Developing, Marketing and Implementing a Business Plan Aboriginal Financial Officers Association of...

Developing, Marketing and Implementing a Business Plan

Aboriginal Financial Officers Association of Canada

National Conference / February 2005

AFOA / 2005 - Business Plan Workshop 2

The Business Plan

The Business Plan is an essential tool – a road map; it should answer two fundamental questions to you (assuming you are the entrepreneur):

Is the opportunity worth pursuing? Can I do it? How?


The Business Plan

Once that threshold is crossed:

A Business Plan is essentially a selling document that must convey excitement, interest, and vision, to whoever is going to back the business.


Ten Good Reasons Introduces the entrepreneur (or team) to key stakeholders; Provides tool to assess viability; Provides a framework for the entrepreneur to conduct an

analysis of the venture; Provides a framework for the entrepreneur to assess

industry and competitive forces; Provides a tool for the entrepreneur to assess “Fit”; Provides a framework for the entrepreneur to conduct self-

assessment; Forces the entrepreneur to define the idea, concept, and

objectives; Forces the entrepreneur to think strategically very early

on; Creates an essential document for raising funds; Provides direction in the early stages.


The Critical Issues The PEOPLE behind the venture and their key

support;

The OPPORTUNITY, what will the business sell, to whom, can it grow?

The ENVIRONMENT that the business operates in;

The RISKS and REWARDS of everything that can go wrong, and right, and how the team will respond.


Developing A Business Plan / The Outline Cover Letter – Provides focus, explains purpose; Cover Page – Show image, quality; Table of Contents – Ease of reference; Executive Summary – Gain interest, showcase vision; Research – Illustrate market size, growth, change; Marketing – Show strategy to enter market, get clients; Operations – Show structure, processes, key management; Finance – Show requirements, sources/uses, and when

profit is expected; Appendices – Show relevant support documentation.

Note: This is a basic outline, it can be modified as needed.


Cover Letter One page maximum; Sets the mood and focus; Address the reader and begin a “soft sell”; Spell names correctly; and sign; Close on a positive; Buzzwords: “Our research indicates….an opportunity in

the market”; “We will target….niche…using aggressive

marketing”; “We have the resources….successful

implementation”.


Cover Page Similar to the business card concept; Immediately projects image, first impression; Be appropriate, flashy versus understated; Use color scheme, graphics, logo, brand; Avoid similarity with an existing “look”; Be creative.


Table of Contents Reference point; Should be reader friendly; Show a clear path to information; Link to Tabs if applicable; Use headings and sub-headings; Sounds obvious, but make sure pagination is

correct.


Executive Summary This is it! It might be all that that an investor

reads; One page maximum; It MUST grab the attention of the reader; The reader is interested in: The market opportunity; Your strategy to fill it; How much will this cost, where is money coming

from; When will there be profits, and how much? Who are the key people, what is their expertise? What are you requesting from the reader?


Research Section

Industry Research Target Market Research Competition Research

Purpose is to show the validity of your business expectations;

Prove to and convince a “skeptic”.


Industry Research Hopefully, it is in a growth stage; But, change in the industry is also a good sign; If it is stagnant and/or saturated, you will have

to “steal” customers from the competition.


Target Market Research State clearly, “the target market is…”; State who they are, “males ages 18 – 35…”; State how many are in the area you intend to

serve;


Competition Research Note the number, size , and “track record”; Use easy to find data, phone directories,

newspaper ads; Use observation, visit them and pose as

customer; Assess their strengths and weaknesses; Assess their ability and willingness to change; Think about differentiation;


Secondary Research Use easy data sources; INTERNET; Remember that the reader is NOT an expert in

every sector of the economy, present information in an easy to read format, use charts, etc.


Primary Research Survey; Consider selecting an easy target market, i.e.

students; “Expert opinion” interviews; Critical information: Perception of product/service; Desired features/benefits; Desired availability; Price expectations; Frequency of purchase.


Marketing “A body at rest stays at rest”…. Sales are critical at start up; Marketing is the most important skill in the

beginning; Describe the window of opportunity from

previous section; Discuss differentiation; Highlight your “unique selling point”.


Product Briefly describe product/service; Highlight differentiation again; Highlight selling points, “superior quality”,

“easy to use”; Mention add-ons, special points.


Price Reflection of quality; Don’t go too low; Think about who is buying, is it for a gift? Remember, it’s likely you do NOT have the

power to undersell (predator pricing) your competition to steal market share.


Promotion Communication to your target audience; Critical difference, mass market vs. niche

market; Mass market, think Wal-Mart; forget about it! Niche market: Think how you get your message to your target

market; Get attention; Generate interest; Develop desire; Take action, purchase.


Place Location; Look for anchor (community mall); Look for cluster (around others); Remember, if you are a “specialty shop” and

expect others to “find” you, you better be good!


Operations Competencies Process Structure Scheduling / Facility

Purpose is to show the internal workings of the business;

Show “fit” between external market opportunity and internal strength of “system” to meet opportunity.


Competencies The management team is very important; Weakness is indicated when someone does not

“add-value”, why are they there? Family support is important; Indicate advisors, if applicable;


Process (Flow charts) System means work is accomplished most

efficiently; System allows for customer to move through a

process in the “best” way; Best means best for the business; System should be designed so that product

flows in most efficient way; Compare how a customer flows through a self-

serve gas station versus a casino;


Structure Sole proprietorship: Very easy to set-up,

places risks on the sole owner;

Partnership: Several owners, but as partners;

Incorporation: Most costly, but provides for limited liability on owners and usually used as business grow larger.


Scheduling / Facilities

Schedules: Think of the typical week.

Facility: Layout of business, applicable for most business plans.


The Financial Plan How much will it cost to start? What is your equity? How much is needed from external sources? Where will the funds come from? (Debt or

equity?); How will you pay it back – debt? How much of the business will you give up –

equity? Beak-even analysis.


Major Cost Assumptions Indicate in simple format: Major cost items; Equipment purchases; Supplies, etc. Any other major cost items relevant to the

specific business needs.


Pro-Forma Financials Cash Flow is KING/QUEEN! No, they don’t

teach this at the Harvard Business School. Cash Flow (forecast) statement: key planning

financial showing simply cash in and cash out, should be monthly;

Income Statement – the financial statement showing profitability over a period of time;

Balance Sheet: the financial statement showing assets, liabilities, equity, at a specific point in time.


Ratios Liquidity: Current: Current assets / current liabilities; Quick (Acid test): Cash / current liabilities; Profitability: Return on equity: Net income / total equity; Profit margin: (Net income / sales); Solvency: Debt / equity: (Total debt / total equity).


Appendices Resumes; Organization chart; Ownership information; Surveys, charts, graphs; Layout plan; Patents, illustration of prototypes, etc. Any other items, not sure about something,

put it in.


Marketing A Business Plan

Who is the intended reader?

Back to the beginning, you will have to adjust the outline depending on who you are targeting.


Key Stakeholders (Readers)

Community Government:

Emphasize the positives to the community: Leakage reduction; Job creation; Spin-off potential; Positive for future community development.


Key Stakeholders (Readers)

Government (ABC, INAC):

Emphasize the market viability, and the background / credentials of the entrepreneur;

Be realistic, but show profitability; Make the Business Plan “fit” their guidelines,

don’t waste time arguing about the guidelines; Be patient (especially for contribution

funding.)


Other Readers

Bankers: Emphasize the fundamentals: Positive cash flow; Solid steady growth. Ability to repay debt.

Investors (VC): Fast growth into large market opportunity; Skills of management team.


Other Readers

Internal (Operational Business Plan):

This could be done during fast growth, or as part of an annual process, emphasize:

Growth opportunities, Security, stability; Focus on specific issues, new market, new

process.


Private Sources Banks: Common forms of financing: Operating or working capital; Term loans; Equipment (commercial pledge); Letters of Credit.

Factoring; Leasing is becoming more and more popular.


Public Sources Governments have a wide variety of

programs to assist entrepreneurs; Usually come in a variety of terms, including

loan guarantees; Industry Canada (Aboriginal Business

Canada) Know your Aboriginal Capital Corporations

(ACC’s) and External Delivery Organizations Indian Affairs (INAC) Provincial sources, check your area.


Financing Considerations If successful in marketing the Business

Plan, there are a few basic financing considerations:

In many cases, the traditional non-repayable “contribution” is now mixed with other forms of financing, that’s good as an entrepreneur should have something at risk.


Debt Financing Debt is borrowing money that has to be

repaid;

It does not dilute ownership; It does not result in a loss of control;

Debt can be obtained from both private and public sources.


Equity Equity represents ownership in the business,

raising funding this way means giving up a portion of ownership;

It DOES dilute ownership; It MAY result in a loss of control;

Going public not a realistic option for many small Aboriginal businesses.


Venture Capital By nature, willing to take on more risk; But, VC’s want some control and high returns; VC’s place controls on entrepreneurs such as: Approval of large capital expenditures; Remuneration of senior management; Approval of long term lease arrangements; Approval of disposal of assets; Payment of dividends; Major borrowing or other financial decisions.


Marketing A Business Plan

In general, there really is no magic formula to market a business plan, an entrepreneur should know or become aware of the sources available.

Raising $$$$$$$$ is still major challenge for start-ups and a well developed Business Plan is the key document;

More and more emphasis is being placed on the “Team,” therefore it is becoming more and more important to present a professional management team to sell the Business Plan.


Implementing a Business Plan


Implementing a Business Plan

The usual:

Set goals, make daily plans; Generate POSITIVE CASH FLOW! Without sales…..think dot.bombs


Think Bootstrapping! Bootstrapping means “pulling up your

bootstraps” and getting the funds in any way possible:

Main points: Move venture from idea to implementation

without delay; Keep focus on venture that will generate cash

flow and break even soon, and maintain any advantage;

Avoid premature growth; Keep attention on cash flow; Establish relationship with key stakeholders; Don’t build big team of “pros” too fast.


Implementing A Business Plan

Zen Buddhist saying:

….the menu is not the meal….


Implementing A Business Plan

Really, entrepreneurship itself is:

An orientation to take ACTION every day to make the business successful.

The thought process that goes into developing and writing the Business Plan is more important than actually referring to the Business Plan every day.

Developing, Marketing and Implementing a Business Plan Aboriginal Financial Officers Association of...

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