Strategic Business Planning

For Entrepreneurs

Definition
Written document stating what a company
wants to accomplish and how the entrepreneur
is going to make it
Intra muros (internal audience) strategy that
changes with the business; to be revised
annually
Extra muros (external audience) mainly, fund
raising tool

Outline
Cover page should comprise:
Who wrote the plan? (plus contact data)
Why was the plan developed?
Who will read the plan (e.g. you write that the
plan was developed for bank financing, or its
going to be sent to a bank lending officer
include his name and the name of the bank; if
its for school purposes only, or will be
presented to more than one person, leave the
section empty)

Outline
Contents
Lists the major sections of the business plan
and their corresponding page numbers

Executive Summary
2-3 pages at most
Summary of the plan, which highlights the
most important issues (sell your idea as
condensed as possible, for a rich, but
busy reader)
Written last

Outline
Business Concept
Description of product/service
Be specific!
State in which way what you offer makes a
difference!
Try to answer the question: how could your
potential customers survive without this
product/service all these years?
Idea History
When, how, why this idea crossed your mind
Have you ever tried before? Which were the
results?

Outline
Summary of Experience

previously run small businesses, if any

the periods of paid employment
volunteer work
hobbies

Goals and Objectives

Mission and Vision of the Company
Short-term and long-term goals (have in
mind at least where you would like to place
yourself in one years time!)

Outline
Organization and Management
Board of directors
Organization chart
Key professional service providers (law firm,
accounting firm, business consultants)
Legal structure
legal form of organization (sole proprietorship,
partnership, ltd, corporation)
ownership (mention the founders agreements, if
any)

Intellectual property
patents, trademarks or copyrights applied
for/approved

Outline
Marketing Section
Industry description
industry trends
industry size
industry attractiveness (growing, mature, declining)

Target market
who, where, how many
niche markets

Competitor analysis
Product feasibility and strategy (include a sample product
or an image in the plan!)
product strategy
concept test& utility test (remember: clients dont buy
features, they buy benefits!)

Pricing strategy
Distribution channels
Promotion and advertising

Competitor analysis
Competitive
information
Products/servi
ces offered
Product
strengths
Product
weaknesses
Competitive
advantages
Competitive
disadvantages

Other
competitive
information

Business 1

Business 2

Business 3

Business 4

Outline
Financial Section
Capital requirements sources and uses of
funds
Overview of Financial Projections
explanation on how financial projections are
prepared (assumption sheet)
Income statement
Cash flow projections
Balance Sheet
Payback and Exit Strategies

Financial Section
Financial Objectives of the company

Profitability
Liquidity
Efficiency
Stability

Estimations
completely new firms base their forecasts on a goodfaith estimate of sales and on industry averages
the explanation of the sources of the numbers for
the forecast and the assumptions used to generate
them is called assumption sheet

Financial Section
Forecasts
Historical financial statements
reflect past performance

Pro-forma financial statements

projections for the future based on forecasts

Financial Statements
Income statement
most important items:
net sales
cost of goods sold
operating expenses (marketing, administrative and
all other costs not directly related to production)

profit margin (return on sales) = net income/net sales

a rising profit margin means that the firm is either
boosting its sales without increasing its expenses or
that it controls its costs
a declining profit margin means that the firm is
loosing control of the costs or that its cutting prices
to maintain/increase sales

Pro-forma income statement

(in RON)
Net sales
Cost of goods sold
Gross profit
Operating expenses
Selling, general & adm.
Depreciation
Operating income
Other income
Interest income
Interest expense
Other income/expense
Income before taxes
Income tax expense
Net income
Earnings per share

2005 (actual)
5866
2689
3177

2006 (projected) 2007 (projected)

8212
3900
4312

10265
4876
5389

1178
135
1864

2053
185
2074

2566
225
2598

19
(150)
109
1842
532
1310
1.31

20
(175)
200
2119
636
1483
1.48

20
(170)
200
2648
794
1854
1.85

Pro forma Balance Sheet

Assets
2007 (proj.)
Current Assets
Cash and cash eq.
AR
Inventories
Total Current Assets

2005

Property, plant, equipment

Land
Buildings, equipment
Total property, plant, equipment
Accumulated depreciation
Net property, plant, equipment
Total assets

2006 (proj.)

Pro forma Balance Sheet

Liabilities and equity
2007 (proj.)
Current liabilities
Accounts payable
Accrued expenses
Total current liabilities
Long term liabilities
Long-term debt
Total LTL
Total liabilities
Shareholders equity
Common stock (1000 shares)
Retained earnings
Total equity
Total liabilities + equity

2005

2006 (proj.)

Pro forma Cash Flow

2005
2007 (proj.)
Cash flow from OA
Net income
Changes in WC
Depreciation
Increase/decrease in AR
Increase/decrease in AE
Increase/decrease in
Inventory
Increase/decrease in AP
Total adjustments
Net cash from OA

2006 (proj.)

Pro forma Cash Flow

2005
2007 (proj.)
Cash flow from IA
Purchase of buildings and eq.
Net cash flow from IA
Cash flow from FA
Proceeds from increase in LTD
Principle reduction in LTD
Net cash flow from FA
Increase in cash
Cash and cash equiv. BE
Cash and cash equiv. EE

2006 (proj.)

Ratios
Ratio
2007 (proj.)
Profitability
ROA
ROE
Profit margin
Liquidity
Current
Quick
Stability
Debt
Debt to equity

2004

2005

2006 (proj.)

Financial Feasibility Analysis

Determine whether the projected
return is adequate to justify the
business
Factors:
amount of capital invested
amount of time required to earn the return
risks assumed in launching the business
existing alternatives for money being
invested
existing alternatives for the entrepreneurs
time and efforts