Developing, Marketing and Implementing a Business Plan

1
Developing, Marketing and Implementing a Business
Plan

• Aboriginal Financial Officers Association of
  Canada
• National Conference / February 2005

2
The Business Plan

• The Business Plan is an essential tool a road
  map it should answer two fundamental questions
  to you (assuming you are the entrepreneur)
• Is the opportunity worth pursuing?
• Can I do it? How?

3
The Business Plan

• Once that threshold is crossed
• A Business Plan is essentially a selling document
  that must convey excitement, interest, and
  vision, to whoever is going to back the business.

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Ten Good Reasons

• Introduces the entrepreneur (or team) to key
  stakeholders
• Provides tool to assess viability
• Provides a framework for the entrepreneur to
  conduct an analysis of the venture
• Provides a framework for the entrepreneur to
  assess industry and competitive forces
• Provides a tool for the entrepreneur to assess
  Fit
• Provides a framework for the entrepreneur to
  conduct self-assessment
• Forces the entrepreneur to define the idea,
  concept, and objectives
• Forces the entrepreneur to think strategically
  very early on
• Creates an essential document for raising funds
• Provides direction in the early stages.

5
The Critical Issues

• The PEOPLE behind the venture and their key
  support
• The OPPORTUNITY, what will the business sell, to
  whom, can it grow?
• The ENVIRONMENT that the business operates in
• The RISKS and REWARDS of everything that can go
  wrong, and right, and how the team will respond.

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Developing A Business Plan / The Outline

• Cover Letter Provides focus, explains purpose
• Cover Page Show image, quality
• Table of Contents Ease of reference
• Executive Summary Gain interest, showcase
  vision
• Research Illustrate market size, growth,
  change
• Marketing Show strategy to enter market, get
  clients
• Operations Show structure, processes, key
  management
• Finance Show requirements, sources/uses, and
  when profit is expected
• Appendices Show relevant support documentation.
• Note This is a basic outline, it can be
  modified as needed.

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Cover Letter

• One page maximum
• Sets the mood and focus
• Address the reader and begin a soft sell
• Spell names correctly and sign
• Close on a positive
• Buzzwords
• Our research indicates.an opportunity in the
  market
• We will target.nicheusing aggressive
  marketing
• We have the resources.successful
  implementation.

8
Cover Page

• Similar to the business card concept
• Immediately projects image, first impression
• Be appropriate, flashy versus understated
• Use color scheme, graphics, logo, brand
• Avoid similarity with an existing look
• Be creative.

9
Table of Contents

• Reference point
• Should be reader friendly
• Show a clear path to information
• Link to Tabs if applicable
• Use headings and sub-headings
• Sounds obvious, but make sure pagination is
  correct.

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Executive Summary

• This is it! It might be all that that an investor
  reads
• One page maximum
• It MUST grab the attention of the reader
• The reader is interested in
• The market opportunity
• Your strategy to fill it
• How much will this cost, where is money coming
  from
• When will there be profits, and how much?
• Who are the key people, what is their expertise?
• What are you requesting from the reader?

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Research Section

• Industry Research
• Target Market Research
• Competition Research
• Purpose is to show the validity of your business
  expectations
• Prove to and convince a skeptic.

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Industry Research

• Hopefully, it is in a growth stage
• But, change in the industry is also a good sign
• If it is stagnant and/or saturated, you will have
  to steal customers from the competition.

13
Target Market Research

• State clearly, the target market is
• State who they are, males ages 18 35
• State how many are in the area you intend to
  serve

14
Competition Research

• Note the number, size , and track record
• Use easy to find data, phone directories,
  newspaper ads
• Use observation, visit them and pose as customer
• Assess their strengths and weaknesses
• Assess their ability and willingness to change
• Think about differentiation

15
Secondary Research

• Use easy data sources
• INTERNET
• Remember that the reader is NOT an expert in
  every sector of the economy, present information
  in an easy to read format, use charts, etc.

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Primary Research

• Survey
• Consider selecting an easy target market, i.e.
  students
• Expert opinion interviews
• Critical information
• Perception of product/service
• Desired features/benefits
• Desired availability
• Price expectations
• Frequency of purchase.

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Marketing

• A body at rest stays at rest.
• Sales are critical at start up
• Marketing is the most important skill in the
  beginning
• Describe the window of opportunity from previous
  section
• Discuss differentiation
• Highlight your unique selling point.

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Product

• Briefly describe product/service
• Highlight differentiation again
• Highlight selling points, superior quality,
  easy to use
• Mention add-ons, special points.

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Price

• Reflection of quality
• Dont go too low
• Think about who is buying, is it for a gift?
• Remember, its likely you do NOT have the power
  to undersell (predator pricing) your competition
  to steal market share.

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Promotion

• Communication to your target audience
• Critical difference, mass market vs. niche
  market
• Mass market, think Wal-Mart forget about it!
• Niche market
• Think how you get your message to your target
  market
• Get attention
• Generate interest
• Develop desire
• Take action, purchase.

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Place

• Location
• Look for anchor (community mall)
• Look for cluster (around others)
• Remember, if you are a specialty shop and
  expect others to find you, you better be good!

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Operations

• Competencies
• Process
• Structure
• Scheduling / Facility
• Purpose is to show the internal workings of the
  business
• Show fit between external market opportunity
  and internal strength of system to meet
  opportunity.

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Competencies

• The management team is very important
• Weakness is indicated when someone does not
  add-value, why are they there?
• Family support is important
• Indicate advisors, if applicable

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Process (Flow charts)

• System means work is accomplished most
  efficiently
• System allows for customer to move through a
  process in the best way
• Best means best for the business
• System should be designed so that product flows
  in most efficient way
• Compare how a customer flows through a self-serve
  gas station versus a casino

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Structure

• Sole proprietorship Very easy to set-up, places
  risks on the sole owner
• Partnership Several owners, but as partners
• Incorporation Most costly, but provides for
  limited liability on owners and usually used as
  business grow larger.

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Scheduling / Facilities

• Schedules Think of the typical week.
• Facility Layout of business, applicable for most
  business plans.

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The Financial Plan

• How much will it cost to start?
• What is your equity?
• How much is needed from external sources?
• Where will the funds come from? (Debt or
  equity?)
• How will you pay it back debt?
• How much of the business will you give up
  equity?
• Beak-even analysis.

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Major Cost Assumptions

• Indicate in simple format
• Major cost items
• Equipment purchases
• Supplies, etc.
• Any other major cost items relevant to the
  specific business needs.

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Pro-Forma Financials

• Cash Flow is KING/QUEEN! No, they dont teach
  this at the Harvard Business School.
• Cash Flow (forecast) statement key planning
  financial showing simply cash in and cash out,
  should be monthly
• Income Statement the financial statement
  showing profitability over a period of time
• Balance Sheet the financial statement showing
  assets, liabilities, equity, at a specific point
  in time.

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Ratios

• Liquidity
• Current Current assets / current liabilities
• Quick (Acid test) Cash / current liabilities
• Profitability
• Return on equity Net income / total equity
• Profit margin (Net income / sales)
• Solvency
• Debt / equity (Total debt / total equity).

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Appendices

• Resumes
• Organization chart
• Ownership information
• Surveys, charts, graphs
• Layout plan
• Patents, illustration of prototypes, etc.
• Any other items, not sure about something, put it
  in.

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Marketing A Business Plan

• Who is the intended reader?
• Back to the beginning, you will have to adjust
  the outline depending on who you are targeting.

33
Key Stakeholders (Readers)

• Community Government
• Emphasize the positives to the community
• Leakage reduction
• Job creation
• Spin-off potential
• Positive for future community development.

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Key Stakeholders (Readers)

• Government (ABC, INAC)
• Emphasize the market viability, and the
  background / credentials of the entrepreneur
• Be realistic, but show profitability
• Make the Business Plan fit their guidelines,
  dont waste time arguing about the guidelines
• Be patient (especially for contribution funding.)

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Other Readers

• Bankers
• Emphasize the fundamentals
• Positive cash flow
• Solid steady growth.
• Ability to repay debt.
• Investors (VC)
• Fast growth into large market opportunity
• Skills of management team.

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Other Readers

• Internal (Operational Business Plan)
• This could be done during fast growth, or as part
  of an annual process, emphasize
• Growth opportunities,
• Security, stability
• Focus on specific issues, new market, new process.

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Private Sources

• Banks
• Common forms of financing
• Operating or working capital
• Term loans
• Equipment (commercial pledge)
• Letters of Credit.
• Factoring
• Leasing is becoming more and more popular.

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Public Sources

• Governments have a wide variety of programs to
  assist entrepreneurs
• Usually come in a variety of terms, including
  loan guarantees
• Industry Canada (Aboriginal Business Canada)
• Know your Aboriginal Capital Corporations (ACCs)
  and External Delivery Organizations
• Indian Affairs (INAC)
• Provincial sources, check your area.

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Financing Considerations

• If successful in marketing the Business Plan,
  there are a few basic financing considerations
• In many cases, the traditional non-repayable
  contribution is now mixed with other forms of
  financing, thats good as an entrepreneur should
  have something at risk.

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Debt Financing

• Debt is borrowing money that has to be repaid
• It does not dilute ownership
• It does not result in a loss of control
• Debt can be obtained from both private and public
  sources.

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Equity

• Equity represents ownership in the business,
  raising funding this way means giving up a
  portion of ownership
• It DOES dilute ownership
• It MAY result in a loss of control
• Going public not a realistic option for many
  small Aboriginal businesses.

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Venture Capital

• By nature, willing to take on more risk
• But, VCs want some control and high returns
• VCs place controls on entrepreneurs such as
• Approval of large capital expenditures
• Remuneration of senior management
• Approval of long term lease arrangements
• Approval of disposal of assets
• Payment of dividends
• Major borrowing or other financial decisions.

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Marketing A Business Plan

• In general, there really is no magic formula to
  market a business plan, an entrepreneur should
  know or become aware of the sources available.
• Raising is still major challenge for
  start-ups and a well developed Business Plan is
  the key document
• More and more emphasis is being placed on the
  Team, therefore it is becoming more and more
  important to present a professional management
  team to sell the Business Plan.

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Implementing a Business Plan
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Implementing a Business Plan

• The usual
• Set goals, make daily plans
• Generate POSITIVE CASH FLOW!
• Without sales..think dot.bombs

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Think Bootstrapping!

• Bootstrapping means pulling up your bootstraps
  and getting the funds in any way possible
• Main points
• Move venture from idea to implementation without
  delay
• Keep focus on venture that will generate cash
  flow and break even soon, and maintain any
  advantage
• Avoid premature growth
• Keep attention on cash flow
• Establish relationship with key stakeholders
• Dont build big team of pros too fast.

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Implementing A Business Plan

• Zen Buddhist saying
• .the menu is not the meal.

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Implementing A Business Plan

• Really, entrepreneurship itself is
• An orientation to take ACTION every day to make
  the business successful.
• The thought process that goes into developing and
  writing the Business Plan is more important than
  actually referring to the Business Plan every
  day.