an Preparing Effective Business Plan
Bruce R. Barringer ISBN: 0132318326
Why write a plan?
Explains every aspect of a new business Experts recommend it Internally as a road map of strategies Externally informs investors and others to the business opportunity Part of a larger process Less than 40% of entrepreneurs do Shows others your preparedness
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Guidelines for a Business Plan
Follow basic structure
2535 pages Avoid boilerplate templates
Make it easy for the reader to find critical information
Convey a sense of excitement
Don't make it looked canned
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Guidelines for a Business Plan
(cont.)
Write it yourself It should look neat, but not too expensive Do not overuse design elements
Use a logo It must convey a clear and concise story
Italics, bold, clipart, different fonts and colors
Develop an elevator speech (45 seconds to 2 minutes)
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4 Steps to an Elevator Speech
1. 2. 3. 4.
Describe the opportunity or problem that needs to be solved (20 seconds) Describe how your product solves this problem (20 seconds) Describe your qualification (10 seconds) Describe your market (10 seconds)
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Guidelines for a Business Plan
(cont.)
Avoid red flags
Founders have no money at risk Poor citations Broad market definitions Overly aggressive financials Hiding or avoiding weaknesses Sloppiness Too long
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4 Types of Businesses
Survival
Lifestyle
Handyman, Lawn service, parttime childcare Pizzeria, personal trainer, clothing boutique Multiunit Pizzeria, Web retailer, Multiunit franchise Software, medical equipment
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Managed Growth
Aggressive Growth
Naming a Business
An integral part of the branding process
It should complement the type of business
Customerdriven Big and Tall Guys Productdriven Whole Foods, Jiffy Print Industrydriven Home Depot, GM Personalitydriven Ben & Jerry's, Dell
Brand a unique set of attributes that allow consumers to separate one company from another
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Naming a Business
Legal issues
Must be unique in each state Can't be confusingly similar to another
Contact Secretary of State Fedex and Fedextra www.uspto.gov
Obtain trademark with name and logo
Obtain URL
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Elements of a Business Plan
Cover Sheet TOC Executive Summary Company Description Industry Analysis Market Analysis Marketing Plan Management Plan Operations Plan Financial Plan
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Introductory Material
Cover page
Name of company Street address Email address Phone numbers Date Website Logo
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Introductory Material
Table of Contents
Main sections Sub sections Appendices Corresponding page numbers Tabs are optional Always double check page numbers to ensure they correspond
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Introductory Material
Executive Summary
Must interest the reader 2 singlespaced pages Section by section overview of the entire plan Completed last
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Content of Executive Summary
Each section should be crisp and concise Section headings bolded Tone should convey excitement Factual, showing research was conducted Avoid technical jargon Connect on an emotional level
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Company Description
Provide an overview of the business and the reason it is starting Demographic info
Names of the founders Address of headquarters Contact information
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Company Description
5 Elements
Company history Mission statement Products & services Current status Legal status & ownership
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Company History
Be brief Where did the idea come from? Tell how you will meet a compelling need
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Mission Statement
Explains why a company exists Describes your reason for being Include a tagline in this section
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Products & Services
Explain your product or service How is your product or service unique? How is it positioned in the marketplace? Who are your customers? How did your product idea come about? Identify any IP
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Current Status
How far along are you in your development? Milestones completed? Milestones to be completed? Current management team Early customer reaction to your product or service Your financial status
Debt or equity commitments
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Legal Status & Ownership
Who owns the company? What agreements have been setup? What is your current form of ownership?
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Industry Analysis
A group of firms producing similar products or services airplanes, music, restaurants Focus is on the industry Precedes the analysis of the target market and marketing strategy
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Industry Analysis Contents
Industry definition
Brief ( just a few sentences) SIC and NAICS codes
www.census.gov/epcd/www/naicstab.htm
Classify your business as narrow as possible If operating in multiple industries, analyze all (e.g., software & healthcare)
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Industry Analysis Contents
Size
Displayed in dollars Create table to show change over 3 5 years Provide number of establishments
2002 Sales (in billions) # Employees $16.1 48,321 464,555 2003 $17.3 49,578 486,98 7 2004 $18.4 50,453 507,689 2005 $19.7 51,235 516,758 2006 $21.0 51,823 531,457
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Industry Analysis Contents
Size
Break down industry into smaller segments
Segments of Women's Clothing Tops Pants Dresses % of Sales 32.0% 24.0% 18.0%
Report contribution that the narrow industry contributes to broad industry (e.g., Analysis 32%)
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Industry Contents
Growth Rate and Sales Projections
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Industry Analysis Contents
Industry Characteristics
Industry Structure
Concentrated Fragmented
Industry Ratios Key Success Factors
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Industry Analysis Contents
Industry Trends
Trade journals, industry magazines, industry reports from research organizations Environmental Trends
Business Trends
Economic, Social, Technological, Regulatory, Political Profit margins, Cost of goods
Long Term Prospects
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Market Analysis
Focus on describing a firm's target market Why is it important?
Helps define the nature of your business Defines potential of the market
Size of the market Sales projections
Well thought out market Understands the customers and competitors Can generate sufficient sales
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Market Analysis
Market Segmentation
Who are your customers and how will you appeal to them? Dividing a market into subsets that have similar needs
Geographic (city, state, country) Demographic (age, gender, family size, income) Psychographic (lifestyle, values) Combination of more than one
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Market Analysis
Determine if the segmentation is successful
Segment by consulting with:
Homogeneity of needs within segment Heterogeneity of needs between segments Is it possible to determine size within segment? Is the segment large enough to make a profit? Trade associations Industry journals Suppliers, distributors, customers
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Market Analysis
Estimating size of target market selected
Your plan will be judged by:
Estimate sales
Reasonableness of estimate Degree to which estimate is anchored by facts Extent to which a good faith effort expended
How much of the target market can the business gain during the following years
32
Market Analysis
Buyer Behavior
Deal directly with the behavior of the consumers in the target market Explain why your customers will purchase your product or service Describe how your product or service differs from the competitors
33
Market Analysis
Competitor Analysis
Direct competitors offer a product very similar to yours Indirect competitors offer close substitutes that meet the same need Future competitors competitors that could become direct or indirect competitors
34
Detailed analysis of the firm's competition Never say you don't have any competitors
Market Analysis
Competitor Analysis
Include Competitor Analysis Grid
End this section with your conclusions to help the reader interpret the information
Comparison of your firm to others Shows how you stack up against others in key areas Illustrates your source of competitive advantage
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Market Analysis
Estimate of Annual Sales
The final section of the market analysis This information will also be presented in the financial plans The estimate must be realistic and attainable
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Market Analysis
Estimate of Annual Sales
Four methods to use
1.
2.
3. 4.
Ask the trade association. Use "rules of thumb" if necessary: Sales per square foot; Average sales per employee. Find a comparable store. Use a store out of your trade area. Use common sense to adjust your num...