- 1. The Business Plan BU113: Foundations of Business
Administration Business Plan BU113: Foundations of Business
Administration
2. Memorable statistics
- New business start-ups each year:
- Business failures each year:
3. Reasons for Failure and Success of Businesses
- Managerial incompetence or inexperience
- Hard work, drive, and dedication
- Market demand for product/service
4. The Process, the Plan and BU113
5. What is a Business Plan?
- Blueprint of your business
- Written plan detailing operational and financial aspects of
your company
- Explanation of the business concept
- Presentation of the strategy
- Outline of projected development of the business
- Definition of capital needs of the business
- Projection of financial performance
- Presentation of managements credentials/positions
6. Who needs a Business Plan?
7. Concerns of Investors
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- Great ideas wont go anywhere without good management.
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- High risk requires potential for high return
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- Where on the growth curve is the business?
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- Are financial projections reasonable?
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- How to get out with mega profit (go public, sell out)
8. Cover Page
- Business Plan Copy Number 5
- This document contains confidential and proprietary information
belonging exclusively to XYZ Company
- This is a business plan.It does not imply an offering of
securities.
9. Business PlanFormat & Components
- Table of Contents (with page numbers)
- Your companysmission statement
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- Management : Management Structure/Background
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- PowerPoint slides in handout form
10. Mission Statement
- A mission statementis a brief description of a companys
fundamental purpose. A mission statement answers the questions, Why
do we exist? What do we hope to achieve in the future?
- The mission statement articulates the companys moral/ethical
position, public image, the target market, products/services, the
geographic domain and expectations of growth and profitability
(Center for Business Planning:http:// www.businessplans.org ).
11. Mission -- Examples
- It is the mission of Saint Michaels College to contribute
through higher education to the enhancement of the human person and
to the advancement of human culture in the light of the Catholic
faith. (SMC Catalogue)
- The Home Depot is in the home improvement business and our goal
is to provide the highest level of service, the broadest selection
of products and the most competitive prices. We are a values-driven
company and our eight core values include the following:
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- Excellent customer service
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- Taking care of our people
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- Creating shareholder value
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- Building strong relationships
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- Source:Home Depot Our Company Values
12. Components of the Plan: Management
- Type of organization / form of business ownership /
Background
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- Supporting documents: Resumes
XYZ Company General Manager Marketing Manager 1 Finance Manager
Marketing Manager 2 13. Components of the Plan: Marketing
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- Key characteristics, uniqueness
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- Amount of inventory to be ordered
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- Economic / social / cultural characteristics
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- Projected sales (revenue): calculated
14. Components of the Plan: Marketing (contd)
15. Components of the Plan: Marketing (contd)
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- Pricing strategy vs. competition
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- Promotional strategy: developing demand for product
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- Getting the product from production to theconsumer
16. Supporting documents
- List of Shareholders: Attach a table with the information about
your shareholders investment.
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- number of shares invested
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- percent ownership in the company based onthe number of shares
owned
- Revised resume of each manager
- PowerPoint slides in handout form (6 slides per page)
17. Shareholder List Outside or Management Shareholders # Shares
Bought Contact Info Name 18. Business PlanFinance
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- Management characteristics and experience
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- Outlook for competitiveness of business
19. Financial Plan BU113: Foundations of Business Administration
BU113: Foundationsof Business Administration Financial Plan 20.
PurposeFinancial Plan
- Determine feasibility of business
- Determine capital needed to start business
- Estimate return to shareholders
21. Capital Needed to Start Business
- Determine total amount of capital needed to start the
business
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- Buy product/raw materials for product to sell? (Include in
product cost: transportation & packaging)
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- Buy supplies for advertising
22. Financing Sources: How to Raise Money
- Sources : Sellingstockorborrowingmoney
- Stock sales: 25 cents/share
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- Inside shareholders (management team).What percent of company
do you want to own?
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- Outside shareholders (sell to others at marketplace)
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- You must offer at least 20 shares to outside shareholders.
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- Specify what percent ownership1 share represents
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- EX: If you plan to sell 100 total shares to management and
outsiders, 1 share = 1% ownership in the company.
23. Financing Sources: Examples
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- Outside 20 shares: $5= 5%
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- Inside 380 shares (calculated as: remaining $95 / $.25 per
share = 380 shares) : $95= 95%
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- Total Raised: $100 = 100%
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- Total Shares Issued:400 shares
- Outside 20 shares: $5= 20%
- Inside 80 shares (calculated as: remaining 80 shares * $.25 per
share = $20) : $20= 80%
- Total Shares Issued:100 shares
24. Projected Income Statement
- Sales= Number of units of product/service expected to be sold
per week X sales price
- Less:Cost of Goods Sold( COGS ) = number of units of product
expected to be sold each week X cost to buy including taxes,
shipping, etc. (no COGS with a service)
- Less:Advertising and other expenses= actual amount expected to
be spent during a particular week
- Less:Taxes= 10% of profit before taxes (EBT)
- Note : You cannot pay management wages.
25. ABC Company Projected Income Statement For the Six-Week
Period Ending ____ , 200_ 163.8 18 18 19.8 88.20 18 1.8 Net Income
18.20 2 2 2.20 9.80 2 .20 Taxes (10%) 182 20 20 22 98 20 2 EBT 108
10 10 18 52 10 8 Total Expenses 12 6 6 Gas 4 2 0 Advertising 92 10
10 12 50 10 2 Cost of Goods Sold Expenses $290 $30 $30 $40 $150 $30
$10 Sales Total WK 6WK 5 WK 4 WK 3 WK 2 WK 1 26. Projected Return
on Equity
- As a start up business, consider your equity to be the money
you raise from selling stock to inside and outside
shareholders
- Projected ROE: tells shareholders what they expect to earn on
their investment in terms of % return
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- ROE=Total Projected Net Income /$ Raised from sale of stock to
management and outsideshareholders
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- EX:$ 163.8 projected NI / $25 Common stock proceeds
27. Liquidating Dividend
- Liquidating Dividend to be paid at end of semester
- Different from a regular dividend real companies pay
- = Distribution of all the cash of the company after payment of
all liabilities.
- Purpose: to close the business down
- Liquidating Dividend Per Share =
- Ending cash (= $ from sale of stock to managers andoutsiders +
Net Income)
- -Liabilities(including taxes payable) d ivided by total #Shares
outstanding