Marketing Case Analysis

2. Anatomy of a Business Plan – Linda Pinson – 7th. Edition – – Chapter 4 Part I: The Organization Plan – Administrative Plan

Answer:

1.Executive Summary of the Reading

2.Key concepts that you got from the reading:

3.Insights from this reading to your Business Plan (What and how can you apply this reading to your Business Idea?)

2. COMPETITOR ANALYSIS: UNDERSTAND YOUR OPPONENTS, Source: Harvard Business Press Chapters – Harvard Digital Course Pack

1.Executive Summary of the Reading

2.Key concepts that you got from the reading:

3.Insights from this reading to your Business Plan (What and how can you apply this reading to your Business Idea?)

Anatomy of a

BUSINESS PLAN

The Step-by-Step Guide to Building a Business and Securing Your Company’s Future

7th Edition

eBook

Used by over 1 million business owners

Discount coupon included for our business plan software

Linda Pinson Author of the SBA Publication, “How to Write a Business Plan”

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Seventh Edition

Anatomy of a

Business Plan The Step-by-Step Guide to Building Your Business and Securing Your Company’s Future

Linda Pinson

 

 

published by

Out of Your Mind… and Into the MarketplaceTM

 

 

 

ii

© 2008 Linda Pinson. All rights reserved. ISBN 0-944205-35-6 Anatomy of a Business Plan, 7th edition, eBook (for Windows® and Macintosh®)

If this book is distributed with AUTOMATE YOUR BUSINESS PLAN software that includes an end-user agreement, this book, as well as the software distributed with it, is furnished under license and may be used or copied only in accordance with the terms of such license. Except as permitted by any such license, no part of this book may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, recording, or otherwise, without the prior written permission of Linda Pinson. Please note that the content in this book is also protected under copyright law even if it is not distributed with software that includes an end-user license agreement.

Note: Further be advised that the publishing rights for the printed version of Anatomy of a Business Plan are also owned by Linda Pinson, Out of Your Mind…and Into the Marketplace™ publishing company in Tustin, CA. Print this file for your own use only. The content of this book is furnished for informational use only, is subject to change without notice, and should not be construed as a commitment by Linda Pinson. Linda Pinson assumes no responsibility or liability for any errors or inaccuracies that may appear in the informational content contained in this guide. Please remember that existing artwork or images that you may want to include in your business plan may be protected under copyright law. The unauthorized incorporation of such material into your new work could be a violation of the rights of the copyright owner. Please be sure to obtain any permission required from the copyright owner. Any references to company names in sample templates are for demonstration purposes only and are not intended to refer to any actual organization unless otherwise noted. Automate Your Business Plan™ and OUT OF YOUR MIND…AND INTO THE MARKETPLACE™ are trademarks of Linda Pinson. The cover photo is used by permission and copyrighted by the photographer, Andres Rodriguez. (© Andres Rodriguez. Image from BigStockPhotos.com) All other trademarks and copyrights are the property of their respective owners. Linda Pinson

 

OUT OF YOUR MIND… AND INTO THE MARKETPLACE™

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Praise for Previous Editions Anatomy of a Business Plan & Automate Your Business Plan “Anatomy of a Business Plan and Automate Your Business Plan have served as excellent business planning and financial analysis tools for Dale Carnegie© Training Centers Worldwide.”

Marc K. Johnston Senior Vice President, Franchise Development

Dale Carnegie© Training Centers Worldwide

“Anatomy of a Business Plan is one of the best books on the basics of putting together a thoughtful, thorough, and professional business plan.”

Jeffrey L. Seglin Inc. Magazine

 

“Simply put, Anatomy of a Business Plan with its companion software, Automate Your business Plan, is the best step-by-step guide to starting, building, and raising capital for your business. We have raised over $20 million for our clients by using it, and we have an additional $15 million pending. Use it; it works!”

Thomas Jay Wacker Centaur Holdings Corporation

 

“I recently reviewed two loan applications that included business plans. The most noteworthy item in both of these applications was the business plan. After reading each one, my confidence was greatly boosted. Each applicant stated that Linda Pinson’s software and book were easy to use. By the way, both loans were approved.”

Nancy Russell Comerica Bank

 

“Most business plan books need updating to account for new tax laws and other changes. This 6th edition (of Anatomy of a Business Plan) is one of the newest – and best – on the topic.”

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About the Author Linda Pinson is an award-winning author, business planning expert, speaker, consultant, and nationally recognized business educator with a specialty in financial management and small business curriculum development. The author of nine popular entrepreneurial books, she has also developed and published the best selling business plan software program, Automate Your Business Plan™. Linda’s books are widely used as curriculum in colleges and universities. They have been translated into several foreign languages including Spanish, Chinese, and Italian. Anatomy of a Business Plan has also been localized for Australia and the UK. Automate Your Business Plan™ has been customized for corporations and associations including Dale Carnegie® Training Centers Worldwide and The American Bar Association. Linda’s has been widely recognized and utilized as a business planning and financial expert, contracting with U.S. Government Accountability Office, Visa, MSN, and others. Linda is an officer on the Board of Directors of the Small Business Financial Development Corporation (CA state lending program). She also serves on the Tri County SBDC Advisory Board and is a member of the Entrepreneurial Advisory Committee at California State University at Fullerton. Her dedication to the small business community has been recognized through awards from the U.S. Small Business Administration, the National Association of Women Business Owners, and the State of California. Linda served as a delegate and tax issue chair at the White House Conference on Small Business. Linda resides in Tustin, California with her husband Ray. She is an avid golfer (one hole- in-one) and bowler, paints watercolors, and loves to fish. Linda and Ray have two sons, two daughter-in-laws, two grandsons, and one granddaughter (all great, of course).

 

 

 

 

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Dedication It is with a great deal of pleasure that I dedicate this book to Tom Drewes, former President and founder of Quality Books, Inc., my mentor and friend. His kindness and encouragement was my inspiration in 1986. Because of his belief in me, my books are now being used in libraries across the nation. Thank you, Tom for your many years of tireless dedication to independent publishers and for your willingness to share yourself with so many—and ask for nothing in return.

 

Acknowledgments During the writing and revising of seven editions of Anatomy of a Business Plan, it has been my good fortune (and the readers’) to have input from many business associates whose expertise in certain areas admittedly exceeds my own. I would like to acknowledge four of those individuals here.

• Bernadette Tiernan, owner of Tiernan & Associates, in Ridgewood, NJ, was instrumental in helping me with the development “Chapter 5, The Marketing Plan”. Bernadette was the Assistant Dean of the School of Business at Rutgers University and the author of E-Tailing and the great marketing book, The Hybrid Company.

• Dr. Donald R. McCrea, President of Bus-Ed Partners, Inc., Irvine California

(www.bus-edpartners.com) wrote the “Product-Market Analysis” section on pages 64-67. This is a very valuable tool for narrowing your target market to realistic customers. Don was also the developer of my interactive marketing research web page for AUTOMATE YOUR BUSINESS PLAN. He has 30 years of experience and was formerly Director of Executive Education in the Graduate School of Management at University of California, Irvine. Prior to that he directed the Executive Degree Program at the Peter Drucker Graduate School of Management at Claremont Graduate University.

• John Neal, CPA, of Paulin Neal Associates (www.paulinneal.com) helped me with

“Developing an Exit Strategy” on pages 7-11. His company provides interim management and special projects. Their services include strategic planning and business plan development, business modeling, capital formation, financial management, and others. John serves on several for profit and not-for-profit boards and is chairman of the Small Business Committee of the California Chamber of Commerce.

• Ndaba Mdhlongwa, owner of Business Plan Solutions in Dallas, Texas

(www.businessplanprofessionals.com) was the writer of the Wholesale Mobile Homes.com business plan in Appendix III and worked with the owner to write the Karma Jazz Café business plan in Appendix IV. Ndaba has worked with me for eight years on various other book and software tasks, including the development of a great Instructor’s Manual for Anatomy of a Business Plan.

Thank you, Bernadette, Don, John, and Ndaba. Anatomy of a Business Plan is a better book because of you. I thank you—and I know that my readers would also thank you personally if they had the chance.

 

 

vi

Table of Contents

Author Bio (Linda Pinson) . . . . . . . . . . . . . . . . . . . . . . . . iv Dedication and Acknowledgments . . . . . . . . . . . . . . . . . v Automate Your Business Plan companion software . . ix Preface . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi

Chapter 1 Business Plan Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Why Do You Need a Business Plan? . . . . . . . . . . . . . . . 2 What Do Lenders and Investors Look For? . . . . . . . . . . . 2 Developing an Exit Strategy . . . . . . . . . . . . . . . . . . . . . . . 7 Developing Financial Assumptions . . . . . . . . . . . . . . . . . . 12 Introduction to Planning for a Nonprofit Organization . . . 14 Steps to E-Tailing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

Chapter 2 Cover Sheet & Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 What to Include on a Cover Sheet . . . . . . . . . . . . . . . . . . 18 Sample Cover Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 The Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Chapter 3 Executive Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Executive Summary Instructions . . . . . . . . . . . . . . . . . . . 22 Sample Executive Summary (not seeking funding) . . . . . 27 Sample Executive Summary (seeking funding) . . . . . . . . 28

Chapter 4 Part I: The Organizational Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Summary of the Business . . . . . . . . . . . . . . . . . . . . . . . . 32 Products or Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Administrative Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Location . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 Legal Structure . . . . . . . . . . . . . . . . . . . . . . . . 38 Management and Personnel . . . . . . . . . . . . . 39 Accounting and Legal . . . . . . . . . . . . . . . . . . . 40 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Intellectual Property . . . . . . . . . . . . . . . . . . . . 42 Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42

Chapter 5 Part II: The Marketing Plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 Section I: Overview & Goals of a Marketing Strategy . . . 44 Section II: Market Analysis . . . . . . . . . . . . . . . . . . . . . . . 47 Section III: Contents of Your Marketing Strategy . . . . . . . 50 Section IV: Customer Service . . . . . . . . . . . . . . . . . . . . . 61 Section V: Implementation of Marketing Strategy . . . . . . 62 Section VI: Assessment of Marketing Effectiveness . . . . 63 Bonus: The Product-Market Analysis . . . . . . . . . . . . . . . . 64 Marketing Worksheets . . . . . . . . . . . . . . . . . . . . . . . . . . . 68 Marketing Plan Outline . . . . . . . . . . . . . . . . . . . . . . . . . . 75

 

 

 

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Chapter 6 Part III: Financial Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Purpose of Financial Documents . . . . . . . . . . . . . . . . . . . 78 Types of Financial Documents . . . . . . . . . . . . . . . . . . . . . 78 How to Proceed: New or Existing Businesses . . . . . . . . . 79 Section I: Statements of Financial Needs and Uses of Funds from a Lender or Investor . . . . . . . 80 Summary of Financial Needs (Sources) . . . . . . 81 Loan Fund Dispersal Statement (Uses) . . . . . . 81 Section II: Pro Forma (Projected) Statements . . . . . . 83 Pro Forma Cash Flow Statement . . . . . . . . . . . 84 Quarterly Budget Analysis . . . . . . . . . . . . . . . . . 94 Three-Year Income Projection . . . . . . . . . . . . . . 96 Break-Even Analysis . . . . . . . . . . . . . . . . . . . . . 98 Projected Balance Sheet . . . . . . . . . . see page 83 Section III: Historical Financial Statements . . . . . . . . . . 100 Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . 101 Profit & Loss (Income) Statement . . . . . . . . . . . 104 Business Financial History . . . . . . . . . . . . . . . . . 108 Business Financial History Form . . . . . . . . . . . . 110 Section IV: Financial Statement Analysis . . . . . . . . . . 112 Analyzing P&L (Income) Statements and Balance Sheets (Ratio Analysis) . . . . . . . . . . . . . . . . 114-118

Chapter 7 Part IV: Supporting Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 Personal Résumés . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 120 Owner’s Financial Statement (Personal) . . . . . . . . . . . . . 121 Credit Reports, Leases, Letters of Reference . . . . . . . . . 121 Contracts, Legal Documents, Misc. Documents . . . . . . . 122 Résumé Example . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 Personal Financial History Form . . . . . . . . . . . . . . . . . . . 124 Trading Offer Example . . . . . . . . . . . . . . . . . . . . . . . . . . . 126

Chapter 8 U.S. Tax Information: Aid to Business Planning . . . . . . . . . . . . . . 127

Comparing U.S. Tax System and Business Accounting 128 Federal Taxes for Which You May be Liable . . . . . . . . . . . . 128 Tax Calendar – Sole Proprietor . . . . . . . . . . . . . 130 Tax Calendar – Partnership . . . . . . . . . . . . . . . . 131 Tax Calendar – S Corporation . . . . . . . . . . . . . . 132 Tax Calendar – Corporation . . . . . . . . . . . . . . . 133 Free Tax Publications Available From the IRS . . . . . . . . 134 Order Form for IRS Forms and Publications . . . . . . . . . . 136

Chapter 9 Business Planning for a Nonprofit . . . . . . . . . . . . . . . . . . . . . . . . . 137 Understanding Nonprofits . . . . . . . . . . . . . . . . . . . . . . . . 138 Business Planning for Your Nonprofit . . . . . . . . . . . . . . . 139 Executive Summary & Organizational Plan . . . . 140 Marketing Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 142 Financial Documents . . . . . . . . . . . . . . . . . . . . . 143 Supporting Documents . . . . . . . . . . . . . . . . . . . 150

 

 

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Chapter 10 Packaging and Updating Your Business Plan . . . . . . . . . . . . . . . . 151 Part I: Business Plan Software Help . . . . . . . . . . . . . . . . 152 Part II: Packaging for Success . . . . . . . . . . . . . . . . . . . . . 153 Part III: Keeping Your Business Plan Up-to-Date . . . . . . 154

Chapter 11 Financing Your Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 Will You Need to Borrow Money . . . . . . . . . . . . . . . . . . . . . 157 How Much Do You Need and When Do You Need It? . . . . 158 What are the Sources Available to You? . . . . . . . . . . . . . . 158 Debt Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 Equity Financing . . . . . . . . . . . . . . . . . . . . . . . . . . 163 Which Type of Financing Costs the Most? . . . . . . . . . . . . . 164 Calculating the Cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165

Chapter 12 Resource Lists & Links for Business Plan Research . . . . . . . 167-76

Appendix I: Marine Art of California Business Plan . . . . . . . . . . . . . . . . . . . . . 177

Introduction and How This Plan Can Help You . . . . . . . . 177 Marine Art of California—Complete Business Plan . . . . . 179-216

Appendix II: Dayne Landscaping, Inc. Business Plan . . . . . . . . . . . . . . . . . . . . 217

Introduction and How This Plan Can Help You . . . . . . . . 217 Dayne Landscaping, Inc.—Complete Business Plan . . . 219-254

Appendix III: Wholesale Mobile Homes.Com Business Plan . . . . . . . . . . . . . . 255

Introduction and How This Plan Can Help You . . . . . . . . 255 Wholesale Mobile Homes.com—Complete Business Plan 257-294

Appendix IV: Karma Jazz Café Business Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 295

Introduction and How This Plan Can Help You . . . . . . . . 295 Jazz Cafe—Complete Business Plan . . . . . . . . . . . . . . . 297-330

Blank Forms and Worksheets (To Copy and Use) . . . . . . . . . . . . . . . . . . . . . . . 331

Glossary of Business and Financial Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 351

 

 

 

 

 

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Preface

Thank you for choosing Anatomy of a Business Plan as the tool to help you write your business plan. I think you will be pleased with this new edition. It has often been said that, “You can run your business by the seat of your pants—but you will probably end up with torn pants.” One of the principal reasons for business failure is the lack of an adequate business plan. In today’s world, both small and large businesses have come to understand that they need to take the time to evaluate their business potential and map a plan for the future. It is also understood that lenders and investors no longer risk their money on a business unless they have good reason to think that it will be successful (i.e., profitable). It is the goal of this book to give you a clear, concise, and easy-to-understand process to follow as you develop your business plan. I have been working with business owners for many years and most of them have the same problem—they are experts in their industries, but are novices when it comes to business planning. In fact, many times, the prospect of writing a business plan is so formidable that business owners avoid it until it becomes a requirement for one reason or another. I, on the other hand, am not an expert in your industry. My job is to guide you step-by- step through the business planning process. If I am successful, you can follow that process, apply your industry expertise, and write a winning business plan for your company. Who is this book for? I frequently get asked if Anatomy of a Business Plan is appropriate for a big business or a tiny business—a start-up business or an existing business—high tech or low tech—a business seeking funding or a business looking for an internal planning tool—a product business or a service business—a restaurant or a technology business—a sole proprietorship or a corporation—or a division within a company. The answer is that it is the right book for all of the above. No matter who you are, the business planning process is the same. It is your focus that differs. If you are a smaller business and your business plan is intended only for internal use, your plan may be shorter and you may choose to address only certain issues. On the other hand, if your business is larger and more complex, you will probably need to put key people to work on the development of a more critical business plan that will be in keeping with your company vision. If you need funding, you will have to consider the goals of the lender or investor and address those issues. If you are a new business, you will only have projections. If you are an existing business, you will also have historical information. If you are a pure service business, you have no cost of goods. If you are a product business, you do. If you are high tech or low tech, the process is still the same. The variable is how you focus on your specific industry.

 

 

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The simplification of your business planning task has always been the primary goal of Anatomy of a Business Plan. In order to get the most out of the book and to make your job easier, I would suggest that the first thing you do is read the book to give you a general overview of the format and content. After reading, you will be ready to begin working your way through the actual business planning process. Example Business Plans In the back of the book (Appendix I, II, III, and IV) you will find four full-length business plan examples that are for four different kinds of business. All four were written by the business owners and/or consultants they worked with. The common tools that they used were Anatomy of a Business Plan and its companion software, Automate Your Business Plan.

• Marine Art of California is a start-up product business. The plan is for a sole proprietorship dealing in fine art pieces. The owner is seeking short-time limited partners and plans to recapture 100% ownership within about four years. We have added a possible one-year history for this business to show what might have happened during its first year.

• Dayne Landscaping, Inc. is a one-year-old landscaping and snow removal (service)

business. It is a small corporation, seeking to expand into new territories. Dayne Landscaping, Inc. is planning to seek funding from a traditional lending institution (bank).

• Wholesale Mobile Homes.com, Inc. is a dot.com bricks and clicks start-up

corporation planning to go after $10 million in venture capital. Because the business is more complex and is seeking venture capital, the executive summary, and the organizational and marketing plans are researched more heavily and written in more detail.

• Karma Jazz Café is an upscale restaurant that is scheduled to open in early 2008 in

Fort Worth, Texas. This is the owner’s second location of the same restaurant. The first Karma Jazz Café is in Atlanta, GA and is successfully up and running. The newest restaurant is considered to be a start-up business, but is patterned on and utilizes projected and historical financial information and other knowledge gained from the Atlanta location.

The interesting thing about the four plans is that they were researched and written by different people. As you read them, you will find that each of the writers brings something new and different into the planning process that will prove valuable to you in your own efforts.

 

Thank you again for choosing Anatomy of a Business Plan to help you accomplish your goal. I appreciate your confidence in Anatomy of a Business Plan and wish you success in the writing of your business plan!

 

Linda Pinson

 

 

1

CHAPTER

1

Business Plan Considerations

A well-written business plan will provide a pathway to profit for any new or existing business. Your business plan will also provide the documentation that a lender or investor requires if you find it necessary to seek outside funding sources for your business. This chapter is designed to give you some background information and guidelines to consider prior to writing your business plan. Why do you need a business plan? If you need access to additional capital, what does the lender or investor want to know? What are the key words that make your plan more effective? How do you develop an Exit Strategy? Where do the numbers come from in your financial plan? What is different about a business plan for a nonprofit organization? These questions will be addressed on the following pages.

 

Why Do You Need a Business Plan?

What Do Lenders and/or Investors Look For?

The “Key” to Effective Writing

Developing an Exit Strategy

Developing Financial Assumptions

Guide to Using this Book for a Nonprofit Plan

Bonus: Steps to E-tailing

 

 

Anatomy of a Business Plan, Chapter 1, Business Plan Considerations

 

2

Why Do You Need a Business Plan? Every business will benefit from the preparation of a carefully written business plan. There are two main benefits and an additional one if you do business internationally.

1. To serve as a guide for your business The most important reason for writing a business plan is to develop a guide that you will follow throughout the lifetime of your business. The business plan is a blueprint of your business and will provide you with the tools to analyze your business and implement changes that will make your business more profitable. It will provide detailed information on all aspects of your company’s past and current operations, as well as its projections for the next few years. Of course, new business owners have no history and will base the information in their plans on projections developed through current research of the industry. To be of value, your plan must be kept up-to-date. While plans presented to lenders must be bound, you may choose to keep your working copy of the plan in a loose-leaf binder. Then you may add current financial statements, updated rate sheets, recent marketing information, and other data as they become available.

2. As documentation for financing A business plan is a requirement if you are planning to seek financing. If you are seeking capital, the business plan details how the desired investment or loan will further the company’s goals and increase its profits. Every lender wants to know how you will maintain your cash flow and repay the loan (with interest) on a timely basis. Every investor also wants to know also how his investment will improve the overall net worth of the company and help him to achieve his desired return on investment. You will have to detail how the money will be used and back up your figures with solid information such as estimates, industry norms, rate sheets, etc. Lenders and investors have access to statistics that are considered normal for various industries, so be sure that your projections are reasonable.

3. To work in foreign markets If you do business internationally, a business plan provides a standard means of evaluating your business potential in a foreign marketplace. More than ever before, world trade is essential to the health of the American economy and to the growth of most U.S. companies. No business today can afford to overlook the potential of international commerce brought about by changes in communications, technology, and transportation. The development of a business plan will demonstrate ways in which your business can compete in this global economy.