Michigan SBDC Business Plan Outline PDF

2 GETTING STARTED PERSONAL ASSESSMENT BUSINESS PLAN OUTLINE michigansbdc.org | 27  CHAPTER 2 — MICHIGAN SBDC BUSINESS PLAN OUTLINE Michigan SBDC Business Plan Outline A bus...

2 GETTING STARTED PERSONAL ASSESSMENT BUSINESS PLAN OUTLINE michigansbdc.org | 27  CHAPTER 2 — MICHIGAN SBDC BUSINESS PLAN OUTLINE Michigan SBDC Business Plan Outline A business plan should tell a compelling story as it communicates information about your business, your goals, the market, and more. As you write your business plan, find ways to make each section more interesting to readers, especially if the plan will be used to acquire funding. Drafting your major sections first will help you organize your overall plan. Create a cover sheet and table of contents only after you have your major sections drafted. Every business plan should include the following major sections. Section 1: Company Introduction and Description Introduce and describe your company. Answer questions like: How and why was your company formed? How long has your company been in operation? Where is the company located? What is its legal entity? You may want to highlight the following elements within this section as well: Overview of company capabilities Location and hours of operation Product or service description Present state of development (if applicable) Mission, vision and values Intellectual property status of patents, copyrights, etc. (if applicable) Brief overview of commercialization strategies (if applicable) SWOT analysis (your strengths, weaknesses, opportunities, and threats) Section 2: Market Analysis Your market analysis should include a wide variety of information that pulls together all the research you did in earlier planning stages. You might consider breaking up your market analysis into several large sections, such as the following: Industry Paint a picture of what is happening in your industry and explain how you can plan to take advantage of opportunities within the industry. Use your understanding of the industry to demonstrate how your sales projections are realistic. Explain how fast your industry is growing with sales, numbers of customers and profits. Discuss if any segments are growing faster than others and how you might leverage that information. 28 | Michigan Small Business Development Center  CHAPTER 2 — MICHIGAN SBDC BUSINESS PLAN OUTLINE You may want to highlight the following elements within this section: Current industry size, status and trends (to show how you will position your company for market opportunities and to identify areas of growth or decline) New products or services in the industry, especially ones that will affect your business directly or indirectly Trade associations that support your product or service and that you will be contributing to Opportunities and threats affecting the industry (how you will capitalize on the opportunities as well as handle the threats) Market Provide a good description of your market. Then, group them into primary and secondary markets. Your primary market is the group of customers who are most likely to buy your products or services often or at a high volume. Your secondary market includes customers who are likely to buy but not at the same volume or frequency. These two groups comprise your target markets. When identifying your primary and secondary markets, try and describe them in terms of their attributes, demographics, and buying behavior. Also, describe what problems your product or service is solving for them and why your selling approach will appeal to them. Next, estimate how large your target markets are, both in number of potential customers and how much those customers are likely to spend in a given year. You may also want to estimate how fast your target markets will grow. But be realistic. Even if every customer loves your product or service, they all have limits on their ability to spend. Customers Describe your ideal customer in terms of their attributes and demographics and describe how your selling approach will make sense to each of them. You may want to highlight the following elements within this section: Description of your ideal customer and their attributes Geographic areas and limitations of your target customers Competition Describe the competitive landscape of your business. Discuss direct competitors who provide the same products or services and indirect competitors who provide similar or alternative products or services. Answer questions such as: How much of the market do your competitors hold? Who has the largest share of the market, and what are their strengths and weaknesses? What gives you a competitive advantage? You may want to highlight the following elements within this section: Analysis of individual competitors: what each one does, how they do it, their strengths and weaknesses, how you might differentiate from them, etc. Market share held by competitors and their annual sales volume The problem(s) that your company is solving for each of your customer segments Customer buying behavior: how often, how much, etc. Customer’s decision-making process: how much lead time, who is involved, if it’s a group decision, etc. michigansbdc.org | 29  CHAPTER 2 — MICHIGAN SBDC BUSINESS PLAN OUTLINE Marketing and Sales Plan Your marketing and sales plan should focus on how you will reach your customers based on their characteristics, demographics, purchasing behavior and attitudes about your product or service. It should answer this fundamental question: How will you get customers to buy from you and not a competitor? You will want to start by establishing realistic sales goals based on the information you have already provided: the size of your industry, the size of your target market, how strong your competitors may be, and your ability to deliver your product or service. Once you have outlined sales goals, you will want to help readers understand how you will achieve them with sales force and distribution plans. Will you implement a direct sales approach? Will customers feel comfortable ordering from you online? Will you be offering demonstrations or trials of your product or service to customers? How many (and what types) of contact will customers need before agreeing to a purchase? In tandem with sales, you will also want to outline your communications strategy for reaching enough potential customers to reach your sales goals. Once potential customers have a need for your product or service, they will follow some version of the buyer’s journey before they make a purchase from you. That journey involves three major phases: Phase 1: Customers need to be aware of your company before they make any progress Awareness toward purchasing from you. In your communications plan, be sure to incorporate the marketing channels and platforms that your ideal customers use to make purchasing decisions. Examples include: Search engines like Google and Bing Your website Online advertisements Billboards Social media sites Direct mail Events Radio Podcasts Print ads in magazines, trade journals, etc. Email Text messaging By focusing your marketing efforts in areas that will resonate most with your ideal customers, you will save time, effort and money while also maximizing your return on marketing investment. 30 | Michigan Small Business Development Center  CHAPTER 2 — MICHIGAN SBDC BUSINESS PLAN OUTLINE Phase 2: Once customers are aware of your business, they will consider it along with your Consideration competitors before they make a purchase. Your communications strategy should outline the important talking points you want to use throughout your marketing and advertising materials to distinguish you from competitors. Often, this involves carefully considering your brand: what is the look and feel you want people to experience when they encounter your business? To capture more potential customers during the consideration stage, you need to know what matters most to them and address how your business can fulfill their need. Common differentiation points for a business include: Price Quality Customer experience Social proof (online reviews, testimonials, etc.) Approach (eco-friendly, locally owned, etc.) Values (charitable giving, volunteering in the community, etc.) Phase 3: Once a customer has narrowed their list down to the businesses they are willing to Purchasing purchase from, they will likely contact you by adding items to their online cart, stopping Decision in your business, requesting a quote, etc. Their customer experience in this last phase of the buyer’s journey will determine which business they ultimately decide to buy from. As you create a marketing plan, consider how you can develop messages that will reach potential customers in each of these three phases of the buyer’s journey. You will also want to create a regular schedule for getting the word out about your business that includes regular communications throughout the year. Within the marketing and sales plan section of your business plan, you may also want to discuss: Marketing and sales objectives What your customers are looking for or need at different stages in the buyer’s journey How your sales team can target and follow up with customers at each stage of the buyer’s journey Your pricing model and how it may affect sales A detailed sales plan that includes methods, procedures, expectations for salespeople, distribution channels, customer service policies, warranties, etc. A detailed marketing and advertising plan that includes an in-depth calendar and budget for year one as well as a broad outline with budgets and strategy for years two through five michigansbdc.org | 31  CHAPTER 2 — MICHIGAN SBDC BUSINESS PLAN OUTLINE Section 3: Management and Operations The management and operations section needs to focus on how the business will be run. Even the best and brightest entrepreneurs cannot do everything. As you work on creating an operations strategy, you will want to focus on how you will achieve these goals: Ensuring customer satisfaction Clearly outlining the roles and responsibilities of staff members Determining when — and how — your company will grow as demand for your product or service increases In order to accomplish these goals, you will need to consider both high-level ideas and specific details. You’ll need to decide what departments you will have, the specific responsibilities for people within those departments, and how you will measure the effectiveness of people at fulfilling their responsibilities. Any documentation that you create related to organization structure, job descriptions, processes, expectations, etc. will help you consistently provide quality in production, sales, delivery and customer care. Included within your overall management and operations plan, You will need to address the following key areas within your overall management and operations plan: Human Resources You should discuss your team in this section. Discuss your core management team and the experience and skills each member brings to the business. In addition, explain any skills gaps that may require new hires or outside help. Describe areas where you will need to incorporate specialized assistance. Some common examples include: Financial and tax management help from an accountant or bookkeeper Legal advice from an attorney Risk and compliance management assistance from an insurance agent Site and facilities purchasing help from a realtor or local economic development organization Marketing and advertising support from an agency or consultant(s) Human resources assistance from a staffing service or consultant Technology/computer systems installation and support from an IT company or consultant You will also want to cover other information in your human resources section, such as: How many staff members will you hire and in which roles? Will you be utilizing full-time, part-time and/or contract employees, and what will the associated costs be? How will new employees be trained? What are your team’s greatest strengths, and what skill areas and team members need to be added? An organization chart that includes departments such as operations, sales, and finance (at a minimum) Job duties and work schedules for all team members The board of directors or advisory board (if applicable) 32 | Michigan Small Business Development Center  CHAPTER 2 — MICHIGAN SBDC BUSINESS PLAN OUTLINE Operations If human resources covers who will be doing the work at your business, operations covers the how it will get done. You will need to carefully consider what crucial processes need to be in place in order to run your business as efficiently as possible. This includes everything from how important decisions are made at your company down to how you will keep customers satisfied after they have purchased your product or service. Within the operations section, you’ll want to focus on answering questions like: How will you know when you need new team members? What will your interview, hiring and onboarding processes look like when you need new team members? How will new employees be trained? How will work be processed within your organization? For example, how will you manage new orders from purchase to completion? What quality control measures will you put in place? How will subcontractors fit into your processes and workflows? How will you manage your customers’ data? How will you process returns or order changes? What project management tools will you need to ensure that everyone on the team is accountable for their responsibilities? How will you handle performance reviews, and how often will you conduct them? Growth and Development While you may be excited to hit the ground running with your current idea, you should also have broad plans for your company’s future and growth. Whether you will be developing new products, branching into additional locations or expanding your targeting to new types of customers, a growth plan is important to help set your vision for the future and help you make decisions now that will help you achieve it. As you write this section of your business plan, you’ll want to cover topics like: What are your goals and plans for growth and expansion? What obstacles do you foresee while trying to achieve your objectives? What finance objectives will you need to reach in order to push beyond your current operations? Will you need additional financing to grow? What important milestones will you need to work toward and monitor in order to avoid difficulties and risks associated with growing your business? Some businesses are focused on transitioning an idea or invention from conception to the marketplace. For these businesses, you will want to include a commercialization strategy that outlines the current status of the new product or services as well as the timeline for making it marketable and purchase-able. michigansbdc.org | 33  CHAPTER 2 — MICHIGAN SBDC BUSINESS PLAN OUTLINE Section 4: Financials In this section, you will want to identify the financial goals and projections for your company. You will need to outline the funds you need and how you will obtain them. Start by providing your estimated monthly costs, both fixed and variable. After this, you can logically work backwards to show how many products you need to sell or how many hours of service you need to complete in order to break even or turn a profit at different levels. The financials section of your business plan will need to be detailed, technical and accurate. You should include the following key elements in order to effectively communicate your financial needs and projections to investors, partners and others: Startup Costs To calculate your BEQ, use the following formula: Detail and itemize all the costs associated with launching your business BEQ = FC / (AP – VC) (FC = fixed costs per month, AP = average price per unit, Monthly Costs VC = variable costs per unit) Detail and itemize all the costs associated with operating your business on a monthly basis Any amount of monthly sales above your BEQ should turn into profits. However, when your monthly sales dip below the BEQ, you’ll Sales Estimates lose money. Detail and itemize the expected monthly sales of your product or service and how much revenue those sales will bring in Monthly Cash Flow Projections for 3–5 Years Compare the estimated money coming into your business through Break-Even Analysis sales to the estimated costs of operating your business in order A break-even analysis can help you identify what sales goals your to demonstrate your profitability. Your local Michigan SBDC company needs to meet in order to make a profit. To perform a Consultant can provide templates to help you accomplish this. break-even analysis, you’ll need to determine your: Financial Assumptions Fixed costs per month: All costs like rent and payroll that This section describes the methods you used to estimate revenue don’t change much from month to month and expenses in your cash flow projections. It’s important to describe your financial assumptions logically and make sure they’re Variable costs per unit: All costs like inventory, shipping and realistic. sales commissions that go up or down with your sales volume, calculated on a per-unit basis Profit and Loss (P&L) Statements (If Applicable) P&L statements are more detailed and comprehensive than cash Average price per unit: The price a customer will pay for one flow projections. A P&L statement will break your costs down into unit of your product or service different categories, such as sales, operating expenses, etc. This can then be used to determine if your business is reaching its Once you have these three pieces of information, you can use them financial goals. If you have been operating your business in some to calculate your monthly break-even quantity (BEQ), which is the way in the past, P&L statements can help demonstrate business number of units you need to sell each month to cover your costs. potential and profitability. If you have not been operating your business yet, you will benefit from building a template for your P&L statements that can be used to assess your financials each year, quarter, or even month. 34 | Michigan Small Business Development Center  CHAPTER 2 — MICHIGAN SBDC BUSINESS PLAN OUTLINE Prior Financing (If Applicable) If you have prior personal or commercial financing that will impact your business, you will want to provide detailed information about any existing debt, equity and other financial arrangements. Financial Need Based on the numbers presented in earlier sections, you will want to outline exactly what finances are needed in order to launch or expand your business. Along with that, you will want to explain how you intend to obtain those finances. How much of it will be covered by your personal contributions? How much will come from investors, and how will investors be compensated for their investment? How much will come from loans or other financing options, and what will the terms and conditions be? Exit Strategy In this section, you will want to answer questions about how money will be extracted from the business. How will profits be used? Do you plan to sell the business? Will it be inherited (and by whom)? Section 5: Appendices Throughout your business plan, you may want to refer to supporting documentation that doesn’t fit neatly into any section or that would detract from the forward momentum of your plan’s structure. In those areas, you may want to leave a brief note in parentheses: (see Appendix A). In your appendices at the end of your business plan, you can then include supporting documentation such as: Resumes or biographies of individuals mentioned A list of owners Personal income tax forms (if applicable) Letters of recommendation Existing purchase orders Market research studies or results Site floor plans Existing or pending contracts Any other relevant supporting document michigansbdc.org | 35  CHAPTER 2 — MICHIGAN SBDC BUSINESS PLAN OUTLINE Final Touches In this section, you will want to identify the financial goals and projections for your company. You will need to outline the funds you need and how you will obtain them. Start by providing your estimated monthly costs, both fixed and variable. Then you can logically work backwards to show how many products you need to sell or how many hours of service you need to complete in order to break even or turn a profit at different levels. The financials section of your business plan will need to be detailed, technical and accurate. In order to effectively communicate your financial needs and projections to investors, partners and others, you should include the following key elements: Cover Page The front page of your business plan should include all of following information: Business name Business owner’s name Business logo (if available) Business or owner’s email address Business address Business or owner’s phone number City, state and zip code Business or owner’s fax number Website (if available) Date Executive Summary Immediately after the cover page, you will want to include a one or two page executive summary. The executive summary section provides a high-level overview of the business plan. It will highlight the primary ideas from each of the business plan components, and it should explain the primary purpose for writing the plan; for example, “to obtain financing.” The order in which you present highlights depends on the audience who will be reading it. For example, if investors will be reading the plan, you might want to lead with strong financial highlights to make a more compelling case for obtaining their financial support. Table of Contents Your table of contents should exactly follow the sections you include in your plan and have accurate page numbers so that readers can easily navigate your document. Below is an outline based on all the information presented in this chapter. Executive Summary Financials Company Introduction Startup Costs Don’t forget that your local Michigan Market Analysis Monthly Costs SBDC Consultant can help you with your Industry Sales Estimates business plan at no cost! Michigan SBDC Market Cashflow Projections also maintains an on-demand library of Customers Financial Assumptions webinars that’s curated specifically for busy Competition Profit and Loss Statements entrepreneurs looking to start or grow their Marketing and Sales Plan Prior Financing businesses. To access our on-demand Management and Operations Financial Need courses and webinar recordings, Human Resources Exit Strategy register online at: lms.michigansbdc.org. Operations Appendices Growth and Development 36 | Michigan Small Business Development Center