Download - How to Develop Your Own Business Plan-PPT
BusinessPlanningPresentation: 1
From Backpacksto Briefcases.
How to develop yourown business plan.
Hank Jordan, CMCwww.atl.devry.edu/hjordan
BusinessPlanningPresentation: 2
Outline of a Business Plan
I. Executive Summary
II. Company DescriptionA. Legal Form of Business
B. Company’s Mission
C. Names of Top Management
D. Location and Geographic Information
E. Company’s Development Stage
F. Company’s Products or Services
G. Specialty Business Information
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Outline of a Business Plan continued
III. The Industry AnalysisA. Size and Growth Trends
B. Maturity of Industry
C. Vulnerability to Economic Factors
D. Seasonal Factors
E. Technological Factors
F. Regulatory Issues
G. Supply and Distribution
H. Financial Considerations
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Outline of a Business Plan continued
IV. The Target MarketA. Demographics/Geographics
B. Lifestyles and Psychographics
C. Purchasing Patterns
D. Buying Sensitivities
E. Size and Trends of Market
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Outline of a Business Plan continued
V. The CompetitionA. Competitive Position
B. Market Share Distribution
C. Barriers to Entry
D. Future Competition
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Outline of a Business Plan continued
VI. Marketing and Sales StrategyA. Company’s Message
B. Marketing Vehicles
C. Strategic Partnerships
D. Other Marketing Tactics
E. Sales Force and Structure
F. Sales Assumptions
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Outline of a Business Plan continued
VII. OperationsA. Plant and Facilities
B. Manufacturing/Production Plan
C. Equipment and Technology
D. Variable Labor Requirements
E. Inventory Management
F. Supply and Distribution
G. Order Fulfillment and Customer Service
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Outline of a Business Plan continued
VII. Operations continuedH. Research and Development
I. Capacity Utilization
J. Quality Control
K. Safety, Health and Environmental Concerns
L. Shrinkage
M. Management Information Systems
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Outline of a Business Plan continued
VIII. Management and OrganizationA. Principals/Key Employees
B. Board of Directors
C. Consultants/Specialists
D. Management to Be Added
E. Organizational Chart
F. Management Style/Corporate Culture
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Outline of a Business Plan continued
IX. Development and Exit PlansA. Long-Term Company Goals
B. Growth Strategy
C. Milestones
D. Risk Evaluation
E. Exit Plan
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Outline of a Business Plan continued
X. The Financials (grouped by year)
A. Sales Plan
B. Staffing Plan
C. TQM Plan
D. Marketing Plan
E. Operations Plan
F. Capital Budget
G. Cash Budget
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Outline of a Business Plan continued
X. The Financials (continued)
H. Income Statement
I. Balance Sheet
J. Cash Flow
K. Break Even Analysis
L. Plan Assumptions
M. Use of Funds
XI. Appendix
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Sales Plan
Production Plan
Staffing Plan
Operations PlanTQM Plan Marketing Plan
Cash Budget Capital Budget
Income Statement
Balance Sheet Cash Flow
Financial Flow Chart
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Time Saving Tips
Develop a research planPrioritize the most important areasOrganize your documentationUse technologyWhen stuck - get help
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Considerations for Your Business
When you sell a service,
You sell yourself.
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Common Factors of Service Businesses
1. Intangible product;
2. Subjective judgment of Quality;
3. Relatively few barriers to entry;
4. Perishable product;
5. Time lapses between use;
6. Quality depends on the actual service provider.
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Trends in Business
Faster delivery speed
Branching out/franchises
One stop shopping/personal banker
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Strategies for Improving Your Business
1. Make your product more tangible;
2. Develop a distinct image;
3. Cultivate referral sources;
4. Stay in touch with your customers;
5. Encourage timely purchases;
6. Stress quality and employee education;
7. Find ways to use excess capacity.
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Internal Planning for ExistingBusinesses & Corporations
Define specific objectives such as:
Total revenues
Sales per employee
Revenues per customer
Profit margin
Inventory levels and Production time
Collection activity
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Performance Objectives
Measurable: objective not subjective
Reasonable: reachable goal
Time Specific: by a certain date
Motivational:not too hard, not too easy
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Problem Solving Plan
1. Define the problem
2. Assemble the team
3. Consider solutions
4. Recommend activities
5. Implement activities
6. Measure activities
Plan - Do - Check - Act
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Customer Analysis - current customers
Products/Services purchased?
Number of units purchased?
Sales $ this year?
Sales $ last year?
Sales $ prior year?
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Customer Analysis - new customers
Reason for purchase?
How was sale secured?
Sales $ this year?
Sales $ last year?
Sales $ potential?
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Customer Analysis - lost customers
Products/Services purchased?
Reason for loss?
Potential for regain?
Last annual purchase $?
Previous $ high annual?
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I - The Executive Summary
1. Your basic business concept makes sense;
2. Your business had been thoroughly planned;
3. That management is capable;
4. A clear-cut market exists;
5. Your business has competitive advantages;
6. Your financial projections are realistic;
7. Investors have an excellent chance to get a return.
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I - The Executive Summary (continued)
• Your executive summary is the single most important part of your business plan.
• It must motivate the reader to consider your plan.
• Prepare your Executive Summary last, only after your entire plan has been completed.
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II - Company Description
Names:
Legal or corporate name
Doing business as ...
Brand or trade names
Subsidiary companies
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Company Description (continued)
Legal form:
Legal form of business
State incorporated
County for business license
Owners or major stakeholders
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Company Description (continued)
Management/Leadership:
Chairperson of the board
President
Chief Executive Officer
Chief Financial Officer
Chief Operating Officer
Advisory board members
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Company Description (continued)
Location:
Company headquarters
Place of business
Branches
Geographic area served
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Company Description (continued)
Developmental stage:
When company was founded
When product or service introduced
Milestones reached
Significant developmental indicators
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Company Description (continued)
Financial status:
Last year’s total sales
Last year’s pretax profit
Current number of employees
Amount of funds sought
Basic use for funds sought
Major financial obligations
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Company Description (continued)
Products and services:
General description
Number and type of lines
Number in each line
Patents and licenses:
Patents held and pending
Trademarks held and pending
Licenses held and pending
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III - Industry Analysis
• A description of your industry• Current trends in your industry• Strategic opportunities that exist in your industry
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Your Economic Sector
Service
Manufacturing
Retail
Distribution
Note: your business may belong to more than one
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Size and Growth Rate
Two years ago
Last year
This year
Next year
Five years out
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Industry Maturity
Introduction
Growth
Mature
Decline
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Sensitive to Economics
Which of these will affect your business?
Little business expansion
Increased unemployment
High interest rates
High inflation
Weakened dollar
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Seasonality
How many seasons does your business have?
Holidays
Summer
Winter
Spring
Fall
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Technological Change
How will changes in technology affect . . .
your products
your services
your costs
your business
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Regulation and Certification
National
State
County
What effects will they have on your business?
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Plan Preparation Form
Industry description
Industry trends
Strategic opportunities
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IV - The Target Market
Demographic
Geographic
Psychographic
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Market Size and Trends
• What is the current size?• What is the rate of growth?• Are changes occurring in your market?• Are social values affecting your market?• What else is affecting your market?
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Strategic Opportunities
• Alliances with other businesses?• Who makes the decision to buy?• How are these decisions made?• How can you get your message to them?• Compare your business to the competition?
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V - The Competition
Know who your major competitors are?
On what basis do you compete?
Who are your potential future competitors?
What barriers exist for new competitors?
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Customer Perception Factors
• Product or service features• Convenience• Quality• Durability• Image or intangibles• Customer relations• Social image
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Internal Operational Factors
• Financial resources• Marketing program • Economies of scale• Operational efficiencies• Strategic partnerships• Company esprit de corps
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Market Share Distribution
List each competitor and show . . .
Percent of total revenues
Percent of total units sold
Trend of market share (up or down)
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Barriers to entry
Patented process
Trademarks
High start up costs
Substantial expertise required
Lack of suppliers or distributors
Market already saturated
Sophisticated machinery
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VI - Marketing and Sales Strategy
This section should cover . . .
How do you make customers aware of your product?
What message are you trying to convey?
What methods will you use?
How will you get the actual sales?
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Sales Plan
Production Plan
Staffing Plan
Operations PlanTQM Plan Marketing Plan
Cash Budget Capital Budget
Income Statement
Balance Sheet Cash Flow
Financial Flow Chart
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The Four P’s of Marketing
Product: quality, features, style, options, packaging, guarantees, services, spares
Price: list, discounts, allowances, credit terms, payment terms, rental, lease
Place: numbers and types, locations/availability, inventory levels, transportation
Promotion: advertising, personal selling, sales promotion, point-of purchase, publicity
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The Five F’s of Customer Wants
1. Functions: does it work?
2. Finances: is it worthwhile?
3. Freedom: easy to use?
4. Feelings: do I really feel better?
5. Future: will I have support?
Am I receiving true benefits?
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Marketing Vehicles
Brochures: leaflets, flyers
Print media: newspapers, magazines
Broadcast media: radio, television
Advertising specials: caps, pens, calculators
Direct mail: brochures, coupons
Public relations: news articles, specials
Sampling: free products, coupons
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Strategic Partnerships
Cooperative advertising: two companies mentioned in the advertisement;
Licensing: let someone else use your product as part of their product;
Distribution agreement: let someone else carry your product;
Bundling: let another company include your product as part of a total package.
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Sales Process and Productivity
1. How do you identify potential customers?
2. Should you use cold calling?
3. How do you qualify potential customers?
4. Who should be allowed to contact customers?
5. How frequently should you follow up?
6. What are your sales goals?
7. How do you capture all of this information?
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Sales Plan
Production Plan
Staffing Plan
Operations PlanTQM Plan Marketing Plan
Cash Budget Capital Budget
Income Statement
Balance Sheet Cash Flow
Financial Flow Chart
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VII - Operations
Theory into practice.
Master the basics.
Define standards of performance.
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Sales Plan
Production Plan
Staffing Plan
Operations PlanTQM Plan Marketing Plan
Cash Budget Capital Budget
Income Statement
Balance Sheet Cash Flow
Financial Flow Chart
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What Your OperationsSection Should Cover
Issues that . . .
1. Are essential to your business
2. Will help you succeed
3. Will provide a competitive advantage
4. Will overcome frequent problems
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Facilities Selection Considerations
Location
Lease versus Purchase
Improvements
Utilities/Maintenance
Exit clauses
Other key factors
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Inventory Management and Control
1. How much is enough?
2. How much is too much?
3. When and where to purchase supplies?
4. What type of system to use?
5. Who is responsible for its accuracy?
6. Which distribution methods to use?
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Order Fulfillment and Customer Service
Who is the best in your industry?
Utilize benchmarking.
L.L. Bean
Ritz Carlton
Federal Express
Motorola
What makes them the best?
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Order Fulfillment and Customer Service continued
1. Who specifically processes orders?
2. How are orders checked?
3. What percent are incorrect?
4. How and when do you ship?
5. Who is responsible for extra costs?
6. What service programs do you offer?
7. What is your return policy?
8. How do you solicit customer feedback?
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Assessing your production plan
Workforce: level or chase strategy?
Productivity: output divided by input.
Capacity: time available for work.
Quality: cost of quality (Cost of doing it right
+ Cost of doing it wrong).
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Staffing Chart or Plan
1. Level or chase strategy?
2. How many employees at start-up?
3. Skills required?
4. How will you attract qualified people?
5. How will you keep qualified people?
6. Who is going to keep track of payrolls?
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Research and Development
– New products in development?– New services in development?– Who is doing the development?– How much company time is spent on R&D?– What equipment is needed for R&D?– What are the trends in your industry?– What is your competition spending on R&D?
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Other Operational Issues
How are you ensuring safe working conditions?
How are you protecting the environment?
How are you complying with governmental regulations?
How are you providing adequate insurance protection?
How are you managing start up activities?
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Start Up Costs
Facilities: Initial rent/Purchase
Equipment: Furniture, Equipment, Telephones, Vehicles, Other
Materials: Initial inventory
Supplies: Production materials, Packaging supplies, Brochures, Samples, Other
Fees: Permits, Inspections, Licenses
Other Costs: Accounting, Legal, Insurance, Marketing, Salaries, Unanticipated costs
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Sales Plan
Production Plan
Staffing Plan
Operations PlanTQM Plan Marketing Plan
Cash Budget Capital Budget
Income Statement
Balance Sheet Cash Flow
Financial Flow Chart
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VIII - Management and Organization
Your management team:
Key employees and Principals
Board of directors
Advisory committee
Consultants and specialists
Key people to be added
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Sales Plan
Production Plan
Staffing Plan
Operations PlanTQM Plan Marketing Plan
Cash Budget Capital Budget
Income Statement
Balance Sheet Cash Flow
Financial Flow Chart
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Your Management Team
Do your key players . . .
Possess the necessary skills
Have a record of success
Have a team member attitude
As a whole are they effective
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Management Compensation and Incentives
Salary
Bonuses
Commissions
Profit sharing
Equity
Stock
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Consultants and other Specialists
Management consultants
Marketing consultants
Designers and Engineers
Industry specialists
Attorneys
Accountants
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Management Structure and Style
1. How will decisions be made?
2. What are the lines of authority?
3. How much employee involvement do you want?
4. Do you believe in empowerment?
5. What will be the corporate culture?
6. Do you have a clear set of company policies?
7. How will you handle sexual harassment?
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Sales Plan
Production Plan
Staffing Plan
Operations PlanTQM Plan Marketing Plan
Cash Budget Capital Budget
Income Statement
Balance Sheet Cash Flow
Financial Flow Chart
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IX - Development and Exit Plans
You can’t reach a goal you haven’t set.
What do you want your business to look like in two, three, five years?
Your long terms plans should include goals, milestones, risks and an exit plan.
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Sales Plan
Production Plan
Staffing Plan
Operations PlanTQM Plan Marketing Plan
Cash Budget Capital Budget
Income Statement
Balance Sheet Cash Flow
Financial Flow Chart
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What are your goals?
1. Steady provider?
2. Innovator?
3. Quality leader?
4. Industry leader?
5. Niche leader?
6. Exploiter?
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Growth Strategies
1. Market penetration
2. Promotion and support
3. Expansion
4. Increase focus
5. Diversify
6. Refocus
Plan - Do - Check - Act
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Milestones
• How will your investors know you are making sufficient progress towards your goals?
• A milestone list focuses on the specific objectives you intend to achieve by date.
• Progress comes slowly, be conservative.
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Risk Evaluation
• Work on solving today’s problems and avoiding tomorrows.
• Every enterprise involves risk.
• Risks include . . .
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Exit Plan
How do investor’s get their money back?
1. Go public 5. Buy out
2. Acquisition 6. Franchise
3. Sale 7. Hand down
4. Merger 8. Close
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Sales Plan
Production Plan
Staffing Plan
Operations PlanTQM Plan Marketing Plan
Cash Budget Capital Budget
Income Statement
Balance Sheet Cash Flow
Financial Flow Chart
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X - The Financials
Numbers are merely the reflection of . . .
the decisions you make.
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Sales Plan
Production Plan
Staffing Plan
Operations PlanTQM Plan Marketing Plan
Cash Budget Capital Budget
Income Statement
Balance Sheet Cash Flow
Financial Flow Chart
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Numbers represent your decisions
Every business decision leads to . . .
a number,
which taken together form the basis of . . .
your financials.
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Can I use my Visa card topay for my MasterCard bill?
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What do you mean I’m broke?
I still have checks!
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Getting control of your finances
1. Read your statements.
2. Set policies and stick with them.
3. Use automation where practical.
4. Do not be afraid to get help.
Remember YOU are making management decisions based on this information.
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Types of Financial Forms
1. Income Statement - are we making a profit?
2. Cash Flow Projections - can we pay our bills?
3. Balance Sheet - how much are we worth?
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General Financial Terms you should know
Accounts payable Current liabilities
Accounts receivable Debt
Accumulated depreciation Depreciation
Assets Equity
Assets current Fixed costs
Assets fixed Gross profit
Cash Liabilities
Cost of goods Long term liabilities
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General Financial Terms continued
Net profit
Net worth
Other or Intangible assets
Profit
Pro forma
Others?
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Guidelines for Preparing Your Financials
1. Be conservative
2. Be honest
3. Use standard terminology
4. Get realistic advice
5. Follow practices in your industry
6. Choose the appropriate accounting method
7. Be consistent
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Income or P & L StatementIncome:
Gross Sales - Returns & Allowances = Net Sales - Cost of Goods = Gross ProfitExpenses: -
Salaries & wages; Employee benefits; Payroll taxesSales Commissions; Professional Services; Rent;Maintenance; Equipment Rental; Furniture &Equipment; Depreciation and Amortization; Insurance;Interest; Utilities; Telephone; Office supplies; Postage and Shipping; Marketing & Advertising; Travel; Other.
Net income before taxes - Provision for taxes on income
Net Income After Taxes (Net Profit)
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Cash-Flow Projections
Why is this the single most important financial statement?
If you can’t pay your bills, you are not going to stay in business.
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Cash-Flow Items
Cash sales Reserve
Collections Owner’s draw
Interest Income Net cash flow
Loan proceeds Opening cash balance
Cost of goods
Operating expenses
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The Balance Sheet
Provides a snapshot of the overall financial worth of the company.
It accounts for all the company’s assets minus all the company’s liabilities.
The remaining amount is figured to be the net worth of the company.
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Sources and Use of Funds
Equity Financing: selling ownership via . . .
Preferred stock
Common Stock
Debt Financing: taking out loans via . . .
Mortgage loans
Short and Long Term Loans
Investment from Principals: you or other key individuals will contribute
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Assumption Sheet
Contains information you have already gathered.
Total sales per product line
Total payroll costs
Calculate gross margin per product line
Total costs and timing for additional expenses
Changes in costs or timing of financing
Other costs such as . . .
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Break Even Analysis
Why do you need to know this?
You need to know . . .
Fixed expenses
and
Gross profit margin (GPM)
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Sales Plan
Production Plan
Staffing Plan
Operations PlanTQM Plan Marketing Plan
Cash Budget Capital Budget
Income Statement
Balance Sheet Cash Flow
Financial Flow Chart
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XI - Appendix
State and Federal forms
Drawings and layouts
Photographs
Surveys
Other
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