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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 – PowerPoint PPT presentation

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Title: How to Write a Business Plan


1
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.

3
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.

4
BUSINESS PLAN FORMAT What is the correct model ?
5
The Three Basic Sections of a Business Plan
  • Description of the business
  • Marketing
  • Financials

6
1. Description of Your Business
  • Mission Statement
  • Legal Structure
  • Products services
  • Location
  • Management personnel
  • Insurance
  • Taxes
  • Security
  • Recordkeeping

7
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.

8
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

10
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.

11
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.

12
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.

13
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.

14
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.

15
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.

16
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.

17
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.

18
Location
  • Factors to consider
  • Type of building
  • Organization of space
  • Parking
  • Transportation accessibility
  • Traffic
  • Community residents
  • Target Market
  • Incentives

19
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

20
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)

21
Personnel Cont
  • Timesheets
  • Work Schedules
  • Classes of employees
  • Pay rates/tables
  • Full- time vs. part- time vs. independent
    contractor
  • Benefits

22
Insurance
  • General Business Liability Insurance
  • Workmens Compensation
  • Bonding
  • Performance bonds
  • Tender bonds

23
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.

24
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

25
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.

26
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

27
Security
  • Facilities equipment
  • Security of employees
  • Intellectual property
  • Client records and business files
  • Personnel records
  • Internet/network security

28
Recordkeeping
  • Database managements
  • Filing systems and procedures
  • Reporting mechanisms
  • Manual vs. automated
  • Software usage

29
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?

30
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

31
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?

32
Your Industry
  • Background Industry Information
  • Current/Future Trends
  • The Business Fit in the Industry

33
Marketing Strategies
  • Advertising
  • Print
  • Radio
  • Television
  • Promotion
  • Design of Materials
  • Pricing
  • Press Relations

34
Risk and Opportunities A SWOT Analysis may be
helpful in identifying Risks and Opportunities
35
SWOT Analysis (your organizations major
Strengths and Weaknesses, and the most important
Opportunities and Threats internal to your
organization).
36
Sample SWOT
  • Factor Strength Weakness
  • Quality X
  • Training X
  • Capital X
  • Management X
  • Operations X
  • Production X
  • Staff X

37
CONTD
  • Factor Opportunities
    Threats
  • Customer Base X
  • Competition X
  • Technology X
  • Political Climate
    X
  • Regulatory Bodies X
  • Economic Environment
    X
  • Legal
    X

38
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?

39
Financials
  • Uses and Sources
  • Profit Loss Statements
  • Income Statement
  • Balance Sheet
  • Cash Flow Projections
  • Break Even Analysis
  • Start Up Costs

40
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.

41
Break-Even Analysis A. 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.
42
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

43
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
44
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

45
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

46
Contact Information
  • Telaekah Brooks, JD
  • Dean, School of Professional Studies
  • Trinity Washington University
  • (202) 884-9620
  • brookste_at_trinitydc.edu
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