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CAPITAL SBDC

Southern University
“Developing a Business Plan
for Your Small Business”

Presented by:
Gregory A. Spann

1933 Wooddale Boulevard, Suite E


Baton Rouge, LA 70806-1514
Phone: (225) 922-0998
PURPOSE OF BUSINESS PLAN

‹ It helps to guide the business operation by forcing the


entrepreneur to take a critical, objective look at every
aspect of the business venture in order to set realistic goals
and to make informed business decisions.
Specifically, the business plan can help to determine:
- If you are the right person to start or operate the
selected business.
- If there is a market for the product/service you plan
to offer.
- If the proposed venture will be profitable.
PURPOSE OF BUSINESS PLAN

‹ If you should need financial assistance, it enables a lending


institution to evaluate the potential success of the business.
BUSINESS PLAN OUTLINE

 Executive Summary
 General Company Description
 Products and Services Plan
 Technical Description of Product (for a manufacturer)
 Marketing Plan
ƒ Industry Profile
ƒ Customer Profile & Target Market(s)
ƒ Market Size & Trends
ƒ Competition Profile
ƒ Distribution Strategies
BUSINESS PLAN OUTLINE

 Marketing Plan (Cont’d)


ƒ Promotional Methods
ƒ Pricing Strategies
 Management Plan
 Operational and Facility Plan
 Financial Plan
ƒ Start-Up Costs
ƒ Break-even Analysis
ƒ Pro Forma Financial Projections
Income Statement
Cash Flow Statement
Balance Sheet Statement
 Appendix
ENTREPRENEURIAL MYTHS

 Bootstrapping the business.


 Living-off the business too soon.
 Being your own boss.
 Getting rich overnight.
 Having nothing to lose.
 It takes money to make money.
RISKS & REWARDS

 Summarize risks of proposed business venture or expansion


 Summarize how risks will be addressed
 Estimate expected benefits or returns
LOWERING START-UP RISKS

 Gain experience in management and in the type of


business you plan to start.
 Plan ahead.
 Make sure you have your family's support.
 Be prepared to persevere.
 Use facts to substantiate your "hunches" before acting on
them.
 Don't be afraid to quit.
TRAITS OF SUCCESSFUL
ENTREPRENEURS

 Desire  Problem Solving


 Initiative/Assertiveness  Persuasive
 Energy  Self-Confidence
 Need for Achievement  Well-Developed Ego
 Perseverance  Value of Money
 Responsibility  Self-Discipline
 Willingness to Take  Market Awareness
Moderate Risks
GENERAL COMPANY DESCRIPTION

 Founding of company
 Company history (if applicable)
 Mission of company
 Legal structure
 Target market(s)
 Size of company and number of employees
BUSINESS CONCEPT

 What business are you in?


 Why is this the right business for you to be in?
 What would you like your business to be famous for?
 What do you sell?
 Why will people buy from you?
 Who are your competitors?
 How can you stand out from the crowd?
MISSION STATEMENT

A clear, concise written description of a firm’s


business philosophy for making the entrepreneur’s
vision a reality. In a few sentences, it should convey
how your business will meet its goal and distinguish
itself from the competition. It is imperative that a
mission statement be simple, believable, and
achievable.
SAMPLE MISSION STATEMENT

The mission of Ms. Blissful’s Bridal


Boutique is to become the premier bridal shop
committed to providing the highest quality
bridal merchandise at fair market prices. The
company’s products and services will reflect
the owner’s belief that, as a specialty business
creating a once-in-a-lifetime event, her
customers will be able to secure all of their
wedding needs in one place.
YOUR MISSION STATEMENT

Step 1: Describe the purpose of your business.


__________________________________________________
__________________________________________________
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__________________________________________________
__________________________________________________
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Step 2: Create a Mission Statement (20 words or less).
__________________________________________________
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LEGAL AND ORGANIZATIONAL
STRUCTURE

 Building a management team and the key players


 Advantages and disadvantages of each legal form of
ownership
ƒ Sole Proprietorship
ƒ Partnerships
General
Limited
ƒ Corporations
C and S
ƒ Limited Liability Company (LLC)
ƒ Non-Profit Corporation
LEGAL FORMS OF OWNERSHIP

SOLE PROPRIETORSHIP

ADVANTAGES
 Costs
 Control
 Profits
 Flexibility
LEGAL FORMS OF OWNERSHIP

SOLE PROPRIETORSHIP

DISADVANTAGES
 Unlimited liability
 Less available capital
 Limited scope of management
 Business life
LEGAL FORMS OF OWNERSHIP

PARTNERSHIPS

General
Limited

ADVANTAGES (of General Partnership)


 Pooling of expertise and capital
 Continuity
 Taxation
LEGAL FORMS OF OWNERSHIP

PARTNERSHIPS

DISADVANTAGES (of General Partnership)


 Unlimited liability
 Responsible for partner’s actions/decisions
 Business life precarious
 Hardest entity to end if a dispute arises
LEGAL FORMS OF OWNERSHIP

CORPORATIONS

C and S

ADVANTAGES (of C Corporation)


 Limited liability
 Access to capital
 Perpetual life
 Transfer of ownership
 Ability to attract management
LEGAL FORMS OF OWNERSHIP

CORPORATIONS

DISADVANTAGES (of C Corporation)


 Costs
 Taxation
 Government regulation and paperwork

NOTE: The S Corporation gives you the benefit of limited liability


protection and is taxed as a partnership. However, there are certain
eligibility requirements.
LEGAL FORMS OF OWNERSHIP

LIMITED LIABILITY COMPANY (LLC)


ADVANTAGES
 Limited liability
 Taxation
 More flexibility than S Corporation
DISADVANTAGES
 Relatively new (state law is still evolving
regarding treatment)
 Restrictions on members and transfers of interest
 Organizational costs
PRODUCTS AND SERVICES PLAN

 Describe your products and services offering


 Discuss intellectual property (patents, trademarks, etc.)
 Explain uniqueness of products and services vs. competition
 What is your main selling point?
 Discuss future products
INTELLECTUAL PROPERTY

 Patents
 Trademarks and Trade Names
 Copyrights
 Trade Secrets
 Customers and Valued Employees
 Contracts and Leases
ƒ Employment contracts
ƒ Buy-out agreements
ƒ Non-compete agreements
ƒ Non-disclosure agreements
THE PRODUCT LIFE CYCLE
Dollars

Sales Curve

Profit Curve

0
Time

Introduction Growth Maturity Decline


Stage Stage Stage Stage
ENTRY STRATEGIES

The major goal of an entry strategy is to make customers


aware of the availability of your product or service offering
and give them a compelling reason to buy it from you, instead
of the competition.

There are three common options in selecting your business


opportunity:

 You can start your business from scratch.


 You can buy an existing business.
 You can purchase a franchise business.
FACTORS INFLUENCING ENTRY
STRATEGIES:

 Time  Expected Competitive


 Market Size and Direction Reaction
 Geographic Location and  Capital Required to
Density of Customers Launch Venture
 Buying Patterns of  Threat of New Entrants
Customers  Threat of Substitute
 The Need to Overcome and Products
Erect Barriers to Entry  Relative Bargaining Power
 Nature of Competition of Suppliers
 Relative Bargaining Power
of Customers
MARKETING PLAN

 Who are your potential customers? (Describe this market)


 Market size and trends (including geographic location)
 Nature of competition (SWAT analysis)
 Marketing Strategy
Product
Distribution
Promotional
Pricing (including selling terms)
 How will you monitor customer satisfaction
MARKETING RESEARCH

Marketing research is a systematic process of


gathering, recording, and analyzing data for
helping you to make marketing decisions.
HOW TO CONDUCT MARKET
RESEARCH

Step 1: Define the Problem


Step 2: Collect the Data
Step 3: Analyze and Interpret the Data
Step 4: Act on the Data or Findings
HOW TO CONDUCT MARKET
RESEARCH

Step 1: Define the Problem


The most crucial step in market research is defining
the problem clearly and concisely. A common mistake is
to confuse a symptom with a true problem.

Example:
Dwindling sales is not a problem; it is a symptom.
HOW TO CONDUCT MARKET RESEARCH

Step 2: Collect the Data


 Search for Secondary Data and Primary Data
Business owners need to collect the following information
about their target customers:
1. Geographic. Where are my customers located?
2. Demographic. What are the characteristics of my
customers (age, gender, education level, income,
marital status, etc.)?
3. Psychographic. What drives my customers’ buying
pattern or behavior (lifestyles, beliefs, opinions,
perceptions, motivations, attitudes, etc.)?
HOW TO CONDUCT MARKET
RESEARCH

Step 3: Analyze and Interpret the Data


The business owner must attach some meaning to the
research data by transforming it into useable information.

 What do the facts mean?


 Do the results suggest any changes in the way the
business is run?
 Are there new opportunities the owner can take
advantage of?
HOW TO CONDUCT MARKET
RESEARCH

Step 4: Act on the Data or Findings


The research process is not complete until the business
owner acts on the information collected. In many
instances, the action needed is obvious once the
entrepreneur has interpreted the results of the research.
CHANNELS OF DISTRIBUTION
(for Consumer Goods)

Manufacturer Manufacturer Manufacturer Manufacturer

Wholesaler Wholesaler

Retailer Retailer

Consumer Consumer Consumer Consumer


MANAGEMENT PLAN

 What positions will the new venture or expansion create?


 Discuss expertise and experience of management team
(include resumes’ for each member)
 How will you structure company? (Organizational chart)
 What are the duties and responsibilities of employees?
 How will employees be compensated?
SAMPLE
ORGANIZATIONAL CHART

President
or
Owner/Manager

Production/Operations Marketing Finance


OPERATIONAL & FACILITY PLAN

 Company hours of operation


 What inventory and supplies will be needed?
 Identify primary and secondary suppliers (including terms)
 What licenses and permits are needed?
 Do you have proper zoning for business location?
 Where will the business be located? Do you have proper
zoning?
(Advantages and disadvantages of business location)
 Do you have sufficient parking?
 Will you lease or purchase? Does facility allow for
expansion?
FINANCIAL PLAN

 What will it cost to start or expand the business?


 Sources and uses of financing (including collateral)
 What is your break-even point?
 Financial statements for past three-years (for existing
company)
 Financial projections for three-year period (including
assumptions):
Income statement
Cash flow statement
Balance sheet
FIVE C'S OF CREDIT

 CHARACTER
 CAPITAL
 COLLATERAL
 CAPACITY
 CONDITIONS
FIVE QUESTIONS TO TEST YOUR LOAN
READINESS

 HOW MUCH DO YOU NEED TO BORROW?

 WHAT WILL YOU DO WITH THE LOAN PROCEEDS?

 WHEN WILL YOU PAY THE LOAN BACK?

 HOW WILL YOU PAY THE LOAN BACK?


(How will you generate cash flow?)
 WHAT IF SOMETHING GOES WRONG?
(What is your contingency plan?)