creating a business plan

creating a business plan

Creating a Business Plan

1. Executive Summary

Overall, the report provides an in-depth analysis of Outdoor Equipment Ltd’s financial performance and position. With the major areas of concern being identified in the areas of liquidity, profitability, and financial stability, the report concludes with suggestions for improvements that will assist Outdoor Equipment Ltd to meet its short and long-term financial objectives.

The report finds that the prospects and profitability for Outdoor Equipment Ltd in the future are not secure. The major areas of concern can be identified as: – Declining profitability – Lack of working capital – Elevated inventory levels – Long collection payment period

Results of data analyzed show that all ratios are below industry averages. In particular, comparative performance is poor in the areas of profit margins, liquidity, credit control, and inventory management.

This report provides an analysis and evaluation of the current and prospective profitability, liquidity, and financial stability of Outdoor Equipment Ltd. Methods of analysis include trend, horizontal, and vertical analyses as well as ratios such as debt, current, and quick ratios. Other calculations include rates of return on shareholders’ equity and total assets and earnings per share, to name a few. All calculations can be found in the appendices.

2. Company Description

The company description outlines vital details about your company, such as where you are located, how large the company is, what you do, and what you hope to accomplish. The company description can be used in your business plan or other documents to meet lending applications for an SBA loan or a loan from a bank. It can be used to attract investors to your company. Building a company profile and company brochure are handy tools to help build your company brand. Use your company description to provide detailed information about your company. Go into detail about the problems your business solves. Be specific and list out the consumers, organizations, or businesses your company plans to serve. Explain the competitive advantages that you believe will make your business a success, such as your location, expert personnel, efficient operations, or ability to bring value to your customers. Finally, discuss your company’s long-term and short-term goals.

3. Market Analysis

Market segmentation is the division of the market or population into subgroups with similar motivations. Using segmentation allows companies to target groups effectively and allocate marketing resources in a way that will maximize profit. Segments are usually measured in terms of sales value or volume. In the diagram below, you can see the process of segmentation and imagine a company which is looking at selling a new sandwich. They can segment in terms of whether there are enough customers in each segment to make money. Are the segments substantial in size and growth? Is the segment declining? If so, the company may have to consider retrenchment. After identifying a suitable market, the next step for a company with an undeveloped market is to decide whether it wants to create a niche market or a mass market option. Marketing to the selected segments will require deciding whether to differentiate the marketing mix. By deciding what the company wants to achieve and who it wants to achieve it with, it is clear that market segmentation is a fundamental part of a company’s business strategy.

4. Marketing and Sales Strategy

Expanding our targeted market into other cities is the best approach to allocate more customers to our company. At the moment, our islands and the gray whales are the main tourist attractions that bring customers to our store. In this case, our business is located throughout the city and most of the tourists visit the island for whale watching. Those customers would not want to purchase the merchandise and carry it during the island tour, and would prefer to buy it on their way back. We believe in expanding the targeted overseas market into Asia. We failed to approach the tourist market in Asia because they were not previously informed about our product before going on the trip. We plan to distribute brochures to travel agencies and hold booths at travel fairs to promote our product. Offering a premium price is very important for the image of the company and the product. Enhancing the customer base in the business-to-business sector is relatively easier to approach because it is more targeting potential partners. The most important issue in this sector is to increase the image of our product compared to competitors’ products. This can be achieved by providing the best quality of our product since the more expensive price is relatively less sensitive to the customer in comparison to the end consumer market. To further improve our presence and relationship with corporate customers, we will attempt to sponsor and hold events in related industries to promote our product.

5. Financial Projections

The very last section in your business plan will be the 5. Financial Projections. This is the most important section of the business plan, especially if you need debt financing or want to attract investors. The financial plan has to demonstrate that your business will grow and be profitable. To do this, you will need to create pro forma statements. The first is a Profit and Loss statement (P&L) which incorporates your total revenue minus total costs to find your net income. The second is a Pro Forma Statement which is similar to your P&L statement, but it contains a series of general projections for the future on your income. Also, create a break-even analysis which shows how and when the business will become profitable. This can be represented through a graph and also shows the margin of safety the business may have. The final piece to your financial plan is your cash flow analysis. This demonstrates when your business will incur a cash expense rather than an accounting expense (an expense which does not require the cash payment at the time) to investigate the fiscal health of the business. Before you can create a financial plan, you must first complete a quantitative forecast. This is an estimate of the future level of activity of a business, such as the future total sales of a product. After doing this, you can create a marketing plan which will estimate the costs of achieving the quantitative forecast. Now you can create pro forma statements which were previously discussed. Much of the information found in this financial section will be a proof of the details mentioned in your business plan throughout previous sections. For example, if you have written about using a highly skilled workforce who offer a higher quality service than your rivals, then more than likely the cost of this labor will be high, so it should be mentioned in the P&L.