Lesson 17: Business Plan Analysis

1. Lesson 17: Business Plan Analysis

2. Objectives • Explain the importance of preparing a business plan • Describe the main components of an effective business plan and the information contained in each section • Explain the purpose of financial reports within a business plan • Identify characteristics of a professional business plan and resources that may assist you in preparing one • Compute personal net worth and business equity in terms of assets and liabilities • Forecast revenue, calculate net sales, and determine net profit using industry averages • Review a business plan, identify potential problems, and make necessary changes

3. What is a Business Plan? • A document that details a plan for the creation of a business • Covers all aspects of the proposed business

4. Why Prepare a Business Plan? • Requires research, time, and THOUGHT • Often referred to as a business blueprint • Not something that can be Google’d • Benefits to writing a business plan • Helps set and clarify your goals • Helps determine the steps to accomplish goals • Details how much money is needed for start-up • Helps you secure finances

5. Developing a Business Plan • Keep it realistic! • Be honest about expectations and goals • Use the SBA website • Give yourself a reasonable timeline to develop the business plan and goals

6. Elements of a Business Plan • Executive Summary – 1 paged summary of the proposal for the business that introduces your proposed business venture and helps familiarize the reader with your concept • Description of Business, Product, or Service – explains the products or services your business will provide • Management Team – explains personnel needs (staffing), qualifications for management, and an organizational chart (of who reports to who)

7. Customer Profile – analysis of and information about the target market (who you want as your customers) • Competitive Analysis – information about direct and indirect competitors, their product and service offerings, and their pricing policies • Marketing Plan – information about how the business will be marketed and promoted, pricing policies, and proposed promotional policies • Operations Plan – how the business will operate, the type of ownership, and the location of the business

8. Financial Projections – the amount of money necessary to start and operate the proposed business • Personal financial report – your personal financial status and personal assets and liabilities • Pro Forma income statements – monthly income states that provide information about sales, expenses, profit, or loss • Pro Forma cash flow statements – monthly statements about when cash is coming in and leaving throughout the month • Pro Forma balance sheet – assets, liabilities, and owner’s equity • Proposed sources of funding – personal and outside sources of funding, short- and long-term notes • Short-term – paid off within one year • Long-term – paid off within one to five years

9. Creating a Professional Business Plan • Use proper grammar and spelling • Incorrect grammar and misspelled words show a lack of attention to details • Use standard fonts (Arial, TNR) • Use business terms • Keep it clean and simple in formatting

10. Key Math Concepts Net Worth = Assets – Liabilities Forecasted Revenue = % increase or decrease X Industry Ave. of Rev. Revenue = Unit Sales X Price per Unit Net Sales = Total Sales – (Returns and Discounts) Net Profit = Total Revenue – Total Expenses Equity = Assets - Liabilities