Business Planning

Business Plans That Win $$$

Presented byJeremy Kravetz,

MBA

Business Planning Process

Business Plans

MAIN TOPICS

Definition Who Plans? How It’s Done Key Sections Uses & Benefits Costs of NOT planning

PLANNING – Key Topics

Types/Uses Differences Key Sections/Topics Work Products

BUSINESS PLANS – Key Topics

THE BUSINESS PLANNING

PROCESS

Wikipedia:

PLANNING DEFINED

Planning (also called forethought) is the process of thinking about and organizing the activities required to achieve a desired goal.

…combines forecasting of developments with the preparation of scenarios of how to react to them

Setting Goals Thinking Forecasting/Visualization of Future Organizing How to React – Courses of Action (Managing proactively is better!)

KEY CONCEPTS

Both Internal and External Uses:

WHY PLAN?

Management Equity Financing – Investors Debt Financing – Lenders Business Development –

e.g. strategic partners, suppliers, distributors, landlords, regulators, community groups, etc.

All Levels – CEO to dishwasher Strategic – Long-term organizational

goals. Executive function. Operational/Tactical – Day-to-day

management. Managers Individuals – Organization of work.

Personal and career

WHO PLANS WHAT?

BOARD OF DIRECTORS – Key Strategies, L-Term Goals, Policies, Values

CEO – Competitive Strategies (Marketing), Overall Business Development, Strategic Relationships, Exec Team-Building/Organization/Capital Preparedness

PRESIDENT – Overall Business/Organizational Mgt. VPs – Overall Departmental/Functional development and

management DEPT. MANAGERS, SUPERVISORS – Operations,

staffing, budgets..

WHO PLANS WHAT?Large Organizations:

Owner/Managers – Wear many hats

Both Internal and External People – Employees/staff and external consultant, advisors, service providers

WHO PLANS WHATin

Small Businesses?

Avoid Surprises – Anticipate future events

Prepare for what ever happens Cheaper to “make mistakes on paper” Organize Complexity See things more clearly – how pieces fit

together and interact

WHY PLAN?(Strategic Level)

Definition of goals Definition of assumptions Strategic allocation of scarce resources Coordination Alignment – Working with same concepts and

principles and goals Improved Efficiency

WHY DO MANAGERS PLAN?

(Tactical Level)

Confusion Become reactive (instead of proactive) Everyone makes their own plans “System” deteriorates Unhappy customers Loss of competiveness

WHAT HAPPENS w/o ADEQUATE PLANNING?

Clarity, focus on key strategies More proactive Better integration/coordination Satisfied customers Greater Competitiveness

BENEFITS OF GOOD PLANNING

WHO ARE WE TRYING TO SATISFY??

CUSTOMERS

WHO ARE WE TRYING TO SATISFY??

Customers – Acquisition, satisfaction, retention Other Stakeholders:

◦ Investors◦ Lenders◦ Employees◦ Suppliers◦ Community

Company / Operation - Sustainability

WHO ELSE?STAKEHOLDERS:

Plan the work of others Execute (manage) the work of others Coordinate with other functions/

departments

EXECUTION of plans

PLAN > ACT > MONITOR > PLAN ..

PLANNING -A CONTINUOUS CYCLE

Research > Analyze Visualize/ideate > Strategize Tactics > Resource Planning Economic/Financial Planning Develop > Operate > Manage Monitor > Evaluate >

Repeat..

PLANNING / MANAGEMENTCYCLE

Multi-disciplinary Teamwork Systems-Thinking Top down – Strategic, big picture, L-Term Bottom-up – Tactical, operational Economic/financial design Sustainable Achieves LT Goals of stakeholders

PROCESS

Everything must work Pieces must work together Cannot lack something essential Vision Resources Management

CONGRUENCE

Industry dynamics Product Life-Cycle Technology Availability (lack) of resources US & global economy Competition Government/Politics Terrorism “Acts of God”

(Uncontrollable)ENVIRONMENTAL FACTORS

BUSINESS PLANS

LENDERS - Safety

INVESTORS - Profit

LENDERS VS. INVESTORS

Survival Profitability / Cash Flow Sustainability Ability to pay back the loan (with

interest)

LENDERS

Unique Value-Proposition Innovation > Large growth in value Intellectual Property Potential Market Size – Scalability Market Timing Value-creation milestones, sequence

INVESTORS

Market Analysis Competitive Strategies Startup budget and projections Sales projections 5-year P&L and Cash Flows Management Sustainability – ability to pay off debt

WORK PRODUCTS - LENDERSDetailed Operational Business Plan:

Market Analysis Value-Proposition/Innovation Pitch-Deck Executive Summary Brief, strategic, yet comprehensive business plan Team – Vision, leadership, ability to

“pivot”/adapt Scalable (large) value creation

WORK PRODUCTS - INVESTORSMotivated by possibility of large returns:

Executive Summary Market Analysis Value-Proposition Marketing/Sales

BUSINESS PLANS FOR SMALL BUSINESSES

Strategy:

Marketing Management Team/Organization External Consultants, Advisors Human Resources Operations Command and Control - MIS Finance

BUSINESS PLANS FOR SMALL BUSINESSES

Tactics – Traditional Management Functions:

Market research studies Contracts, orders Management Bios Intellectual Property Marketing materials Appraisals Cost Estimates Risk Management Etc.

BUSINESS PLANS FOR SMALL BUSINESSES

Supplemental Materials:

► The activity► set of institutions► and processes► for creating, communicating, delivering, and

exchanging offerings► that have value for customers, clients,

partners, and society at large.

“MARKETING”American Marketing Association:

Responsibility of the managing leadership within a business, not a separate function.

There is only one valid definition of business purpose: to create a customer… Because it is its purpose to create a customer, any business enterprise has two — and only these two—basic functions: marketing and innovation…

Marketing is so basic that it is not just enough to have a strong sales department and to entrust marketing to it. Marketing is not only much broader than selling; it is not a specialized activity at all. It encompasses the entire business. It is the whole business seen from the point of view of its final result, that is from the customer’s point of view. Concern and responsibility for marketing must therefore permeate all areas of the enterprise..

PARAMOUNT ROLE OF MARKETINGPeter Drucker:

The function that links the consumer, customer, and public to the marketer

through information used to identify and define marketing opportunities and problems; generate, refine, and evaluate marketing actions monitor marketing performance; and improve understanding of

marketing as a process. specifies the information required to address these issues, designs the method for collecting information, manages and implements the data collection process, analyzes the results, and communicates the findings and their implications.

MARKET RESEARCH

Captures/specifies/organizes all projected, quantifiable assumptions about the enterprise, including hard and soft resources, growth and development processes, sources of income, costs, expenses, investments, sources of capital, financial structure, and all sources and uses of funds.

Requires the participation/input of planners and managers most familiar with, and responsible for, the various areas of the enterprise

Structures and charts a systematic roadmap to meet the needs of the organization/operation itself, and that of each and all stakeholders

FINANCIAL PLANNING

Aids in strategic, systems-oriented allocation of resources

Specifies key strategic development/value-creation goals and milestones

Informs the architecture and key monitoring points for Management Information Systems

Allows for “stress tests” and other sensitivity analyses

Allows for efficient periodic updating of plans

FINANCIAL PLAN

Yields data for work products needed for fundraising and stakeholder communications and relationship management

Provides clear analyses for investors, lenders and entrepreneurs to understand their investments and returns

Thoroughly prepares entrepreneurs, owners and executives for negotiations with others vying for a piece of the pie. Enables strategic control of what, how much, and how financial information is shared.

Conveys/sells the capabilities and professionalism of an entrepreneur, business and management team.

FINANCIAL PLAN

Pre-operations/organization budget Startup operation at a loss Sales projection / development Break-Even-Point Required operating loss reserves Continued growth development Running rate Financial structure – debt / equity Investor analysis Lender analysis Sustainability until next value inflection point/value

milestone/exit

FINANCIAL PLAN

WhoWhatWhereWhenWhyHow

GOAL - SETTING

STRATEGIES

TACTICS

MARKETING

DEMAND VS. SUPPLY = GAP?

COMPETITIVE STRATEGY:

CUSTOMER-FOCUSED MISSION◦ Vision/Mission◦ Value-Proposition◦ Raison D’etre

COMPETITIVE ANALYSIS

Does my business idea have potential?

What are my source(s) of finance?

Do I have experience in the field or know someone who does?

Where will my business be located?

How many employees will I hire?

Pre-Business Questions

What is a Business Plan? A roadmap to business success

Essential Tool – The Business Plan

Why Prepare a Business Plan?

Strategic Planning

Secure Funding-Loan Application-Investors

Measure Success

◦Executive Summary (1- 2 pgs.)

◦Product and/or Service Description

◦Financial Plan

◦Marketing Plan Analysis Need Target Market

◦Competition

Key Business Plan Information

What is a FICO (Fair Isaac Corp) Score?

◦Measures Credit Worthiness (Risk)

◦Score Range from 300 to 850

◦Determines whether Banks will Approve or Deny You Credit

◦Determines Your Loan Interest Rate

Capital and Financing

What is Your FICO Score?

Separate Personal funds from business◦Open a business bank account

Obtain a Credit Card & Merchant Account◦Expand Customer Base (short term

supplies - network or outreach)◦Increase Sales & Profits by accepting

Debit and Credit Cards

Finances & Your Business

Business Name or DBA (Doing Business As) is your legal business name

You don’t need a DBA if?◦Using part or all of your surname plus the

service or product description (i.e. Mr. Jones Auto Repair versus JS Auto Repair)

Legal Considerations Business Name

If you are not using your legal name you must:

◦Contact the County of S.D. Assessor/Recorder/County Clerk’s Office

◦File a Fictitious Business Name

◦Check to Ensure the name is not already in use

Fictitious Business Name

Sole Proprietorship

General Partnership

“C” Corporation

“S” Corporation

Limited Liability Corporation

Legal ConsiderationsBusiness Entities

Sole Proprietorship

PROS CONS

Simple Formulation (i.e. fictitious business name, license, permit)

Minimal Cost

(business license, public announcement)

No Special Business Income Tax Rates

Bankruptcy – Company & Individual

Not Protected from Liability

Business & Individual are Identical

General Partnership

PROS CONS

Partnership Pays No Tax (Individual Return)

Inexpensive to Create

and Maintain

Partnership Agreement

Partner Liable for Debt and Legal Liabilities

Third Party Issues – Partnership Comes Under Fire

Two or More Legal Entities

Identical to General Partnership

Difference is Limited versus General

Only Liable for Capital Investment

No Involvement in Company Management

Allows Shared Profits without Losing More than their contributions

Limited Partnership

“C” Corporation

PROS CONS

Legal Entity which Files Its’ Own Taxes

Responsible for Its’ Own Dealings (Liability)

Unlimited Number of Shareholders

Expensive to Begin & Maintain (annual fees)

Board of Directors

Stock Must be Issued

Double Taxed on Dividend Income (to avoid roll-over)

Standard State Formed – Legal Entity

“S” Corporation

PROS CONS

Responsible for Its’ Own Dealings (Liability)

Shareholders can claim their share on personal income taxes (avoids double taxation)

Expensive to Begin & Maintain (annual fees)

Limited to a Max. of 75 Shareholders

Not Double Taxed on Dividend Income

Standard State Formed – Legal Entity

Hybrid of a Corporation and Partnership

Identical Tax & Liability as a Corporation

Same Management Structure as Partnership

Articles of Organization are Submitted to the State

Operating Agreement (can be verbal)

Limited Liability Corporation

Why do I need Business Insurance?

Lawsuits, natural disasters and injuries to you or your employees could threaten your business at any time. Obtaining business insurance is critical to the existence of your business.

Business Insurance

If possible hire an attorney to review the contract/lease agreement

Read all Terms and Conditions (including the fine print)

Contract/Leasing Agreement

The city and type of business determines what licenses and permits you will need

Search for your industry’s business license and permits through the Cal gold website:◦www.calgold.ca.gov

Licensing and Permits

There are more than 200 Regulated Businesses

◦State Department of Consumer Affairswww.dca.ca.gov

◦Police Regulated - S.D. Police Dept www.sandiego.gov/police/

Special Licenses & Permits

Seller’s Permit◦Selling Tangible

Personal Property

How to obtain a Seller’s Permit◦State Board of

Equalization www.boe.ca.gov

Sellers Permit

What is an EIN Number?

Why do I need an EIN Number?

Where do I obtain an EIN Number?◦Internal Revenue Service◦(800) 829-3676◦www.irs.treas.gov

Employer Identification Number

Logo CreationSignageBusiness CardsForms (i.e. invoices, etc.)Promotional Pieces Website

Marketing & Your Business Identity

Ensure the Feasibility of Your Business

Business Research

Business Plan Preparation

Get Your Finances in Order

Utilize Small Business Resources

Essential Tools Review

Website - http://www.growmybiz.org How You Can Use our Services

* Workshops * Counseling

10-Key Steps to Starting a Business Business Plan Template S.D. SBDC Business Training Center

We are here to Serve You!

San Diego SBDC Resources

SBDC Can Help You!

Our Mission is to provide superior consulting & training to small

businesses resulting in entrepreneurial success & growth & prosperity for

California. 

San Diego SBDCSouthwestern College Higher Education Center880 National City Boulevard, Suite 103National City, CA 91950Tel. (619) 482-6391—Fax: (619) 216-6692www.growmybiz.org