Developing, Marketing and Implementing a Business Plan

1. Developing, Marketing and Implementing a Business Plan Aboriginal Financial Officers Association of Canada National Conference / February 2005

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? AFOA / 2005 - Business Plan Workshop

3. 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. AFOA / 2005 - Business Plan Workshop

4. 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. AFOA / 2005 - Business Plan Workshop

5. 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. AFOA / 2005 - Business Plan Workshop

6. 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. AFOA / 2005 - Business Plan Workshop

7. 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”. AFOA / 2005 - Business Plan Workshop

8. 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. AFOA / 2005 - Business Plan Workshop

9. 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. AFOA / 2005 - Business Plan Workshop

10. 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? AFOA / 2005 - Business Plan Workshop

11. 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”. AFOA / 2005 - Business Plan Workshop

12. 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. AFOA / 2005 - Business Plan Workshop

13. 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; AFOA / 2005 - Business Plan Workshop

14. 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; AFOA / 2005 - Business Plan Workshop

15. 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. AFOA / 2005 - Business Plan Workshop

16. 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. AFOA / 2005 - Business Plan Workshop

17. 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”. AFOA / 2005 - Business Plan Workshop

18. Product • Briefly describe product/service; • Highlight differentiation again; • Highlight selling points, “superior quality”, “easy to use”; • Mention add-ons, special points. AFOA / 2005 - Business Plan Workshop

19. 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. AFOA / 2005 - Business Plan Workshop

20. 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. AFOA / 2005 - Business Plan Workshop

21. 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! AFOA / 2005 - Business Plan Workshop

22. 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. AFOA / 2005 - Business Plan Workshop

23. 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; AFOA / 2005 - Business Plan Workshop

24. 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; AFOA / 2005 - Business Plan Workshop

25. 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. AFOA / 2005 - Business Plan Workshop

26. Scheduling / Facilities • Schedules: Think of the typical week. • Facility: Layout of business, applicable for most business plans. AFOA / 2005 - Business Plan Workshop

27. 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. AFOA / 2005 - Business Plan Workshop

28. 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. AFOA / 2005 - Business Plan Workshop

29. 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. AFOA / 2005 - Business Plan Workshop

30. 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). AFOA / 2005 - Business Plan Workshop

31. 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. AFOA / 2005 - Business Plan Workshop

32. 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. AFOA / 2005 - Business Plan Workshop

33. Key Stakeholders (Readers) • Community Government: • Emphasize the positives to the community: • Leakage reduction; • Job creation; • Spin-off potential; • Positive for future community development. AFOA / 2005 - Business Plan Workshop

34. 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.) AFOA / 2005 - Business Plan Workshop

35. 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. AFOA / 2005 - Business Plan Workshop

36. 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. AFOA / 2005 - Business Plan Workshop

37. 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. AFOA / 2005 - Business Plan Workshop

38. 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. AFOA / 2005 - Business Plan Workshop

39. 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. AFOA / 2005 - Business Plan Workshop

40. 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. AFOA / 2005 - Business Plan Workshop

41. 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. AFOA / 2005 - Business Plan Workshop

42. 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. AFOA / 2005 - Business Plan Workshop

43. 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. AFOA / 2005 - Business Plan Workshop

44. Implementing a Business Plan AFOA / 2005 - Business Plan Workshop

45. Implementing a Business Plan • The usual: • Set goals, make daily plans; • Generate POSITIVE CASH FLOW! • Without sales…..think dot.bombs AFOA / 2005 - Business Plan Workshop

46. 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. AFOA / 2005 - Business Plan Workshop

47. Implementing A Business Plan • Zen Buddhist saying: ….the menu is not the meal…. AFOA / 2005 - Business Plan Workshop

48. 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. AFOA / 2005 - Business Plan Workshop