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Crafting a winning business plan
The document provides guidance on crafting an effective business plan. It explains that a well-developed plan can earn outsiders' respect and support for necessary financial matters. The document outlines key elements that should be included in a business plan such as an executive summary, company history, products/services description, marketing strategy, management team, and financial forecasts. It emphasizes that an entrepreneur's vision, competitive strategies, and ability to prove a venture's value are crucial for attracting investors and lenders.
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Introduction to the importance of a winning business plan and a quote emphasizing its value.
Goals for the presentation include understanding the need, elements, presentation tips, and credit considerations in business plans.
Overview of what a business plan entails, its audiences, core functions, and necessary tests for viability.
Discusses why a business plan is crucial and outlines key elements like executive summaries and mission statements.
Detailing elements like marketing strategy, competitor analysis, and the importance of features vs. benefits.
Outlines necessary content for the executive summary, including market overview and financial requests.
Explains the company's mission, history for existing businesses, and industry profiling information.
Details on business strategies using SWOT analysis and descriptions of products/services offered.
Covers target market, advertising strategies, and distribution plans as part of comprehensive marketing strategy.
Focus on location, competitor analysis, management description, and plan of operation for effective execution.
Details on financial documentation including forecasts and loan proposal essentials.
Discusses additional supporting documents needed and guidelines for preparing a business plan.
Practical tips for making an appealing and precise business plan, along with tips for effective presentation.
Details on the 5 Cs of credit criteria that lenders use to evaluate business loans.
A list of common reasons why business plans fail, highlighting the importance of realistic and measurable goals.
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Crafting a winning business plan
- 1. Crafting a Craftinga Winning Winning Business Plan Business Plan 1
- 2. The more concreteand complete the plan, the more likely it is to earn the respect of outsiders and their support in necessary financial matters. -----Jesse Werner 2
- 3. Learning Objectives Explain whyevery entrepreneur should create a business plan and list the benefits of such a plan Describe the elements of a solid business plan Understand the keys to making an effective business plan presentation Explain the “five Cs of credit” and why they are important to potential lenders and investors reading business plan 3
- 4. Planning The Business Operation Business Plan- Document Describes Internal/External Elements/Strategies For New Venture Plan (Road Map) Short-Term Long-Term Author = Entrepreneur Internet - Resource 4
- 5. Business Plan Audiences 1) Employees 2) Investors/Venture Capitalists 3) Lenders/Suppliers 4) Customers 5) Advisors/Consultants 5
- 6. The Business Plan Businessplan – a written summary of: an entrepreneur’s proposed business venture its operational and financial details its marketing opportunities and strategy its managers’ skills and abilities 6
- 7. The Business Plan: Three Essential Functions 1. Guiding the company by charting its future course and defining its strategy for following it. 2. Attracting lenders and investors who will provide needed capital. 3. Demonstrating that the entrepreneur understands the business venture and what will make it succeed. 7
- 8. A Plan MustPass Three Tests The Reality Test - proving that: a market really does exist for your product or service. you can actually build or provide it for the cost estimates in the plan. The Competitive Test - evaluating: a company’s position relative to its competitor. management’s ability to create a company that will gain an edge over its rivals. The Value Test – proving that: a venture offers investors or lenders an attractive rate of return or a high probability of repayment. 8
- 9. Why Take theTime to Build a Business Plan? Although building a plan does not guarantee success, it does increase your chances of succeeding in business. A plan is like a road map that serves as a guide on a journey through unfamiliar, harsh, and dangerous territory. Don’t attempt the trip without a map! 9
- 10. Key Elements ofa Business Plan Executive Summary Mission Statement Company History Business and Industry Profile 10
- 11. The relationship amongmission, goals, and objectives. Mission Goals Objectives
- 12. Key Elements ofa Business Plan Executive Summary Mission Statement Company History Business and Industry Profile Business Strategy Description of Products/Services 12
- 13. Features vs. Benefits Feature– a descriptive fact about a product or service (“an ergonomically designed, more comfortable handle”). Benefit – what a customer gains from the product or service feature. 13
- 14. Key Elements ofa Business Plan (continued) Marketing Strategy Competitor Analysis Description of Management Team Plan of Operation Forecasted Financial Statements Loan or Investment Proposal 14
- 15. I Executive Summary A.Company name, address, and phone number B. Name(s), addresses, and phone number(s) of all key people C. Brief description of the business, its products and services, and the customer problems they solve D. Brief overview of the market for your products and services 15
- 16. Executive Summary (Contd.) E.Brief overview of the strategies that will make your firm a success F. Brief description of the managerial and technical experience of key people G. Brief statement of the financial request and how the money will be used H. Charts or tables showing highlights of financial forecasts 16
- 17. II Vision andMission statement A. Entrepreneur's vision for the company B. "What business are we in?" C. Values and principles on which the business stands D. What makes the business unique? What is the source of its competitive advantage? 17
- 18. III Company History(for existing businesses only) A. Company founding B. Financial and operational highlights C. Significant achievements 18
- 19. IV Business andIndustry Profile A. Stage of growth (start-up, growth, maturity) B. Company goals and objectives 1. Operational 2. Financial 3. Other C. Industry analysis 1. Industry background and overview 2. Significant trends 3. Growth rate 4. Key success factors in the industry 5. Outlook for the future 19
- 20. V Business strategy A.Desired image and position in market B. SWOT analysis 1. Strengths 2. Weaknesses 3. Opportunities 4. Threats C. Competitive strategy 1. Cost-leadership 2. Differentiation 3. Focus 20
- 21. VI Company Productsand Services A. Description 1. Product or service features 2. Customer benefits 3. Warranties and guarantees 4. Uniqueness B. Patent or trademark protection 21
- 22. Company Products andServices (Contd.) C. Description of production process (if applicable) 1. Raw materials 2. Costs 3. Key suppliers D. Future product or service offerings 22
- 23. VII Marketing Strategy A.Target market 1. Complete demographic profile 2. Other significant customer characteristics B. Customers' motivation to buy C. Market size and trends 1. How large is the market? 2. Is it growing or shrinking? How fast? D. Advertising and promotion 1. Media used-reader, viewer, listener profiles 2. Media costs 3. Frequency of usage 4. Plans for generating publicity 23
- 24. Marketing Strategy (Contd.) E.Pricing 1. Cost structure a. Fixed b. Variable 2. Desired image in market 3. Comparison against competitors' prices F. Distribution strategy 1. Channels of distribution used 2. Sales techniques and incentives 24
- 25. VIII Location andLayout A. Location 1. Demographic analysis of location vs. target customer profile 2. Traffic count 3. Lease/Rental rates 4. Labor needs and supply 5. Wage rates B. Layout 1. Size requirements 2. Ergonomic issues 3. Layout plan (suitable for an appendix) 25
- 26. IX Competitor Analysis A.Existing competitors 1. Who are they? Create a competitive profile matrix. 2. Strengths 3. Weaknesses B. Potential competitors: Companies that might enter the market 1. Who are they? 2. Impact on your business if they enter 26
- 27. X Description ofmanagement team A. Key managers and employees 1. Their backgrounds 2. Experience, skills, and know-how they bring to the company B. Resumes of key managers and employees (suitable for an appendix) 27
- 28. XI Plan ofOperation A. Form of ownership chosen and reasoning B. Company structure (organization chart) C. Decision making authority D. Compensation and benefits packages 28
- 29. XII Financial Forecasts(suitable for an appendix) A. Financial statements 1. Income statement 2. Balance sheet 3. Cash flow statement B. Break-even analysis C. Ratio analysis with comparison to industry standards (most applicable to existing businesses) 29
- 30. XIII Loan orInvestment Proposal A. Amount requested B. Purpose and uses of funds C. Repayment or "cash out" schedule (exit strategy) D. Timetable for implementing plan and launching the business 30
- 31. XIV Appendices-Supporting documentation, includingmarket research, financial statements, organization charts, resumes, and other items. 31
- 32. Guidelines for Preparing a Business Plan Remember: No one can create your plan for you. Potential lenders want to see financial projections, but they are more interested in the strategies for reaching those projections. Show how you plan to set your business apart from competitors; don't fall into the “me too” trap. Identify your target market, and offer evidence that customers for your product or service exist. 32
- 33. Tips on Preparing a Business Plan Make sure your plan has an attractive cover. (First impressions are crucial.) Rid your plan of all spelling and grammatical errors. Make your plan visually appealing. Include a table of contents to allow readers to navigate your plan easily. Make it interesting. 33
- 34. Tips on Preparing a Business Plan (continued) Your plan must prove that the business will make money (not necessarily immediately, but eventually). Use spreadsheets to generate financial forecasts. Always include cash flow projections. Keep your plan “crisp” – between 25 and 50 pages long. Tell the truth – always. 34
- 35. Presenting the Plan Demonstrateenthusiasm, but don’t be overemotional. Know your audience thoroughly. “Hook” investors quickly with an up-front explanation of the venture, its opportunities, and its benefits to them. Hit the highlights; focus on the details later. Keep your presentation simple – 2 or 3 major points. 35
- 36. Presenting the Plan (continued) Avoid overloading your audience with technological jargon. Use visual aids. Close by reinforcing the nature of the opportunity. Be prepared (with details) for potential investors’ questions. Follow up with every investor to whom you make your presentation. 36
- 37. Five Cs ofCredit: Criteria lenders and investors use to evaluate the creditworthiness of entrepreneurs seeking financing. 37
- 38. The “5 Cs”of Credit Capital Capacity Collateral Character Conditions 38
- 39. What lenders andinvestors look for in a Business Plan Capital: Lenders expect small businesses to have an equity base of investment by the owner(s) that will help support the venture during times of financial strain Capacity: A synonym for capacity is cash flow. The bank must be convinced of the firm’s ability to meet its financial obligations and to repay the bank loan 39
- 40. What lenders and…(Contd.) Collateral:It includes any assets that owner pledges to the bank as security for repayment of the loan Character: Before approving a loan to a small business, the banker must be satisfied with the owner’s character Conditions: The conditions (interest rates, the health of the nation’s economy, industry growth rates, etc.) surrounding a loan request which affect the owner’s chance of receiving funds 40
- 41. Reasons For PlanFailure 1. Unreasonable Goals 2. Goals Not Measurable 3. No Total Commitment 4. Lack Of Experience 5. No Understanding Of Threats Or Weaknesses 6. Customer Need Not Established 41