Developing a Successful Business Plan

1
Developing a Successful Business Plan
New Venture Creation Chapter 11
2
Purpose of Your Business Plan

• Feasibility analysis
• Operating guide
• Financing tool
• Valuation

3
Why Write a Business Plan?

• Make more money
• Map and compass for future
• Take advantage of opportunities
• Impress your banker

• Set realistic goals
• Operating and financing plans
• Communicate more clearly

4
Reasons People Give for Not Writing a Business
Plan

• I dont need one
• I have one in my head
• I dont know how to begin
• I dont have enough time
• Im not a numbers person
• I make more than enough money and I am immortal

5
Who Are We Writing for?

• Yourself
• Bank
• Investors
• Strategic Alliances
• Establish Image
• Attract Stars
• Facilitate MAs
• Motivate Focus MGT Team

6
Three Types of Biz Plans

• Summary Business Plan
• 10 pages, no history, hot founders, test the
  waters
• Full Business Plan
• 10-40 pages, substantial financing sought,
  substantial alliance sought
• Operational Business Plan
• 40 pages, going concern, growing quickly, part
  of annual process

7
General sections of a business plan

• The Business
• Financial data
• Supporting documents

8
Section One The Business

• Description of the business
• Product/service lines
• Markets
• Location
• Competition
• Management
• Personnel
• Type and use of financing being sought
• Summary

9
A Starting Point

• What business are you in?
• Product/service definition
• Market definition
• Industry definition
• What is your mission?
• What is your business?
• Who is your customer?
• How does that customer define value?

10
Description of Business

• Objectives
• What your business is
• How it will be run
• Why you think your business will succeed

• Questions
• What business are you in?
• What is the status of the business?
• Whats the businesss form?
• Why is your business going to be profitable?
• When will you open?
• What are your operating days and hours?
• Is your business seasonal?

11
Product or Service Description

• What are you selling?
• What are the benefits?
• How does your product/service differ from
  competitors?
• If your product/service is new or innovative,
  what makes it different?
• If your product/service is not new or innovative,
  why would people buy from you?

12
The Market

• What business are you in?
• Who and what are your target markets?
• Customer demographicspsychographics, product
  markets, Geographic markets
• What do your customers buy? What benefits do
  your customers think they receive from your
  product/service?

13
The Market Customers

• What are your markets?
• Which ones are buying from you or existing
  competitors now?
• What products or services are they buying?
• Who are the people that will be buying from you?
• What are their purchasing behaviors?

14
The Market Product Benefits

• Why are these people going to buy from your
  company?
• Why are these people going to buy from your
  company and not from the competition?
• What are these people going to be buying from
  you?
• On what cycle will they make their purchases?
• How can your company find more people like these?

15
The Market Sales and Distribution

• What distribution channels will you use?
• What are the economics of this distribution
  channel?
• What is the key to gaining access to this
  distribution channel?

16
The Market Competition

• Who are your competitors?
• What do your competitors do well?
• What can you do better than your competitors?
• How do your competitors please their customers?
• What are your competitors pricing policies?
• Where do your competitors advertiseand does it
  work?

17
The Market Additional sections

• Positioning, publicity, promotion
• Pricing
• Goals and Budgets
• Strategies

18
Location of business

• What will your business address be?
• What physical features will your building
  require?
• Will you lease or own the space?
• What renovations will be needed and at what cost?
• Does zoning permit your type of business to
  operate in that location?
• What other businesses are in the area?
• Why did you pick this site over others?
• Why is this the right location for your business?
• How will the choice of your location affect your
  operating costs?

19
Competition

• Who are your five nearest competitors?
• How is their business doing stable, increasing,
  or decreasing?
• How are their operations similar or dissimilar to
  yours?
• What have you learned from watching their
  operation? What works for them? What doesnt?
• How will your operation be better than theirs?

20
Management

• Personal history of the principals
• Related work experience
• Duties and responsibilities
• Salaries
• Resources available to the business

21
Personnel

• What are the starting personnel needs?
• What skills will your business need?
• Are people with those skills available? Where?
• Will employees be salaried or hourly?
• What fringe benefits will you offer?
• Will you pay overtime?
• Will you have to train employees?

22
Type and Use of Financing

• How is investment/loan to be spent?
• What equipment will be purchased?
• Who is the supplier?
• What is the price?
• Are there alternative sources?
• BE DETAILED

23
Summary

• At the end of section one, make a two or three
  paragraph summary statement that ties the whole
  section back together. I usually call this
  Highlights of Investment.

24
What Should We Include?

• Cover page Professional
• Table of Contents
• Executive Summary Not an abstract, intro,
  preface
• The Company Identity strategy players
• The Market Buyers? Selling Market Research
  Competition Pricing from Scratch
• The Product/Service Whats being sold? Bells,
  Whistles Delivery Service
• Sales and Promotion How do you sell? How do you
  motivate Sellers? How will you promote product?
• Finances What will you need to include?
• Appendix
• Exhibits, resumes, sources

25
Sample Table of Contents

• Executive Summary
• The Company and Its Overall Strategy
• The Market and Competitors
• Industry Analysis
• Competitor Analysis
• Customer Analysis
• Marketing Strategy
• Design and Development Plan

• Operations Plan
• Management Team
• Schedule
• Critical Risks
• Financial Analysis
• Financing
• Exit Strategy
• Exhibits
• Financials, resumes, diagrams, sources

26
Exercise

• Executive Summary Develop a short statement
  regarding what your company is, what it sells,
  what it hopes to achieve, etc.
• The Company Identify more specifically what
  business your new venture plans to be in.
  Describe the key characteristics that its
  founders possess.
• The Market Who are the buyers for your
  product/service? How can you reach them? What
  type of Market Research would be helpful? What
  is the competition like (existing and potential)?
  How much will your charge for your
  product/service? What margins do you expect?
• The Product/Service What is it that is being
  sold? Are there any Bells and Whistles that add
  value? How will the product/service be delivered?
  What type of ongoing service will you provide
  after purchase?
• Sales and Promotion How will you sell? How many
  sellers will you need? How will you motivate
  Sellers? How will you promote the
  product/service?
• Finances What will you need to include?
• Appendix What do you expect to include?