Chapt 2 Starting a Business in Michigan Business Plan: Company and Market Analysis

• A business plan communicates information about your business, goals, and the market.
• Sections of a business plan should be engaging, especially if seeking funding.
• Structure the plan by drafting major sections first before creating a cover sheet and table of contents.

Company Introduction and Description

• Introduce the company by addressing its purpose, history, location, and legal structure.
• Highlight company capabilities, location, hours, product/service descriptions, and development status.
• Include the mission, vision, values, intellectual property status, commercialization strategies, and a SWOT analysis.

Market Analysis

• The market analysis should consolidate research from prior planning stages.
• Include industry overview, market description, customer profiles, and competitive analysis.
• Industry section should describe current events and opportunities, including how the business plans to capitalize on them.
• Explain industry growth in terms of sales, customers, and profits, identifying faster-growing segments.
• Market section requires a market description, dividing customers into primary (high frequency or volume) and secondary markets.
• Describe primary and secondary markets by attributes, demographics, and buying behavior.
• Explain what problems the product solves and the appeal of the company's selling approach.
• Estimate target market size in potential customers and spending per year, plus growth rate.
• The customer section involves detailing an ideal customer's attributes, demographics, and the suitability of the selling approach.
• The geographic area and limitations of target customers should be highlighted.
• The competition section should describe the competitive landscape.
• Discuss direct and indirect competitors, their market share, strengths, weaknesses, and the company's competitive edge.
• Include the analysis of competitors, their actions, strengths, weaknesses, and differentiation strategies.
• Detail market share held by competitors and their annual sales volume.
• Identify the problem the company solves for each customer segment.
• Describe customer buying behavior and decision-making processes.

Marketing and Sales Plan

• The marketing and sales plan should detail how to reach customers based on their demographics, purchasing behavior, and attitudes.
• Address how the company will win customers over competitors.
• Establish realistic sales goals based on industry size, target market, competitor strength, and product/service delivery capability.
• Explain sales force and distribution plans, including direct sales, online ordering, demonstrations, and customer contact types.
• Outline a communication strategy to reach the target market and achieve sales goals.
• Acknowledge that potential customers go through a buyer’s journey consisting of three phases.

Awareness Phase

• Customers must be aware of the company through marketing channels and platforms relevant to ideal customers.
• Examples include search engines, websites, online ads, billboards, social media, direct mail, events, radio, podcasts, print ads, emails, and text messages.
• Focused marketing efforts in resonant areas maximize return on investment.

Consideration Phase

• Customers consider the business alongside competitors.
• The communications strategy should highlight key points that differentiate the company.
• Brand look and feel are important when customers encounter the business.
• Identifying and addressing customer needs increases potential during this phase.
• Common differentiation points include price, quality, customer experience, social proof, approach, and values.

Purchasing Decision Phase

• Customers narrow their choices and engage with the business through online carts, store visits, quotes, etc.
• Customer experience during this phase determines the ultimate decision.
• The marketing plan should consider messages that reach each phase of the buyer's journey.
• It is key to create a regular communication schedule throughout the year.
• Discuss marketing/sales objectives, customer needs at each buyer's journey stage, and sales team targeting.
• Highlight the pricing model, detailed sales plan (methods, procedures, expectations, distribution, customer service, warranties), plus a marketing/advertising budget for the first year and a broad budget for the next 2-5 years.

Management and Operations

• Focus on how the business operates, ensuring customer satisfaction, clear roles for staff, and growth management.
• Consider high-level ideas and specific details, including departments and responsibilities while measuring staff effectiveness.
• Documents regarding organizational structure, job descriptions, and processes should ensure delivery and customer care.
• Address key areas like human resources and overall operations.

Human Resources

• Discuss the core management team's experience, skills, and needed new hires or outside help.
• Common assistance examples include financial/tax management, legal advice, and risk/compliance management.
• Support can also come from realtor or local economic development organizations, agencies/consultants, staffing services, IT companies, etc.
• Address staff numbers, roles, full-time/part-time/contract employees, associated costs, and training.
• Note the team's strengths, needed skills/members, organizational chart, job duties, work schedules, and the board of directors or advisors.

Operations

• Outline how work gets done efficiently, from decision-making to customer satisfaction.
• Questions to address include when to hire, onboarding processes, employee training, and work processing.
• Detail how you will manage new orders, quality control, subcontractors, customer data, returns, and order changes.
• Identify project management tools to ensure accountability and how to handle performance reviews.

Growth and Development

• Plan for the company's future, including new products, locations, and customer targets.
• Cover goals, expansion plans, obstacles, financial objectives, the need for additional financing, and critical milestones.
• For businesses focused on commercializing an invention, include a commercialization strategy outlining the new product's status and timeline to market.

Financials

• Identify financial goals and projections.
• Outline required funds and how to obtain them.
• Start with estimated monthly costs (fixed and variable).
• Logically show how many products to sell or service hours to complete to break even and profit.
• Startup costs, monthly costs, sales estimates, and break-even analysis should be included.
• The financials section should be detailed, technical, and accurate.

Break-Even Analysis

• The break-even analysis helps identify the sales goals required to make a profit.
• Determine fixed costs, variable costs per unit, and average price per unit.
• BEQ = FC / (AP – VC), or break even quantity = fixed costs / (average price - variable costs)
• Monthly sales above BEQ result in profits; sales below result in losses.
• Compare estimated income and operating costs for 3–5 years to demonstrate profitability.

Financial Assumptions

• This section describes the methods used to estimate revenue and expenses in cash flow projections.
• The assumptions should be realistic.

Profit and Loss (P&L) Statements

• P&L statements break costs into categories like sales and operating expenses.
• These can determine if a business is reaching its financial goals.
• P&L statements are helpful to demonstrate a business’s potential and profitability
• Build a template to assess financials each year, quarter, or month.

Prior Financing

• Disclose any personal/commercial financing impacting the business.

Financial Need

• Outline the finances needed to launch/expand with how these finances will be obtained.
• The financial need should include a breakdown of personal contributions, investments, loans, and terms for each type of funding.

Exit Strategy

• Answer how money will be extracted from the business, how profits will be used, and plans for selling or inheriting the business.

Appendices

• Include supporting documentation that doesn’t fit into any section of the plan.
• The supporting documentation in the appendices can include resumes, list of owners, tax forms, letters of recommendation, and purchase orders.
• Market research, site floor plans, existing contracts, and any other relevant documentation should also be included.

Final Touches

• Accurate financial details, detailed calculations, and a well-written conclusion showing the upside potential are key for final preparations.

Cover Page

• The cover page of a business plan should include the contact information for the business and business owner.
• The business name, logo, address, city, state, zip code, and website should be included.
• The business owner's name, email address, phone number, fax number, and the date should be included.

Executive Summary

• A summary of the business plan should be no longer than 1-2 pages,
• The summary should include the key points from each section of the business plan.
• The executive summary should also include the reason you are writing the plan, to obtain financing for example.

Table of Contents

• The table of contents should be accurate and well-organized so readers can navigate the document.
• Include accurate page numbers for each section.