Your Road Map For Success: Business Plan Writing Workshop

Your Facilitator

• Alexandra Kulas• Small Business Advisor at

AWE• Communications expert

with Start-up Canada and Enactus

• Bachelor of Commerce in Entrepreneurial Management

What does AWE do?• Start-Up Training• Performance Learning Series- Build Your Business• Excelerator Program• Lending• Market ExpansionMarket Expansion Training, Supplier Diversity Network, Trade Missions, Buy/Sell Forums

• ConferencesAnnual Leadership Series

• Programs for Aboriginal Women

Objectives for the workshop• Describe your business or concept• Explain why the business plan is important• Identify the main sections of a business plan• List sources for market research information• Create a customer profile• Determine method for sales forecast

Group Activity

Group One• Entrepreneur• Cash Flow• Target Market • Sole Proprietorship

Group Two• Competitor • Profit• Contingency Plan• Elevator Pitch

Let’s Get Started!

What is a Business Plan?• A living document that outlines the

strategy behind your business.• It explains how you will start and operate

your business• 30-45 page document on average

Why Do you need a Business Plan?

Fact: Most lenders won’t consider financing a firm that does not have a business plan

Internal ReasonForces the founding team to work together to hammer out

the details of a business venture

External ReasonCommunicates the merits of a new venture to outsiders, such

as investors or bankers

What Does a Business Plan Include?

• Cover Page• Table of Contents• Executive Summary• Business Concept• Marketing Research*

• Marketing Plan• Operations Plan• Financial Plan*• Risk Analysis• Appendices

Red Flags in Business Plans• Founders with none of their own money at

risk• Defining the market size too broadly• Overly aggressive financials• Hiding or avoiding weaknesses• Sloppiness in any area• Too long or too short of a plan

Market ResearchThe Spine of the Business

Plan

Market Research• Uncovering your best customer• Provides background to determine how you

will market and operate your company• Highlights how the industry works, it’s

history, and it’s projected future

Market Research• Is about asking questions and finding

information about:

The Industry/Market

Competitors

Customers

What should I consider when I start?

• Think like a detective• Identify the key questions you want answers

to• Constantly evaluate the information you

have gathered, what are it’s implications to your business?

Answering the "So What Question"

• Look for information that provides evidence or rationale to support your claim

• Seek out specific information: be aware of making leaps in logic when making deduction from available information

• Example of a leap in logic: “The economy is doing well therefore my business will do well.”

What business are you in?• What industry are you in?• Where is the industry going?

Industry Trends and Characteristics

• What is your NAICS code?

Industry Trends and Characteristics

Involves:•PEST Analysis•Porter’s Five Forces•SWOT•Size of an industry

- Sales - Numbers

What industry are you in?Identify the industry your company is in…Develop a profile of the industry to answer questions such as: •How does the industry work? •How do existing companies reach customers? •Who are the competitors? •Is the industry fragmented?

What industry are you in?• Tip: Be cautious about using market

research to prove the WHY the business works, use market research to show under WHAT condition the business works

Where is the industry going?• Briefly outline the history of the industry• How could past trends impact your

predictions and what does this mean for your business?

Market Data• Is your business structured as a business to

business or a business to consumer?

What is your local market?Define the immediate market you are targeting.•What is the geographic scope? It’s important to define regardless of delivery•This will help create focus for marketing and sales to contribute to business successDetermine how many customers are in the local market •Think of the “lowest hanging fruit”

Who are your key competitors?Identify your 4-5 closest competitors.Conduct a SWOT analysis for each:•Strengths•Weaknesses•Opportunities •Threats

Market Research• Who will buy?

Demographics

Lifestyle/Psychographics

Buying Behavior

Scope

http://www.environicsanalytics.ca/prizm-c2-cluster-lookup

Marketing PlanHow You Reach Your

Customer and Make the Sale!

Marketing Plan• Sales and Marketing= Finding Customers• Determine the best strategy to reach your

customers• Outline the tactical details to implement

each

What is Marketing?• Anything that influences the buying decision

of the customer• Starts with the initial presentation of you

(whether it be in person, over the phone, or online)

• Good marketing is built on small action oriented steps that you repeat again and again to create an impact over time

How to form a strategy based on marketing research

• Articulate the key message of your company• Identify the most effective ways to reach

your best customer- utilize your research to understand their needs, potential spending, and what they value

• How does this reflect or incorporate your key message?

Marketing Strategy• Identify 3-5 specific marketing activities

you’ll employ to find your best customers• Don’t be overly ambitious. Be realistic • Provide details on each activity

How do you determine price?• Know your competition• Know your market• Know your worth• Be consistent

Know your Competition• Outline what competitors are charging for

similar or like products/services• How does your product/service compare?• Where does your price position in the

market?

Know your Market• Identify what price the market will bear• How does your product or service compare?• Where does your price position you in the

market?

Know your Worth • Don’t be afraid to charge for your products

or services!• It’s easier to decrease your price once you’re

in the market than it is to increase it• It’s very common for entrepreneurs to

undervalue their offerings

Be Consistent• Review your positioning statement and your

compelling value • Does your pricing rationale align?

What is YOUR Marketing Strategy?

• Define the overall direction of your marketing efforts

• Establish the most effective methods to reach your ideal customer (target market)

• What is your primary marketing activity?• What is your secondary marketing activity?• What is your supporting marketing activity?

Smart Marketing for Start-Ups• Build on your three key marketing activities• Activities and Tools to consider

Build on your 3 Key Marketing Activities

• Outline the implementation for each activity. Think about:

• How will you do this?• Where will you do this?• What support materials are needed?• What is the follow-up system?• When will you do this and how often?• What are the costs?

Activities to Consider• Networking• Direct selling• Social Media• Advertising- Newspaper, Radio, Magazine• Publicity• Grand Opening• Trade Shows• Website

Marketing Support Tools• Presentation• Website• Print Materials• Business Cards• Email sales letters• Samples• Testimonials

How much of my revenue do I spend on marketing?

How do you define smart marketing objectives?

• Define your top 3 marketing objectives for the next year

• Include one that is your yearly sales target• Calculate the number of sales you’ll need

per year to achieve that target• Set a goal for the number of clients you

want to gain for the year

Customer Profiling for B2CImportantInformation What do you know? How will this inform your

decision making?GenderAge(child, teen, adult, senior)

Occupation type(white collar, blue collar, sales,service, student, retired)

Education levelHomeownerHobbies and interests

When do they buy

Market area(urban, rural, national, international)

Size of marketPopulation

For your small business…

• Explain the target market and why you chose that target market

• Identify 1 key message for the business• Identify 1-3 tactics of getting the

message out

5-10 MINUTE BREAK

Financial Projections• Source and Use of Funds Statement• Income Statement• Balance Sheet• Cash Flow Statement• Break-Even Analysis • Ratio Analysis

Cash Flow Statement • The cash flow statements provide an

indication of whether a firm will be able to maintain a sufficient cash balance to get up and running successfully.

• Should prepare your cash flow on a monthly basis, at least for the first two years of business.

What is Included in a 12-Month Cash Flow?

• Projected Sales/Sales Forecast

• Expenses

• Cost of Sales

• Startup

• Ongoing Operating

• Net Cash Balance (net income/loss)

Cash Flow Surprises That Could Hurt Your Start-Up

1. Not documenting cash-flow projections2. Seasonal Sales Fluctuations3. Unanticipated expenses and emergencies4. New businesses don’t get normal terms5. Sales volumes don’t always keep up with marketing

expenses

Determining Costs1. Start Up and/or Expansion Costs• Licenses/permits• Beginning inventory• Leasehold improvements• Marketing and promotions• Insurance• Website • Rent Damage Deposits etc.

Determining Costs2. Ongoing Operating Costs•Rent•Salaries/Commissions •Utilities•Inventory •Supplies•Loan Payment •Taxes

Important Tip Calculate your expenses first and then determine what will be required in monthly sales in order to cover those expenses.

Remember: Factor in a small contingency amount to take care of unforeseen costs.

Forecasting Sales Bottom Up Method

1.Number of people passing the location per day. (Observe the people passing by to obtain this info. Try different times of the day to determine an average.)

500

2. Number of people who enter the business 250

3. Estimated percentage of those people entering the business who make a purchase 50%

4. Multiply Line 2 by Line 3 to find:Potential Buyers Per Day 125

5. Average purchase per visit. (Ask in a customer survey or find out from competitors.) $40

6. Multiply Line 4 by Line 5 to determine:Average Daily Sales $5,000

7. How many days per year will you be open? 300

8. Multiply Line 6 by Line 7 to determine:Projected Total Annual Sales $1,500,000

Forecasting Sales Top Down Method

1. Estimate the number of people or families in your market area. 50,000

2. Identify the percentage of market survey respondents who indicated they do or would use a business such as yours. 40%

3. Multiply Line 1 by Line 2 to find:Estimated Market 20,000

4. Number of times per year the respondents say they would use this type of business 2

5. Multiply Line 3 by Line 4 to find the:Number of Potential Sales per Year 40,000

6. Amount per average sale. (Ask in a survey or find out from competitors.) $25.00

7. Multiply Line 5 by Line 6 to find:Potential Total Market (in dollars) $1,000,000

8. The number of existing competitors plus one (you). 4

9. Divide Line 7 by Line 8 to find:One Full Market Share 250,000

10. What percentage of One Full Market Share do you expect to gain in your first year? 50%

11. Multiply Line 9 by Line 10 to find:Projected Annual Sales $125,000

How Can You Finance Your Business?

• Personal Savings• Love Money• Angel Investors• Venture Capital• IPO• Banks & Credit

Unions

• Credit cards• Lease Financing• Supplier Financing• Government

Supported Business Financing

What Do Lenders Look At?• Credit history• Viability of the business plan• Likelihood of success• Management capacity• Experience of the owner/manager• Owner’s investment

Questions?

Thank you for joining us today!

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