PREPARING YOUR PREPARING YOUR BUSINESS PLANBUSINESS PLAN

Business Plan

- a written document that describes all aspects of your business venture. Including your:

• product or service• customers• competition• production and marketing methods• management team• financing

Overview of Your Business PlanOverview of Your Business Plan

- an ending result of all the ideas, goals, objectives, - an ending result of all the ideas, goals, objectives, research, analysis, thoughts, and schemes that you have research, analysis, thoughts, and schemes that you have put into production, that represent your intentions and all put into production, that represent your intentions and all aspects of your business venture.aspects of your business venture.

Why Develop a Business Plan?Why Develop a Business Plan?

1. For the internal evaluation of your business1. For the internal evaluation of your business

- as a checklist to see that you have covered all - as a checklist to see that you have covered all the the important bases and as a timetable for important bases and as a timetable for accomplishing your stated objectives accomplishing your stated objectives

2. For external use2. For external use

- in attracting resources and obtaining support for - in attracting resources and obtaining support for your venture your venture

Cont’d Why develop a business plan?Cont’d Why develop a business plan?

Internal PerspectiveInternal Perspective

1. Can be used to inform 1. Can be used to inform employees about the goals employees about the goals and direction of your businessand direction of your business

2. Lets everyone know how 2. Lets everyone know how they fit into the organization, they fit into the organization, and your expectations of themand your expectations of them

3. Helps you develop as a manager3. Helps you develop as a manager

4. Requires you to deal with 4. Requires you to deal with problems like competitive problems like competitive conditions, promotional conditions, promotional opportunities, and other situations opportunities, and other situations that you will be confronted withthat you will be confronted with

External PerspectiveExternal Perspective

1. Can serve as an effective sales 1. Can serve as an effective sales document as part of the capital-document as part of the capital-raising processraising process

2. Allows external views such as 2. Allows external views such as bankers suppliers, customers, and bankers suppliers, customers, and investors see if you can pay back investors see if you can pay back their loans (principle plus interest)their loans (principle plus interest)

and if they can meet their and if they can meet their expected return on investment.expected return on investment.

Who Should Write Your Business PlanWho Should Write Your Business Plan

Do notDo not under any circumstances hire someone else to write under any circumstances hire someone else to write

the final plan for you. the final plan for you.

Its is quite difficult to defend someone else’s workIts is quite difficult to defend someone else’s work

You have a better understanding and feel for the You have a better understanding and feel for the businessbusiness

Should be a personal expression written in a uniqueShould be a personal expression written in a unique

style, but also professionally done.style, but also professionally done.

How Long Does it Take?How Long Does it Take?

- Actual time to create a business plan will vary in respect- Actual time to create a business plan will vary in respect

to the nature of your venture. Anywhere between a fewto the nature of your venture. Anywhere between a few

weeks to a few months.weeks to a few months.

- see table 10.1 and figure 10.1- see table 10.1 and figure 10.1

What Should Your Plan Contain?What Should Your Plan Contain?

- Plans require a formal, structured presentation so that they - Plans require a formal, structured presentation so that they are easy to read and follow, and avoids confusion.are easy to read and follow, and avoids confusion.

There are 6 components that a business plan should contain:There are 6 components that a business plan should contain:

1. Letter of Transmittal1. Letter of Transmittal

2. Title Page2. Title Page

3. Table of Contents3. Table of Contents

4. Executive Summary & Fact Sheet4. Executive Summary & Fact Sheet

5. Body5. Body

6. Appendixes6. Appendixes

1. Letter of Transmittal1. Letter of Transmittal

- Officially introduces your business plan to the reader. - Officially introduces your business plan to the reader.

- Explains reasoning to writing your plan- Explains reasoning to writing your plan

- Gives title of plan, or name of business- Gives title of plan, or name of business

- Outlines major features of plan- Outlines major features of plan

2. Title Page2. Title Page

- provides information that identifies you and your proposed - provides information that identifies you and your proposed business.business.

Should include:Should include:• NameName• AddressAddress• Date ( when finalized or submitted)Date ( when finalized or submitted)• Telephone Number (business and personal)Telephone Number (business and personal)

3. Table of Contents3. Table of Contents

- lists major headings and subheadings enclosed in plan.- lists major headings and subheadings enclosed in plan.

- provides readers with quick overview of the contents of - provides readers with quick overview of the contents of your plan, and allows them to quickly be able to retrieve your plan, and allows them to quickly be able to retrieve information that may be of particular interest to them.information that may be of particular interest to them.

4. Executive Summary and Fact Sheet4. Executive Summary and Fact Sheet

Summary SheetSummary Sheet1. Explains business status1. Explains business status2. Describes products / services and 2. Describes products / services and

their benefits to customerstheir benefits to customers3. provides overview of ventures 3. provides overview of ventures

objectives, market prospects, and objectives, market prospects, and financial forecastsfinancial forecasts

4. indicates amount of financing 4. indicates amount of financing needed, how money is usedneeded, how money is used

5. benefits to the lender / investor5. benefits to the lender / investor

Fact SheetFact Sheet1. Company name1. Company name2. Location and telephone2. Location and telephone3. Type of business & industry3. Type of business & industry4. Form of business organization 4. Form of business organization

(proprietorship, partnership, corporation)(proprietorship, partnership, corporation)5. Principle product or service line5. Principle product or service line6. Registered patents or trademarks6. Registered patents or trademarks7. Number and name of 7. Number and name of

founders/partners/shareholdersfounders/partners/shareholders8. Length of time in business8. Length of time in business9. Current and/or projected market share9. Current and/or projected market share10. Funds invested business to date and their 10. Funds invested business to date and their

sourcesource11. Additional financing required11. Additional financing required12. Proposed terms and payback period12. Proposed terms and payback period13. Total value or net worth of business13. Total value or net worth of business14. Name of business advisors (legal counsel, 14. Name of business advisors (legal counsel,

accountants, etc)accountants, etc)

- must capture readers attention, stimulate interest - must capture readers attention, stimulate interest - approximately 2-3 pages in length- approximately 2-3 pages in length

5. Body5. Body- Longest component; detailed story of business proposition- Longest component; detailed story of business proposition- broken into major divisions using headings, and subheadings- broken into major divisions using headings, and subheadings

Material that should be included in the body of plan:Material that should be included in the body of plan:1. Your Company1. Your Company2. The Industry2. The Industry3. Your product / service offering3. Your product / service offering4. Market Analysis4. Market Analysis5. Your Marketing Plan5. Your Marketing Plan6. Your Development Plan6. Your Development Plan7. Your Production / Operations Plan7. Your Production / Operations Plan8. Your Management Team8. Your Management Team9. Implementation Schedule and Risks Associated with the Venture9. Implementation Schedule and Risks Associated with the Venture10. Your Financial Plan10. Your Financial Plan11. Appendixes11. Appendixes12. Conclusion12. Conclusion

Your CompanyYour Company

BackgroundBackground - date business started, form of organization, - date business started, form of organization, location, historical information. location, historical information.

- name founders, other key people- name founders, other key people

- explain how products/services are chosen - explain how products/services are chosen and developed and developed

- achievements of business- achievements of business

Current SituationCurrent Situation – discuss how you identified market opportunity, – discuss how you identified market opportunity, assessed competition, and developed some assessed competition, and developed some unique factor unique factor

Future Plans Future Plans – discuss goals and ambitions of business, and how you – discuss goals and ambitions of business, and how you achieved them achieved them

The IndustryThe IndustryPrinciple CharacteristicsPrinciple Characteristics – – Describe status and prospects for industryDescribe status and prospects for industry- How big is industry? Total sales and units ($)? - How big is industry? Total sales and units ($)? - What are the industry standards? Gross margins? Seasonal patterns - What are the industry standards? Gross margins? Seasonal patterns and similar factors?and similar factors?

Major ParticipantsMajor Participants- identify the role market share and performance measures, strengths- identify the role market share and performance measures, strengths and weaknesses of major industry participantsand weaknesses of major industry participants

Industry TrendsIndustry Trends- Discuss how you feel the industry will evolve in the future. Growing? - Discuss how you feel the industry will evolve in the future. Growing?

Stable?Stable?- How will industry be affected by economic, social, technological, - How will industry be affected by economic, social, technological,

environmental and regulatory trends?environmental and regulatory trends?

Product / Service OfferingProduct / Service Offering

DescriptionDescription

- in detail describe product / service. Its characteristics, and advantages - in detail describe product / service. Its characteristics, and advantages over competitors. Indicate what stage of development product is over competitors. Indicate what stage of development product is currently at. Prototypes? Working models? Finished units available? currently at. Prototypes? Working models? Finished units available? Photographs available?Photographs available?

Proprietary PositionProprietary Position – describe patents, trademarks, licensing – describe patents, trademarks, licensing agreements, legal contracts, that you have or applied for. Lists agreements, legal contracts, that you have or applied for. Lists regulatory or government standards product must meet, and if you have regulatory or government standards product must meet, and if you have how or when you will obtain thishow or when you will obtain this

PotentialPotential – Outline market opportunity, and your advantages of it – Outline market opportunity, and your advantages of it

List and explain how you plan to exploit key success List and explain how you plan to exploit key success

factors of business to your advantagefactors of business to your advantage

Market AnalysisMarket Analysis

- describe total market and how you feel it can be broken - describe total market and how you feel it can be broken down into segments. Indicate segment you plan to down into segments. Indicate segment you plan to concentrate on, and what share the business will obtain.concentrate on, and what share the business will obtain.

1. Market studies available from private research firms and 1. Market studies available from private research firms and government departments and agencies government departments and agencies

2. Statistics Canada or U.S. Bureau of the Census data2. Statistics Canada or U.S. Bureau of the Census data

3. Information from trade associations and trade 3. Information from trade associations and trade publications publications

4. Surveys or informal discussions with dealers, distributors, 4. Surveys or informal discussions with dealers, distributors,

sales representatives, customers, or competitors sales representatives, customers, or competitors

Cont’d Market AnalysisCont’d Market Analysis

Target Market and CustomersTarget Market and Customers

-Who represents your primary target markets? -Who represents your primary target markets?

i.e. individuals, consumers, companies, health care, i.e. individuals, consumers, companies, health care, educational institutions, government departments, etceducational institutions, government departments, etc

- Can these markets be broken down into characteristics such - Can these markets be broken down into characteristics such as: geographic location, age, size, industry type, etc.as: geographic location, age, size, industry type, etc.

- Describe profile of principal target customers- Describe profile of principal target customers

- Identify major buyers- Identify major buyers

Cont’d Market AnalysisCont’d Market Analysis

Market Size and TrendsMarket Size and Trends

- Estimate size of the current total market for your product - Estimate size of the current total market for your product or service in both units and dollarsor service in both units and dollars

- Describe how market size of segments has changed over - Describe how market size of segments has changed over the past 3 or 4 years in units and dollarsthe past 3 or 4 years in units and dollars

- Include major factors that affected past market growth- Include major factors that affected past market growth

i.e. socioeconomic trends, industry trends, regulatory i.e. socioeconomic trends, industry trends, regulatory changes, government policy, populations shifts, etc.changes, government policy, populations shifts, etc.

Cont’d Market Analysis

Competition

- Identify each of principle competitors, and - Identify each of principle competitors, and compare competing product or services on compare competing product or services on the basis of price, quality, performance, the basis of price, quality, performance, service support, warranties, etc.service support, warranties, etc.

- Evaluate the market share of each - Evaluate the market share of each segment by each competitor, their relative segment by each competitor, their relative profitability, sales, marketing, distribution, profitability, sales, marketing, distribution, and production capabilitiesand production capabilities

Cont’d Market AnalysisCont’d Market Analysis

Estimated Sales and Market ShareEstimated Sales and Market Share

- Estimate share of each segment of market in sales in - Estimate share of each segment of market in sales in units and dollars, that you believe that you will acquire in units and dollars, that you believe that you will acquire in next 3 to 5 yrs.next 3 to 5 yrs.

- Should be developed by month for next year, and - Should be developed by month for next year, and annually for each year thereafter.annually for each year thereafter.

- Best presented in tabular form. Indicated any - Best presented in tabular form. Indicated any assumptions you may have madeassumptions you may have made

Your Marketing PlanYour Marketing Plan- describes what, when, and how sale projections will be achieved, - describes what, when, and how sale projections will be achieved,

and who will be responsible for sales strategy, advertising, and and who will be responsible for sales strategy, advertising, and promotion, pricing policy, and channels of distribution.promotion, pricing policy, and channels of distribution.

PricingPricing- Summarize financial characteristics of your business and industry- Summarize financial characteristics of your business and industry

- Discuss the prices you plan to charge for your product- Discuss the prices you plan to charge for your product

- Detail the markups your product will provide to the various members - Detail the markups your product will provide to the various members of your channel of distribution. of your channel of distribution.

- Indicate normal terms of sale, and how long it will take you to break - Indicate normal terms of sale, and how long it will take you to break even.even.

Cont’d Your Marketing PlanCont’d Your Marketing Plan

Sales and DistributionSales and Distribution

- Indicate methods you will use to sell and distribute product or - Indicate methods you will use to sell and distribute product or serviceservice

- If using your own sales force, describe how large it will be - If using your own sales force, describe how large it will be and how it will be structuredand how it will be structured

- If using distributors, or wholesales, indicate how they have - If using distributors, or wholesales, indicate how they have been or will be selected, who they are, territories they cover, been or will be selected, who they are, territories they cover, their compensation, credit and collection policies, and any their compensation, credit and collection policies, and any special policies such as rights, discounts, and cooperative special policies such as rights, discounts, and cooperative advertising programsadvertising programs

- Indicate any plans for export sales, and international - Indicate any plans for export sales, and international marketing arrangementsmarketing arrangements

Cont’d Your Marketing PlanCont’d Your Marketing Plan

Advertising and PromotionAdvertising and Promotion

- Describe program you plan to use to make consumers - Describe program you plan to use to make consumers aware of your product or service. Ie advertising, mediaaware of your product or service. Ie advertising, media

- Outline any plans to obtain free publicity for your product - Outline any plans to obtain free publicity for your product or companyor company

Cont’d Your Marketing PlanCont’d Your Marketing Plan

Service and Warranty ProgramService and Warranty Program

- Indicate your service arrangements, warranty terms, and - Indicate your service arrangements, warranty terms, and methods of handling service problems.methods of handling service problems.

- Describe how you will handle customers complaints and - Describe how you will handle customers complaints and other problemsother problems

Will service be handled by company, dealers and Will service be handled by company, dealers and

distribution or independent service centres?distribution or independent service centres?

Your Development PlanYour Development Plan

Development StatusDevelopment Status

- Describe current status of product and what remains to be done to make it - Describe current status of product and what remains to be done to make it marketablemarketable

CostsCosts

- indicate the amount of money that has been spent on products development - indicate the amount of money that has been spent on products development to date, and what areas it has been spent in. to date, and what areas it has been spent in.

- Present a development budget indicated funds required, how it will be spent, - Present a development budget indicated funds required, how it will be spent, and timing involvedand timing involved

Proprietary IssuesProprietary Issues

- Indicate any patents or trademarks acquired or applied for.- Indicate any patents or trademarks acquired or applied for.

- Indicate regulatory requirements needed to product or market product- Indicate regulatory requirements needed to product or market product

- Has standardized testing been done through Underwriters Laboratory, - Has standardized testing been done through Underwriters Laboratory, Canadian Standards Association (CSA) or other agencies?Canadian Standards Association (CSA) or other agencies?

Your Production / Operations PlanYour Production / Operations Plan

Outlines operating side of business. Outlines operating side of business.

LocationLocation- Describe planned location of business, and any - Describe planned location of business, and any

advantages or disadvantages of this location in advantages or disadvantages of this location in terms of cost, labour, proximity to customers, terms of cost, labour, proximity to customers, access to transportation, energy and natural access to transportation, energy and natural resources, zoning, etcresources, zoning, etc

- Describe location in reference to market size, traffic - Describe location in reference to market size, traffic flows, local and regional growth rates, income flows, local and regional growth rates, income levels, and similar market-related factorslevels, and similar market-related factors

Cont’d Your Production/Operations PlanCont’d Your Production/Operations Plan

Facilities and EquipmentFacilities and Equipment

- Describe property and facilities currently used or that will - Describe property and facilities currently used or that will be required. i.e. factory, storage space, selling space, be required. i.e. factory, storage space, selling space, property size, etc.property size, etc.

- List machinery and equipment required for manufacturing- List machinery and equipment required for manufacturing

- Draw physical layout of plant and other facilities, if - Draw physical layout of plant and other facilities, if possiblepossible

Cont’d Your Production/Operations PlanCont’d Your Production/Operations Plan

Manufacturing Plans and CostsManufacturing Plans and Costs

- List manufacturing costs that show standard production - List manufacturing costs that show standard production costs at various levels of production. i.e. raw materials, costs at various levels of production. i.e. raw materials, work in process, finished goods, component parts, work in process, finished goods, component parts, labour and overheadlabour and overhead

- Indicate suppliers, or subcontractors for raw materials and - Indicate suppliers, or subcontractors for raw materials and componentscomponents

- What are the quality control procedures used to minimize - What are the quality control procedures used to minimize service problemsservice problems

- Indicate production capacity- Indicate production capacity

Cont’d Your Production/Operations PlanCont’d Your Production/Operations Plan

LabourLabour

- Describe the number of employees you have and their - Describe the number of employees you have and their qualifications i.e. Full/part-time, hours of training, labour qualifications i.e. Full/part-time, hours of training, labour costs/hour, pension plan, fringe benefits, profit-sharingcosts/hour, pension plan, fringe benefits, profit-sharing

- Indicate whether your employees will be union or non-- Indicate whether your employees will be union or non-union. i.e. terms and expiration dateunion. i.e. terms and expiration date

Cont’d Your Production/Operations PlanCont’d Your Production/Operations Plan

Environmental and Other issuesEnvironmental and Other issues

- Indicate approvals necessary for you to obtain related - Indicate approvals necessary for you to obtain related zoning requirements, permits, licences, health and safety zoning requirements, permits, licences, health and safety requirements, environmental approvals, etc. requirements, environmental approvals, etc.

Your Management TeamYour Management Team

Description of Management TeamDescription of Management Team- Outline exact duties and responsibilities of each key member of - Outline exact duties and responsibilities of each key member of

management team…Include brief resume of each, including age management team…Include brief resume of each, including age martial status, education, professional qualifications employment martial status, education, professional qualifications employment experiences, etc.experiences, etc.

DirectorsDirectors- Indicate size and composition of board of directors- Indicate size and composition of board of directors

-Include brief statement of each member indicating what he/she will -Include brief statement of each member indicating what he/she will bring to the companybring to the company

Management and Directors’ CompensationManagement and Directors’ Compensation- List names of all members of management team, and board of - List names of all members of management team, and board of

directors and compensation they will receive in fees or salary.directors and compensation they will receive in fees or salary.

Cont’d Your Management TeamCont’d Your Management Team

ShareholdersShareholders

- Indicate name of each of the individual shareholders (or - Indicate name of each of the individual shareholders (or partners) in business, and then number of shares each partners) in business, and then number of shares each owns, the percentage of ownership and the price paid.owns, the percentage of ownership and the price paid.

- Describe any investors other than your management team - Describe any investors other than your management team and member s of your board. How many shares to they and member s of your board. How many shares to they own? When were they acquired? What price did they own? When were they acquired? What price did they pay?pay?

- Indicate employment contracts/agreements made with - Indicate employment contracts/agreements made with members of management teammembers of management team

Cont’d Your Management TeamCont’d Your Management Team

Professional AdvisorsProfessional Advisors

- Indicate the name and complete address of each or your - Indicate the name and complete address of each or your professional advisors. professional advisors.

i.e. lawyer, accountant, banker, etci.e. lawyer, accountant, banker, etc

- Disclose any fees or retainers that have been paid to - Disclose any fees or retainers that have been paid to themthem

Implementation Schedule and Risks Implementation Schedule and Risks Associated with the VentureAssociated with the Venture

MilestonesMilestones- Summarize significant goals you, and your business have already - Summarize significant goals you, and your business have already

reached and hope to accomplish.reached and hope to accomplish.

ScheduleSchedule- Develop a schedule of significant events and their priority for - Develop a schedule of significant events and their priority for

completion. i.e. strategic planning, contingency positionscompletion. i.e. strategic planning, contingency positions

Risks and ProblemsRisks and Problems- Summarize major problems dealt with and how they were resolved.- Summarize major problems dealt with and how they were resolved.

- Identify risks associated with business, now, and in the future.- Identify risks associated with business, now, and in the future.

- Summarize downside risk- Summarize downside risk

Your Financial PlanYour Financial Plan

Illustrates current financial status, and represent your best Illustrates current financial status, and represent your best

estimate of its future operationsestimate of its future operations

Funding RequestedFunding Requested- Indicate amount and type (debt or equity) of funding needed- Indicate amount and type (debt or equity) of funding needed

- Give an overview of current financial structure of business, - Give an overview of current financial structure of business, levels of investments made, and where they came fromlevels of investments made, and where they came from

-Outline proposed terms of investment. i.e. payback period, -Outline proposed terms of investment. i.e. payback period, ROI, tax benefits, etc.ROI, tax benefits, etc.

Cont’d Your Financial PlanCont’d Your Financial Plan

Current Financial StatementsCurrent Financial Statements

- provide copies of financial statements (profit and loss - provide copies of financial statements (profit and loss statement and balance sheet), for current and previous 2 statement and balance sheet), for current and previous 2 years.years.

Cont’d Your Financial PlanCont’d Your Financial Plan

Financial ProjectionsFinancial Projections

Should be developed on a monthly basis for 1Should be developed on a monthly basis for 1stst yr and yr and quarterly or annual for next 2 to 4 yrsquarterly or annual for next 2 to 4 yrs

1. Profit and Loss Forecasts1. Profit and Loss Forecasts – indicates profit expectations for next – indicates profit expectations for next few years of operation of business. few years of operation of business.

2. Pro forma balance sheets2. Pro forma balance sheets - - indicates assets to be required to indicates assets to be required to support projected level of operations, and how to financingsupport projected level of operations, and how to financing

3. Cash Flows Statements3. Cash Flows Statements – indicate amount of cash in and out – indicate amount of cash in and out flows. Helps to predict cash needs and avoid flows. Helps to predict cash needs and avoid ininsolvency.solvency.

4. Breakeven Analysis4. Breakeven Analysis – indicates the level of sales and production – indicates the level of sales and production needed to cover all fixed and variable costs.needed to cover all fixed and variable costs.

6. Appendixes6. Appendixes

Explains, supports, and supplements the material in theExplains, supports, and supplements the material in the

body of the business plan. Some inclusions are:body of the business plan. Some inclusions are:

1. Product specifications, and photographs1. Product specifications, and photographs

2. Detailed resumes of the management team2. Detailed resumes of the management team

3. Lists of prospective customers3. Lists of prospective customers

4. Names of possible suppliers4. Names of possible suppliers

5. Job descriptions for the management team5. Job descriptions for the management team

6. Consulting reports and market surveys6. Consulting reports and market surveys

7. Copies of legal documents i.e. leases, franchise & licencing 7. Copies of legal documents i.e. leases, franchise & licencing

agreements, contracts, licences, patent or trademark agreements, contracts, licences, patent or trademark

registrations, articles of incorporationregistrations, articles of incorporation

8. Letters of reference8. Letters of reference

9. Relevant magazine, trade journal, newspapers articles9. Relevant magazine, trade journal, newspapers articles

CONCLUSIONCONCLUSION

Make a good impression. Demonstrate that you have done Make a good impression. Demonstrate that you have done

significant amount of thinking and work on your venture. significant amount of thinking and work on your venture.

Ensure your material is presented to prospective investors, Ensure your material is presented to prospective investors,

lenders, and others in an attractive, readable, and lenders, and others in an attractive, readable, and

understandable fashion.understandable fashion.