Session #1
Introductions Slide 1
Business Plan Workshop; September 20 - November 1, 2007, Thursdays 7-9 PM
Presented by Business Odyssey
Participants: Name, business, how long in business, why a business plan now -
Class format & preliminaries- Slide 2
Textbook & relationship to class sessions; Blend of lecture & discussions; Role of homework: process & content important, not perfection; To get full benefit - do homework; Respect confidentiality; Web notes & password
Slide 3 Patton’s Law: A good plan today is better than a perfect plan tomorrow.
What is a business plan? - Slide 4
Business plan / Reasons
Start a business
Grow, expand a businessRise money: obtain loan(s) - debt financing; obtain investors - equity financing
Manage business in an organized way
Reduce risk
Business plan vs strategic plan
Purposes of a business plan: planning in order to secure $$; planning in order to run your business better
Planning as a process: mind set - laying things out as an integral part of the way that you operate
All plans similar even though customized for your business and for the reasons you are doing a plan - see page 143 in text and hand out
Back to basics - laying a good foundation - Slides 5 through 8
Planning flow
Corporate mission statement <–> Business concept statement -> Unique Selling Proposition (USP) -> Marketing position stattements -> Goasl, objectives -> Strategies -> Action plan -> Budget -> Financial statement
Plan flow - example 1
Objective: Increase sales by 20%
Strategy #1: Increase awareness of our product to 1 in 25 people
Action #1: Weekly ads in Sun Press
Action #2: Radio ads on 3 selected stations, two times a day on each station
Budget: $$ for newspaper ads; $$ for radio ads
Financial statements: marketing expense on income and cash flow statements
Plan flow - example 2
Strategy #2: Make 10 additional sales calls each month
Action #1: Purchase Harris Company Reach service
Action #2: Hire part time appointment setter
Action #3: Increase field sales time on the road
Budget #1: Cost of company Reach subscription
Budget #2: Wages, equipment, benefits, training, etc.
Budget #3: Mileage, additional office support, etc.
Financial statements: marketing expense on income and cash flow statements
Plan flow review - shows how important basics are
Importance of Mission Statement and Business Concept Statement:
First 2 sessions will be spent on these 2 elements and on research - how to get info needed
Hard thinking parts vs “get’er done” parts
Developing the business concept statement - Slide 9
Business Concept Statement
Description of your product or service
Description of your primary customer(s)
Value propostion - why customer will pay $
Distribution - how customers get your product
Defining your product/service - Slide 10
Product description / easiest part for most.
Physical appearance
Nature of service
Packaging (both products & services)
What does it do? What need does it fill?
Definitions: item, product line, product mix
Packaging - usual for product, for services, how are services “bundled”
Describing your most likely customer - Slide 11
Customer description / spend lots of time - revisit often.
Socioeconomic descriptors: age, income, education, life stage
Lifestyle descriptors: how free time is spent
Buying behavior descriptors: purchasing purpose, method, issues
People rarely spend enough time on this. Very important to know what motivates your customer and how to communicate with them in ways that they understand.
Might be more than one group: niches & segments -
Niche: an unserved or underserved portion of the market.
(1) advantages: barriers to entry usually low(2) disadvantages: harder to define, might be harder to reach adequate numbers
Segment: portion of your target customers with unique characteristics
(1) different people using product or service for different reasons
(2) disparate groups using product or service to same extent: grocery store example: has to appeal to all adult life stages
Socioeconomic: Income, home ownership; Age, gender - lifestage: child rearing, household formation, retirement; Education
Lifestyle - in free time, where do they go and what do they do?; Recreational & vacation time: active or passive, indoors or outdoors, etc; Memberships - religious, social; Sexual orientation; Preferences in movies, music, TV; Reading habits: books, magazines, newspapers, on-line
Buying behavior - Where do they shop: stores, catalogs, on-line, home parties; Impulse or planned buying; Luxury or utility; Bargain or full price, wholesale or retail; Type of buyer: consumer, B2B, government
Value Propositions - slide 12
Value proposition / think carefully.
Why would someone pay $ for your product or service?
What problem does your product solve?
How does your product increase pleasure or reduce pain?
Why would people part with their hard earned dollars for your product or service?
Why your product and not your competitors?
Deeeep thought piece of concept - not a lot of words but very important
Distribution Strategy - Slide 13
Distribution
Where do people buy your product or service? Store or other physical location; direct marketing - phone, catalog/mail, on-line; sales calls; etc.
How do they pay for it?
How is it delivered into their hands? Delivery service, carry away, project completion
Where and how do people purchase your product or service: Store, party plan, direct marketing, etc
How is it delivered to them: Physical delivery or project completion; For services, communication is an important component - Meetings, phone, review of progress, etc.
Inter-relationship between Business Concept Statement and Mission - slide 13
Planning flow revisited - see slide #4
Deep thought on concept because your Unique Selling Propositon falls out of it - - When you examine Concept statement, easy to see that USP = “elevator speech”
Back up to mission statement now: Marketing positoning will utilize mission, concept and competitive analysis
Mission statement development
Reasons for a mission statement - Slide 15
Mission Statement / reasons
More profitable: high substance -> more profit
Guide to creating the business you want: helps with making tough decisions; keeps you on track
Capsulizes your reasons for being in business
Review article HO
Elements of mission statement - slide 16
Elements of mission / content is important.
Long term desires: cash out; legacy; job
Reasons you went into business: fulfillment; professional development; time
Stakeholders: family; customers; colleagues; suppliers
Personal values: integrity; religion; lifestyle
What you want out of business in the long run
Reasons you went into business in the first place - think back - have things changed?
Stakeholders; Personal values; Compatible with personal life
(Slide 17) Homework 1
Draft Business concept Statement
Revise or draft Mission Statement
Read Introduction and Chapters 3 & 4
Session #2
Review & discussion of mission and business concept statements
Slide 1. Research: Getting the information you need to plan and operate your business.Slide 2. Questions: A starting point.- What is unique about your product?
- Who is your target buyer?
- Who are your comptittors?
- What is your positioning statement?
- What is your distribution strategy?
- How big is your market; is it growing or shrinking?
All business owners should have answers. We have already covered some.
Slide 3: External Influences: What external factors effect your business?- Prospects & customers
- Economy & world events
- Government regulation
- Business cycles
- Seasonality, weather
- Industry structure
- Competition
What external factors have an impact on your business?Anything that exists outside of your own company and outside of your control: all of the above and more.
Slides 4 - 6: Information: What you should be looking for.- Industry structure: carrying capacity, complexity, threats to new entrants, cycles, uncertainty
- Business cycles: seasonality, industry cycles
- Technology, R & D spending: amount, impact on product lifecycles
- New players in the market: how many, capitalization
- Industry performance statistics: costs, profitability
- Competitive intelligence: who, how many, marketing strategies, business policies, quality, perceptions of customers
- Prospects & customers: demographic info - who they are, where they are; psychographic info - how do they behave, how do they perceive themselves
Slides 7 & 8: Lifecycle: Of your industry, of your own business, of your product.
- Birth: very few in market; buyers are early adaptors; costs, prices aare high; proprietary protections
- Adaption: more competitors; better availability; prices still high
- Differentiation: more comptition -> product differentiation; prices coming down; product in common useage; growth plateaus
- Shakeout: strong pricing pressures; survival of the fittest
- Maturity: fewer -> survivors; prices low but so are costs; cash cows
Product/business lifecycle: can be for a product, industry, style, etc. usually represented on a bell curve - see HO for more - Birth (beginning of curve) - Adaptation: refinement of product and marketing, proprietary protection within timeframe of patents (growth side of curve) - Differentiation, competition: loss of proprietary protection, more competition which produces greater product differentiation, added value, price drops, and so forth; standards established (infant electric industry and computer industry), increase consumer expectations for performance and value (top of curve) - Shakeout: increased competition eventually forces the weak out - survival of the fittest; either they leave the market or are swallowed by those higher on the food chain (downward slope of the curve) - Maturity: a few dominant firms; “cash cows” for the survivors of shakeout (bottom of downward slope)
Slide 9 & 10: Industry Structure- Carrying capicity & complexity
- Predictability, uncertainty
- Threats to new entrants
- Threats from buyers’ bargaining power
- Threats from suppliers’ buying power
- Competitive rivalries
- Rate of technological change
- Success of new entrants
- Standard performance statistics: average cost per unit; average profit per unit; capitalization needs, recommendations; average marketing/advertising budget
Industry structure and its impact on your venture - - carrying capacity, uncertainty, and complexity; where on lifecycle
- extent to which an industry can accept more business
- predictability or unpredictability of industry
- number and diversity of customers, suppliers, competitors, etc.
- threats to new entrants - many
- economies of scale and capital requirements - high capital requirements mean that you are going to have to produce and sell a lot in order to break even; established companies that are operating near capacity have achieved economy of scale giving them lower fixed costs per unit of production and more leverage with suppliers
- entry marketing costs - what will it take to overcome brand loyalty and buyer switching costs? will you need incentives for luring people to do things different or build new habits? what will it cost to establish name recognition in a market with well-established brands?
- industry hostility and access to distribution channels can inhibit your ability to secure raw materials (competition and price advantages of quantity and established relationships) and supplies and your ability to get your product to customers; develop new channels of distribution
- Government regulations - environmental, food and drug, local health codes, zoning, licensing for certain kinds of businesses and professions, etc.
- proprietary protections - if you have something truly new that can be protected, it can give you time to get on your feet and garner some good profits; can also bar you from entering certain markets until protections expire.
- threats from substitute products also called indirect competition- threats from buyers’ bargaining power: new entrants can’t purchase raw materials and supplies at volume rates and, therefore have to charge their customers more; need to show added value in order to do this successfully- threat from suppliers’ bargaining power: where few suppliers or labor shortage you are in a seller’s market; real estate a common example when interest rates fluctuate- rivalry among existing firms: price wars, etc.; characteristic of shakeout phaseAlso need to know about * new technology and research and development spending - how rapidly do products and services become obsolete? how rapidly does business change? * are there any new players in the market and are they having any success? under what circumstances?
Performance statistics for that industry: gross profit margins, average cost of goods sold, etc. Knowing average performance data can tell you if your business is on track and where your strengths and weaknesses are. Benchmarking against a representative business or similar one.
Slide 11. Competitors: Who are they?- Direct competitors: offer the same product as your do; function the same way
- Indirect competitors: alternative that fills the same need
- Tertiary competitors: unrelated products competing for customers’ $$
Slide 12. Competitors cont: What are their characteristics?
- Strengths & weaknesses: capitalization, management
- Plans & strategies: expansion, downsizing, moving; loans, going public
- How they market: distribution, business policies; ad budget, sales methods; market position
Competitive intelligence:
- Direct vs indirect competition
- Who is your competition? Yellow Pages; read advertising
- How competitive is your marketplace? ~ are there a lot of competitors in your geographic area? ~ how far do people have to travel to get this product? how far are they willing to travel? ~ how many other business offer this product or service? ~ what is your indirect competition?
- What are your competitors doing? ~ expanding or down-sizing, hiring or laying off ~ relocating, restructuring ~ diversifying with related products or services or with unrelated products
- What do your prospects think of the competition?
- prices charged, marketing strategy, customer service policies, complaint handling, quality, etc.
- easy to obtain information - buy products, read advertisements, visit store, check out web pages, read local newspapers in headquarters towns, check out parking lot at night, attend association meetings, many other ways
ResearchUnderstanding Your IndustryBeginning points - validity of information and the internet - use of SIC and NAICS codes - give credit to source: reader needs to know that info comes from a valid source
Slide 13: Information Sources: Secondary sources- Books, periodicals
- Trade studies
- Government sources
- Internet resources
- Competitors & suppliers marketing materials
- Your own company reports
Easiest to get at and what we will be relying upon for most of our needs.
Slide 14. Secondary Sources: A few good examplesBusiness & trade journals, directories, databases, census data, trade studies, books.
Directories: some on line - accessible with library card as are databases.Tell reference librarian what you are looking for.Harris Directories, Gale, Standard Rates & Data, Yellow PagesMagazines often have info available from their research depts. Or special studies for a fee. Ask for media kit.
Slide 15: Secondary Sources: Internet examplesIndustry information; government information; university research & studies; business publications; your local public library; specialized portals; invisible internet
Review HO for internet sourcesCheck out city and county web sites: look for planning dept info.Universities or colleges which have strong programs in your field.
Slide 16. Google: Some tips for finding reliable information- New features: Specialized searches - blog search, scholarly papers, etc; RSS feeds
- Limiting results: Site:edu; site:gov; site:org
Search engines - Google: around 2 billion web pages! only 50 in 1995!Google about 60%; Yahoo about 25% of searchesGoogle adding new features all the time. Special features for mobile phone use.Limiting searches by using site:edu, etc.
Slide 17: Info Sources cont: Primary sources- Experimental: lab studies; field testing
- Non-experimental:
Qualitative - likes & dislikes: focus groups, qualitative questionnaires
Quantative: statistical sampling; mathematical measures - respiration, pupil dilation, etc.
From the horse’s mouthInformation you create yourself
Slide 18 & 19. Surveys: Data in four main areas. - Interest in your product or service: degree of like/dislike; interest in things related to your product; degree of purchasing probability; how much willing to pay
- Demographic & psychographic information: age, income, education, etc; how they perceive themselves; livestyles, behaviors
- Media use: what do they read; what do they watch; what do they listen to
- Relationships, feelings about competition: degree of loyalty; degree of like/dislike; purchasing patterns
Most commonly used by smaller businesses - one we will focus on here.Can be done informally - asking a question or two of prospects, customers, etc in casual conversation or more formal - with printed questionnaires, tabulation, etcAll need some form of tabulation to assess the results objectively.Mail, phone personal interview.Focus groups also capture non-verbal; videotape; takes skill to plan and execute effectively - hire a pro.
Slide 20. Surveys: Structuring a survey is an art.
- Keep it short
- Easy questions first: yes/no or multiple choice; age, income, other sensitive questions last
- Test your questionnaire: be sure you ask what you think you are asking; keep tabulation method in mind
- Adequate sample size: random sample; selected sample
Hire professional marketing firm if you want to do a large, important survey. Good to know to do simple ones - customer feedback forms, quick surveys to answer a specific question, even for a few add on questions for forms used to build mail and e-mail lists.
Prime example: when you are asked for zip when purchasing from a store like Target. This is one-question survey.
Slide 21. Homework: read handouts; reasearch your business, industry; draft analysis of your business in terms of external influences
No reading in text: research is time consuming.
Session #3
Note: Arron found a great web site at Case Western Reserve for local demographic data. I'm probably going to add it to my lesson plan for future workshops. See below -
http://neocando.case.edu/cando/quickProfile/interface.jsp
Review & discussion of research & analysis of business in terms of external influences
Today, you should begin to see more clearly how these preliminaries will fit in with the planning process. You will find that you’ll think of ways to add to, edit or revise as you go along. The most painful part of this process is nearly over - once you have the business description and analysis done, you can set goals with more realism.
Begin by doing a quick review of last week.
Slide 1: External influences - reviewWhat external factors have an impact on your business?Anything that exists outside of your own company and outside of your control: prospects & customers economy and world events government regulation business cycles seasonality, weather changing demographic patterns industry structure competition much more
Slide 2: Information: What you should be looking for (review)
Slide 3: Lifecycle: Of your industry, of your own business, of your product. (Review)
Slide 4: Information Sources: Secondary sources - information that has already been compiled for you. (review)
Slide 5. Secondary Sources cont: Internet (review). See HO for examples.
Slide 6. Info Sources cont: Primary sources.
Experimental: lab studies; field testing
Non-experimental- Qualitative: likes & dislikes - focus groups; qualitative questionnaires
- Quantitative - mathematical measures: respiration, pupil dilation, etc; statistical sampling
(new material - not covered last week)
Experimental / Non Experimental: Qualitative & QuantitativeFor any, sample size is important - be sure that yu have enough completed questionnaires so that you have valid data. Two or three responses not enough - 80 or 90 might be. In most cases, 500 will be adequate. You might have to consult with statistician to be sure. Professional market research companies will do this for you for a price.
Two kinds of sampling - random & selected sample: participants chosen based on who you most likely customer is, for example. Similar in age, income, gender, other characteristics.
Slides 7 & 8. Surveys: Data in four main areas.
Interest in your product or service
- Degree of like/dislike
- Interest in things related to your product
- Degree of purchase probability
- How much willing to pay
Demographic & psychographic info
- Age, income, education, etc.
- How they perceive themselves
- lifestyles, behaviors
Media use
- What they read
- What they watch
- What they listen to
Relationships, feelings about competition
- Degree of loyalty
- Degree of like/dislike
- Purchasing patterns
Interest in your product or service, demographic & psychographic info, media use, relationships or feelings about competition
Slide 9. Surveys cont: Structuring surveys is an art.
- Keep it short
- Easy questions first: yes/no or multiple choice; age, income, other sensitive questions last
- Test your questionnaire: be sure you ask what you think you are asking; keep tabulation method in mind
- Adequate sample size: random sample vs selected sample
Testing is important. Keep in mind what you expect to get out of the survey when you are structuring questions - tabulation methods vs open-ended responses.
Slide 10 & 11. Internal influences: Things within your business; under your control.- Personnel: talents, expertise, training
- Training: Of personnel, clients/customers
- Equipment: Age, condition, capacity
- Quality: Of product/service, gaurantee/warranty
- Pricing: In relation to competition; in relation to alternative products; profit margin
- Marketing: Geographic coverage; advertising & sales; joint ventures & collaborations
- Company’s stage of development: Start-up or very small business; mid-growth or mid-size; slow growth or large businesses
Important: Stage of development of your own business - you can choose to stay at a size or stage that suits you. Review HO.
A couple of analytical tools you might find useful.
Slide 12: Stakeholders Make a list. How good a job are you doing for each?- You
- Family: yours & your employees
- Suppliers
- Customers & prospects
- Creditors
Might be longer than what is on slide. Just make a list and rate on a scale from 1 - 10.
Slide 13. SWOT: An analytical tool.- Strengths
- Weaknesses
- Opportunities
- Threats
Using all of the information you have gathered, both internal and external influences, what are your strengths, weaknesses, opportunities, threats.Strengths: management expertise, experience, location, smallness = flexibility, $$ to invest or spend on marketing, strong market position, spousal support, high profit margin, etc.Weaknesses: lack of management expertise, unknown in market, shoestring budget, street being torn up, competition, etc.Opportunities: growth segments, identified niches & untapped markets, new technology, new government regulations, etc.Threats: changing government regulations, business cycles, new entrants into market (competition), changing technology, your health
Slide 14: goal Setting: You only need a few.Concrete, measurable
- How will you tell if you have achieved your goal?
- Market share, sales, profit, etc.
- Find a way to measure less tangible goals
Must be measurable, realistic.
Slide 15. Homework: Read Chapters 7 & 8; Using SWOT and stakeholders, analyze your business; continue expanding and refining the description & analysis of your business; set goals
Session #4
Review
Slides 1 & 2. Planning Flow: Corporate Mission Statement <-> Business Concept Statement -> Unique Selling Proposition -> Marketing Position Statement -> Goals, Objectives -> Strategies -> Action Plan -> Budget -> Financial StatementsIn reviewing these slides, you can see where we stand in this process. Working on Goals & objectives now. Next, we will work on strategies, action plans and budgets. Taking this on in chunks.
Slide 3. Plan Flow - Example 1:- Objective: Increase sales by 20%
- Strategy #1: Increase awareness of our product to 1 in 25 people
- Action #1: Weekly ads in the Sun Press
- Action #2: Radio ads on 3 selected stations, two times a day on each station
- Budget: $$ for newspaper ads; $$ for radio ads
- Financial statements: Budget $$ to marketing expense on income and cash flow statements
Slide 4. Plan flow - example 2
- Strategy #2: Make 10 additional sales calls each month
- Action #1: Purchase Harris Company Reach service
- Action #2: Hire part time appointment setter
- Action #3: Increase field sales time on the road
- Budget #1: Cost of company Reach subscription
- Budget #2: Wages, equipment, benefits, training, etc.
- Budget #3: Mileage, additional office support, etc.
- Financial statements: marketing expense on income and cash flow statements
Remember progression - you have written your objectives. Now we will talk about laying out exactly how you are going to set about achieving those goals. First by looking at things that have to happen with marketing, then with operations & administration. These examples on the slides are focussed mostly on marketing.
Slide 5. Business Concept Statement
Description of your product or service
Description of your primary customer(s)
Value propostion - why customer will pay $
Distribution - how customers get your product
You should all have written one including all four of the elements listed. This is a foundation piece which you will see in a few moments. If you have not written your, or if it is still sketchy, I suggest that you put some time into that this week. Let’s look at each of the elements in review.
Slide 6. Product description: Easiest part for most.
Physical appearance
Nature of service
Packaging (both products & services)
What does it do? What need does it fill?
Slide 7. Customer description: Spend lots of time - revisit often.
Critical for planning marketing strategies.
Socioeconomic descriptors: age, income, education, life stage
Lifestyle descriptors: how free time is spent
Buying behavior descriptors: purchasing purpose, method, issues
Look at this carefully - it will tell you a lot about how you are going to market - what you will be doing to get customers.
Slide 8. Value proposition: Think carefully.
An important component of your marketing message. Why would someone pay $ for your product or service?
What problem does your product solve?
How does your product increase pleasure or reduce pain?
Again, critical part of marketing.
Slide 9. Distribution
Successful distribution driven by customer characteristics. Where do people buy your product or service? Store or other physical location; direct marketing - phone, catalog/mail, on-line; sales calls; etc.
How do they pay for it?
How is it delivered into their hands? Delivery service, carry away, project completion
How can you devise a successful distribution strategy if you do not know where your customers go, how they behave, what their expectations are? Drug stores delivering prescriptions via drive-up window- a need that was largely ignored for 100 years - reduced inconvenience, mistakes, fraud.
Slide 10. Planning Flow (revisited)
Corporate Mission Statement
Business Concept Statement
Unique Selling Proposition
Marketing Position Statement
Goals, Objectives
Concept statement, USP, market position are the bases for your marketing strategies & messages.
Slide 11.Market Positioning: Where does your product stand in the minds & hearts of your customers and in relationship to your competition?
- Features: what it has
- Benefits: what it does
- Differentiation: how it differs from competition
- Pricing: to promote sales & make profit
If you have several products or serve several unique market niches, you might have several position statements relating to each specific product or market. However, they should not be so extremely different from each other so as to confuse the customer about what kind of a company you have. Some auto manufactures have made this mistake & we are seeing the results. You cannot be all things to all people.
Slide 12. Marketing by the Numbers: Hit the numbers to make the sale. To make one sale, you need . . .- 5 sales presentations
- 40 cold calls to get 1 sales presentation
- 200 cold calls to get 5 sales presentations
- 6 or 7 exposures before prospect is ready to make a decision
These are some basic averages that hold true across the board. Your numbers might be different, but this is a good starting point if you are not sure.
Slide 13.Work the Circle: Constantly be moving from outer edge to center.Universe -> Your market (cold prospects) -> Warm prospects -> Hot prospects -> Customers!
Don’t market to the entire universe - wastes time and $. Newer and smaller businesses work their warm markets - family & friends - and tend to ignore the outer parts of the circle. They are busy for a number of months then find that sales dry up - they have not primed the pump so to speak. You need to be working the entire circle to produce consistent results.
Slide 14. Circle Strategies: Each part of the circle needs its own strategy.- Outer edges: Wide broadcast, general communication
- Warm prospects: More targeted, more detailed
- Hot prospects: Personal touch; close the sale messages
- Customers: Personal touch; highly targeted
Different parts of the circle require different communication strategies. Outer is more general. You might use ads & press releases. For warm market you might use mailings, personal contact perhaps in person or by phone. Hot prospects need more customized mailings, mor information, sales calls, close the sale messages, incentive like discounts or add-ons to close the sale. Customers need careful care. The personal touch - holiday cards, newsletters, reselling and appreciation devices, referral incentives, etc.
Slides 15 & 16. Improving the Numbers: Depending where your business is on the growth curve.- Present a clear, consistent message: USP, Position, value proposition
- Project an image that supports your message & market position: appeal to your customers’ tastes & expectations
- Follow-up: part of hitting the numbers; don’t annoy your prospects
- Take good care of your customers: fastest, easiest, cheapest sal is resale; satisfied customers talk
- Target your most likely customer: improves the odds of making a sale; more cost effective
- Follow-up: extremely important
Most smaller businesses do not pay enough attention to image. Subliminal communication that helps make your messages memorable. Important in maximizing the impact of the 6 - 7 exposures needed to get the prospect to make a decision. Also helps in creating perceptions of credibility, reliability, professionalism. Makes you more memorable and reinforces verbal messages.
Follow-up alone, can improve your efficiency in closing sales by 4 fold! Most important part of you marketing effort once the pump is primed. With an effective follow-up plan, you can get 4 sales out of your original 200 cold calls instead of just 1. Devise a system and utilize contact management software if you have a large number of prospects to contact.
Slide 17. Homework: Due for session #5
Read Chapter 5
Draft Marketing Plan: Position statement
Continue to refine/revise previous sections
Session #5
Review & discuss marketing position statements & objectives.
Slide 1. Planning Flow (revisited)
Corporate Mission Statement
Business Concept Statement
Unique Selling Proposition
Marketing Position Statement
Goals, Objectives
Focus on your business concept statement, USP & positioning statement as foundation for doing marketing plan.
Slide 2. Goals, Objectives -> Strategies -> Action Plan -> Budget -> Financial Statements
We are now working on strategies, action plans & budgets. You should be able to start to figure out what your marketing will cost. Budget will flow into financial statements which Pat Zinn will cover for us next week.
Slides 3 & 4. Plan Flow - Example 1:- Objective: Increase sales by 20%
- Strategy #1: Increase awareness of our product to 1 in 25 people
- Action #1: Weekly ads in the Sun Press
- Action #2: Radio ads on 3 selected stations, two times a day on each station
- Budget: $$ for newspaper ads; $$ for radio ads
- Financial statements: Budget $$ to marketing expense on income and cash flow statements
Plan flow - example 2
- Strategy #2: Make 10 additional sales calls each month
- Action #1: Purchase Harris Company Reach service
- Action #2: Hire part time appointment setter
- Action #3: Increase field sales time on the road
- Budget #1: Cost of company Reach subscription
- Budget #2: Wages, equipment, benefits, training, etc.
- Budget #3: Mileage, additional office support, etc.
- Financial statements: marketing expense on income and cash flow statements
Review
Slide 5. Market Positioning: Where does your product stand in the minds & hearts of your customers and in relationship to your competition?
- Features: what it has
- Benefits: what it does
- Differentiation: how it differs from competition
- Pricing: to promote sales & make profit
Review
Slide 6. Marketing by the Numbers: Hit the numbers to make the sale. To make one sale, you need . . .- 5 sales presentations
- 40 cold calls to get 1 sales presentation
- 200 cold calls to get 5 sales presentations
- 6 or 7 exposures before prospect is ready to make a decision
If you need 5 more customers to meet your goals, multiply things out -> 1000 contacts of people who are not yet customers. This makes at least part of your marketing plan a simple arithmetic problem & more straightforward. How are you going to make that 1000 contacts, follow-up, expose them to your message 6 or 7 times, etc?
Slide 7. Work the Circle. Constantly be moving from outer edge to center.Universe -> Your market (cold prospects) -> Warm prospects -> Hot prospects -> Customers!
Review.
Slide 8. Circle Strategies: Each part of the circle needs its own strategy.- Outer edges: Wide broadcast, general communication
- Warm prospects: More targeted, more detailed
- Hot prospects: Personal touch; close the sale messages
- Customers: Personal touch; highly targeted
Review.
Slides 9 & 10. Improving the Numbers Depending where your business is on the growth curve.- Present a clear, consistent message: USP, Position, value proposition
- Project an image that supports your message & market position: appeal to your customers’ tastes & expectations
- Follow-up: part of hitting the numbers; don’t annoy your prospects
- Take good care of your customers: fastest, easiest, cheapest sal is resale; satisfied customers talk
- Target your most likely customer: improves the odds of making a sale; more cost effective
- Follow-up: extremely important
Review. Takes you right back to - - - Business concept, USP, marketing position & a deep knowledge of your customers.
Slide 11. Operations & Administration: Definitions. (Can be lumped together under Operations.) - Operations: how you produce your product or service including the equipment that is used.
- Administration: all necessary activities not directly related to production or marketing - Accounting & bookkeeping; Filing & record keeping; Office support; Human resources, insurance, etc.
By now, things should be getting easier for everyone. Don’t be concerned if you find that things overlap from the marketing section - hiring & training for example might appear in both.
Slide 12. Operations & Administration: Two steps.- Describe your current circumstances.
- Describe how things need to change so that you can achieve your goals.
This 2 step approach is used throughout the planning process.
Slides 13 & 14. Operations: Current circumstances.- Describe your facility - Age, condition; Size; Lease cost & term (or mortgage:
- Document essential processes - Step-by-step; Schedules; Purchasing of materials & supplies; House keeping & maintenance
- Delivery of product or service - Delivery service; Installation or other services; Follow-up; Warranty servicing, return policy, etc.
See pg. 83 in book. If a sentence or two will do, that’s all you need - true of any section of the plan. Just be sure that that section is, in fact, complete.
Depreciation - choice between expensing or depreciating if under $10,000. IRS rules.
Stability of material supplies. Might develop flow chart of how things re accomplished under ideal circumstances.
Slide 15. Administration: Current circumstances. - Itemize necessary functions - Accounting/bookkeeping; Record keeping & filing; House keeping & filing; Human resources & insurance
- Describe how each is handled
List with brief description of how things are handled - if work is done by an outside supplier, state who that is, what they provide & comment about adequacy of both quality and scope of service. If in-house, comment on whether handled by full-time or part-time, adequacy, ability to take on more, etc.
Slides 16 & 17. Ops & Admin Plan: How things need to change. - Personnel changes - Hiring & training; Reorganizing jobs, delegating
- Facilities changes - Expansion; More favorable location
- Equipment changes - Replacement of old equipment; Refurbishing & upgrading; For expanded capacity (new hires)
- Process changes - To improve efficiency, reduce costs; To handle greater volume; To improve quality
- Supplier changes - To ensure supplies; To reduce costs; To increase services don by outside suppliers
Hiring, training new hires - also training current employees or yourself to better manage or expand skills - should have budget for improving, maintaining skills & keeping up to date with your industry.
Delegate - entrepreneurs are lousy at this.
Expanded space might allow you to (will probably require) change how things are done. Simply relocating where supplies are stored can improve - or hinder - efficiency.
Suppliers sometimes offer services you had not even considered - they have a vested interest in your success & are trying to stand out from their competition, too. If you have a problem to solve, view suppliers as a possible resource for solutions.
Slide 18. Homework: Due for Session #6- Read Chapters 1 & 6
- Draft Operations & Administrations Plans
- Continue to refine/revise previous sections
Session #6
Review of Operations & Administration
Slide 1. Operations & Administration: Definitions. (Can be lumped together under Operations.) - Operations: how you produce your product or service including the equipment that is used.
- Administration: all necessary activities not directly related to production or marketing - Accounting & bookkeeping; Filing & record keeping; Office support; Human resources, insurance, etc.
By now, things should be getting easier for everyone. Don’t be concerned if you find that things overlap from the marketing section - hiring & training for example might appear in both.
Slide 2. Operations & Administration: Two steps.- Describe your current circumstances.
- Describe how things need to change so that you can achieve your goals.
This 2 step approach is used throughout the planning process.
Slides 3 & 4. Operations: Current circumstances.- Describe your facility - Age, condition; Size; Lease cost & term (or mortgage:
- Document essential processes - Step-by-step; Schedules; Purchasing of materials & supplies; House keeping & maintenance
- Delivery of product or service - Delivery service; Installation or other services; Follow-up; Warranty servicing, return policy, etc.
See pg. 83 in book. If a sentence or two will do, that’s all you need - true of any section of the plan. Just be sure that that section is, in fact, complete.
Depreciation - choice between expensing or depreciating if under $10,000. IRS rules.
Stability of material supplies. Might develop flow chart of how things re accomplished under ideal circumstances.
Slide 5. Administration: Current circumstances. - Itemize necessary functions - Accounting/bookkeeping; Record keeping & filing; House keeping & filing; Human resources & insurance
- Describe how each is handled
List with brief description of how things are handled - if work is done by an outside supplier, state who that is, what they provide & comment about adequacy of both quality and scope of service. If in-house, comment on whether handled by full-time or part-time, adequacy, ability to take on more, etc.
Slides 6 & 7. Ops & Admin Plan: How things need to change. - Personnel changes - Hiring & training; Reorganizing jobs, delegating
- Facilities changes - Expansion; More favorable location
- Equipment changes - Replacement of old equipment; Refurbishing & upgrading; For expanded capacity (new hires)
- Process changes - To improve efficiency, reduce costs; To handle greater volume; To improve quality
- Supplier changes - To ensure supplies; To reduce costs; To increase services don by outside suppliers
Hiring, training new hires - also training current employees or yourself to better manage or expand skills - should have budget for improving, maintaining skills & keeping up to date with your industry.
Delegate - entrepreneurs are lousy at this.
Expanded space might allow you to (will probably require) change how things are done. Simply relocating where supplies are stored can improve - or hinder - efficiency.
Suppliers sometimes offer services you had not even considered - they have a vested interest in your success & are trying to stand out from their competition, too. If you have a problem to solve, view suppliers as a possible resource for solutions.
Financial Statements
Slide 8. Cash Flow Statement: Tells if you have enough cash to operate your business. Good tool for analyzing the impact of expenditures.
Slide 9. Cash flow statement example. See hand outs.
Slide 10. Income Statement: Also called Profit & Loss Statement or P & L. Tells if you are making a profit.
Slide 11. Income statement example See Pat’s hand outs
Slide 12. Balance Sheet: Bankers & investors want to see this because it tells how healthy your business is.- Assets: What you own.
- Liabilities: What you owe.
- Owners equity or net worth
Slide 13. Balance sheet example See hand outs
There are 3 levels of service available from CPA firms: compilation, review and audit.Compilation: creating financial statements.Review: seeing if figures are reasonable, tying back to the source, balancing. For example, seeing that income and wages for an S corp are reasonable - if not, could raise a red flag for IRS scrutiny. S corp income goes to Schedule K on personal tax return.
Accounting firms dealing with smaller businesses generally work with QuickBooks or Peachtree if there is a manufacturing operation which has inventory - will do set up and training. Min charge of $275 w/ hourly rate of $120 is common. Will take new businesses and do set up, etc - some will negotiate lower for first year. See als if they will do business & personal taxes and tax planning starting in December.
Can also utilize accountant to do monthly write up and bank reconciliation for companies that choose to have them do it.
Recommend using a payroll company even if you have only one or two employees - if reports are not in on time and proper amounts not withheld, penalties are severe - enough to pay for an entire year of payroll service the first time a deadline is missed. Be sure that the payroll company is bonded.
Before you go to look for financing, know the terminology first. Slide 14. Finding the money: Know the terminology- Debt financing = loans
- Equity financing = investment
- Money = capital
Slide 15. Sources of capital: both debt and equity
- Banks (debt) - SBA loans are administered through banks
- Investors (equity)
- Venture capitalists (equity)
- “angels” (debt or equity)
Let’s look at sources of debt financing first• friends and relatives - pros and cons, usually for smaller amounts of money• “angels” a term more often heard icw Broadway plays, now being use with a new twist for smaller businesses, private sources, need to be in right place at right time or have an introduction, be aware that also used icw equity financing arrangements• lending institutions like banks - conservative - better understanding of manufacturing than of service business - shop around - try smaller banks and those with special small business programs; branch bank manager is often the key person - Cleveland is very conservative, tough to get financing, NEO also tough but surrounding counties and smaller banks are sometimes more willing, many have to go out of state to get money - no reflection on whether your business plan is good - this is just a peculiarity of the Cleveland market (refer to handout about local small business financing)• SBA has hundred of different options. Most are loan guarantee programs administered by banks. Each SBA program has different requirements and different benefits. 9 are outlined in your book but there are literally dozens of programs addressing different groups of people with different needs. See booklet being passed around.
Equity financingIf the % of what you owe is high in comparison to what you own, this is an option. You trade a piece of your company for money. Sources -• friends and relatives• SBA licensed investment companies and small business investment companies (SBIC’s) provide equity capital and unsecured loans. Alternative to bank financing. Fills the gap between venture capital and small business needs - venture capitalists often are looking for an investment of &5 million or more. These are for profit firms which share in your success. Must operate according to SBA guidelines.• matchmakers match up businesses with venture capitalists. Generally looking for companies with some track record - 3 to 5 years in business - and a high growth potential. Venture capitalists have a right to participate in management. this can be a blessing or a curse - you need to know who you are getting into bed with and be clear about your own objectives. usually hands-off if company is successful. Deal is based on who has most bargaining power. Exit strategy required - a way out for the investor - need to be careful that they cannot deliver you into the hand of the enemy or devil! Exit strategy is a part of a complete business plan and you should plan for your own exit if needed - health, market changes, etc.
Slide 16. Cost of capital - considerations - Interest rate
- Term of financing
- When payment begins and size of payment
- Secured or unsecured
- How much control does investor require
- Timing
Relative costs• Least expensive is using your own money but not from credit cards. Use credit cards with extreme caution.• Next least expensive is family and friends. You can negotiate prime rate or lower an it is still a good deal for both of you.• Next in cost is traditional sources like bank or SBA. Problem is banks are generally looking for a sure thing.• Most expensive is outside lenders and venture capitalists. Because they will underwrite higher risk. Cost is directly related to risk.
When determining the total cost of the financing consider
- the interest rate
- the term of the financing or how long you will take to repay
- when will payment begin - don’t forget to plug into your cash flow statement
- how big are payment
- is loan secured or unsecured - what do you have to use for collateral
- for venture capital - how much of business & how much control will you have to give up
- consider timing - do you need to spend right now? Time value of $
Look at total cost over the life of the financing. Look at impact on you cash flow statement to determine if $ will make you more profitable & if you will be able to repay.
Slide 17. Homework: Due for Session #7- Read Chapters 9 & 2 and Appendix C
- Develop financial projections
- Schedule private sessions
Session #7
Slides 1 - 6 Review of financial statements. See session #6.
Slides 7 - 9. Elements of Your Plan: Customize to fit your business. - Preliminary Materials: cover letters; non-disclosure statements
- Title Page: “Business Plan;” date; contact info; “confidential”
- Table of Contents
- Executive Summary: key points; piques interest of lenders, investors
- Vision/Mission: reasons for being in business; long term objective(s)
- Description of Business *
- Goals
- Marketing Plan & Budget>li> Operations Plan & Budget
- Administrative & General Plan & Budget
- Financial Statements
- Appendixes
The cover letter is to the investor or banker from whom you are trying to get funding. It explicitly states how much money you need, what it will be used for and how it will improve your business (why you will be able to pay back or increase value of firm).
If you have company secrets or a highly original idea, you might want an attorney to draw up an non-disclosure statement to be signed by each person who views the business plan - or anyone with whom you discuss your business idea.
At the very least, include a statement of confidentiality on the cover of your plan. You might also want to number the copies of your plan and keep a log of people who have copies.
The Executive Summary is generally written last and is a page or two of key points.
The remainder of the plan document follows the general format of sections as they were discussed in this workshop.
Slides 10 - 13. Description of Business *:Back to Session #1.- Business Concept (Slides #8 - 12): product description; customer description; value proposition; distribution
- Mission Statement: Capsulizes reasons for being in business - high substance -> more profit; core values
- Six questions (Session #2, Slide #2): unique selling proposition; target buyer; competition; positioning message; distribution strategy; market size & growth
- External influences (Session #2, Slide #3): industry structure; business cycles; technology, R & D; new players; industry performance standards; competitive intelligence; prospects & customers; lifecycle stage - your industry, product, business
- Internal influences (Session #3): personnel; training; equipment; quality; pricing; marketing; company’s stage of development
Slide 14. Suggested Format: Each subsection on its own page. - Table of contents . . . . . . . . . . 1
- Executive summary . . . . . . . . . . 2
- Description of business . . . . . . . . . . 3
- Mission . . . . . . . . . . 3.1
- Business concept . . . . . . . . . . 3.2
- Analysis . . . . . . . . . . 3.3
- External influences . . . . . . . . . . 3.3.1
- Internal influences . . . . . . . . . . 3.3.2
- Key objectives . . . . . . . . . . 4
- Marketing plan . . . . . . . . . . 5
Giving each section and subsection of the plan will enable you to easily make changes, additions, and deletions of sections without completely haveing to redo the Table of Contents. Keeping page numbers straight is difficult and utilizing this format of “legal” outlining will prevent a lot of headaches.
Slide 15. General - Appendixes: legal documents - leases, patents/trademarks, sales contracts; resumes, supporting materials
- Professional looking: proofread; contents page correct; look appropriate for your business
Slide 16. Use Your Plan: Make your plan part of the way that you operate your business. - Management reports: daily, monthly, quarterly; compare plan or budget to actual; are you on track?
- Periodic review: alt least annual; evaluate progress and quality of planning; revise where needed
Develop reports that will help you make better decisions and that will tell you if your plan is on track. Some businesses review cash flow daily - use a frequency that is adequate for your business.
Evaluate the quality of your planning, too. You will get better at it over time - revise as often as you think you need to. Revise at least every 2 years - things do change.
Slide 17. Homework: Due for consultation. - Draft as much of plan as you can
- Complete reading (if you have not yet done so)
- List problem areas or things you want to discuss in the consultation
- Schedule private sessions
