Planning for Business Success

Business Success Requires Planning

· Market Planning
· Facilities Planning
· Product/Services Planning
· Personnel Planning
· Sales Planning
· Financial Planning

Marketing –

The performance of all activities involved in the flow of goods and services from the point of initial production to final consumption.

· Consumer driven
· Dynamic, not static
· Foundation of all business success

A Business without a market plan and strategy is like a ship without a rudder

· No direction
· No control
· Adrift

Marketing Concept –

The consumer is the primary determinant of all market related activities including:

· What is produced
· Where it is produced
· At what cost it is produced
· How it is produced
· How it is processed, packaged, shipped, and presented
· What market channel it will follow
· How and where it is sold
· At what price it is sold

Economic utility -

The creation of “VALUE” (economic utility) for the final consumer is the sole justification for business activity in the marketing system

· Form
· Time
· Place
· Possession

Therefore –

Our business success is entirely dependent upon knowing WHO our customers are and WHAT will be required to satisfy their demands -

Customer satisfaction is in fact the sole economic justification for our existence!

THINKING STRATEGICALLY

THE NEED FOR STRATEGIC PLANNING:

QUESTION: WHICH WAY SHOULD I GO?

RESPONSE: THAT DEPENDS ON WHERE
YOU ARE GOING.

ANSWER:

I DON’T KNOW WHERE I AM GOING!

CONCLUSION:

THEN IT DOESN’T MATTER WHICH WAY YOU GO.

GOOD STRATEGIC PLANNING RESULTS IN A BETTER UNDERSTANDING OF HOW WE COMPETE FOR THE FUTURE, AND DEFINES THE OPTIMUM STRATEGIES NEEDED TO SUCCEED AND THE TACTICAL APPROACHES NEEDED TO IMPLEMENT THESE STRATEGIES, AS WELL AS, THE CONTINGENCY PLANS FOR DEALING WITH OBSTACLES ALONG THE WAY.

STRATEGIC DECISIONS REQUIRE CONSENSUS ON WHERE TO GO, AND GENERALLY HOW TO GET THERE.

Eg.
Ø We’re going to California
Ø We will go west using the interstate highway system

TACTICAL DECISIONS ARE BASED UPON INDIVIDUAL ACTIONS AND SUBJECT TO THEIR SPECIFIC NEEDS, GOALS, AND RESOURCES.

Eg.
Member #1 takes the northern route
I-80 to San Francisco

Member #2 takes the southern route
I-40 to Los Angeles

The Business Planning Model

Research

Planning

Strategy

Organization

Execution

Success

The Research Approach

1. Problem Definition
2. Secondary Data Acquisition
3. Primary Data Acquisition
4. Data Analysis
5. Alternative Strategy Assessment (SWOT)
6. GAP Analysis
7. Target Strategy Development
8. Strategy Documentation
9. Implementation

DEFINITIONS

MARKET RESEARCH - the systematic gathering, recording, analyzing, and interpreting of data to answer a defined problem.

GATHERING - collecting and bringing together

RECORDING - set down in writing or reproducible form

ANALYZING - separation of whole into its component parts AND to study and determine relationships of parts.

INTEGRATION - to form or blend as a whole.

INTERPRETATION - to explain or tell the meaning of - present in understandable terms.

PURPOSE
To collect the best data possible and use to make our best estimate. Don’t look for the “right answer”, look for reasonable assumptions based on data and logic.

The Business Planning Process

Part 1 – Defining the Market
Part 2 – Developing the Strategy
Part 3 – Developing the Business Plan

Part I - Market Definition

· Assess industry structure and performance
· Assessment of the overall demographics to develop a consumer profile - (Answer who and what)
· Define the target customer base in the proposed market area - (Answer how many)
· Define the geographic market area to be developed - (Answer where and what competition)
· Measure the target market area to determine development potential - (Answer what sales potential and what share)

= TARGETING THE MARKET

Estimated Market Potential -

The development of baseline calculations that estimate overall market size in a specific sector of business activity

Estimated Market Share -

That portion of the total market potential that can be captured by an individual firm in a defined market

Part II - Developing the Strategy

· Establish a plan to successfully develop the full potential of the market targeted - (Answer how)

· Requires taking all the information developed in Part I and establishing an approach (strategy) for achieving your market objectives.

= THE MARKET STRATEGY

SWOT Analysis

S – Strengths

Areas that the organization performs above the average. Areas with greater efficiency, technical proficiency, Produce or Service quality. That provide a competitive advantage in the market
An internal factor

W – Weaknesses

Areas that the organization performs below the average. Areas with less efficiency, technical proficiency, produce or service quality. That provide a competitive disadvantage in the market. An internal factor

O – Opportunities

The condition in the market where consumer needs are not satisfied. The current market environment develops a gap between what the market offers and what consumers want (are willing to pay for). External Factors

T – Threats

Competition in the market. Potential changes in the market the are disadvantageous to success in the market. External factors.

Part III - Anatomy of a Business Plan

I. Cover Page
II. Executive Summary
III. Industry, The Company and its
Products
IV. Market Research and Analysis
V. Marketing Plan
VI. Operations Plan
VII. Management Team
VIII. Overall Business Development
Schedule
IX. Critical Risks Assessment
X. The Financial Plan
XI. Proposed Company Financing
Anatomy of a Business Plan

I. Cover Page
1. Name of company (logo)
2. Address and phone number of contact

II. Executive Summary
1. Who you are
2. What you plan to do
3. How you plan to do it

III. Industry/Company/Products
1. Industry - Background, National, Regional, Trends
2. Company - define who / what you are going to be
3. Products - detail of the products and services to be sold

IV. Market Research and Analysis
1. Customers - Who they are and what they want
2. Market size – Current market and where it is going
3. Competition - Who is already there and what threats do they pose
4. Market Share - Expected market penetration

V. Marketing Plan
1. Marketing Strategy – philosophy, product lines, product/service market positioning, pricing, market penetration
2. Customer Targets – profile, estimated market share, promotional strategy, sales strategy.

VI. Operations Plan

1. Geographic location - Customer proximity, Costs, Traffic flow, Zoning.
2. Facilities and Improvements - New vs. existing building, costs and location
3. Quality / Inventory Control – strategies to monitor
4. Labor - Technical, Sales, Administrative

VII. Management Team

Who is going to do what

VIII. Overall Business Schedule

Timeline starting with important pre-opening objectives:

Ø Financial backing
Ø Key staffing
Ø Supplier arrangements
Ø Cash flow
Ø Sales targets, Financial deadlines
(critical payment date etc.).

IX. Critical Risks Assessment

The what ifs - economic, legal, market problems AND solutions or strategies to counter

X. The Financial Plan

The financial plan includes:

1. Profit and Loss forecast (Income statements)
2. Cash flow Projections
3. Balance sheet
4. Break-even analysis

X.1 - Pro Forma Income Statement

Gross Sales
Less: Discounts (variable)
Less: Cost of Goods Sold (variable)

Gross Profit Margin
Less: Operating Expenses (Variable)
Less: Overhead Expenses (Fixed)

Profit (or Loss) Before Taxes

X.2 - Pro Forma Cash Flow Statement

Opening Cash Balance

Add: Cash receipts
Collection of Acct. Receivable,
Other incoming cash

Less: Disbursements:
Inventory payments
Overhead payments
Operating payments

Closing Cash Balance

X.3 - Pro Forma Balance Sheet – Assets

Assets

Current: Cash
Accounts Receivable
Inventory
Prepaid Items

Plant and Equipment

Less: Accumulated Depreciation

TOTAL ASSETS

X.4 - Pro Forma Balance Sheet – Liabilities and Stockholder Equity

Liabilities

Current: Notes Payable
Accounts Payable
Other

Long Term: Long Term Notes
Other

Stockholder Equity
Common Stock
Retained Earning

TOTAL LIABILITIES / STOCKHOLDER EQUITY

X.5 - Pro Forma Income Statement – Example

Gross Sales $600,000
Discounts (v) $ 18,000
Cost of Goods Sold (v) $252,000

Gross Profit Margin $330,000

Operating Exp. (v) $120,000
Overhead Exp. (f) $180,000

Net Profit before taxes $ 30,000

X.6 - Breakeven Point

Point where sales exactly cover all fixed and variables expenses (profits begin)

Breakeven Formula:

BEP = Total Fixed Costs .
1 - Total Variable Costs Sales

X.6.a - Breakeven Example:

Sales = $600,000
Total Fixed Costs (TFC) = $180,000
Total Variable Costs (TVC) = $390,000

BEP = $180,000 .
1 - $390,000
$600,000

X.6.b - Breakeven Example:

BEP = $180,000
.350 (Fixed Cost Coefficient
– FCC )

BEP = $514,286

Profit = Sales - BEP X FCC

Profit = $600,000 - $514,286 X .35

Profit = $30,000

XI Proposed Financing

1. How much is needed
2. How will it be used
3. Ownership - offering and payback schedule
4. Capitalization - by source: Equity, Debt, Trade sector.