Virtual Enterprise Developing a Business Plan Adam Beatty

Virtual Enterprise: Developing a Business Plan Adam Beatty & Danielle La. Barbera October 16, 2006

Agenda Business Planning Overview Defining the Business Market Analysis Marketing Program SWOT Analysis Financial

BUSINESS PLANNING OVERVIEW Copyright © 2005 Deloitte & Touche LLP. All rights reserved.

Purpose of Business Planning • Understand Business Environment • Reach Consensus • Guide Decision-Making • Facilitate Control and Performance Evaluation A good business plan connects the facts of the present with a vision of the future. Copyright © 2005 Deloitte & Touche LLP. All rights reserved. 3

“Game Plan” for Business • Actions and Tactics – New Products or Services – Customer Service – Cost Control • Resources – Investment in Facilities and Equipment – Staff Recruiting and Training • Position – Market Share Copyright © 2005 Deloitte & Touche LLP. All rights reserved. 4

Budget Reflects the Plan • Budgeting is the “Translation” of Business Planning into Financial Terms • Consists of… – Sales Plan – Cost Components • Variable • Fixed – Cash Needs – Investment Needs – Source and Cost of Funds Copyright © 2005 Deloitte & Touche LLP. All rights reserved. 5

Connecting Budget to Plan • Budgeting is the “Translation” of Business Planning into Financial Terms • Every Element of the Business Plan Has Financial Impact – Marketing Plan – Sourcing – Production / Preparation – Distribution / Delivery – Billing and Collections – Administration • Prepare and Maintain the Budget DURING the Planning Process Copyright © 2005 Deloitte & Touche LLP. All rights reserved. 6

Elements of a Business Plan INTRODUCTORY Statement of Purpose Objective Company Description Personnel Company Description (Products and Services) Strategic Objectives MARKET ANALYSIS DISCUSSION OF RISKS MARKET ANALYSIS SWOT ANALYSIS FEASIBILITY MARKETING PLAN OPERATING PROCEDURES MARKETING PLAN WRITING SKILLS FINANCIAL ANALYSIS OPERATING PROCEDURES PRESENTATION Statement Of Purpose FINANCIAL DATA SUPPORTING DOCUMENTS DISCUSSION OF RISKS Copyright © 2005 Deloitte & Touche LLP. All rights reserved. 7

Sources of Planning Information • Company Data • Existing Documents – Previous Plans – Financial Statements • External Information – Government Reports – Public Company Filings – Business and Trade Publications • Benchmarking – Competitor Business Plans – Company Web Sites Copyright © 2005 Deloitte & Touche LLP. All rights reserved. 8

DEFINING THE BUSINESS Copyright © 2005 Deloitte & Touche LLP. All rights reserved.

Defining the Business • Customer Offering – Core Product(s) or Service(s) • Service or Product – Product May Have Related Services – Service May Involve Products • Individual or Corporate Customers – Both Are Possible for the Same Service or Product – Require Different Marketing Programs The specific, distinctive qualities of the business should be reflected throughout the business plan. Copyright © 2005 Deloitte & Touche LLP. All rights reserved. 10

Operations Description • Sourcing – Raw Materials, Finished Goods, Other Supplies (Maintenance, Administration) • Production / Preparation – How? When? How Much? • Sales and Marketing Process • Distribution / Delivery – How? Where? How Fast? How Often? Channels? • Customer Service and Quality Control • Remember the Budget… What Will It Cost? Copyright © 2005 Deloitte & Touche LLP. All rights reserved. 11

Administration • Management Background • Company History • Stage of the Business – Pioneer, Growth, Mature • Current-Year Initiatives – Internal Projects – Investments – Alliances or Joint Ventures Copyright © 2005 Deloitte & Touche LLP. All rights reserved. 12

MARKET ANALYSIS Copyright © 2005 Deloitte & Touche LLP. All rights reserved.

Market Analysis • Industry Overview • Market Segmentation • Customer Profiles (vs. Company Offering) • Market Size • Remember the Budget… – Sales Potential – Pricing & Margin INDUSTRY OVERVIEW MARKET ANALYSIS MARKET SEGMENT CUSTOME R PROFILES CUSTOMER PROFILES MARKET SIZE & SHARE MARKETING PROGRAM Analysis of market segments and customers will drive the marketing program … as well as the financial plan. Copyright © 2005 Deloitte & Touche LLP. All rights reserved. 14

Industry Overview • Major Competitors • Degree of Concentration • Size and Growth • Cost Structure and Profitability • Regulatory Aspects • Powerful Suppliers • Recent Trends – Technology – Customer Offering Copyright © 2005 Deloitte & Touche LLP. All rights reserved. 15

Market Segmentation • Use of Product or Service – Business vs. Leisure – Single or Multiple Provider • Demographics – Age Group – Income or Spending Group • Location / Distribution Channel • Seasonality Copyright © 2005 Deloitte & Touche LLP. All rights reserved. 16

Customer Profile • Lifestyle and Buying Habits • Corporate Purchasing Policies • Key Features / Order Winners • Ancillary Services • Customer Trends Copyright © 2005 Deloitte & Touche LLP. All rights reserved. 17

Size of Market Segment • Build Reasonable Assumptions – Portion of Population – Volume and Frequency of Purchases – Pricing Bands – Growth • Perform “Reality Check” – Other Sources • Competitor Estimates • Third Parties (Analysts, Government, Trade Associations) – Unit Volume -> Dollar Volume – Sensitivity Analysis Copyright © 2005 Deloitte & Touche LLP. All rights reserved. 18

MARKETING PROGRAM Copyright © 2005 Deloitte & Touche LLP. All rights reserved. 19

Marketing Program • Advertising • Brand Image • Promotional Initiatives • Sales Support • Remember the Budget… – Sales Impact (Indirect) – Cost Impact (Direct) The detailed customer understanding gained from market analysis helps to select the right marketing tools. Copyright © 2005 Deloitte & Touche LLP. All rights reserved. 20

Marketing Program • Four P’s: Product, Price, Placement, Promotion – Product – Covered in Business Definition – Price – Explored in Segment Analysis • Placement & Promotion – Related to Distribution Channels – Seasonal or Continuous – Provides Customer with: • Purchase Incentive • Information Copyright © 2005 Deloitte & Touche LLP. All rights reserved. 21

Advertising • Type of Advertising – Big Media (TV and Radio) – Internet: Narrow Reach, Can Be Targeted – Direct Mail: Existing Customers, Lists • Purpose – Increase Awareness – Build Brand Image – Communicate Features, Channels, Promotions Copyright © 2005 Deloitte & Touche LLP. All rights reserved. 22

Marketing Mix Price High Quality High Medium Low Medium Premium Strategy High-Value Strategy Super. Value Strategy Overcharging Strategy Medium-Value Strategy Good-Value Strategy Rip-Off Strategy False Economy Strategy Copyright © 2005 Deloitte & Touche LLP. All rights reserved. Low 23

SWOT ANALYSIS Copyright © 2005 Deloitte & Touche LLP. All rights reserved.

Elements of SWOT Analysis POSITIVE NEGATIVE INTERNAL / FACTUAL Strengths Weaknesses EXTERNAL / POTENTIAL

Company’s Response • Primary Benefit of SWOT is Company’s Response • Address Results of Each Quadrant – Actions to Exploit or Remedy – Explanation of Other Items • Intended Future Action • Explanation of Mitigating Factors – Time Horizon for Significant Items • How does our SWOT compare with competitors? Copyright © 2005 Deloitte & Touche LLP. All rights reserved. 26

FINANCIAL ANALYSIS Copyright © 2005 Deloitte & Touche LLP. All rights reserved.

Financial Analysis • Breakeven Analysis • Operating Budget • Cash Flow and Funds Need • Funding and Capital Structure • Results of Financial Analysis should accompany business planning at every stage, and ultimately reflect the final plan. Copyright © 2005 Deloitte & Touche LLP. All rights reserved. 28

Breakeven Analysis • Composed of Sales, Variable Costs and Fixed Cost • Sales Forecast Can Be Broken Down – Product / Service Lines – Sales / Distribution Channel – Customer Segment • Sales and Variable Cost Can Be Combined Into Product Margin • Sensitivity Analysis May Show Risks or Opportunities Copyright © 2005 Deloitte & Touche LLP. All rights reserved. 29