How to Write a Business Plan

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How to Write a Business Plan

• Presenter
• Telaekah Brooks, JD
• Dean, School of Professional Studies
• Trinity Washington University

2
What is a Business Plan ?

• A road map
• A dynamic, living document that describes who you
  are, what you sell, how much money you will need,
  who will work for you, and so on.
• Business plans often include strategies for
  expansion or risk.

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Why Develop a Business Plan ?

• The process of putting a business plan together,
  including the thought you put in before you write
  it, forces you to take an objective, critical,
  emotional look at your business project in its
  entirety.
• The finished product is an operating tool which,
  if properly used will help you manage your
  business and work effectively toward its success.
• The completed business plan communicates your
  ideas to others and provides the basis for
  corporate buy-in and ownership.

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BUSINESS PLAN FORMAT What is the correct model ?
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The Three Basic Sections of a Business Plan

• Description of the business
• Marketing
• Financials

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1. Description of Your Business

• Mission Statement
• Legal Structure
• Products services
• Location
• Management personnel
• Insurance
• Taxes
• Security
• Recordkeeping

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Mission Statement

• Your mission statement states, in the
  broadest terms possible, what your business hopes
  to be and do. To help people work more
  efficiently and comfortably, or To provide
  healthy, energizing juices, or To take the
  anxiety out of tax preparation.

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Mission Statement Exercise

• In just a few sentences the mission statement
  should communicate the essence of your company to
  both your stakeholders and to the public.
• What values would you like your business have?
• What is the purpose of your business?
• What is your vision for the future of your
  business?
• Mission Statement (50 words or less)

9
Legal Structure

• Sole Proprietorship
• Partnerships
• General Partnerships
• Limited Partnerships
• Limited Liability Company
• Corporations
• S Type Corporations
• C Type Corporations

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Sole Proprietorships

• In a sole proprietorship, you have all of the
  control and all of the liability. It is the
  easiest to start, and usually does not require
  significant licensure. You run the show and keep
  the money.
• Major Downside You are completely, 100
  personally liable if something goes wrong.

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General Partnerships

• General Partnerships
• These are relatively easy to start by requiring
  only 2 or more people. This type of business
  requires little licensure and is easy to run.
• All partners share in the management of the
  business, the profits, and the personal
  liability.
• Major Downside You can be liable for the actions
  of your partner, and it is sometimes difficult to
  manage disputes.

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Limited Partners

• Limited Partnerships
• Limited Partnerships are a little more
  complicated to start and do require some
  incorporation in most states.
• Though you can start an LP with just 2 people,
  there is a catch
• At least one partner is limited and one is
  general. The limited partner is like a silent
  partner- they get to avoid most liability, but
  have to give up management control to get it.
• The general partner has management control- and
  is fully liable if something goes wrong.
• Major Downside It is hard for limited partners
  to resist the urge to manage.

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Limited Liability Companies

• LLCs were designed to provide you with the best
  of two worlds
• The flexibility and ease of ownership found in a
  sole proprietorship
• And, the restricted personal liability of a
  corporation.
• These can be started with just one owner/member
  and little investment. They do require
  incorporation in most states.
• Major Downside More complicated than a sole
  proprietorship- but the restricted liability can
  be worth it.

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Corporations

• S Type Corporations
• These require formal incorporation in every
  state.
• You are required to have a Board of Directors,
  which sets policy and controls the President of
  the corporation.
• It can be a complicated process, Board members
  and Officers have little personal liability, and
  shareholders are taxed on dividends.
• Major Downside Most small business owners try to
  run corporations like sole proprietorship-
  forgetting to keep good corporate records and
  buy ownership in their business.

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More on Corporations

• C Type Corporations
• This type of structure also requires formal
  incorporation in all states.
• This is the most complex business structure,
  which is subject to stricter regulations by the
  govt.
• Though the personal liability of owners is
  shielded, there is not total protection against
  lawsuits.
• Shareholders, Board members, and officers run the
  business
• Major Downside Complicated management structure,
  double taxation on earnings.

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Product Services

• Most businesses are built around products and/or
  services already available. A fish market for
  example has a simply described product line
  (seafood) the service element involves how they
  process the product and satisfy their customers.
• If your products or services are unique,
  state-of-the-art, or otherwise noteworthy, take
  advantage of it. Such differentiation is
  valuable, tends to be fleeting, and attracts
  imitators.

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Products Services contd

• The Internet has a wealth of information that can
  lead you to better understand your product or
  service and its place in the market.
• Using Google.com to search for Maine seafood
  yielded 51,900 responses. Dont faintof the
  51,900 responses only the first 20 had much to
  offer, including descriptions of seafood
  products, services, and trade association
  studies. A search for Maine seafood retail
  yielded a mere 4,780 sites. Some of the other
  sites observed were very specific seafood
  retailers (from everywhere, even though Maine
  was a qualifier) with a description of their
  prices and products. Some were general
  aquaculture.
• A general rule for conducting a Web search is to
  make your descriptors as specific as possible.
  This will give you more useful results.

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Location

• Factors to consider
• Type of building
• Organization of space
• Parking
• Transportation accessibility
• Traffic
• Community residents
• Target Market
• Incentives

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Space

• Plan your space
• How much space should you set aside for offices?
  How much storage do you need?
• How will you utilize your storefront? What about
  signage?
• How much display space do you need?
• Lets talk basic consumer economics

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Management Personnel

• About your principals
• Business Background
• Management Experience
• Educational Background
• About your staff
• Types of staff you will need
• Duties and responsibilities
• Policies and procedures (employee handbook)

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Personnel Cont

• Timesheets
• Work Schedules
• Classes of employees
• Pay rates/tables
• Full- time vs. part- time vs. independent
  contractor
• Benefits

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Insurance

• General Business Liability Insurance
• Workmens Compensation
• Bonding
• Performance bonds
• Tender bonds

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General Liability Insurance

• A Commercial General Liability (CGL) insurance
  policy is the first line of defense against many
  common claims. General Liability insurance
  covers claims of bodily injury or other physical
  injury or property damage. It is frequently
  offered in a package with Property insurance to
  protect your business against incidents which may
  occur on your premises or at other covered
  locations where you normally conduct business.
  Commercial General Liability enables your
  business to continue operations while it faces
  real or fraudulent claims of certain types of
  negligence or wrongdoing.

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Workmens Compensation

• This insurance protects you, the business owner,
  from financial devastation in the event that an
  employee is injured on the job. It also helps the
  employee return to work with little or no loss of
  income. It provides
• Legal protection for the business owner
• Income, medical and rehab benefits for employee
  work-related injuries
• Payment to surviving family members if your
  employee is fatally injured on the job
• Employers liability insurance (including damages
  due to a third party) for care and loss of
  services for consequential body injury to a
  family member

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Bonds

• Performance Bonds
• Most capital works projects require this type of
  bond.
• This bond is an indicator that your company has
  the necessary skills and capabilities to carry
  out the required work and comply with the terms
  of the contract.
• Tender Bonds
• Bid or Tender bonds provide a financial fallback
  for the contracting agency in the event that you
  are unable to finish the contract.

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Taxes

• Corporate franchise tax
• In most states, your business will have to pay
  corporate income taxes on income made in that
  state. Rates will vary based upon location
• Sales and Use Taxes
• The general rule here is that you must pay sales
  tax for all retail products that you sell. You
  can usually elect to pay monthly or quarterly.
• Personal Property Tax
• Many states require you to pay taxes on the
  aggregate value of your business possessions.
• Employer Taxes
• Some can be deducted from the gross salaries of
  your employees- withholding taxes
• Some come out of your pocket

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Security

• Facilities equipment
• Security of employees
• Intellectual property
• Client records and business files
• Personnel records
• Internet/network security

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Recordkeeping

• Database managements
• Filing systems and procedures
• Reporting mechanisms
• Manual vs. automated
• Software usage

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2. Marketing

• Who are your customers?
• What benefits do you provide them?
• How many are there?
• How many do you need?
• What are there current buying patterns?
• Where do they currently buy?
• How will they know about you?
• What are your major risks and opportunities?

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Your Target Market

• For Individuals Age Gender Race and
  ethnic group Hobbies Lifestyle Reading,
  listening, and viewing patterns (newspapers,
  magazines, TV, radio) Education Social
  class Occupation Income level Family
  life cycle

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Competition

• Who are your five nearest competitors?
• How is their business? Steady, increasing,
  decreasing?
• What are the similarities and differences between
  their business and yours?
• What have you learned from watching their
  business? What works for them and what doesnt?
• How will your operation be better than theirs?

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Your Industry

• Background Industry Information
• Current/Future Trends
• The Business Fit in the Industry

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Marketing Strategies

• Advertising
• Print
• Radio
• Television
• Promotion
• Design of Materials
• Pricing
• Press Relations

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Risk and OpportunitiesA SWOT Analysis may be
helpful in identifying Risks and Opportunities
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SWOT Analysis (your organizations major
Strengths and Weaknesses, and the most important
Opportunities and Threats internal to your
organization).
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Sample SWOT

• Factor Strength Weakness
• Quality X
• Training X
• Capital X
• Management X
• Operations X
• Production X
• Staff X

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CONTD

• Factor Opportunities
  Threats
• Customer Base X
• Competition X
• Technology X
• Political Climate
  X
• Regulatory Bodies X
• Economic Environment
  X
• Legal
  X

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3. Financials

• How much capital do you need?
• How can you maintain cash flow and Liquidity?
• How much working capital do you need?
• What kind of budgets should you follow?
• How can you control your finances?
• How much growth can you afford?

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Financials

• Uses and Sources
• Profit Loss Statements
• Income Statement
• Balance Sheet
• Cash Flow Projections
• Break Even Analysis
• Start Up Costs

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The Balance Sheet

• The balance sheet show the businesss financial
  situation on a given day only. The formula for
  the balance sheet is
• Assets Liabilities Owners equity
• Assets are economic resources owned by the
  business, purchased with the funds supplied by
  creditors or owners.
• Liabilities are amounts owned by the business to
  creditors. Owner's equity is amounts owned by the
  business to
• the owners.

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Break-Even AnalysisA. Total sales
_______B. Fixed costs _______C.
Gross margin _______D. Gross margin
as sales (CA)
_______E. Break-Even Sales (BD) _______F.
Profit goals _______G. Sales required to
reach profit goal may be calculated
(BF)D _______
Operating Expenses
Fixed Salaries Payroll Benefits Utilities Licenses
Insures Advertising Office Supplies Legal
Accounting Maintenance Cleaning Depreciation Int
erest
Variable Sales Commissions Boxes, Paper,
Etc. Travel for Sales Overtime Personnel
Extra Labor for Manufacturing Freight Out Etc.
Both Postage Telephone Etc.
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Cash Flow Projections

• Plot out the revenue that you are expecting to
  come in over a 12-month schedule
• Plot out your expected expenses over the same
  period
• Make sure to include stable monthly expenses
  (utilities, rent, etc) and contract receivables

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Business Plan Checklist

• Prepare Objectives and Mission
• ?Growth plan description
• ? Stage of development
• ? Mission Statement
• ? Objectives
• Prepare Background Information
• ? Industry analysis and trends
• ? The business fit in the industry
• Design the Organization
• ? Business structure
• ? Management
• ? Personnel
• ? Outside services/advisors
• ? Risk management
• ? Operating controls
• Prepare the Marketing Plan

Compile the financial Plan ? Financial
worksheets ? Cash flow projections ? Financial
statements ? Additional financial
information Assemble Appendices ? Timetable ?
Supporting documents Write Executive Summary ?
Analyze target readers (investors/leaders) and
write accordingly ? Consolidate and summarize all
accumulate data ? Adjust original business
concept as needed Finishing Touches ? Proofread
and edit document ? Create/collect graphs,
charts, and photographs ? Reread entire business
plan ? Determine overall feasibility of plan ?
Give plan to friends, advisors, or family for
review ? Make changes as necessary
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Business Resources

• US Small Business Administration (www.sba.gov)
• Service Corps of Retired Executives
  (www.score.org)
• Maryland State Department of Assessments and
  Taxation Corporate Charter Division Telephone
  (410) 767- 1340 http//www.dat.state.md.us

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Marketing Resources

• 1. American Demographics, the monthly magazine,
  has an excellent home page at ltwww.marketingtools.
  comgt. American Demographics is the magazine of
  record for demographic research. They make using
  census data simple and effective.
• 2. Princeton Universitys Survey Research Center
  home page ltwww.princeton.edu/abelsonf
  index.htmlgt is a must-visit. It contains a number
  of links to other sites, and is of value in
  itself.
• 3. The National SBDC Research Network home page
  ltwww.smallbiz.suny.edu/gt is your entry into the
  SBDCs extraordinary wealth of information.
• 4. SCORE On Line ltwww.score.orggt has one-on-one
  marketing research advice as well as plenty of
  helpful links.
• 5. Hoovers Online (The ultimate source of
  information on businesses) is terrific for
  getting financial information on publicly traded
  companies ltwww.hoovers.com/gt

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Contact Information

• Telaekah Brooks, JD
• Dean, School of Professional Studies
• Trinity Washington University
• [phone]
• brookste_at_trinitydc.edu