Concepts of a Business by Harlan Harley Kirwan

Create a Business Plan as the
first step on your path to
success
Building a Business Plan by
Harley Kirwan

At the end of this module, you will be able to:
– Identify the essential elements of a Business Plan.
– Identify how a good Business Plan can create an anchor for continued success.
– List additional resources that can help you develop an effective Business Plan.
Learning Objectives
2
Building a Business Plan

 The Federal Deposit Insurance Corporation (“FDIC”) recognizes the
important contributions made by small, veteran, and minority and
women-owned businesses to our economy. For that reason, we strive to
provide small businesses with opportunities to contract with the FDIC. In
furtherance of this goal, the FDIC has initiated the FDIC Small Business
Resource Effort to assist the small vendors that provide products, services,
and solutions to the FDIC.
 The objective of the Small Business Resource Effort is to provide
information and the tools small vendors need to become better
positioned to compete for contracts and subcontracts at the FDIC. To
achieve this objective, the Small Business Resource Effort references
outside resources critical for qualified vendors, leverages technology to
provide education according to perceived needs, and offers connectivity
through resourcing, accessibility, counseling, coaching, and guidance
where applicable.
 This product was developed by the FDIC Office of Minority and Women
Inclusion (OMWI). OMWI has responsibility for oversight of the Small
Business Resource Effort.
About FDIC Small Business
Resource Effort
3

 A Business Plan identifies key areas of your business so you can maximize
the time you spend on generating income.
 Key investors will want to look at your Business Plan before providing
capital.
 A Business Plan helps you start and keep your business on a successful
path.
 You should prepare a Business Plan, although, in reality, many small
business owners do not.
Executive Summary
4

 A Business Plan is a written document that defines the goals of your
business and describes how you will attain those goals.
 A Business Plan is worth your considerable investment of time, effort, and
energy.
 A Business Plan sets objectives, defines budgets, engages partners, and
anticipates problems before they occur.
What is a Business Plan?
5

1. To attract investors.
2. To see if your business ideas will work.
3. To outline each area of the business.
4. To set up milestones.
5. To learn about the market.
6. To secure additional funding or loans.
7. To determine your financial needs.
8. To attract top-level people.
9. To monitor your business.
10. To devise contingency plans.
10 Reasons Why You Need a
Strong Business Plan
6

 Business plans differ widely in their length, appearance, content, and the
emphasis placed on different aspects of the business.
 Depending on your business and your intended use, you may need a very
different type of Business Plan:
– Mini-plan: Less emphasis on critical details. Used to test your assumptions,
concept, and measure the interest of potential investors.
– Working Plan: Almost total emphasis on details. Used continuously to review
business operations and progress.
– Presentation Plan: Emphasis on marketability of the business concept. Used to
give information about the business to bankers, venture capitalists, and other
external resources.
How Detailed Should
Your Plan Be?
7

Every Business Plan should include some essential components:
– Overview of the Business: Describes the business, including its products and
services.
– The Marketing Plan: Describes the target market for your product and explains
how you will reach that market.
– The Financial Management Plan: Details the costs associated with operating
your business and explains how you will pay for those costs, including the
amount of financing you may need.
– The Operations and Management Plan: Describes how you will manage the
core processes of your business, including use of human resources.
Assembling a Business Plan
8

 Business plans must help investors understand and gain confidence on
how you will meet your customers’ needs.
 Seven common parts of a good Business Plan are:
1. Executive Summary
2. Business Concept
3. Market Analysis
4. Management Team
5. Marketing Plan
6. Financial Plan
7. Operations and Management Plan
Seven Common Parts of a
Good Business Plan
9

 The Executive Summary of a Business Plan is a 3-5 page introduction to
your Business Plan.
 The Executive Summary is critical, because many individuals (including
venture capitalists) only read the summary.
 The Executive Summary section includes:
– A first paragraph that introduces your business.
• Your business name and location.
• A brief explanation of customer needs and your products or services.
• The ways that the product or service meets or exceeds the customer needs.
• An introduction of the team that will execute the Business Plan.
– Subsequent paragraphs that provide key details about your business, including
projected sales and profits, unit sales, profitability, and keys to success.
– Visuals that help the reader see important information, including highlight
charts, market share projections, and customer demand charts.
Part 1: Executive Summary
10

 The business concept shows evidence that a product or service is viable
and capable of fulfilling an organization's particular needs.
 The Business Concept section:
– Articulates the vision of the company, how you plan to meet the unique needs
of your customer, and how you plan to make money doing that.
– Discusses feasibility studies that you have conducted for your products.
– Discusses diagnostics sessions you had with prospective customers for your
services.
– Captures and highlights the value proposition in your product or service
offerings.
Part 2: Business Concept
11

 A Market Analysis defines the target market so that you can position your
business to get its share of sales.
 A Market Analysis section:
– Defines your market.
– Segments your customers.
– Projects your market share.
– Positions your products and services.
– Discusses pricing and promotions.
– Identifies communication, sales, and distribution channels.
Part 3: Market Analysis
12

The Management Team section outlines:
– Organizational Structure: Highlights the hierarchy and outlines responsibilities
and decision-making powers.
– Management Team: Highlights the track record of the company’s managers.
You may also offer details about key employees including qualifications,
experiences, or outstanding skills, which could add a competitive edge to the
image of the business.
– Working Structure: Highlights how your management team will operate within
your defined organizational structure.
– Expertise: Highlights the business expertise of your management and senior
team. You may also include special knowledge of budget control, personnel
management, public relations, and strategic planning.
– Skills Gap: Highlights plans to improve your company’s overall skills or
expertise. In this section, you should discuss opportunities and plans to acquire
new information and knowledge that will add value.
– Personnel Plan: Highlights current and future staffing requirements and
related costs.
Part 4: Management Team
13

 The Marketing Plan section details what you propose to accomplish,
and is critical in obtaining funding to pursue new initiatives.
 The Marketing Plan section:
– Explains (from an internal perspective) the impacts and results of past
marketing decisions.
– Explains the external market in which the business is competing.
– Sets goals to direct future marketing efforts.
– Sets clear, realistic, and measurable targets.
– Includes deadlines for meeting those targets.
– Provides a budget for all marketing activities.
– Specifies accountability and measures for all activities.
Part 5: Marketing Plan
14

 The Financial Plan translates your company's goals into specific financial
targets.
 The Financial Plan section:
– Clearly defines what a successful outcome entails. The plan isn't merely a
prediction; it implies a commitment to making the targeted results happen and
establishes milestones for gauging progress.
– Provides you with a vital feedback-and-control tool. Variances from
projections provide early warnings of problems. When variances occur, the
plan can provide a framework for determining the financial impact and the
effects of various corrective actions.
– Anticipate problems. If rapid growth creates a cash shortage due to
investment in receivables and inventory, the forecast should show this. If next
year's projections depend on certain milestones this year, the assumptions
should spell this out.
Part 6: Financial Plan (Slide 1 of 2)
15

 The Financial Plan is the most essential part of your Business Plan. It
shows investors the timeframes you have scheduled to make profits.
 Some elements of the Financial Plan include:
– Important Assumptions
– Key Financial Indicators
– Break-even Analysis
– Projected Profit and Loss
– Projected Cash Flow
– Projected Balance Sheet
– Business Ratios
– Long-term Plan
Part 6: Financial Plan (Slide 2 of 2)
16

 Short-term Forecast: Projects either the current year or a rolling 12-
month period by month. This type of forecast should be updated at least
monthly and become the main planning and monitoring vehicle.
 Budget: Translates goals into detailed actions and interim targets. A
budget should provide details, such as specific staffing plans and line-item
expenditures.
– The size of a company may determine whether the same model used to
prepare the 12-month forecast can be appropriate for budgeting.
– In any case, unlike the 12-month forecast, a budget should generally be frozen
at the time they are approved.
Different Financial Planning
Options (Slide 1 of 2)
17

 Strategic Forecast: Incorporates the strategic goals of the company into
the projections. For startup companies, the initial Business Plan should
include a month-by-month projection for the first year, followed by annual
projections for a minimum of three years.
 Cash Forecast: Breaks down the budget and 12-month forecast into more
detail. The focus of these forecasts is on cash flow, rather than accounting
profit, and periods may be as short as a week in order to capture
fluctuations.
Different Financial Planning
Options (Slide 2 of 2)
18

 The Operations and Management section outlines how your company will
operate.
 The Operations and Management section includes:
– Organizational structure of the company. Provides a basis for projected
operating expenses and financial statements. Because these statements are
heavily scrutinized by investors, the organizational structure has to be well-
defined and realistic within the parameters of the business.
– Expense and capital requirements to support the organizational structure.
Provides a basis to identify personnel expenses, overhead expenses, and costs
of products/services sold. These expenses/costs can then be matched with
capital requirements.
Part 7: Operations and
Management
19

 Business Plans are critical for the success of a company.
 Different businesses will require different types of Business Plans.
 All Business Plans have some essential sections that explain the core
aspects of the company.
 In order to help your company have a better chance of gaining interest
and investors, a Business Plan should include seven essential sections:
1. Executive Summary
2. Business Concept
3. Market Analysis
4. Management Team
5. Marketing Plan
6. Financial Plan
7. Operations and Management Plan
Key Takeaways From This
Module
20

 Small Business Administration, Business Planning, How To Prepare a
Business Plan
 Gary Cadenhead, No Longer Moot
 Shirleen Glasin, ProSidian Consulting, Building a Business Plan
 Entrepreneur.com, Small Business Encyclopedia, Business Plans
 AllBusiness, A D&B Company, 10 Reasons Why You Need a Strong Business
Plan
 Business Owners Toolkit, Total Know-How for Small Businesses
Sources and Citations
21

Concepts of a Business by Harlan Harley Kirwan

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