><li>Sociological </li></ul><ul><li>Economic </li></ul>
  25. 26. Marketplace Analysis <ul><li>Competition: </li></ul><ul><ul><li>Who else offers your product/service? Where? </li></ul></ul><ul><ul><li>Who buys from your competitors? What are their plans for growth? </li></ul></ul><ul><ul><li>How important are your target customers to the competition? What share of market do you have vs. the competition per customer segment? </li></ul></ul><ul><ul><li>Compare strengths and weaknesses to you: </li></ul></ul><ul><ul><ul><li>Product performance </li></ul></ul></ul><ul><ul><ul><li>production/service delivery </li></ul></ul></ul><ul><ul><ul><li>Experienced personnel </li></ul></ul></ul><ul><ul><ul><li>Location </li></ul></ul></ul><ul><ul><ul><li>Brand awareness </li></ul></ul></ul><ul><ul><ul><li>Etc. </li></ul></ul></ul>
  26. 27. Marketing Strategy <ul><li>Define Market </li></ul><ul><li>Product description </li></ul><ul><li>Marketing objective </li></ul><ul><li>Positioning: What’s your value proposition? </li></ul><ul><li>Pricing </li></ul><ul><li>Distribution channels </li></ul><ul><li>Communications tactics: direct mail, advertising, promotion, trade shows, word-of-mouth, etc. </li></ul><ul><li>Public relations </li></ul><ul><li>Strategic alliances that help penetrate the market faster </li></ul><ul><li>Demographic </li></ul><ul><li>Psychographic </li></ul><ul><li>Geography </li></ul><ul><li>Purchasing habits </li></ul><ul><li>Life / business style </li></ul><ul><li>Buying sensitives </li></ul>
  27. 28. Operations What are the key factors involved in creating your product/service? How does the business work (production process, supply chain, facility, equipment, management information systems)? Differs by type of business: <ul><li>Manufacturing: How do you turn raw materials into finished products? Capacity challenges? Quality control? </li></ul><ul><li>Retail: What are your hours of operation, systems, customer service practices and store layout? </li></ul><ul><li>Service: Describe type of people and processes involved in delivering the service. How will you control for quality? How will you handle capacity issues? </li></ul>
  28. 29. Organization Plan <ul><li>The strength of the management team is absolutely critical to the success and to the ability to raise investment capital and form strategic partnerships. </li></ul><ul><ul><li>Highlight management’s experience, industry knowledge and functional skills </li></ul></ul><ul><ul><li>Include an organizational structure </li></ul></ul><ul><ul><li>Board of directors </li></ul></ul><ul><ul><li>Advisory board </li></ul></ul><ul><ul><li>Key consultants </li></ul></ul>
  29. 30. Values and Social Responsibility – Employees – Suppliers – Customers – Community – Environment – Obey the law – Act ethically – Honesty and fairness in dealings – Double or triple bottom line Values Social Responsibility
  30. 31. Exit Strategy <ul><li>Go public </li></ul><ul><li>Acquisition/merger </li></ul><ul><li>Sale </li></ul><ul><li>Buy-out </li></ul><ul><li>Franchise </li></ul><ul><li>Hand down </li></ul><ul><li>Close </li></ul>
  31. 32. Financials <ul><li>Income statement </li></ul><ul><li>Cash flow statement </li></ul><ul><li>Balance sheet </li></ul><ul><li>Other </li></ul><ul><ul><li>Source and use of funding </li></ul></ul><ul><ul><li>Startup costs </li></ul></ul><ul><ul><li>Breakeven analysis </li></ul></ul><ul><ul><li>Assumptions </li></ul></ul>
  32. 33. Financials <ul><ul><li>Develop realistic assumptions </li></ul></ul><ul><ul><ul><li>Forecast revenues based on industry standards for price, sales volume and growth rate </li></ul></ul></ul><ul><ul><ul><li>Cost of goods: source vendors and suppliers for their fees </li></ul></ul></ul><ul><ul><ul><li>Operations: project staffing needs with salaries and start dates, fixed costs and marketing dollars </li></ul></ul></ul><ul><ul><li>Include your assumptions </li></ul></ul><ul><ul><li>Project realistic numbers </li></ul></ul><ul><ul><li>Provide monthly data for 1 st year, annual for 2 nd and 3 rd year </li></ul></ul><ul><ul><li>Consider 2 or 3 scenarios: best, worst, likely </li></ul></ul><ul><ul><li>Include what’s important summarize the rest </li></ul></ul>
  33. 34. Risk & Contingency <ul><li>Identify risk factors and a plan for mitigating them. </li></ul><ul><ul><li>Market </li></ul></ul><ul><ul><li>Competition </li></ul></ul><ul><ul><li>Technology </li></ul></ul><ul><ul><li>Production </li></ul></ul><ul><ul><li>Execution </li></ul></ul><ul><ul><li>Capitalization </li></ul></ul><ul><ul><li>Economic </li></ul></ul>
  34. 35. Appendix <ul><li>Letters of intent/key contracts </li></ul><ul><li>Endorsements </li></ul><ul><li>Photos </li></ul><ul><li>Location list </li></ul><ul><li>Market research results </li></ul><ul><li>Managers resumes </li></ul><ul><li>Technical/operational information </li></ul><ul><li>Marketing material </li></ul>
  35. 36. Executive Summary • Solve a problem • Turn the problem into an opportunity • Define the market and its potential • Analyze the competition and state your advantage • Describe the company’s products • Strategize on the best way to market your product • Portray solid management expertise • Summarize financials and spell out how much you need and for what
  36. 37. Questions
  37. 38. Success Factors
  38. 39. Questions to Ask Yourself <ul><li>Does your idea solve a significant problem, meets a significant unmet need </li></ul><ul><li>Offers a profit potential (reward) that it outweighs the risk </li></ul><ul><li>Good fit for your expertise </li></ul><ul><li>Opportunity for profits will exist for a reasonable length of time – forget fads </li></ul><ul><li>People will want to finance idea </li></ul>
  39. 40. Questions Others Will Ask Is the idea solid? Is the market large enough? Do they understand the market? Is the industry healthy? Are the financial projections realistic and positive? Is management experienced and capable? Are they strategic and flexible? Do they have good control of their finances? Are they passionate and motivated? Does the team have values and integrity? How will I get my money back?
  40. 41. Dotting the “i” and Crossing the “t” <ul><li>Clear and compelling </li></ul><ul><li>Accurate data </li></ul><ul><li>Credible sources </li></ul><ul><li>Jargon-free </li></ul><ul><li>Clear typeface 11 or 12 point type </li></ul><ul><li>Include graphics and charts </li></ul><ul><li>Use color for emphasis </li></ul><ul><li>Correct typos and grammatical mistakes </li></ul>
  41. 42. Questions
  42. 43. Something Extra
  43. 44. Nondisclosure Agreement (NDA) <ul><li>Increases chance of information remaining confidential </li></ul><ul><li>Prohibits recipient from disclosing information in your Business Plan </li></ul><ul><li>Nothing guarantees confidentiality </li></ul><ul><li>Venture capitalists and professional investors will NOT sign NDAs </li></ul>
  44. 45. 5 Ways to Name <ul><li>Take the names of people, animals, places or symbols: Johnson & Johnson, Procter & Gamble, Scientific Atlanta, Ford, Heinz, Alamo, Eli Lilly, Disneyland, Stengel Solutions </li></ul><ul><li>Literally describe the business, product or service: American Airlines, General Motors, Metropolitan Life, General Electric, Universal Studios </li></ul><ul><li>Use contractions, acronyms and initials: IBM, FedEx, Nabisco, ESPN </li></ul><ul><li>Make up a nonsense name, or pick an unrelated or coined name, or use a foreign phrase that sounds good: Google, Yahoo, Zocor, Exxon, Dos Equis, TiVo, Xerox </li></ul><ul><li>*Come up with a benefit-related name: Spic and Span (household cleaner), Edge (shaving lather), Head & Shoulders (shampoo), Nice ’n Easy (hair coloring), I Can’t Believe It’s Not Butter! (margarine) </li></ul>
  45. 46. Identify Your Reasons For Starting a Business <ul><li>This is personal journey </li></ul><ul><li>There are no right or wrong answers </li></ul>
  46. 47. Determine the Additional Support You’ll Need <ul><li>Take classes </li></ul><ul><li>Join industry groups </li></ul><ul><li>Join networking groups </li></ul><ul><li>Network </li></ul><ul><li>Join peer-to-peer mastermind or CEO Roundtables </li></ul><ul><li>Read books and magazines on entrepreneurs and entrepreneurial techniques </li></ul><ul><li>Find a mentor or advisor </li></ul><ul><li>Use a coach </li></ul>
  47. 48. Set Your Own Direction
  48. 49. Suggested Reading <ul><li>Harvard Business Essentials Entrepreneur’s Toolkit: Tools and Techniques to Launch and Grow Your New Business </li></ul><ul><li>Values-driven Business: How to Change the World, Make Money and Have Fun by Ben Cohen and Mal Warwick </li></ul><ul><li> </li></ul><ul><ul><li>Ten Tips for Developing a Meaningful Market Analysis </li></ul></ul><ul><ul><li>Ten Tips to Getting Valuable Feedback Online </li></ul></ul><ul><li>Stengel Solutions Handouts (to be emailed) </li></ul><ul><ul><li>Hungry for Feedback That Will Really Grow Your Company? Create the Perfect Survey </li></ul></ul><ul><ul><li>Redefine (Define) the Company Vision/Mission </li></ul></ul><ul><ul><li>Sample business plan </li></ul></ul><ul><li> </li></ul><ul><ul><li>How to Research Your Business Idea </li></ul></ul><ul><ul><li>How to Name Your Business </li></ul></ul><ul><ul><li>Full Dream Ahead </li></ul></ul><ul><li> </li></ul><ul><li>Business Week </li></ul>
  49. 50. Questions