How to Write a How to Write a Business PlanBusiness Plan

Presenter:Presenter:Telaekah Brooks, JDTelaekah Brooks, JD

Dean, School of Professional Dean, School of Professional StudiesStudies

Trinity Washington UniversityTrinity Washington University

What is a Business What is a Business Plan ?Plan ?

A road mapA road map A dynamic, living document that A dynamic, living document that

describes who you are, what you describes who you are, what you sell, how much money you will need, sell, how much money you will need, who will work for you, and so on.who will work for you, and so on.

Business plans often include Business plans often include strategies for expansion or risk.strategies for expansion or risk.

Why Develop a Business Why Develop a Business Plan ?Plan ?

The process of putting a business plan together, The process of putting a business plan together, including the thought you put in before you write including the thought you put in before you write it, forces you to take an objective, critical, it, forces you to take an objective, critical, emotional look at your business project in its emotional look at your business project in its entirety. entirety.

The finished product is an operating tool which, The finished product is an operating tool which, if properly used will help you manage your if properly used will help you manage your business and work effectively toward its success.business and work effectively toward its success.

The completed business plan communicates The completed business plan communicates your ideas to others and provides the basis for your ideas to others and provides the basis for corporate buy-in and ownership.corporate buy-in and ownership.

BUSINESS PLAN FORMATBUSINESS PLAN FORMAT What is the correct model ?What is the correct model ?

The Three Basic Sections of The Three Basic Sections of a Business Plana Business Plan

Description of the businessDescription of the business MarketingMarketing FinancialsFinancials

1. Description of 1. Description of Your BusinessYour Business

•Mission StatementMission Statement•Legal StructureLegal Structure•Products & servicesProducts & services•LocationLocation•Management & personnelManagement & personnel•InsuranceInsurance•TaxesTaxes•SecuritySecurity•RecordkeepingRecordkeeping

Mission StatementMission Statement

Your mission statement states, Your mission statement states, in the broadest terms possible, what in the broadest terms possible, what your business hopes to be and do. your business hopes to be and do. “To help people work more “To help people work more efficiently and comfortably,” or “To efficiently and comfortably,” or “To provide healthy, energizing juices,” provide healthy, energizing juices,” or “To take the anxiety out of tax or “To take the anxiety out of tax preparation.” preparation.”

Mission Statement Mission Statement ExerciseExercise

In just a few sentences the mission In just a few sentences the mission statement should communicate the essence statement should communicate the essence of your company to both your stakeholders of your company to both your stakeholders and to the public.and to the public.

What values would you like your business What values would you like your business have?have?

What is the purpose of your business?What is the purpose of your business? What is your vision for the future of your What is your vision for the future of your

business?business? Mission Statement: (50 words or less)Mission Statement: (50 words or less)

Legal StructureLegal Structure

Sole ProprietorshipSole Proprietorship PartnershipsPartnerships

General PartnershipsGeneral Partnerships Limited PartnershipsLimited Partnerships

Limited Liability CompanyLimited Liability Company CorporationsCorporations

S Type CorporationsS Type Corporations C Type CorporationsC Type Corporations

Sole ProprietorshipsSole Proprietorships

In a sole proprietorship, you have all In a sole proprietorship, you have all of the control and all of the liability. of the control and all of the liability. It is the easiest to start, and usually It is the easiest to start, and usually does not require significant does not require significant licensure. You run the show and licensure. You run the show and keep the money. keep the money.

Major Downside: You are Major Downside: You are completely, 100% personally liable if completely, 100% personally liable if something goes wrong.something goes wrong.

General PartnershipsGeneral Partnerships

General PartnershipsGeneral Partnerships These are relatively easy to start by These are relatively easy to start by

requiring only 2 or more people. This type requiring only 2 or more people. This type of business requires little licensure and is of business requires little licensure and is easy to run. easy to run.

All partners share in the management of the All partners share in the management of the business, the profits, and the personal business, the profits, and the personal liability.liability.

Major Downside: You can be liable for the Major Downside: You can be liable for the actions of your partner, and it is sometimes actions of your partner, and it is sometimes difficult to manage disputes.difficult to manage disputes.

Limited PartnersLimited Partners Limited PartnershipsLimited Partnerships

Limited Partnerships are a little more complicated Limited Partnerships are a little more complicated to start and do require some incorporation in most to start and do require some incorporation in most states.states.

Though you can start an LP with just 2 people, Though you can start an LP with just 2 people, there is a catch:there is a catch:

At least one partner is limited and one is general. At least one partner is limited and one is general. The limited partner is like a silent partner- they get The limited partner is like a silent partner- they get to avoid most liability, but have to give up to avoid most liability, but have to give up management control to get it.management control to get it.

The general partner has management control- and The general partner has management control- and is fully liable if something goes wrong.is fully liable if something goes wrong.

Major Downside: It is hard for limited partners to Major Downside: It is hard for limited partners to resist the urge to manage.resist the urge to manage.

Limited Liability Limited Liability CompaniesCompanies

LLCs were designed to provide you with the LLCs were designed to provide you with the best of two worlds:best of two worlds: The flexibility and ease of ownership found in a The flexibility and ease of ownership found in a

sole proprietorshipsole proprietorship And, the restricted personal liability of a And, the restricted personal liability of a

corporation.corporation. These can be started with just one owner/member These can be started with just one owner/member

and little investment. They do require and little investment. They do require incorporation in most states.incorporation in most states.

Major Downside: More complicated than a sole Major Downside: More complicated than a sole proprietorship- but the restricted liability can be proprietorship- but the restricted liability can be worth it.worth it.

CorporationsCorporations

S Type CorporationsS Type Corporations These require formal incorporation in every state. These require formal incorporation in every state. You are required to have a Board of Directors, You are required to have a Board of Directors,

which sets policy and controls the President of the which sets policy and controls the President of the corporation. corporation.

It can be a complicated process, Board members It can be a complicated process, Board members and Officers have little personal liability, and and Officers have little personal liability, and shareholders are taxed on dividends.shareholders are taxed on dividends.

Major Downside: Most small business owners try Major Downside: Most small business owners try to run corporations like sole proprietorship- to run corporations like sole proprietorship- forgetting to keep good corporate records and forgetting to keep good corporate records and “buy” ownership in their business.“buy” ownership in their business.

More on CorporationsMore on Corporations

C Type CorporationsC Type Corporations This type of structure also requires formal This type of structure also requires formal

incorporation in all states. incorporation in all states. This is the most complex business structure, which This is the most complex business structure, which

is subject to stricter regulations by the gov’t.is subject to stricter regulations by the gov’t. Though the personal liability of owners is shielded, Though the personal liability of owners is shielded,

there is not total protection against lawsuits.there is not total protection against lawsuits. Shareholders, Board members, and officers run the Shareholders, Board members, and officers run the

businessbusiness Major Downside: Complicated management Major Downside: Complicated management

structure, “double taxation” on earnings.structure, “double taxation” on earnings.

Product & ServicesProduct & Services Most businesses are built around products Most businesses are built around products

and/or services already available. A fish market and/or services already available. A fish market for example has a simply described product for example has a simply described product line (seafood); the service element involves line (seafood); the service element involves how they process the product and satisfy their how they process the product and satisfy their customers. customers.

If your products or services are unique, state-If your products or services are unique, state-of-the-art, or otherwise noteworthy, take of-the-art, or otherwise noteworthy, take advantage of it. Such differentiation is advantage of it. Such differentiation is valuable, tends to be fleeting, and attracts valuable, tends to be fleeting, and attracts imitators. imitators.

Products & Services Products & Services cont’dcont’d

The Internet has a wealth of information that can The Internet has a wealth of information that can lead you to better understand your product or lead you to better understand your product or service and its place in the market. service and its place in the market.

Using Google.com to search for “Maine + seafood” Using Google.com to search for “Maine + seafood” yielded 51,900 responses. Don’t faint—of the 51,900 yielded 51,900 responses. Don’t faint—of the 51,900 responses only the first 20 had much to offer, responses only the first 20 had much to offer, including descriptions of seafood products, services, including descriptions of seafood products, services, and trade association studies. A search for “Maine + and trade association studies. A search for “Maine + seafood + retail” yielded a mere 4,780 sites. Some of seafood + retail” yielded a mere 4,780 sites. Some of the other sites observed were very specific: seafood the other sites observed were very specific: seafood retailers (from everywhere, even though “Maine” retailers (from everywhere, even though “Maine” was a qualifier) with a description of their prices and was a qualifier) with a description of their prices and products. Some were general: aquaculture. products. Some were general: aquaculture.

A general rule for conducting a Web search is to A general rule for conducting a Web search is to make your descriptors as specific as possible. This make your descriptors as specific as possible. This will give you more useful results. will give you more useful results.

LocationLocation

Factors to consider:Factors to consider: Type of buildingType of building Organization of spaceOrganization of space ParkingParking Transportation accessibilityTransportation accessibility TrafficTraffic Community residentsCommunity residents Target MarketTarget Market IncentivesIncentives

SpaceSpace

Plan your spacePlan your space How much space should you set aside How much space should you set aside

for offices? How much storage do you for offices? How much storage do you need?need?

How will you utilize your storefront? How will you utilize your storefront? What about signage?What about signage?

How much display space do you need?How much display space do you need? Let’s talk basic consumer economicsLet’s talk basic consumer economics

Management & Management & PersonnelPersonnel

About your principals:About your principals: Business BackgroundBusiness Background Management ExperienceManagement Experience Educational BackgroundEducational Background

About your staff:About your staff: Types of staff you will needTypes of staff you will need Duties and responsibilitiesDuties and responsibilities Policies and procedures (employee Policies and procedures (employee

handbook)handbook)

Personnel Con’tPersonnel Con’t

TimesheetsTimesheets Work SchedulesWork Schedules Classes of employeesClasses of employees Pay rates/tablesPay rates/tables Full- time vs. part- time vs. Full- time vs. part- time vs.

independent contractorindependent contractor BenefitsBenefits

InsuranceInsurance

General Business Liability InsuranceGeneral Business Liability Insurance Workmen’s CompensationWorkmen’s Compensation BondingBonding

Performance bondsPerformance bonds Tender bondsTender bonds

General Liability General Liability InsuranceInsurance

A Commercial General Liability (CGL) A Commercial General Liability (CGL) insurance policy is the first line of insurance policy is the first line of defense against many common claims. defense against many common claims.

General Liability insurance covers claims of bodily General Liability insurance covers claims of bodily injury or other physical injury or property damage. injury or other physical injury or property damage. It is frequently offered in a package with Property It is frequently offered in a package with Property insurance to protect your business against insurance to protect your business against incidents which may occur on your premises or at incidents which may occur on your premises or at other covered locations where you normally other covered locations where you normally conduct business. Commercial General Liability conduct business. Commercial General Liability enables your business to continue operations while enables your business to continue operations while it faces real or fraudulent claims of certain types of it faces real or fraudulent claims of certain types of negligence or wrongdoing. negligence or wrongdoing.

Workmen’s Workmen’s CompensationCompensation

This insurance protects you, the business This insurance protects you, the business owner, from financial devastation in the owner, from financial devastation in the event that an employee is injured on the job. event that an employee is injured on the job. It also helps the employee return to work It also helps the employee return to work with little or no loss of income. It provides:with little or no loss of income. It provides: Legal protection for the business ownerLegal protection for the business owner Income, medical and rehab benefits for employee Income, medical and rehab benefits for employee

work-related injurieswork-related injuries Payment to surviving family members if your Payment to surviving family members if your

employee is fatally injured on the jobemployee is fatally injured on the job Employer’s liability insurance (including damages Employer’s liability insurance (including damages

due to a third party) for care and loss of services due to a third party) for care and loss of services for consequential body injury to a family memberfor consequential body injury to a family member

BondsBonds

Performance BondsPerformance Bonds Most capital works projects require this type of Most capital works projects require this type of

bond.bond. This bond is an indicator that your company This bond is an indicator that your company

has the necessary skills and capabilities to has the necessary skills and capabilities to carry out the required work and comply with carry out the required work and comply with the terms of the contract.the terms of the contract.

Tender BondsTender Bonds Bid or Tender bonds provide a financial Bid or Tender bonds provide a financial

fallback for the contracting agency in the event fallback for the contracting agency in the event that you are unable to finish the contract.that you are unable to finish the contract.

TaxesTaxes Corporate franchise taxCorporate franchise tax

In most states, your business will have to pay corporate In most states, your business will have to pay corporate income taxes on income made in that state. Rates will vary income taxes on income made in that state. Rates will vary based upon locationbased upon location

Sales and Use TaxesSales and Use Taxes The general rule here is that you must pay sales tax for all The general rule here is that you must pay sales tax for all

retail products that you sell. You can usually elect to pay retail products that you sell. You can usually elect to pay monthly or quarterly.monthly or quarterly.

Personal Property TaxPersonal Property Tax Many states require you to pay taxes on the aggregate value Many states require you to pay taxes on the aggregate value

of your business possessions.of your business possessions. Employer TaxesEmployer Taxes

Some can be deducted from the gross salaries of your Some can be deducted from the gross salaries of your employees- withholding taxesemployees- withholding taxes

Some come out of your pocketSome come out of your pocket

SecuritySecurity

Facilities & equipmentFacilities & equipment Security of employeesSecurity of employees Intellectual propertyIntellectual property Client records and business filesClient records and business files Personnel recordsPersonnel records Internet/network securityInternet/network security

RecordkeepingRecordkeeping

Database managementsDatabase managements Filing systems and proceduresFiling systems and procedures Reporting mechanismsReporting mechanisms Manual vs. automatedManual vs. automated Software usageSoftware usage

2. Marketing2. Marketing Who are your customers?Who are your customers? What benefits do you provide them?What benefits do you provide them? How many are there?How many are there? How many do you need?How many do you need? What are there current buying patterns?What are there current buying patterns? Where do they currently buy?Where do they currently buy? How will they know about you?How will they know about you? What are your major risks and What are your major risks and

opportunities?opportunities?

Your Target MarketYour Target Market For Individuals For Individuals

• Age • Age • Gender • Gender • Race and ethnic group • Race and ethnic group • Hobbies • Hobbies • Lifestyle • Lifestyle • Reading, listening, and viewing patterns • Reading, listening, and viewing patterns (newspapers, magazines, TV, radio) (newspapers, magazines, TV, radio) • Education • Education • Social class • Social class • Occupation • Occupation • Income level • Income level • Family life cycle • Family life cycle

CompetitionCompetition Who are your five nearest competitors?Who are your five nearest competitors? How is their business? Steady, How is their business? Steady,

increasing, decreasing?increasing, decreasing? What are the similarities and differences What are the similarities and differences

between their business and yours?between their business and yours? What have you learned from watching What have you learned from watching

their business? What works for them their business? What works for them and what doesn’t?and what doesn’t?

How will your operation be better than How will your operation be better than theirs?theirs?

Your IndustryYour Industry

Background Industry InformationBackground Industry Information Current/Future TrendsCurrent/Future Trends The Business Fit in the IndustryThe Business Fit in the Industry

Marketing StrategiesMarketing Strategies

AdvertisingAdvertising PrintPrint RadioRadio TelevisionTelevision

PromotionPromotion Design of MaterialsDesign of Materials PricingPricing Press RelationsPress Relations

Risk and OpportunitiesRisk and Opportunities

A SWOT Analysis may be helpful in A SWOT Analysis may be helpful in identifying Risks and Opportunitiesidentifying Risks and Opportunities

SWOT Analysis SWOT Analysis (your (your organization’s major organization’s major

Strengths and Strengths and Weaknesses, and the Weaknesses, and the

most important most important Opportunities and Opportunities and

Threats internal to your Threats internal to your organization). organization).

Sample SWOTSample SWOT

Factor Factor Strength Strength WeaknessWeakness

Quality XQuality X

TrainingTraining X X

Capital Capital X X

Management XManagement X

Operations XOperations X

Production Production X X

Staff XStaff X

CONT’DCONT’D

Factor Factor Opportunities Opportunities ThreatsThreats

Customer Base XCustomer Base XCompetitionCompetition XXTechnology XTechnology XPolitical Climate XPolitical Climate XRegulatory Bodies XRegulatory Bodies XEconomic Environment XEconomic Environment XLegal XLegal X

3. Financials3. Financials

How much capital do you need?How much capital do you need? How can you maintain cash flow and How can you maintain cash flow and

Liquidity?Liquidity? How much working capital do you How much working capital do you

need?need? What kind of budgets should you What kind of budgets should you

follow?follow? How can you control your finances?How can you control your finances? How much growth can you afford?How much growth can you afford?

FinancialsFinancials

Uses and SourcesUses and Sources Profit & Loss StatementsProfit & Loss Statements Income StatementIncome Statement Balance Sheet Balance Sheet Cash Flow ProjectionsCash Flow Projections Break Even Analysis Break Even Analysis Start Up Costs Start Up Costs

The Balance SheetThe Balance Sheet

The balance sheet show the business’s financial situation on a given day only. The balance sheet show the business’s financial situation on a given day only. The formula for the balance sheet is:The formula for the balance sheet is:

Assets = Liabilities + Owner’s equityAssets = Liabilities + Owner’s equity

Assets are economic resources owned by the business, purchased with the Assets are economic resources owned by the business, purchased with the funds supplied by creditors or owners. funds supplied by creditors or owners.

Liabilities are amounts owned by the business to creditors. Owner's equity is Liabilities are amounts owned by the business to creditors. Owner's equity is amounts owned by the business to amounts owned by the business to

the owners.the owners.

Break-Even AnalysisBreak-Even Analysis

A. Total sales: A. Total sales: $_______$_______B. Fixed costs: B. Fixed costs: $_______$_______C. Gross margin: C. Gross margin: $_______$_______D. Gross margin as % sales: (CD. Gross margin as % sales: (C÷÷A) A) _______% _______%E. Break-Even Sales: (BE. Break-Even Sales: (B÷D)÷D) $_______$_______F. Profit goals: F. Profit goals: $_______$_______G. Sales required to reach profit goalG. Sales required to reach profit goal may be calculated: [(B+F)÷D] may be calculated: [(B+F)÷D] $_______$_______

Operating Expenses

FixedSalaries

Payroll

Benefits

Utilities

Licenses

Insures

Advertising

Office Supplies

Legal & Accounting

Maintenance & Cleaning

Depreciation

Interest

VariableSales Commissions

Boxes, Paper, Etc.

Travel for Sales

Overtime Personnel & Extra

Labor for Manufacturing

Freight Out

Etc.

BothPostage

Telephone

Etc.

Cash Flow ProjectionsCash Flow Projections

Plot out the Plot out the revenuerevenue that you are that you are expecting to come in over a 12-expecting to come in over a 12-month schedulemonth schedule

Plot out your expected Plot out your expected expenses expenses over the same periodover the same period

Make sure to include stable monthly Make sure to include stable monthly expenses (utilities, rent, etc) and expenses (utilities, rent, etc) and contract receivablescontract receivables

Business Plan ChecklistBusiness Plan Checklist

Prepare Objectives and MissionPrepare Objectives and Mission□□Growth plan descriptionGrowth plan description□ □ Stage of developmentStage of development□ □ Mission StatementMission Statement□ □ ObjectivesObjectives

Prepare Background InformationPrepare Background Information□ □ Industry analysis and trendsIndustry analysis and trends□ □ The business “fit” in the industryThe business “fit” in the industry

Design the OrganizationDesign the Organization□ □ Business structureBusiness structure□ □ ManagementManagement□ □ PersonnelPersonnel□ □ Outside services/advisorsOutside services/advisors□ □ Risk managementRisk management□ □ Operating controlsOperating controls

Prepare the Marketing PlanPrepare the Marketing Plan□ □ Description of products or servicesDescription of products or services□ □ Market analysisMarket analysis□ □ Competitor analysisCompetitor analysis□ □ Market size and trendsMarket size and trends□ □ Sales volume potentialSales volume potential□ □ Marketing mix strategyMarketing mix strategy□ □ Explain market strategyExplain market strategy

□ □ PricePrice □ □ PlacementPlacement □ □ ProductProduct □ □ PromotionPromotion

Compile the financial PlanCompile the financial Plan□ □ Financial worksheetsFinancial worksheets□ □ Cash flow projectionsCash flow projections□ □ Financial statementsFinancial statements□ □ Additional financial informationAdditional financial information

Assemble AppendicesAssemble Appendices□ □ TimetableTimetable□ □ Supporting documentsSupporting documents

Write Executive SummaryWrite Executive Summary□ □ Analyze target readersAnalyze target readers (investors/leaders) and write accordingly(investors/leaders) and write accordingly□ □ Consolidate and summarize all accumulate dataConsolidate and summarize all accumulate data□ □ Adjust original business concept as neededAdjust original business concept as needed

Finishing TouchesFinishing Touches□ □ Proofread and edit documentProofread and edit document□ □ Create/collect graphs, charts, and photographsCreate/collect graphs, charts, and photographs□ □ Reread entire business planReread entire business plan□ □ Determine overall feasibility of planDetermine overall feasibility of plan□ □ Give plan to friends, advisors, or family for Give plan to friends, advisors, or family for

review review □ □ Make changes as necessaryMake changes as necessary

Business ResourcesBusiness Resources

US Small Business Administration (US Small Business Administration (www.sba.gov))

Service Corps of Retired Executives Service Corps of Retired Executives ((www.score.org))

Maryland State Department of Maryland State Department of Assessments and Taxation Corporate Assessments and Taxation Corporate Charter Division Telephone: (410) Charter Division Telephone: (410) 767- 1340 767- 1340 http://www.dat.state.md.us

Marketing ResourcesMarketing Resources 1. 1. American Demographics, American Demographics, the monthly magazine, has an the monthly magazine, has an

excellent home page at <www.marketingtools.com>. excellent home page at <www.marketingtools.com>. American Demographics American Demographics is the magazine of record for is the magazine of record for demographic research. They make using census data demographic research. They make using census data simple and effective.simple and effective.

2. Princeton University’s 2. Princeton University’s Survey Research Center Survey Research Center home home page <www.princeton.edu/—abelsonf index.html> is a page <www.princeton.edu/—abelsonf index.html> is a must-visit. It contains a number of links to other sites, and must-visit. It contains a number of links to other sites, and is of value in itself. is of value in itself.

3. The 3. The National SBDC Research Network National SBDC Research Network home page home page <www.smallbiz.suny.edu/> is your entry into the SBDCs <www.smallbiz.suny.edu/> is your entry into the SBDCs extraordinary wealth of information. extraordinary wealth of information.

4. SCORE On Line 4. SCORE On Line <www.score.org> has one-on-one <www.score.org> has one-on-one marketing research advice as well as plenty of helpful marketing research advice as well as plenty of helpful links. links.

5. Hoover’s 5. Hoover’s Online Online (“The ultimate source of information on (“The ultimate source of information on businesses”) is terrific for getting financial information on businesses”) is terrific for getting financial information on publicly traded companies <www.hoovers.com/> publicly traded companies <www.hoovers.com/>

Contact InformationContact Information

Telaekah Brooks, JDTelaekah Brooks, JD

Dean, School of Professional StudiesDean, School of Professional Studies

Trinity Washington UniversityTrinity Washington University

(202) 884-9620(202) 884-9620

brookste@trinitydc.edubrookste@trinitydc.edu