build a practical business plan handout

Provided by Sigma College of Small Business, Inc.

Build a Practical Business Plan for Your Business

Tuesday, April 6, 2010

6pm – 8pm

Sigma College of Small Business

6611 Jefferson St., Suite 103

Haymarket, VA 20169

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Building a Practical Business Plan for Your Business

Copyright 2010 Sigma College of Small Business

Balancing the Need, Product and Opportunity Value

The core process of business planning is one that every small business owner used as they made the decision to start their business. It’s not fancy and in many cases it is not even written down, it is simply the logical thought process we use each day to determine if we should go into a certain business, expand our business or stay in business.

Matching Product/Service to a Market Need

Anyone who has started a business has either: • Had a skill or product to offer and found a market need, or • Saw a market need and developed a skill or product to meet that need. Matching the Market Need to your Product/Service is the first step in ongoing busi-ness planning. The match occurs when: • The Market Need is validated • The Product/Service meets the need • “Value” is created in the transaction Value is created when a transaction benefits both buyer and seller!

Valuing the Opportunity

Once the product is matched to the market need, we determine if the opportunity has enough value for us to invest time and money.

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Execution—the Essential Element

The reason we “plan” is to create a set of actions that will result in the desired out-come. The Core Process for business planning is to first match the product, need and opportunity value, and then determine the actions required to generate revenue. Execution is an essential element of business planning. We each completed a list of actions that were required to get into business and become successful and we continue this cycle each year in order to improve the business and remain success-ful. This is the core process of business planning! Sure, there are a lot of things that you can and will add into the planning mix, but this is the foundation: • Match a product to a market need where value can be produced, and • Accomplish the right actions to achieve the desired outcome.

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Types of Business Plans

There are essentially two types of business plans. The business plan that you write is dependent on how it will be used.

Business Investment Plans

Investors use business plans to evaluate the potential return and the risk for their investment. • Bankers want to ensure that their loan with interest will be repaid • Equity investors evaluate the likelihood of getting their estimated return Both have a tremendous interest in ensuring your business can be successful Investor Plans are written to communicate the business concept to others. Primarily used to raise capital, they are focused more on selling the business concept, than selling the actual product.

Business Management Plans

A business plan that is written by and for the owners and managers of the business is a Business Management Plan.

Used to Run the Business

Because the business management plan is written to help the company sell the product, not the business, it’s content is more useful in running the business. As a communication tool, it provides a basis for guiding the business decisions of owners and managers • Consolidates information • Facilitates decision making • Records decision history and reasoning Execution – Actions to Achieve the Desired Out-come

The real guts of a Business Management Plan are the actions that are created and assigned. This is the execu-tion part of the planning proc-ess and is essential for suc-cess. As a business owner and leader, it is your job to make sure these actions are completed—this will signifi-cantly improve your chances for success.

Copyright 2010 Sigma College of Small Business, Inc.

Types of Business Plans

Investor Plans• Communicate business

concept to others

• Primarily to raise capital– Debt or Equity

– Find Partners

• Selling “The Business”– Not necessarily the

product

Business Management Plans• Used to run the business• Communicates business

decisions to managers• Process for guiding business

decisions– Consolidates information– Facilitates decision making– Decision history and reasoning– Execution

• Links actions todesiredoutcomes

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Get Money vs. Make Money

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The Practical Business Plan

The Practical Business Plan is designed to focus owners on their core business, making the critical decisions and assigning the priority actions first. The core elements of this plan include:

Market Opportunity—Matching the Product to the Need Budget—Forecasting the opportunity value and cost Marketing and Sales—Methods for exchanging products for cash

This is a lot simpler than what is seen in a typical business plan book. Keeping it simple in the beginning of the planning process increases the likelihood that owners complete and use the business plan process in their decision making.

Justifying the Simplicity

• The audience is familiar with a lot of material that is required for investors • Focus is on information that changes or can be changed frequently

The Business is an INVESTMENT

Business Planning is like doing your homework for an investment. You’re original assumptions for market opportunity, product and the potential revenue may be wrong due to changes in the market and they must be periodically re-visited, especially when the outcome is not what you expected or what it has been in the past.

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Market Opportunity

Take a minute to write down your current market opportunity – both market need and the product/service that you provide.

The market need that I fill is:

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The buyers and users who have this need are:

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The current product/service that we deliver is:

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Do the market need and product/service match? Can the match be improved?

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Required Actions:

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Market Opportunity

• Gap in the Market– The specific need or desire– Potential buyers and users– Reason for Gap

• Product Definition– Basic description– How it fills the gap

• Match Product and Need with Value– Describe how the match will create value in the market

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Budget

Take a minute to analyze your budget. Considering the cost to make and sell the product, evaluate the opportunity

How many of the product (how much service) can I sell? _________________

What is the expected average price? (from marketing plan) _________________

Forecasted Revenue __________________

How much will it cost to produce and sell the product? _________________

• Include cost to make and overhead (cost to manage and sell)

Profit—How much do I need to earn above all the costs: _________________

Does the calculated profit make this a valuable opportunity?

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How can I increase the value of this opportunity?

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Required Actions:

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Budget

• Revenue– Market Potential Approach– Break Even Approach

• Expenses– Cost to build– Cost to market, sell and manage

• Cash Flow• Profitability

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Marketing and Sales

How will the product be packaged? (Size, hours, project, square feet, etc…)

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What is the price per unit of packaging?

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What specific VALUE does your product deliver to buyers and users?

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What makes your product DIFFERENT from competitors?

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Based on my value and differentiation, my message is:

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What are the best methods and media to reach my buyers and users?

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Required Actions:

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Marketing and Sales

• Packaging– Sizes, combinations, service levels

• Price– Strategy for pricing the product portfolio

• Message– Key points to communicate for each product and

segment– Show value and differentiate

• Promotion and Communication– Methods and media for communicating the

message– Includes advertising, discounts, promotion events,

etc…• Sales and delivery

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Building on the Practical Business Plan

Once the Practical Business Plan is in place and the Execution is in progress, it is essential to build upon the plan. The Practical Business Plan is built for short term planning in the current market. To continually increase the value and maximize the success of your business, a more robust strategic business plan will be required. A strategic business plan goes beyond generating near term revenue and de-fines the actions necessary to build your business to your ultimate vision. Most likely you didn’t just build the business to have a nice secure job. You are building it to grow and become a valuable investment. Building a com-plete business plan will be a critical part of making the dream a reality.