The Importance of a Business Plan

Importance of a Business Plan
PRESENTATION
©COPYRIGHT RK FISCHER & ASSOCIATES, 2010-2019. ALL RIGHTS RESERVED

What is a business plan?
 A business plan is a formal
guide for how you plan to
create or grow a business.
• It will address every area of your
business especially those related
to expenses and income.
• It is used to demonstrate the value
and profitability of your idea and
approach to your business.

Why do you need a business plan?
 A business plan provides clarity to
your business
 A business plan documents your
current business and go forward
direction
 A business plan articulates how
you make money with your
business to lenders and investors

Difference in a business plan and business case
 A business case is for a particular business-related project and the goal is to
show that it is practical and profitable
 A business plan is for your whole business
 Examples of Business Cases
• Buying New Equipment
• Adding a New Product
• Adding a New Department or Person within Company that needs to be justified

Difference in business plan and financial plan
 A financial plan is only a current and
future view of your financial
statements and does not take into
account how you got to the
numbers
 A financial plan is only as good as
the information about your business
that is there to back it up.
• Example: Your financial plan can state that
you are going to make $2M in revenue and
your margin is 50%, but if you cannot show
how you got to this in a business plan –
the information is not really of any true
value.

Key to a good business plan
 Understand all aspects of
your business
 Be an expert yourself or have a team
or set of advisors to help define all
of the requirements to start or grow
your business
• How can you expect investors or lenders
to provide funding for a business that the
owner and or stakeholders are not able to
articulate in detail and show how they
plan to be profitable and when?

What are investors and lenders looking for?
 A thorough and articulate plan which makes sense and
shows you have thought through all aspects of your
business.
 Marketing, Sales, Operations, Human Resources, and
Finance
• This is minimum – certain industries might have additional
sections such as Development or Manufacturing broken out.
 Experience and understanding of the market and
industry by the business owner
 If more than sole proprietorship, a team of people
that have skills and experience to make business a
success

 All of your financials and other models within
your plan need to make sense. If they cannot
see this – they will not see a return on their
investment or how the loan will be paid back.
• Example Business Model
 You have a product priced at $30,000.00
 You have a sales cycle of 3 months for the product
 You have 2 sales reps when you start
 You have shown sales in Q1 of Year 1 of $150,000.00
• Why This Does Not Look Feasible
 Your sales reps will have a learning curve and will not
hit the ground running Day 1
 The chances of 2 sales reps with a sales cycle of 3
months and 5 sales between them is unlikely

 You need to be clear about the amount required
and why you are asking for funding or investing
• They must understand how the funding will be used in
detail
 They want to see what your investment has been
in your business
• Why would others invest or lend you money if you have
not invested yourself in your business?
 It shows a lack of commitment on your part
 You need to show that you are a good credit risk
• What assets do you have from a business or personal
perspective and do you have a good credit rating?

Executive Summary
 This section should summarize your overall
plan at a very high level.
 Certain individuals at the lender or
investor will only read this section. Should
be a few pages where it could almost
stand alone.
• Introduction
• Market Overview
• Products and Services
• Financial Summary
• Objectives of Business Plan
• Keys to Success for Your Business

Company Overview
 This section should provide an overview
of your business.
• Existing Business
 Should include also a history of the company.
• Start-up / Expansion
 Should include an overview of the funds required
and how they will be used in the business (Expenses
and Assets)

Products & Services
 This section provides an overview of each of the products and services
that you sell
• Problem Solved
• Key Features and Benefits
• How They Are Developed
• Pricing Model
• Margin
• How They Will be Sold
• Value They Provide
• Customer Target Market

Market Analysis
 This section provides an overview of the
market for your products and services and
the industry of your business.
 It is in this section, you will need to show
the reader that you understand your
market, your industry, and your target
market.
• Market Selection and Reasoning
• Market Segmentation
• Market Analysis and Size of Addressable Market
• Target Market Breakdown
• Industry Analysis
• Competition and Buying Patterns

Marketing & Sales Strategy
 This section provides an overview of how you plan to implement your product and service
strategy by generating leads and prospects and then making and closing sales.
• SWOT Analysis
• What is Your Competitive Edge
• Marketing Strategy
 Product Strategy
 Pricing Strategy
 Branding Strategy
 Communication Strategy
 Promotional Strategy
• Sales Strategy
 Go To Market Strategy
 Marketing and Sales Assumptions
 Forecasts
• Milestones

Online Presence Strategy
 This section provides an overview of your
online presence and how you will use an
online presence to promote your business. An
online presence is key today as most buying
decisions are researched on the web prior to
purchase.
• Current and Go Forward Strategy
 Examples
 Web
 Blog
 Social Media
 Online Newsletters

Operational Strategy
 Operational Strategy
• This section will differ based on the industry,
but focuses on the capability of the business
to deliver on the promises it makes to its
customers. This section includes:
 Order Management
 Inventory Management
 Productivity
 Service and Delivery
 Quality Assurance
 Use of Technology/Systems
 Customer Care

Management & Human Resource Strategy
 This section focuses on the management team
and personnel that exist currently and planned
in the future for the company.
• Management Team
 Provide Detail of Background and How Their Experience
Provides Strength
• Organizational Chart
• Hiring Strategy and Personnel Staffing Charts

Financial Strategy
 This section focuses on the overall financials for the company based off
the rest of the plan. This section may differ a little depending on
whether you are a start- up or a business with existing financials.
• General Assumptions
 Provide interest rates, tax rates, economy information and other measures that affect
your business
• Break Even Analysis
 Provides overview of risk involved in your business
• Cash Flow
 Cash in and out of your business
• Balance Sheet
 Financial statement of assets and liabilities
• Projected Income Statement
 Measures performance over time
• Business Ratios
 Shows how your business is performing

Downfalls of a poor business plan
 Financing will not be approved
• Once a financial institution evaluates and turns down
your business plan, you could be finished with that
institution. The same is true with investors.
• Your credit rating will be affected by going to other
financial institutions with the same plan as a credit check
will be done each time.
 Stunted growth down the road
• If you are not able to articulate your business and how
you are going to move the business forward, you may
be running your business on a daily business and
missing the big picture
 Lack of value
• If you are looking to sell your company and did not
cannot articulate your business properly therefore
buyers may not receive the true value of your business

The Importance of a Business Plan

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