BUS PLAN 3

8/7/2019 BUS PLAN 3

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Business Plan BasicsBusiness Plan Basics

Maria I. Marshall, Ph.D.Maria I. Marshall, Ph.D.

Department of Agricultural EconomicsDepartment of Agricultural Economics

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OverviewOverview

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OverviewOverview

What is a business plan?What is a business plan?

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OverviewOverview


What are the key elements of a businessWhat are the key elements of a business

plan?plan?

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OverviewOverview



plan?plan?

What are the three tests must it pass?What are the three tests must it pass?

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OverviewOverview



plan?plan?

What are the three tests must it pass?What are the three tests must it pass? What are some free resources?What are some free resources?

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A Business Plan IsA Business Plan Is……

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a systematic evaluation of a venturea systematic evaluation of a venture’’ss

chances for success.chances for success.

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chances for success.chances for success. a way to determine the risks facing aa way to determine the risks facing a

venture.venture.

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venture.venture.

a game plan for managing a businessa game plan for managing a businesssuccessfully.successfully.

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venture.venture.


a tool for comparing actual and targeta tool for comparing actual and targetresults.results.

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venture.venture.


a tool for comparing actual and targeta tool for comparing actual and targetresults.results.

an important tool for attracting capital.an important tool for attracting capital.

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The Business Plan:The Business Plan:

Two Essential FunctionsTwo Essential Functions

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Two Essential FunctionsTwo Essential Functions Business planBusiness plan – – a written summary of:a written summary of:

– – an entrepreneuran entrepreneur’’s proposed business venture.s proposed business venture.– – its operational and financial details.its operational and financial details.

– – its marketing opportunities and strategy.its marketing opportunities and strategy.

– – its managersits managers’’ skills and abilities.skills and abilities.

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Two Essential FunctionsTwo Essential Functions Business planBusiness plan – – a written summary of:a written summary of:

– – an entrepreneuran entrepreneur’’s proposed business venture.s proposed business venture.– – its operational and financial details.its operational and financial details.

– – its marketing opportunities and strategy.its marketing opportunities and strategy.

– – its managersits managers’’ skills and abilities.skills and abilities. It serves two essential functions:It serves two essential functions:

– – Guiding the company by charting its future course andGuiding the company by charting its future course and

defining its strategy for following it.defining its strategy for following it.– – Attracting lenders and investors who will provideAttracting lenders and investors who will provide

needed capital.needed capital.

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The Business PlanThe Business Plan

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A plan is a reflection of its creator.A plan is a reflection of its creator.

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Realization that a business idea just wonRealization that a business idea just won’’tt

work.work.

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Realization that a business idea just wonRealization that a business idea just won’’tt

work.work.

The real value is in theThe real value is in the process process of creating it.of creating it.

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Why Take the Time toWhy Take the Time to

Build a Business Plan?Build a Business Plan?

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Although building a plan doesAlthough building a plan doesnot guarantee success, itnot guarantee success, it does does

increase your chances ofincrease your chances of

succeeding in business.succeeding in business.

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Although building a plan doesAlthough building a plan doesnot guarantee success, itnot guarantee success, it does does

increase your chances ofincrease your chances of

succeeding in business.succeeding in business. A plan is like a road map.A plan is like a road map.

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Key Elements of a Business Plan:Key Elements of a Business Plan:

The Executive SummaryThe Executive Summary

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Summary of all the relevant parts of theSummary of all the relevant parts of the

business.business.

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business.business.

Maximum of 2 pages.Maximum of 2 pages.

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business.business.


Anyone should be able to understand theAnyone should be able to understand theentire business concept and the companyentire business concept and the company’’ss

competitive advantage.competitive advantage.

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business.business.


Anyone should be able to understand theAnyone should be able to understand theentire business concept and the companyentire business concept and the company’’ss

competitive advantage.competitive advantage.

““the elevator pitchthe elevator pitch””

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Mission StatementMission Statement

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EntrepreneurEntrepreneur’’s vision of what the companys vision of what the company

is, what it is to become, and what it standsis, what it is to become, and what it standsfor.for.

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EntrepreneurEntrepreneur’’s vision of what the companys vision of what the company

is, what it is to become, and what it standsis, what it is to become, and what it standsfor.for.

Broadest expression of a companyBroadest expression of a company’’sspurpose and defines the direction in which itpurpose and defines the direction in which it

will move.will move.

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Business and Industry ProfileBusiness and Industry Profile

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CompanyCompany’’s general business goals and itss general business goals and its

immediate objectives.immediate objectives.

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immediate objectives.immediate objectives. Industry AnalysisIndustry Analysis

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Ease of entry and exit, economies of scale/scope,Ease of entry and exit, economies of scale/scope,

economic trendseconomic trends– – Summary of Commentary on Current Economic Summary of Commentary on Current Economic

Conditions.Conditions.

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Ease of entry and exit, economies of scale/scope,Ease of entry and exit, economies of scale/scope,

economic trendseconomic trends– – Summary of Commentary on Current Economic Summary of Commentary on Current Economic

Conditions.Conditions.

Provide information on the existing and anticipatedProvide information on the existing and anticipated

profitability of competing firms.profitability of competing firms.

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Business StrategyBusiness Strategy

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Explain how you plan to gain a competitive edge inExplain how you plan to gain a competitive edge in

the market and what sets your business apart fromthe market and what sets your business apart fromthe competition.the competition.

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How you plan to meet goals and objectives in theHow you plan to meet goals and objectives in the

face of competition and government regulations.face of competition and government regulations.

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How you plan to meet goals and objectives in theHow you plan to meet goals and objectives in the

face of competition and government regulations.face of competition and government regulations. Identify the image the business will project.Identify the image the business will project.

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Description of Product/ServiceDescription of Product/Service

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Explain how customers will use product orExplain how customers will use product or

service.service.

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service.service. Indicate productIndicate product’’s position in the product lifes position in the product life

cycle.cycle.

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cycle.cycle.

Summary of patents, trademarks, orSummary of patents, trademarks, orcopyrights protecting the product/service.copyrights protecting the product/service.

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cycle.cycle.

Summary of patents, trademarks, orSummary of patents, trademarks, orcopyrights protecting the product/service.copyrights protecting the product/service.

Focus on customer benefit, not just aFocus on customer benefit, not just adetailed list of the productdetailed list of the product’’s features.s features.

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Marketing StrategyMarketing Strategy

K El f B i Pl

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Prove that a profitable market existsProve that a profitable market exists

– – Show customer interestShow customer interest

– – Document market claimsDocument market claims

K El f B i PlK El f B i Pl

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Prove that a profitable market existsProve that a profitable market exists

– – Show customer interestShow customer interest

– – Document market claimsDocument market claims

Show customer interestShow customer interest– – Prove that the target customers need orProve that the target customers need or

want the product/service and are willingwant the product/service and are willing

andand ableable to pay for them.to pay for them.

K El f B i PlK El t f B i Pl

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Competitor AnalysisCompetitor Analysis

K El t f B i PlK El t f B i Pl

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Provide information on competitorsProvide information on competitors’’ marketmarket

shares, products, and strategies.shares, products, and strategies.

K El t f B i PlK El t f B i Pl

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Provide information on competitorsProvide information on competitors’’ marketmarket

shares, products, and strategies.shares, products, and strategies. Demonstrate that your company has anDemonstrate that your company has an

advantage over its competitors.advantage over its competitors.

K El t f B i PlKey Elements of a Business Plan:

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OwnersOwners’’ and Managersand Managers’’ ResumesResumes


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Should include resume of anyone with atShould include resume of anyone with at

least a 20% ownership in the company.least a 20% ownership in the company.


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least a 20% ownership in the company.least a 20% ownership in the company. Show that the company has the right peopleShow that the company has the right people

organized in the right way.organized in the right way.


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least a 20% ownership in the company.least a 20% ownership in the company. Show that the company has the right peopleShow that the company has the right people

organized in the right way.organized in the right way.

Ideally, lenders look for managers with atIdeally, lenders look for managers with at

least 2 years of operating experience.least 2 years of operating experience.


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Plan of OperationPlan of Operation


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Construct an organizational chart.Construct an organizational chart.


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Describe incentives to keep key personnel.Describe incentives to keep key personnel.


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Describe incentives to keep key personnel.Describe incentives to keep key personnel.

Describe firmDescribe firm’’s form of ownership and anys form of ownership and any

leases, contracts, and other relevantleases, contracts, and other relevantagreements pertaining to the operation.agreements pertaining to the operation.


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Financial ForecastsFinancial Forecasts


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Financial ForecastsFinancial Forecasts Monthly pro forma financial statements for oneMonthly pro forma financial statements for one

year and by quarter for each of the next 2-3 years.year and by quarter for each of the next 2-3 years.– – Income statementIncome statement

– – Cash flow statementCash flow statement

– – Balance sheetBalance sheet


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Three sets of forecasts: optimistic, most likely, andThree sets of forecasts: optimistic, most likely, andpessimistic.pessimistic.


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Three sets of forecasts: optimistic, most likely, andThree sets of forecasts: optimistic, most likely, andpessimistic.pessimistic.

Include break-even analysis.Include break-even analysis.


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The Request for FundsThe Request for Funds


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The Request for FundsThe Request for Funds State the purpose of the loan or investment, theState the purpose of the loan or investment, the

amount requested, and the plans for repayment oramount requested, and the plans for repayment orcash-out.cash-out.


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Key Elements of a Business Plan:ey e e ts o a us ess a



Financial projection must reflect the firmFinancial projection must reflect the firm’’s ability tos ability to

repay loans to lenders and to produce adequaterepay loans to lenders and to produce adequateyields for investors.yields for investors.


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y s a s ss ay



Financial projection must reflect the firmFinancial projection must reflect the firm’’s ability tos ability to

repay loans to lenders and to produce adequaterepay loans to lenders and to produce adequateyields for investors.yields for investors.

Include an evaluation of the risks of the business.Include an evaluation of the risks of the business.

Tips on Preparing a BusinessTips on Preparing a Business

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p p gp p g

PlanPlan


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p p gp p g

PlanPlan Rid your plan of all spelling and grammaticalRid your plan of all spelling and grammatical

errors.errors.


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errors.errors. Make your plan visually appealing.Make your plan visually appealing.


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Leave ampleLeave ample ““white spacewhite space”” in margins.in margins.


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Make sure your plan has an attractive cover.Make sure your plan has an attractive cover.


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Include a table of contents.Include a table of contents.


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Include a table of contents.Include a table of contents.

Write in a conversational style and useWrite in a conversational style and use

““bullets.bullets.””


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PlanPlan


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PlanPlan Support claims with facts and avoidSupport claims with facts and avoid

generalizations.generalizations.


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generalizations.generalizations. Avoid overusing industry jargon.Avoid overusing industry jargon.


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Make it interesting!Make it interesting!


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Use spreadsheets to generate financialUse spreadsheets to generate financial

forecasts.forecasts.


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Always Always include cash flow projections.include cash flow projections.


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Always Always include cash flow projections.include cash flow projections. Keep your planKeep your plan ““crispcrisp””

A Plan Must Pass Three TestsA Plan Must Pass Three Tests

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The Reality Test - The Reality Test - proving that:proving that:

– – a market really does exist for your product or service.a market really does exist for your product or service.

– – you can actually build it for the cost estimates in theyou can actually build it for the cost estimates in theplan.plan.


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The Competitive Test The Competitive Test - evaluates:- evaluates:

– – a companya company’’s position relative to its key competitors.s position relative to its key competitors.

– – managementmanagement’’s ability to create a company that wills ability to create a company that willgain an edge over its rivals.gain an edge over its rivals.


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The Competitive Test The Competitive Test - evaluates:- evaluates:

– – a companya company’’s position relative to its key competitors.s position relative to its key competitors.

– – managementmanagement’’s ability to create a company that wills ability to create a company that willgain an edge over its rivals.gain an edge over its rivals.

The Value Test - The Value Test - proving that:proving that:

– – it offers investors or lenders an attractive rate of returnit offers investors or lenders an attractive rate of returnor a high probability of repayment.or a high probability of repayment.

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Available Free ResourcesAvailable Free Resources

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Available Free ResourcesAvailable Free Resources Indiana Secretary of StateIndiana Secretary of State

– – An Entrepreneur's Guide to Starting A Business in IndianaAn Entrepreneur's Guide to Starting A Business in Indiana

www.in.gov/sos/business/corps/guidewww.in.gov/sos/business/corps/guide

A il bl F RA il bl F R

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www.in.gov/sos/business/corps/guidewww.in.gov/sos/business/corps/guide AccessIndiana AccessIndiana

– – www.in.gov/ai/business/ www.in.gov/ai/business/


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Small Business AdministrationSmall Business Administration

– – www.sba.govwww.sba.gov


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– – www.sba.govwww.sba.gov Small Business Development CenterSmall Business Development Center

– – www.isbdc.orgwww.isbdc.org


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– – www.sba.govwww.sba.gov Small Business Development CenterSmall Business Development Center

– – www.isbdc.orgwww.isbdc.org

New Ventures Team (Purdue University)New Ventures Team (Purdue University)– – www.agecon.purdue.edu/newventures/ www.agecon.purdue.edu/newventures/


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– –

www.sba.govwww.sba.gov

Small Business Development CenterSmall Business Development Center– – www.isbdc.orgwww.isbdc.org

New Ventures Team (Purdue University)New Ventures Team (Purdue University)– – www.agecon.purdue.edu/newventures/ www.agecon.purdue.edu/newventures/

U.S. Business AdvisorU.S. Business Advisor– – http:// http:// www.business.govwww.business.gov / /

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Documents

BUS PLAN 3