SBA Classroom: Self Assessment (text version)

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Self Assessment
Text Version

Introduction Business Assessment Business Planning Action Plan Strengths, Weaknesses, Opportunities, and Threats (SWOT Analysis) Building a Better Business Plan Steps to Developing a Comprehensive Financial Plan Who Are the Right People to Talk to for Assistance? Check Your Understanding

At the conclusion of this activity, users will:

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Understand the importance of and need for examining their business on a regular basis; Ask critical business questions such as where are we, where do we want to be, and how do we get from here to there; Carefully inspect their business and its environment through various dimensions of Strengths, Weaknesses, Opportunities, and Threats (SWOT Analysis); and Determine where he or she they should focus his or their her attention and efforts in order to grow and expand their business.

The purpose of this activity is to provide the user with a general understanding of the Business Assessment process, and how a small business might go about evaluating itself.

Introduction
Welcome to SBA's electronic training course on the Business Assessment process. We hope you will enjoy this course as it presents critical information that you should understand if you are going into business. The purpose of this course is to provide you with a general understanding of the Business Assessment process, and how a small business might go about evaluating itself. The objectives of this course are to:
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Understand the importance of and need for examining your business on a regular basis; Ask critical business questions such as where are we, where do we want to be, and how do we get from here to there; Carefully inspect your business and its environment through various dimensions of Strengths, Weaknesses, Opportunities, and Threats (SWOT Analysis); and Determine where you should focus your attention and efforts in order to grow and expand your business.

Business Assessment
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Assessing your business involves continual evaluation of business, "''where you are," and your actions to achieve your business goals. SWOT Analysis is one tool you can use to help you analyze, prioritize, and plan an appropriate course of action. In the business world, change is inevitable. To achieve business growth and success, you must identify the right strategies and actions to make it happen. Managing a business is a constant learning process. You should continually reassess your assumptions about the business, its performance, and all other aspects inside and outside of the business. SWOT Analysis is a way to organize information and assign probabilities to potential events, both good and bad, as the basis for developing business strategy and operational plans. It involves examining your business's Strengths, Weaknesses, Opportunities and Threats. You will want to consider each of these throughout your business planning process. Potential lenders and investors will also want to know how you have integrated this information into your plans.

Business Planning
The business plan is a document that clearly defines the goals of a business and outlines methods for achieving them those goals. It serves as a roadmap to help you manage your business growth and expansion. Specific information about developing a business plan can be found in the online course, "A Business Plan." The components of an effective business plan include:
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Business Description and Overview Description of Products or Services Sales and Marketing Operating Requirements Financial Management Management Profile Supporting Documents

It is important to perform a detailed analysis of your business when developing your business plan. Creating an action plan, using the SWOT Analysis, and developing an in-depth financial plan can help you examine and assess your business.

Action Plan
There are several critical steps to take when developing your action plan. Don't forget to talk often with the customer groups who may want to buy your products and service. Seek out help where you need special skills or expertise. When developing your action plan, talk to individuals such as your banker and accountant to determine if your books are helping you manage your business. Contact SBA via their web page, local

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district office, or Help Desk for further assistance. You can also tap into your nearest Business Information Center or SCORE counselor for even more assistance. Information is available in the form of booklets, books, and on the Internet. This information can be found in Additional Resources. Evaluating yourself or where you are on a continual basis is crucial when developing an action plan. Remember, for successful growth you must manage the changes. Have you looked at your company financials? How are you doing in terms of sales, market share, profitability, and cash flow? What is the current financial condition of your business? What do you need to reach the next step in the business plan? Periodically, put your business in front of a mirror. Managing a business is a constant learning process in which you should continually reassess your assumptions about the business, its performance, and all other aspects inside and outside of the business.

Strengths, Weaknesses, Opportunities, and Threats (SWOT Analysis)

SWOT Analysis gives you a useful framework in which to assess your business. SWOT Analysis is the process of carefully inspecting the business and its environment through the various dimensions of Strengths, Weaknesses, Opportunities, and Threats;, however,; SWOT Analysis in of itself will not give specific answers. You should use the SWOT Analysis in developing a sound business plan and strategy. This analysis should involve as many key company employees as possible, where by each individual writes down their his or her perceptions of the company's internal strengths and weaknesses, and external opportunities and threats. Once completed, analyze, prioritize, and plan a course of action. Strengths are the company's core competencies and include proprietary technology skills, resources, market position, patents, and others. Examples of Internal Strengths include:
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Key competencies / skill levels Market reputation Financial resource levels Technology advancements Economies of scale Product innovation Cost advantages Relative experience Proven management Competitive advantage Growing market Talented personnel

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Weaknesses are conditions within the company that can lead to poor performance such as house obsolete equipment, no clear strategy, heavy debt burden, poor product or market image, weak management, and others. Examples of Internal Weaknesses include:
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No strategic plan Poor financial condition Under-staffed or over-staffed Insufficient market strategy Wrong combination of personal skills Decreased profitability Obsolete resources Inadequate knowledge systems Out-dated product line Limited distribution network Poor marketing materials

External opportunities are outside conditions or circumstances that the company could turn into its advantages. , andThese opportunities could include a specialty niche skill or technology that suddenly realizes a growth in broad market interest. Examples of External Opportunities include:
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Skills transferable to new products / business Product expansion / revision that meets new market demand Increasing Customer demand levels increasing New technologies that create more opportunities Expanded vertical market channels Expanded horizontal market channels Global sales opportunities Changes in tax structure Increased demand that serves increased capacity Changing Competitive environment changing Rival business experiencing problems Strategic partnering that leads to more sales

External threats are current or future conditions in the outside environment that may harm the company. These threats might include population shifts, changes in purchasing preference, new technologies, changes in governmental or environmental regulations, or an increase in competition. Examples of External Threats include:
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Increased competition Declining demand Introduction of substitute products Adverse trade policies New trade regulations Strike in work force Economic downturn or recession Changing market or demand

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Demographic fluctuations Increased customer bargaining power Increased supplier costs Competitor pulling away employees away Untrained employment pool

Building a Better Business Plan

A thorough and well-drafted business plan documents the process and information you need to manage the growth and expansion of your business. The plan should answer several questions in order for it to be effective. Your business plan should begin with a business description and overview. This section will answer questions like:
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What business am I in? What are my company's products, services, and markets? What makes my business unique? What are the company's goals and objectives? How will the company resolve the most threatening problems that may arise?

Your business plan should also include a description of products and services. This section will answer questions like:
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What does my business sell and plan to sell? How do these products and services benefit the customer? What makes these products and services unique?

The sales and marketing section of your business plan should answer:
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Who are my customers? What are my customers' likes, dislikes, needs, and expectations? Who is the company competing with? What is my competitor's pricing strategy? What new markets will you try to enter? What is the most effective way to promote your products and services? How do you plan to expand your business?

Also included in your business plan should be a section on operating requirements. This section will answer the following:
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How is the business managed day-to day? What are the company's hiring and personnel policies? Should the company rent or own its facilities? What equipment is necessary to produce the company's products and services? How will you get your products and services conveniently and efficiently to your customers?

In addition, your business plan should also include a section on financial management that will answer the questions:

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How do you plan to finance the business's expansion? Are the company's financial projections realistic? Does the company's financial projections include a sales forecast, cash flow projections, projected income statement, break-even analysis and a balance sheet? How do your company financials compare with your peer group?

In conclusion, a final section that should be included your business plan is a management profile. This will answer:
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Who are the owners of the company and who are its key employees? What skills do the key employees possess? How will you restructure the business to adapt to a changing market environment?

Steps to Developing a Comprehensive Financial Plan

An important part of the business plan involves financial planning. Developing a solid financial plan is crucial for success. There are seven preliminary recommendations (steps) that a firm can take to begin to develop a better financial plan. Each step of the way be sure to address your weaknesses and threats as well as your strengths and opportunities. The seven steps a firm can take to develop a better financial plan are:

1. 2. 3. 4. 5. 6. 7.

Identify needs for funds and determine how much money is needed. Identify the type and sources of money needed. Schedule when the money is needed, and as necessary prioritize your needs. Develop or refine your financing plan to address contingencies and the unexpected. Review your financing plan to address the requirements of potential lenders and investors. Make sure your plan provides a clear statement of the strategies and actions to generate enough cash to repay any loans. Identify and talk to lenders and investors that target small businesses.

Who Are the Right People to Talk to for Assistance?

It is very important to do your homework first. Know your market. Once you have the market information you will need to be successful, there are several steps you must take in order to find the right people to talk to for assistance. Here are the steps you need to take to get started:

1. Visit the customer groups and trade associations that are most likely to buy your products and 2. 3. 4. 5.
service. Call the SBA help desk. Visit the SBA web page for SBA resources. Meet with your banker. Meet with your accountant.

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Visit your nearest SBA district office. Visit your nearest Business Information Center (BIC). Contact a Small Business Development Center (SBDC) counselor. Contact a SCORE counselor.

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Check Your Understanding

Now that you have learned about how to assess your small business, let's check your understanding. You will be presented with a series of multiple choice questions. Simply click on the correct answer to each. Good luck! (1) The main purpose of conducting an assessment of your business is to:

A. B. C. D.

Raise capital for your business Develop biographical information on all principals of your business Clearly define your company's products and services Determine a destination for your business and develop a plan for getting there

(Answer)

(2) Conducting an assessment of your business involves:

A. Determining where your business stands today B. Determining exactly what you want your business to accomplish in the C. D.
future Developing a plan for achieving your company's goals All of the above

(Answer)

(3) Which of the following items is a component of a good business plan?

A. B. C. D.

Operating requirements Description of the location / demographics Employee benefits All of the above

(Answer)

(4) Which of the following items is required to develop a better financial plan?

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A. B. C. D.

Identify your target market Consider employee lay-offs Prioritize your needs Research other companies

(Answer)

(5) Evaluating "where you are" primarily involves:

A. Continually reassessing your assumptions about your business, its

performance, and other aspects

B. Meeting with your accountant and discussing the profitability of your C. D.

business Determining the market share of your company's products and services Reviewing and updating your company's business plan

(Answer)

(6) Which of the following individuals can give you assistance with your action plan:

A. B. C. D.

Your former co-workers Your banker Your lawyer Your local state representative

(Answer)

(7) When analyzing your business and its environment, it is useful to carefully inspect its:

A. B. C. D.

Threats Strengths and weaknesses Opportunities All of the above

(Answer)

(8) Which of the following is an example of an internal strength?

A. Obsolete resources B. Changing tax structure

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C. Proven management D. Increased competition

(Answer)

(9) Which of the following is an example of an external threat?

A. B. C. D.

Decreased competition New trade regulations Global sales potential Economies of scale

(Answer)

(10) Which of the following is a step you can take to get started?

A. B. C. D.

Prioritize your needs for funds Refine and update your business plan Identify a competitive advantage Call the SBA help desk

(Answer)

You have now completed the course on self-assessment. As you have learned, the assessment process can help you focus your attention and efforts in order to grow and expand your business. Remember, to grow and develop a successful small business, it is important to examine your business on a regular basis. Once you have completed this analysis, review it with an SBA representative or one of our resource partners. Good luck!

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