Strategic Planning for Your Business

Heather Clark Reynolds

Hoosier Heartland Small Business Development Center, Purdue University

• Hoosier Heartland Small Business Development Center..who are we?

Agenda

• Elements of a Business Plan• Strategic Planning

– PEST– SWOT– Porter’s Competitive Analysis– Balanced Scorecard

• Implementation

The WRITTEN Business Plan

• Why do I need a written plan?

• What’s it good for?

• Guiding Tool – keeps you from wandering

• Specify your product or service

• Clearly identify the business model

• Define the Organizational Structure & Functions

Guiding Tool• Needed by lenders for

loan applications• Keeps you focused

on primary goals• Baseline to refer back

to when things don’t go your way

Executive Summary

• Demonstrates your understanding of the business and industry

• Predict and address concerns that a potential investor might have

• Include highlights of how and when the business will pay back investors

• Should not be longer than 2 pages• Usually written last• Most banks/investors will not look past the

executive summary if it does not grab their attention

Clearly Define your Product/Service

• Can you tell me in 30 seconds or less what it is that you do? 2 minutes?

• What processes do you have in place to serve your customer from beginning to end?

• How many categories of product/service do you have?

• How many categories of customers do you have?

Exercise 1

• What does your business do?• What makes you the best candidate to manage

this business?• What is the number one reason you think this

business will succeed?• What makes this company a good risk?

Description of the Business

• Provide background information about the industry

• Compare your business to others in the community as well as nationwide

• Narrate the history of your business

• Talk about the impact it has on your community

• Describe how your business is different than everyone else

Identify the Business Model

• A business model is a term used to describe a profit-producing system that has an important degree of independence from the other systems within an enterprise. The term is widely used for a broad range of informal and formal descriptions of the purpose, offerings, strategies, infrastructure, organizational structures, trading practices, and operational processes and policies.

• Mom & Pop shop running paper ledger and cash register with no computerized functions

• Sole Proprietor working from home & computer or on the internet

• Retail organization with Store Manager, separate company headquarters with office staff, and future store openings coming

• Light Manufacturing operation with a handful of employees

Organizational Structure & Functions

• One man band• President/CEO with

department heads who hire/fire, make budgets, set goals, etc.

• Owner with a few employees who are under direct control

• Receptionist• Production• Management• Marketing• Sales• Accounting/ Bookkeeping• Purchasing• Shipping & Receiving• Accts Payable & Receivable• Collections• Maintenance• IT – Website & Computers• HR

Which Entity am I?

• Sole Proprietor

• S-corp

• LLCCheck Patents & registrations @

www.uspto.gov

What are you selling?

• Products• Retail• Commercial• Internet• B2B

• Services• Consulting• Individual• Commercial• B2B• Internet Based

Company and Product Overview

• Include a history of sales and profits• Be honest about challenges you have faced and

the strategies you used to overcome them• Demonstrate your knowledge of the industry• Show that you have talked with distributors,

competitors, etc• Articulate the features and benefits of your

product/service

Exercise 2

• What type of business are you planning?• What products or services will you sell?• What makes your product/service unique?• Name 3 features that your product/service will

offer customers.• What is the growth potential of your company?• How did you come up with the business idea?• Who are your competitors?

Market Analysis• National

Trends• National

Statistics• Economic

Conditions

Research

• Dunn and Bradstreet• ESRI Market

Research• Internet• Surveys• Trade shows/industry

think tanks

Target Market• Ideal Client

– What do they look like?

• Demographic• Geographic

– Local, Regional, National

Where do my customers get their information?

• The Greatest Generation

• Baby Boomers• Gen X• Gen Y• Millenials

• Internet• Podcasts• YouTube• Newspaper• TV• Radio• Direct Mail• Friends• Referrals• Word of Mouth

Market Analysis

• Demonstrate your understanding of the industry• Indentify and address business risks• Include a detailed description of your target

customer• Identify all direct and indirect competitors• Discuss your market position relative to

competitors

Exercise 3

• Who are your top 4 competitors?

• Rank those competitors

• List 3 tops strengths• List 3 worst

weaknesses

• List 5 traits that identify your customers

Marketing Plan

• Market Strategy• Sales and Distribution• Pricing• Advertising• Promotion• Public Awareness

Sales Strategy• How am I going to contact prospects?

– Word of mouth– Internet– Direct Mail

• Marketing & Advertising– Newspaper, Radio, TV– Website– Direct Mail

• How much to spend?– % of sales, $$ amount, whatever I can afford

Marketing and Sales Plan

• Consider the position of your product/service in the markeplace

• Define a price based on the customer and the market

• Complete a selling plan to offer the product• Describe the distribution channels you will use to

sell the product or service• Include a complete budget

Exercise 4

• What is the price of your product?

• Name 3 advertising avenues you are going to use.

• Give an example of a promotional strategy you are going to use, and explain why you picked that example

Operations Plan

• Product Design and Development– Why that design?– Time frames of research

• Manufacturing– Explain the steps to be used in producing– Flow chart is great– Outline the requirements and cost

• Delivery of Service– Advantages/disadvantages of location– What type of staff will you have?

Exercise 5

• In one sentence, describe what steps are required to produce your product/service

• What type of building/equipment do you need?• Who will be your suppliers?• How many staff are you going to hire?

Management & Manpower

• Who’s responsible for what? – Me, Myself, & I or Key Employees

• Job descriptions – managing expectations• Processes or systems• Pay schedule

Management Team

• Make sure your team has the skills required to run the business WELL

• Select a board of directors with experience• Include a detailed action plan to meet staffing

requirements• Make strategic alliances to compliment members’

skill sets

Exercise 6

• Who will manage your business? What makes them the best candidate and what are their qualifications?

• How many employees will you need?• What will they do?• What consultants or specialists do you need and

how will you use them?• Who is your attorney, CPA, banker, business

coach?

Critical Risks

• Take the wind out of their sails!!

• Show that you know the potential problems

• The greatest fear is the unknown

• What is your plan if a problem arises?

Exercise 7

• What is one problem that could arise in your business?

• How likely is that problem to occur?

• How do you plan to manage that problem?

Financial Aspects

• Most scrutinized section of the plan

• Financial forecasts• Balance sheets• Income statements• Profit and loss • Budget

Will I make money?• Start up costs• Break Even Analysis

– Cover all costs – fixed & variable

– Assume income– Double expenses & cut

income in half

• Know Your Numbers – Daily– Weekly– Monthly

Funding Sources• Cash on Hand• Friends & Family• Loans/Lines of

Credit• Credit Cards• Cash flow

Exercise 8

• What is your total estimated business income for the first year? Monthly?

• What will it cost you to open the business?• What will your personal financial needs be?• What sales volume will you need to make in order

to make a profit?• What are your potential funding sources?

Milestone Schedule

• "A goal properly set is halfway reached." – Abraham Lincoln

• "You have to know what you want to get it." - Gertrude Stein

Milestones

• Draft a check list of things to do including meetings with attorneys, CPA’s, advisors

• Make a list of your goals for 6 months, 1 year and 5 years

• Make sure your forecasted sales match your goals

• Be as date specific as possible

Exercise 9

• List the top 5 financial goals you want your company to reach in one year

• List the names of all persons you need to meet with and the deadline

Strategic Planning

• Use the business plan as a starting point

• Helps you have something to measure against

• Keeps you on track

Strategic Planning

• Develop or Modify your last business plan in order to guide and manage growth

• Manage your priorities, assign responsibilities and track your progress

• Make sure responsibilities, activity deadlines and budgets are specific

• Develop a mission statement

Exercise 10

• What business are we in? Could we be in? Should we be in?

• What are the basic customer/client/user needs or problems we exist to fill?

• In what ways do we want to respond to these needs/problems?

• Who should be our principle clients/customers?• What makes us distinctive?• What philosophical issues, values and priorities

are/should be important to our organization’s future?• What is likely to be different about our business 3 -5

years from now?

PEST Analysis

• Political

• Economic

• Social

• Technological

• A tool for understanding market growth or decline

• Determines the position, direction and potential for your business

• Focuses on external forces

SWOT Analysis

• Strengths

• Weaknesses

• Opportunities

• Threats

• Tool for understanding and decision making

• Measures a business unit, a proposition or idea

• Focuses on human resources, accounting/financial, marketing, operations

Why use PEST and SWOT?

• If you develop strategies, you can avoid and minimize problems and capitalize on opportunities

• PEST helps you measure the market

• SWOT helps you determine external forces affect your business and evaluates internal conditions

Porter Analysis

• Assessing your competitors • Five Forces

1. Existing competitive rivalry between suppliers

2. Threat of new market entrants

3. Bargaining power of buyers

4. Power of suppliers

5. Threat of substitute products (including technology change)

Exercise 11

• Who are your major competitors in the market?• What are they doing right/wrong?• How easy is it for new, competing businesses to

enter your market?• Are you able to negotiate prices from suppliers?• How easy is it for customers to move their

business to another competitor?• What new competitive threats concern you?

Balanced Scorecard

“A strategic planning and management system used to align business activities to the vision statement of an organization”

How does it work?

• Translates the vague hopes of the company’s vision/mission statement into the practicalities of managing the business at every level

• You must know the following:1. Mission statement

2. Strategic plan/vision

3. Financial status of the organization

4. Operational structure and organization of company

5. Level of expertise of employees

6. Customer satisfaction level

4 perspectives of Balanced Scorecard

• Finance• Internal Business

Process• Learning & Growth

(human focus)• Customer

The metrics must be

• Specific

• Measurable

• Achievable

• Realistic

• Timely

What does it look like?

Benefits of Implementation

• Improved processes• Motivated/educated employees• Enhanced information systems• Monitored progress• Greater customer satisfaction• Increased financial usage

How to implement the Balanced Scorecard

• What (who) are your company’s strengths?– Look to the PEST and SWOT analysis– Porter Analysis

• What (who) are your company’s weaknesses?• What do you see as your company’s strategic

issue(s)?

Formulating Strategies

• Pick a strategic issue and ask the following:1. What are the practical alternatives, dreams or visions

you might pursue to address this strategic issue:

2. What are the barriers (real and imagined) to realizing these alternatives, dreams or visions?

3. What are the major proposals to pursue or overcome these alternatives, dreams or visions?

4. What actions MUST be taken within the next year to implement these strategies?

Action Steps

• For each major action/step to be taken, complete the following:

Action Step # 1

Person Responsible

Date of Completion

Indicator / measure of success

Tips for Success

ACCOUNTABILITYBaby steps

How do you eat an elephant?

Questions?