Build A Practical Business Plan Handout

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Many small businesses don't have a business plan because it seems too complicated to build one and then it is too complicated to actually use. They need a more simple method and a practical planning process that they will actually use to run the business. Most books and templates for building a business plan are overwhelming in the information they need. Learn to filter down to the necessary planning items you need to run your business, a practical business plan that you will use. - Defining the market for your business - Evaluate changing market conditions - Create a practical business plan for daily decisions
  • 1. 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 Provided by Sigma College of Small Business, Inc.
  • 2. Building a Practical Business Plan for Your 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. Copyright 2010 Sigma College of Small Business 3
  • 3. Building a Practical Business Plan for Your Business 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. Copyright 2010 Sigma College of Small Business 4
  • 4. Building a Practical Business Plan for Your Business 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 Types of Business Plans The real guts of a Business Business Management Plans Management Plan are the • Used to run the business actions that are created and • Communicates business   assigned. This is the execu- Investor Plans decisions to managers tion part of the planning proc- • Communicate business  • Process for guiding business  concept to others decisions ess and is essential for suc- • Primarily to raise capital – Consolidates information cess. As a business owner – Facilitates decision making – Debt or Equity and leader, it is your job to – Find Partners – Decision history and reasoning make sure these actions are • Selling “The Business” – Execution • Links actions to completed—this will signifi- – Not necessarily the  desired cantly improve your chances product outcomes for success. Get Money    vs.    Make Money Build a Practical Business Plan for Your Business 7 Copyright 2010 Sigma College of Small Business, Inc. Copyright 2010 Sigma College of Small Business 5
  • 5. Building a Practical Business Plan for Your Business 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. Copyright 2010 Sigma College of Small Business 6
  • 6. Building a Practical Business Plan for Your Business 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: ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ The buyers and users who have this need are: ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ The current product/service that we deliver is: ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ Do the market need and product/service match? Can the match be improved? ___________________________________________________________________ ___________________________________________________________________ ___________________________________________________________________ Required Actions: ____________________________ 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 ____________________________ Build a Practical Business Plan for Your Business 10 Copyright 2010 Sigma College of Small Business, Inc. Copyright 2010 Sigma College of Small Business 7
  • 7. Building a Practical Business Plan for Your Business 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? ___________________________________________________________________ ___________________________________________________________________ How can I increase the value of this opportunity? ___________________________________________________________________ ___________________________________________________________________ Required Actions: ____________________________ Budget ____________________________ • Revenue ____________________________ – Market Potential Approach ____________________________ – Break Even Approach ____________________________ • Expenses ____________________________ – Cost to build ____________________________ – Cost to market, sell and  manage ____________________________ • Cash Flow ____________________________ • Profitability ____________________________ Build a Practical Business Plan for Your Business 11 Copyright 2010 Sigma College of Small Business, Inc. Copyright 2010 Sigma College of Small Business 8
  • 8. Building a Practical Business Plan for Your Business Marketing and Sales How will the product be packaged? (Size, hours, project, square feet, etc…) ___________________________________________________________________ ___________________________________________________________________ What is the price per unit of packaging? ___________________________________________________________________ ___________________________________________________________________ What specific VALUE does your product deliver to buyers and users? ___________________________________________________________________ ___________________________________________________________________ What makes your product DIFFERENT from competitors? ___________________________________________________________________ ___________________________________________________________________ Based on my value and differentiation, my message is: ___________________________________________________________________ ___________________________________________________________________ What are the best methods and media to reach my buyers and users? ___________________________________________________________________ ___________________________________________________________________ Required Actions: 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 ____________________________ Build a Practical Business Plan for Your Business 12 Copyright 2010 Sigma College of Small Business, Inc. Copyright 2010 Sigma College of Small Business 9
  • 9. Building a Practical Business Plan for Your Business 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. Copyright 2010 Sigma College of Small Business 10
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