Developing a Successful Business Plan

Transcription

1 Developing a Successful Business Plan Richard S. Voss, Ph.D. Troy University The Entrepreneurship Council and The Center for Entrepreneurship and Economic Innovation at Troy University in Dothan, Alabama Why Do We Need a Business Plan? Evidence of the business model s viability Investors will need it suppliers will need it Even customers may need it Guidance for others who work with you Your partners need it Perspective as you pursue multiple goals You need it In Formal Terms, What Is It? Fully detailed plan of action Written document describing all relevant internal and external elements and strategies for starting a new venture (Hisrich & Peters, 2002) Includes short-term and long-term goals What must you do this year in three years? What must you do in the next seven years? In Plain Terms, What Is It? A how-to manual You should be able to hand it to someone else, who can then run your business A cookbook With all the ingredients, and how to mix them A roadmap Start point, end point, and clear route Who Should Write the Plan? You the entrepreneur But ask for as much help as you need Attorneys, accountants, engineers Marketing consultants, HR professionals Free or low-cost services SBA, SBDC, SCORE Universities, chambers of commerce Networking! How Often Should You Plan? The initial plan will take the most work Spend a month on it maybe more Yes 200 hours or more are normal After that, update it frequently Enough to make it a habit (e.g., each quarter) Information and circumstance change Especially update your market assumptions 1

2 Partner Up Assess your competencies: Excellent? Good? Fair? Poor? Accounting, finance, taxes Planning, organizing, forecasting Market research, sales, promotion People management, supervision Product design, engineering Legal issues, compliance issues Partner up to fill your own competency gaps Information Needs Market information Define and locate your customer Operations information How to make deliver arrange organize Supplier information Define and locate your suppliers Financial information Expected sales, costs, cash flow (3 years) The Ten Parts of a Business Plan Intro Name, nature, statement of needs Exec summary Industry analysis Venture description Production plan Marketing plan Organizational plan Risk assessment Financial plan Appendices Letters, price lists, data, contracts And Yet The typical startup process, whether in nascent entrepreneurial ventures or in the innovation units of established businesses, is largely driven by poorly conceived business plans based on untested assumptions (Mullins & Komisar, 2010, p. 1). (Hisrich & Peters, 2002) Here s a Different Way Five models find analogs antilogs: Revenue model Working capital model Operating model Gross margin model Investment model Two considerations: Leap of faith customers will do this Hypothesis this will work if ANALOG = EXAMPLE WORTH COPYING ANTILOG = EXAMPLE WORTH AVOIDING (Mullins & Komisar, 2010) Then Again As every seasoned investor knows, financial projections for a new company especially detailed, month-by-month projections that stretch out for more than a year are an act of imagination. An entrepreneurial venture faces far too many unknowns to predict revenues, let alone profits (Sahlman, 1997, p. 98). 2

3 Guess Less Know More Four factors really make it all work: The People the entire entrepreneurial team The Opportunity profile of the business Value chain, costs and benefits, hurdles The Context law econ market society Changes in regulation, bank behavior, people Risk and Reward optimistic pessimistic What will you do in different contingencies? So Who s Right? Plan the future with enthusiasm But keep your mind in the present Pursue the plan with determination But be open to epiphanies Speculate with imagination But assert the truth with courage Respect the trajectory of the business JEDI TRICK? SUDDEN REALIZATIONS DUALITY OF THE ENTREPRENEUR (Sahlman, 1997) Now, Let s Talk Strategy Strategy starts out big Vision what are you in seven years? Values what do you believe in? Mission define your value proposition Objectives measurable outcomes Strategies (plural) specific plans of action Each leads logically to the next Vision Positioned in the future Our vision is to be a completely reliable source of for families who care about We envision being the first thought on the mind of anyone in the Wiregrass who has a problem to solve in the area of. Note: Fortune 500 mission statements Most are really vision statements (go figure) Values What you believe in List of words Warm, caring, loyal, responsible Hard-working, efficient, pragmatic Creative, spontaneous, enterprising Idealized notions of how to be This is you not someone else Mission What you do commit to do Right now not in the future Three essential ingredients Product service what are you selling? Customer precisely who needs it? Method How are you doing it? Your angle customer interface generic strategy 3

4 Good Mission Our mission is to enrich the lives of the residents of Los Angeles by providing safe, welcoming parks and recreation facilities and affordable, diverse recreation and human services activities for people of all ages to play, learn, contemplate, build community and be good stewards of our environment. City of Los Angeles Dept. of Recreation & Parks Bad Mission The Global Beauty Leader We will build a unique portfolio of Beauty and related brands, striving to surpass our competitors in quality, innovation and value, and elevating our image to become the Beauty company most women turn to worldwide. The Women's Choice for Buying We will become the destination store for women, offering the convenience of multiple brands and channels, and providing a personal high touch shopping experience that helps create lifelong customer relationships. The Premier Direct Seller We will expand our presence in direct selling and lead the reinvention of the channel, offering an entrepreneurial opportunity that delivers superior earnings, recognition, service and support, making it easy and rewarding to be affiliated with Avon and elevating the image of our industry. The Best Place to Work We will be known for our leadership edge, through our passion for high standards, our respect for diversity and our commitment to create exceptional opportunities for professional growth so that associates can fulfill their highest potential. The Largest Women's Foundation We will be a committed global champion for the health and well-being of women through philanthropic efforts that eliminate breast cancer from the face of the earth, and that empower women to achieve economic independence. The Most Admired Company We will deliver superior returns to our shareholders by tirelessly pursuing new growth opportunities while continually improving our profitability, a socially responsible, ethical company that is watched and emulated as a model of success. Avon Products, Inc. New York, NY Good Mission We fulfill dreams through the experience of motorcycling, by providing to motorcyclists and to the general public an expanding line of motorcycles and branded products and services in selected market segments. Harley-Davidson Milwaukee, WI Bad Mission Respect, integrity, communication, and excellence. Enron Corporation Revised Mission To reorganize and liquidate the remaining operations and assets of Enron following one of the largest and most complex bankruptcies in U.S. history. Enron Creditors Recovery Corporation Objectives How your business fulfills its mission Measurable lets you track progress Maintain strong customer service quality Mission says something about service quality Decrease unit cost of production Mission implies a need for production efficiency Increase product service range Mission mentions variety or choices Strategies (PLURAL) How your business fulfills its objectives Plans of action aims at objectives Conduct regular customer service training To maintain strong customer service quality Negotiate with suppliers for bulk discounts To decrease unit cost of production Cultivate new suppliers talent To increase product service range Porter s Generic Strategies What about Big Strategy? Generic strategy strategic posture strategic positioning guiding strategy Two big models Porter s (1980) generic strategies Cost leadership, differentiation, focus Miles and Snow s (1978) strategic postures Reactor, defender, analyzer, prospector YOU ARE YOUR ADVANTAGE IS 4

5 Miles and Snow s Model (Modified Appreciably) YOU ARE What Guiding Strategy to Adopt? Small business, if industry already exists Focus strategy defender strategy Focus Avoid competing head-on with big guys Slice of the market not the whole thing Defender Hierarchy, specialization, efficiency Survive and cut costs this is no gold rush Modified Value Chain Model How to Manage the Value Chain? You have a dual responsibility: Strong connection to customers Customer cultivation Why are you special to your customers? Familiarity trust loyalty genuineness Strong connection to suppliers Supplier cultivation Why are you special to your suppliers? Community goodwill fairness reliability FOCUS AND Now Go Do Your Thing We are here to help Education Networking Inspiration But the courage comes from you Trust your instincts But keep learning And be flexible References Hisrich, R. D., & Peters, M. P. (2002). Entrepreneurship (5th ed.). Boston, MA: McGraw-Hill. Miles, R. E., & Snow, C. C. (1978). Organizational strategy, structure, and process. Boston, MA: McGraw-Hill. Mullins, J., & Komisar, R. (2010). A business plan? Or a journey to Plan B? Sloan Management Review, 51(3), 1-5. Porter, M. E. (1980). Competitive strategy: Techniques for analyzing industries and competitors. New York, NY: Free Press. Sahlman, W. A. (1997). How to write a great business plan. Harvard Business Review, 75(4),