Developing a Business Plan in 6 Easy Steps March 24,

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Gervais Russell
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1 Developing a Business Plan in 6 Easy Steps March 24,

2 What we will discuss today Business Plan what & why 6-Step Business Plan Q&A

3 Why Don t Small Businesses do Business Plans?

4 The 6-Step Business Plan 1. Analyze your Market and your Business 2. Define your Competitive Advantage 3. Define 3-year Sales & Earnings goals ( ) 4. Create a 2015 Action Plan (top 5 priorities) 5. Create a 2015 Profit & Loss Statement (P&L) 6. Create a 2015 Cash Flow projection (monthly) and every month review your progress; adjust

5 The 6-Step Approach When is a 6-Step Plan Not Enough? Any business looking to raising money Narrative required! Still the 80% solution

6 What is a business plan? A statement of your business objectives and your plan for achieving them

7 What is a business plan? Set sales & earnings goals Describe how you ll achieve them What to be done By whom By when At what cost Develop monthly metrics to stay on track

8 Why do a business plan? Create a blueprint for growth Align the organization Increase the odds of success Raise money; get a loan Track your progress; adjust

9 No business plan survives first contact with customers. Steve Blank Tech Entrepreneur, Writer

10 The 6-Step Business Plan 1. Analyze your Market and your Business 2. Define your Marketing Positioning 3. Define 3-year Sales & Earnings goals ( ) Flex the 2015 Profit & Loss goals by month 4. Create a 2015 Action Plan (top 5 priorities) 5. Create a 2015 Profit & Loss Statement (P&L) 6. Create a 2015 Cash Flow projection (monthly) and every month review your progress; adjust

11 Market Analysis Know Your Market/Customer Market size, growth, segments Key purchase drivers Quality, cost, service Demographics Competitors Distribution channels Average Profit Margins Seasonality, regionality Key marketing drivers Data Sources Internet - Industry - Competitive Public company reports Government websites Trade associations/shows Trade publications Be a customer! Reference Library

12 Business Analysis Strengths, Weaknesses What s working, not working Customer Marketing Financials Operations Management

13 MARKET REALITIES AND COMPANY LESSONS LEARNED 1 MARKET/CUSTOMER TRENDS COMPETITIVE TRENDS STRENGTHS: OPPORTUNITIES: MY BUSINESS WHAT S WORKING WEAKNESSES: THREATS: MY BUSINESS WHAT S NOT WORKING

14 The 6-Step Business Plan 1. Analyze your Market and your Business 2. Define your Marketing Positioning 3. Define 3-year Sales & Earnings goals ( ) Flex the 2015 Profit & Loss goals by month 4. Create a 2015 Action Plan (top 5 priorities) 5. Create a 2015 Profit & Loss Statement (P&L) 6. Create a 2015 Cash Flow projection (monthly) and every month review your progress; adjust

15 What is your Marketing Positioning? Why should your ideal prospects buy from you rather than any of your competitors? Value Proposition Marketing Positioning Point of Difference Competitive Advantage Unique Selling Proposition (USP)

16 How do you define your positioning? Target Customers Competitive frame of reference Competitive Advantage

17 Demographics Geography Benefits Lifestyle Target Markets (Market Segmentation) Who do you serve? Industry/Distribution channels Retail, Wholesale, Consumer Direct Size: Small, Medium, Large companies Industry: healthcare, financial, technology

18 Niche/Competitive Advantage What makes your business different? - Quality - Price - Innovation - Service - Speed - Location Think Benefits!

19 How Are You Positioning Your Company? 2 Target Customers: Competitors: Competitive Advantage:

20 The 6-Step Business Plan 1. Analyze your Market and your Business 2. Define your Marketing Positioning 3. Define 3-year Sales & Earnings goals ( ) Flex the 2015 Profit & Loss goals by month 4. Create a 2015 Action Plan (top 5 priorities) 5. Create a 2015 Profit & Loss Statement (P&L) 6. Create a 2015 Cash Flow projection (monthly) and every month review your progress; adjust

21 What is a business plan? Set sales & earnings goals Describe how you ll achieve them What to be done By whom By when At what cost Develop monthly metrics to stay on track

22 My Company s Sales & Earnings Goals Company Name: 3-YEAR SALES & PROFIT PLAN Actual Plan Plan Plan Sales Revenue: Pre-tax Profit:

23 My Company s Sales & Earnings Goals Company Name: 3-YEAR SALES & PROFIT PLAN Actual Plan Plan Plan Sales Revenue: Pre-tax Profit:

24 My Company s 2015 Monthly Projection Company Name: 2015 MONTHLY SALES AND PROFIT PLAN 2014 TOTAL Actual JAN FEB MAR APR MAY JUNE JULY AUG SEPT OCT NOV DEC 2015 SALES REVENUE Plan $0 Actual $0 PRE-TAX PROFIT Plan $0 Actual $0

25 3-Year Sales & Earnings Goals and 2015 Flex 3 Company Name: 3-YEAR SALES & PROFIT PLAN Actual Plan Plan Plan Sales Revenue: Pre-tax Profit: 2015 MONTHLY SALES AND PROFIT PLAN 2014 TOTAL Actual JAN FEB MAR APR MAY JUNE JULY AUG SEPT OCT NOV DEC 2015 SALES REVENUE Plan $0 Actual $0 PRE-TAX PROFIT Plan $0 Actual $0

26 The 6-Step Business Plan 1. Analyze your Market and your Business 2. Define your Marketing Positioning 3. Define 3-year Sales & Earnings goals ( ) Flex the 2014 Profit & Loss goals by month 4. Create a 2015 Action Plan (top 5 priorities) 5. Create a 2015 Profit & Loss Statement (P&L) 6. Create a 2015 Cash Flow projection (monthly) and every month review your progress; adjust

27 What is a business plan? Set sales & earnings goals Describe how you ll achieve them What to be done By whom By when At what cost Develop monthly metrics to stay on track

28 Key Business Drivers of any Action Plan Marketing Operations Management Financials

29 Marketing The 5 P s Positioning target, competitors, advantage Product/Service Pricing Place distribution channels/geography Promotion

30 Operations Sales and intermediaries Production, Logistics, Inventory & Supplier Mgt. Quality Control & Customer Service Billing & Accounts Receivable Office Space; Retail Location Technology Management Net: Experience matters!

31 Management Organization Key skill gaps? Outsourced ( virtual ) talent Accounting Legal Insurance Banker SCORE mentor

32 Financials Cost/Margin management Product, Administrative, Benchmarking Cash management Inventory, Accounts Receivable, Capital, Seasonality Tax planning Monthly reporting

33 2015 Action Plan (required to achieve 2015 Sales & Earnings objectives) 4 Priority/Measure Who Due Date Cost

34 The 6-Step Business Plan 1. Analyze your Market and your Business 2. Define your Marketing Positioning 3. Define 3-year Sales & Earnings goals ( ) Flex the 2015 Profit & Loss goals by month 4. Create a 2015 Action Plan (top 5 priorities) 5. Create a 2015 Profit & Loss Statement (P&L) 6. Create a 2015 Cash Flow projection (monthly) and every month review your progress; adjust

35 P&L Statement shows revenues/expenses & profit/loss for a specific period of time PROFIT & LOSS STATEMENT (P&L) PRODUCT COMPANY SALES REVENUE $1,000,000 $ % Sales COST OF GOODS SOLD $600,000 60% GROSS PROFIT $400,000 40% OPERATING EXPENSES $300,000 30% Sales & Marketing Administrative OPERATING PROFIT (LOSS) $100,000 10% INTEREST, TAXES $30,000 30% NET INCOME $70,000 7%

36 Service Companies Do Not Have Cost of Goods Sold PROFIT & LOSS STATEMENT (P&L) SERVICE COMPANY SALES REVENUE $1,000,000 $ % Sales OPERATING EXPENSES $850,000 85% OPERATING PROFIT (LOSS) $150,000 15% INTEREST, TAXES $52,500 35% NET INCOME $97,500 10%

37 P&L Statement shows revenues/expenses & profit/loss for a specific period of time PRODUCT COMPANY, LLC PROFIT & LOSS (P&L) PLAN 2014 % 2015 Plan % $ Net Sales $ Net Sales SALES REVENUE $0 $0 COST OF GOODS SOLD $0 0.0% $0 0.0% GROSS PROFIT $0 0.0% $0 0.0% OPERATING EXPENSES Sales & Marketing $0 $0 Administrative $0 $0 Total Operating Expenses $0 0.0% $0 0.0% OPERATING PROFIT (LOSS) $0 0.0% $0 0.0% TAXES $0 $0 NET INCOME $0 0.0% $0 0.0%

38 The Cash Flow Statement Cash is king!

39 A Monthly Cash Flow projection shows Sources & Uses of cash for a specific period of time Net Cash Flow = Beginning cash balance + Cash inflows Cash outflows.

40 MONTHLY CASH FLOW PROJECTION 2015 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL Cash on Hand, beginning of month $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Cash Receipts: Cash Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Collections on Receivables $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Loans, other cash injections $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Total Cash Receipts $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 6 TOTAL CASH AVAILABLE $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Cash Paid Out: Inventory Purchases (COGS) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Payroll (incl. taxes) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Employee Benefits & Training $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Office/Operating Supplies $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Repairs & Maintenance $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Marketing (adv, website, etc.) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Accounting & Bookkeeping $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Legal & Professional $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Consulting Services $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Auto Expense & travel $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Travel & Entertainment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Rent $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Telephone $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Utilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Insurance $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Taxes (real estate, other) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Interest Expense $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Other Expenses - specify $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Miscellaneous - unspecified $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Sub-Total Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Loan Principal payment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Fixed Asset purchases $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Other start-up costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Owner's Withdrawal $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 TOTAL CASH PAID OUT $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Cash on Hand, end of month $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

41 The Cash Flow Cycle Product Company Cash Flow Statement Profit & Loss (P&L) Cash Flow Statement 11/15/14 Inventory Produced 1/15/15 Product Shipped Sale Recorded Customer Billed 3/1/15 A/R Paid Cash Out Non-Cash Event Cash In 15 weeks

42 MONTHLY CASH FLOW PROJECTION 2015 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC TOTAL Cash on Hand, beginning of month $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Cash Receipts: Cash Sales $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Collections on Receivables $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Loans, other cash injections $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Total Cash Receipts $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 6 TOTAL CASH AVAILABLE $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Cash Paid Out: Inventory Purchases (COGS) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Payroll (incl. taxes) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Employee Benefits & Training $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Office/Operating Supplies $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Repairs & Maintenance $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Marketing (adv, website, etc.) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Accounting & Bookkeeping $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Legal & Professional $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Consulting Services $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Auto Expense & travel $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Travel & Entertainment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Rent $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Telephone $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Utilities $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Insurance $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Taxes (real estate, other) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Interest Expense $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Other Expenses - specify $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Miscellaneous - unspecified $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Sub-Total Paid Out $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Loan Principal payment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Fixed Asset purchases $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Other start-up costs $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Owner's Withdrawal $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 TOTAL CASH PAID OUT $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Cash on Hand, end of month $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 $0

43 The 6-Step Business Plan 1. Analyze your Market and your Business 2. Define your Marketing Positioning 3. Define 3-year Sales & Earnings goals ( ) 4. Define your 2015 Action Plan (top 5 priorities) 5. Create a 2015 Profit & Loss projection 6. Create a 2015 monthly Cash Flow projection & every month review your progress; adjust

44 A good plan executed now is better than a perfect plan executed next week. General George S. Patton

45 The 6-Step Business Plan Q&A

SmallBizU WORKSHEET 1: REQUIRED START-UP FUNDS. Online elearning Classroom. Item Required Amount ($) Fixed Assets. 1 -Buildings $ 2 -Land $

SmallBizU WORKSHEET 1: REQUIRED START-UP FUNDS. Online elearning Classroom. Item Required Amount ($) Fixed Assets. 1 -Buildings $ 2 -Land $ WORKSHEET 1: REQUIRED START-UP FUNDS Item Required Amount () Fixed Assets 1 -Buildings 2 -Land 3 -Initial Inventory 4 -Equipment 5 -Furniture and Fixtures 6 -Vehicles 7 Total Fixed Assets Working Capital