Creating a Business Plan

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• Creating a Business Plan

Brian Cox 1/4/11
Nature is trying very hard to make us succeed,
but nature does not depend on us. We are not the
only experiment.  - R. Buckminster Fuller
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Introduction

• Im a part-time trader and earn my living as an
  engineer.
• There is likely some traders on this call who
  earn their living trading. I invite these
  professional traders to add their insights and if
  possible, share their business plans with the
  rest of the group.

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Introduction

• A business plan needs to be a living document
  that you add to change and update on a regular
  basis. It is not static.
• Its a way to stay focused on the your trading.

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What is a business plan?

• A written document that describes a business, its
  objectives, strategies, market and financial
  forecast.
• A blueprint and communication tool for your
  business. A device to help you, the owner, set
  out how you intend to operate your business. A
  road map to tell others how you expect to get
  there
• In a nutshell, the business plan should clearly
  explain the what, why, when, who and how of the
  project. It should be a comprehensive explanation
  of the opportunity, the people involved, the
  money required to implement the plan, where it
  will come from and what financial results the
  opportunity is likely to produce.

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Why do we as traders need one?

• A business plan will guide us on achieving our
  goals
• It can be a collection of spreadsheets, lists,
  research summaries, and other documents stuffed
  in a binder that you refer to and update on a
  regular basis
• It enables budget expenses and helps in keeping
  control of expenditures, managing cash flow,
  measuring trading measuring success
• It also ensures that money spent is not wasted.

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• If you are expecting to use trading to add to
  your income, retire early, quit your job, then
  you need a business plan.
• Then these may be your goals
• How much will you need to make on a annually,
  monthly, weekly and daily
• How are you going to create income Stocks,
  Options, currency?

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Business Plan Elements

• Mission StatementDescribe why you are building
  this business.
• Are you adding income?
• Retiring early?
• Changing your profession?
• Something else?

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Simple Example Statements

• This business has been developed to add to my
  retirement savings.
• This business has been developed to pay for my
  childs education
• This business has been developed so that I can
  leave a profession that I no longer want to pursue

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More complete Example Statements

• Ive developed this business so that I could
  leave my profession.
• I want to be able to spend more time with my
  family and my community.
• Education is important to me and I will be
  sending the first of my two children to college
  within 4 years. I dont want cost to be an issue.
• Within 5 years, this business will fund the
  procurement of a vacation home.
• I what to be able to participle in community and
  charity activities that I was not able to with my
  previous profession including, PBS fund drives,
  Red Cross activities and my children school
  activities

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Key points of a Mission Statement

• Be as specific as you can.
• Personalize it to your goals for the business
• Remember to put a time frame on it
• If you are building it with a partner, then make
  sure that you both provide input and agree on it
• Share it with others and use it as a means of
  communicating why you are spending time and
  energy on the task

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Key points of a Mission Statement

• Skip Griffin has developed and excellent example
• http//bit.ly/skips-business-plan

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Business Plan Elements

• Funding / Working CapitalWhere are you getting
  the money to fund the enterprise?
• Savings
• IRA
• Income from a job
• Loan

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Business Plan Elements

• What are your expenses?
• Weekly
• Monthly
• Quarterly
• Annually
• Dont forget, insurance, savings and taxes or
  benefits that you job currently cover
• Cant know how much you need to make if you dont
  how much you are spending

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Business Plan Elements

• There are many tools that can help you to
  determine where your money is going.
• I use Quicken to figure out my Mandatory as well
  as discretionary spending.

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Business Plan Elements
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Business Plan Elements
Budget worksheets http//financialplan.about.com/c
s/budgeting/l/blbudget.htm Household Budget
Worksheet http//xsprofits.com/Documents/budget_sh
eet_accc.xls GRS Budget Worksheet http//xsprofit
s.com/Documents/GRS-Budget-Sheet.xls Personal
budget spreadsheet http//xsprofits.com/Documents/
personal-budget-spreadsheet.xls
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Business Plan Elements

• Monthly Estimated Revenue
• Based on your expenses, how much each month do
  you need to make?
• Now figure on a daily, weekly, monthly and
  annually what your cash flow is going to be.
• What will be your types of income?
• Short Term, Mid Term, Long Term
• What will be your income sources?
• Stocks
• Indexes
• ETF
• Options
• Types, directional, spreads, complex
• Currency

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Business Plan Elements

• Business Growth (appreciation)
• Business growth is the measure of profit and
  growth of working capital.
• Growth (liquidated investments revenue)
  (operating expense cash reserve
  employee program)

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Business Plan Elements

• Breakeven point
• At what point have you met your goals? This is
  called your breakeven point. This is a major
  milestone where the revenue is greater than the
  operating expense

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Business Plan Elements

• Target Growth 1 Year
• Percent growth expected from working capital
• Specify the Strategies used for obtaining the
  targeted growth.
• Stocks
• Indexes
• ETF
• Options
• Types, directional, spreads, complex
• Currency

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Business Plan Elements

• Target Growth 5 Year
• Percent growth expected from working capital
• Specify the Strategies used for obtaining the
  targeted growth.
• Stocks
• Indexes
• ETF
• Options
• Types, directional, spreads, complex
• Currency

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Business Plan Elements

• Re-investing in growth
• Budget for investing tools
• Classes
• Conferences
• Subscriptions
• Computer upgrades
• Internet
• Employee Growth
• Expanding Business
• Diversifying

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Business Plan Elements

• Cash Reserves
• Emergency Funds
• Savings
• Taxes
• Differences in taxes Stock vs. Options
• Incorporate or not
• Estimated tax payments
• Tax advisor

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Business Plan Elements

• Employee / Community Programs
• Employee retirement
• Employee Scholarship Programs
• Diversifying
• As the business grows seek out additional avenues
  of investments that generate a reliable as steady
  cash flow usually at expense of lower return.
  Examples are real estate and franchises

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Recommended Books

• Eat that Frog, Brian Tracy
• The five Major Pieces of the life Puzzle, Jim
  Rohn
• The Four Laws of Dept Free Prosperity, Blaine
  Harris and Charles Coonradt
• Rich Dad Poor Dad, Robert Kiyosaki
• Cash Flow Quadrant, Robert Kiyosaki

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Recommended Books
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Any Questions?