What Do We Plan?What Do We Plan?

Topic 2 :: Business StrategiesMrs. Schroeder

The Nature of Business Plans

What is a business plan? The business plan (or strategic plan) is

the document that methodically illustrates the company’s strategic direction, its main operating and financial targets, the actions it will take to achieve those objectives, the new initiatives and investments planned, and their impact on the company’s performance

The Need for Business Plans

When you start a new businessApply for a business loanPromoting an existing businessOperational purposes

Components

Title pageExecutive Summary - should be concise, should tell what you’re asking for Mission statement Date business began Name of founders and functions they

perform

Components

Company description Number of employees Locations of businesses and branches

Products or services Describe what you’re selling; focus on

customer benefits

Market analysis Know your market, customer needs, where

they are how to reach them, etc.

Components

Strategy and implementation Include management responsibilities

with dates and budgets

Management team Describe the organization and key

management team members

Components

Financial analysis Cash flow analysis

The main aspect of your business Cash revenues and cash outlays over a given period

of time The desirable outcome is to prove that you can

maintain a positive cash flow while you pay financing and interest

Pro forma balance sheet Pro forma statements summarize specific financial

activities using a layout approved under the generally accepted accounting principles (GAAP)

Components

Break even analysis Sales forecast Ratio analysis

profitability ratios gross margin return on sales return on investment liquidity ratios such as current ratio, debt

to equity and working capital

Performance Activity

The Mission Statement

Reasons for creating a mission statement: Increases efficiency Increases productivity Increases profitability

Strategic and marketing plans built on the foundation provided by the mission statement

Mission Statement

Helps to keep your company on courseHelps to define your purpose and goalsFundamental in defining where the business is going and how it intends to get there

Mission Statement Characteristics

It should be feasibleIt should be preciseIt should be clearIt should be motivatingIt should be distinctiveIt should indicate major components of strategyIt should indicate how objectives are to be accomplished

Procedures for Defining a Mission Statement

What is the purpose of our company? What needs or opportunities exist?

What are we doing to address these needs or opportunities?What beliefs or values guide our work?

Performance Activity

Company Goals/Objectives

Company goals and objectives are important because: They define your destination They shape what your business will

become

Goals and objectives are critical to the success of any business

Goals/Objectives Uses

Set a goal for your business firstThen set S.M.A.R.T. objectives that help to accomplish your goal S – Smart M – Measurable A – Attainable R – Realistic T – Timely

Uses

Areas that goals/objectives can be defined: Market standing Productivity Profitability Innovation Manager performance Worker performance and attitude

How to Develop Goals/Objectives

First, develop a list of short-term, mid-term, and long-term goals Short-term – first 6 months Mid-term – 6 months to 1 year Long-term – 1 year and longer

Determine what steps need to be taken to accomplish each goal and beak it into manageable sections

How to Develop Goals/Objectives

Determine if there is a cost associated with your goal If there is, ensure that the amount

appears in the appropriate chart in your financial section

Performance Activity