DEVELOPING A BUSINESS PLAN

Chapter 2

Lesson 2.1

Why a business plan is important

What is a Business Plan?

describes all the steps necessary to open and operate a successful business. Describes your product/service, how you

will produce it, and who will buy it Explains who is going to run the business States how it will win over customers &

keep them Provides detailed financial information

(earning a profit)

Why a business plan?

Three Purposes:1. To explain the idea behind your

business and how your product or service will be sold,

2. To set specific objectives and describe how your business expects to achieve them,

3. To describe the backgrounds and experiences of the people running the business.

*Remember to anticipate questions potential investors will want to have answered.

Prewriting/Brainstorming

What is my product/service? Why is my product/service unique? Who are my customers? Where will future customers come from? Who is on my business team? How will I finance my business?

Importance of a Business Plan Makes you think about all aspects of

your business Giving you more confidence in your idea

May help to secure financing Cannot get a loan without it

Helps communicate your ideas to others You know your business in and out which

allows you to explain it properly Serves as a tool to manage your

business Can guide you in decision making

Homework:

Describe the importance of a business plan in your own words.

Answer the who, what, where, when, why, and how of your business. (1-2 sentences to answer each)

Lesson 2.2

What goes into a business plan

Business Plan

NOT all the same Retailer focuses on inventory vs.

Consulting focuses on employee credentials

Small, home-based, sole-owner vs. Large corporation with numerous offices all over

Three Basic Components

1. Introductory Elements2. Main Body

Bulk of info with details Written first and used to write the other

two parts

3. Appendix

Main Body has 5 Sections:

1. Introduction2. Marketing3. Financial Management4. Operations5. Concluding Statement

Where the inspiration came from, your vision, and the goals of the business

1. Introduction

Detailed Description & Goals Inspiration, vision, and direction

Ownership and Legal Structure Number of owners effects business

operations Skills and Experience

Paid, volunteer, hobbies Competitive Advantage

Performance, quality, reliability, distribution, price, promotion, public image/reputation

2. Marketing

Products and Services How is it different? Unique?

Market Prospective customers and size of market

Industry Research: external factors, growth

potential, economic trends, and technology trends

Location Critical for success

3. Financial Management

Identify Risks How will you deal with these risks?

Financial Statements (current & pro-forma)

Funding Request and Return on Investment How much will you borrow? How will you use the money? Return on investment. Who is managing financial records?

4. Operations

Day-to-day operations Hiring and personnel procedures Insurance and lease or rental

agreements Equipment necessary to run your business

5. Concluding Statement

Summary of goals and objectives Emphasize your commitment to

success of business

Introductory Elements

Cover Letter Title Page Table of Contents Statement of Purpose

Why are you asking for a loan and what will you do with the money?

Executive Summary Short restatement of the report

Appendix

Supporting Documents What would you want to know about a

business before lending it money?

Personal tax returns Personal financial

statement Copy of lease or

purchase agreement Copy of Business

license

Copy of resume Letters of

recommendation Copies of letters of

intent from suppliers

Copies of contracts

Putting It All Together

Best opportunity to convince people of: Your idea Your talent Ability to make it successful

Attractive, neat, organized document

Lesson 2.3

How to Create an Effective Business Plan

Research your industry

Community Government Professional Printed Online

SBA SBDC SCORE Chamber of

Commerce Trade Associations Professional

Consultants Financial Institutions

Mistakes to look at

Unrealistic Financial Projections Undefined Target Market Poor Research Ignored Competition Inconsistencies in the Business Plan