your business plan. digital safari institute greenbizz project purpose of a business plan three...

Your Business PlanYour Business Plan

Digital Safari InstituteGreenBizz Project

Purpose of a Business PlanPurpose of a Business Plan

Three basic purposes: Three basic purposes: – CommunicationCommunication– ManagementManagement– PlanningPlanning

"The business plan is a necessity. If the person who wants "The business plan is a necessity. If the person who wants to start a small business can't put a business plan together, to start a small business can't put a business plan together, he or she is in trouble.“he or she is in trouble.“

Robert Krummer, Jr., Chairman of First Business Bank in Los Angeles Robert Krummer, Jr., Chairman of First Business Bank in Los Angeles


A Communication ToolA Communication Tool

Used for: Used for: – Securing outside funding (banks, investors) Securing outside funding (banks, investors) – Seeking credit (vendors, suppliers)Seeking credit (vendors, suppliers)– Retaining top employeesRetaining top employees– Attracting strategic business partnersAttracting strategic business partners

Demonstrates Profit PotentialDemonstrates Profit Potential– The development of a comprehensive business plan The development of a comprehensive business plan

shows whether or not a business has the potential shows whether or not a business has the potential to make a profit. to make a profit.

Documents SolutionsDocuments Solutions– It requires a realistic look at almost every phase of business It requires a realistic look at almost every phase of business

and allows you to show that you have worked out all the problems and allows you to show that you have worked out all the problems and decided on potential alternatives before actually launching and decided on potential alternatives before actually launching your business.your business.


A Management ToolA Management Tool

The business plan helps you track, The business plan helps you track, monitor and evaluate your progress. monitor and evaluate your progress.

By using your business plan to establish By using your business plan to establish timelines and milestones, you can gauge your timelines and milestones, you can gauge your progress and compare your projections to actual progress and compare your projections to actual accomplishments.accomplishments.

The business plan is a living document that The business plan is a living document that you will modify as you gain knowledge and you will modify as you gain knowledge and experience. experience.


A Planning ToolA Planning Tool

The business plan guides you through the The business plan guides you through the various phases of your business. various phases of your business.

A thoughtful plan will help identify roadblocks A thoughtful plan will help identify roadblocks and obstacles so that you can avoid them and and obstacles so that you can avoid them and establish alternatives.establish alternatives.


Contents of a Business PlanContents of a Business Plan

CoverCover Table of contents Table of contents Executive summaryExecutive summary I. The BusinessI. The Business II. The Market and Marketing PlanII. The Market and Marketing Plan III. Operating PlanIII. Operating Plan IV. The FinancialsIV. The Financials V. Supplemental DocumentsV. Supplemental Documents


Executive SummaryExecutive Summary

Clear, concise summary of the Clear, concise summary of the key components of the business plankey components of the business plan

No more than two pages!!! No more than two pages!!! Needs a “hook” at the beginningNeeds a “hook” at the beginning State the business opportunity clearlyState the business opportunity clearly Make the ask (if appropriate)Make the ask (if appropriate) Usually drafted LASTUsually drafted LAST Often revised for different usesOften revised for different uses


I. The Business SectionI. The Business Section

Give a detailed description of the business, Give a detailed description of the business, its history, its mission and goals its history, its mission and goals

Discuss the ownership of the business and Discuss the ownership of the business and the legal structure the legal structure

List the skills and experience you bring List the skills and experience you bring to the business to the business

Describe your products and/or servicesDescribe your products and/or services– Needs/problems that are solvedNeeds/problems that are solved– Features and functionsFeatures and functions

Describe key success factorsDescribe key success factors


II. The Market/Marketing SectionII. The Market/Marketing Section

Market AnalysisMarket Analysis– Identify the customer demand for your Identify the customer demand for your

product/serviceproduct/service– Identify your market, its size and locationsIdentify your market, its size and locations

Competitive AnalysisCompetitive Analysis– Identify potential competitors and how they are or Identify potential competitors and how they are or

might be competing with your businessmight be competing with your business– Discuss the advantages you and your business Discuss the advantages you and your business

have over your competitorshave over your competitors


II. The Market/Marketing SectionII. The Market/Marketing Section

Marketing Plan (4 P’s)Marketing Plan (4 P’s)– Describe your Describe your Product’s or service’sProduct’s or service’s “unique, “unique,

sustainable advantage” in your marketsustainable advantage” in your market– Explain the Explain the PricingPricing strategy strategy– Explain how and where your Product/Service Explain how and where your Product/Service

will be sold will be sold (Place)(Place)– Explain how your product/service Explain how your product/service

will be advertised and marketed will be advertised and marketed (Promotion)(Promotion)


III. The Operating PlanIII. The Operating Plan

ProductionProduction - Describe how your products will be - Describe how your products will be made, purchased or acquiredmade, purchased or acquired

DistributionDistribution - Describe how your product/service - Describe how your product/service will be distributed and/or deliveredwill be distributed and/or delivered

ManagementManagement - Explain how the business will be - Explain how the business will be managed on a day to day basismanaged on a day to day basis

PersonnelPersonnel - Discuss hiring and personnel - Discuss hiring and personnel proceduresprocedures

Operating DetailsOperating Details – Discuss insurance, – Discuss insurance, compliance, environmental and other issues compliance, environmental and other issues pertinent to your businesspertinent to your business


IV. The FinancialsIV. The Financials Financial Write-upFinancial Write-up

– Discuss who will maintain your accounting records Discuss who will maintain your accounting records and how they will be kept. and how they will be kept.

– Provide "what if" statements that address alternativeProvide "what if" statements that address alternative approaches to any problem that may develop. approaches to any problem that may develop.

– Explain your method(s) of compensation. Explain your method(s) of compensation.

Financial Documents Financial Documents – Start-up sources and uses of funds Start-up sources and uses of funds – Operating budget Operating budget – Balance sheet Balance sheet – Breakeven analysisBreakeven analysis– Pro-forma income and cash flow projectionsPro-forma income and cash flow projections

First year: details by month First year: details by month Second and third: details by quarterSecond and third: details by quarter Fourth and fifth: annual summaries Fourth and fifth: annual summaries Assumptions upon which projections are basedAssumptions upon which projections are based


V. Supporting DocumentsV. Supporting Documents

Tax returns of principals for last three years Tax returns of principals for last three years Personal financial statement Personal financial statement Copy of proposed lease Copy of proposed lease

or purchase agreement for building space or purchase agreement for building space Copy of licenses and other legal documents Copy of licenses and other legal documents Copy of resumes of all principals Copy of resumes of all principals Copies of letters of intent from suppliers, etc. Copies of letters of intent from suppliers, etc. For franchised businesses, a copy of franchise For franchised businesses, a copy of franchise

contract and all supporting documents provided contract and all supporting documents provided by the franchisorby the franchisor

Go For It!Go For It!

Digital Safari InstituteSmall Business Management

The Financial Six C'SThe Financial Six C'S CHARACTER CHARACTER

– The degree to which a borrower feels a moral obligation to pay his/her debts, measured by the The degree to which a borrower feels a moral obligation to pay his/her debts, measured by the credit and payment history. credit and payment history.

CAPACITY TO PAY CAPACITY TO PAY – A subjective determination made by a lender based upon an analysis of the borrower's A subjective determination made by a lender based upon an analysis of the borrower's

financial statements and other information. financial statements and other information.

CAPITAL CAPITAL – The amount of capital in a business is equal to the total of capital from debt and equity. The amount of capital in a business is equal to the total of capital from debt and equity.

Lenders prefer low debt-to-asset and debt-to-worth ratios and high current ratios. These Lenders prefer low debt-to-asset and debt-to-worth ratios and high current ratios. These indicate financial stability. indicate financial stability.

COLLATERAL COLLATERAL – An asset owned by the borrower, but promised to a lender against non-payment of the loan. An asset owned by the borrower, but promised to a lender against non-payment of the loan.

The amount of collateral varies from lender to lender. The closer the collateral value is to the The amount of collateral varies from lender to lender. The closer the collateral value is to the loan amount, the more comfortable the lender will be that the loan will be repaid. loan amount, the more comfortable the lender will be that the loan will be repaid.

CONDITIONS CONDITIONS – General economic, geographic and industryGeneral economic, geographic and industry

CONFIDENCE CONFIDENCE – A successful borrower instills confidence in the lender by addressing all the lender's A successful borrower instills confidence in the lender by addressing all the lender's

concerns on the other Five C's. Their loan application sends the message that the company is concerns on the other Five C's. Their loan application sends the message that the company is professional, with an honest reputation, a good credit history, reasonable financial professional, with an honest reputation, a good credit history, reasonable financial statements, good capitalization and adequate collateral. statements, good capitalization and adequate collateral.