How to Develop a Business Plan Bryan K. Singletary President Practical Energies Tampa, Florida (813)...

transcript

How to Develop a

Business Plan

Bryan K. SingletaryPresident

Practical EnergiesTampa, Florida(813) 915-0545

Business Plan Fundamentals

A business plan …is part of strategic planning processcontributes to organizational missionis formulated with public power

business model idealsis iterative, not linearis inclusive

Business Plan Elements

Vision and goals Service definition Market research Organizational structure and operations plan Financials Marketing and communications Exit strategy

Two simple questions:What do you want to accomplish?Why?

Must be consistent with system values and mission.

Describe: Your Company (who, what, where, when) What your objectives are. Why you will be successful. If you need a financing

why you need it, how much you need, and how you intend to recover the costs or benefit the owners.

Vision and Goals

Vision Is the authors vision for the organization

consistent with the management team’s and governing board’s view of the future?

Is it consistent with the public power business model?

Is it realistic?

Vision and Goals

GoalsSMART

SpecificMeasurableAttainableRealisticTime based

Service Definition

Specifically describe what you will be doing and for whom

Seek input from as many stakeholders as possible input from utility staff interviews with early adopters -utilities interviews with potential users

Must fit within overall utility strategy and organizational structure

Service Definition

Have a non-participant read the service definition

Ask them to tell you what it means If they can’t accurately describe what you

plan to do, the board may not see the value in funding the project

Lather – Rinse - Repeat

Market Research

You just can’t guess You must conduct a valid survey Don’t do this in house unless you have the

specific expertise Watch your objectivity

Market Research

What you want to find out Is your service definition clearDo your customers understand the serviceHow do they feel about itWhat are your demographicsHow big is the potential total market

Your share Which marketing channels will work best

Market Research Survey design and distribution issues

Ensure validity Don’t take a fully designed program to this stage – survey

early then go/no go If your organization does not believe in surveys

Implement a true pilot program Seek expert opinions Don’t allow senior staff or board to inject specific questions

Ask what they want/need to know then have the expert how best to recover that data

Have board and senior staff take the survey

Organizational Structure

This section should include a brief "description of your business" statement followed by information on the "administrative" end of your company.

Public power has some unique competitive attributesAs well as challenges

Describe the attributes of the public power business model Explain when and why the company was

formed. Describe the nature and uniqueness of the

services and/or products provided, and review the general development of the utility in the community.

Project a sense of where you see your company going in the next few years.

Programs Products and ServicesWhat programs, products, and

services (PPS) does your utility/community provide

How do they fit with the proposed PPS – and vice versa

Describe interdepartmental relationships

Legal IssuesWhat challenges/opportunities does the

public power business model present form a legal perspective

Opinions from inside and outside legal counsel

Realistic risk assessmentOpportunity details later

Location specific operational issuesDescribe any projected location based

issues/opportunities Projected costs associated with the

location as they may differ from comparing utility projects

Include legal agreements, licensing agreements, etc. in Supporting Documents

Management Team and Key Personnel If the PPS is championed by a single

person, the loss of that person could have a significant impact on the PPS

List the people who are (or will be) running the PPS

Discuss succession planningDescribe their responsibilities and abilitiesProject their salaries – will you pay what

the market requires

Operational PersonnelWho and how many FTEs will be doing the work?What are the necessary qualifications?Does that skill set fit your utility culture?Will you require net new personnel?How many hours will they work and at what wage?

Accounting and FinancialsWhat system will you set up for the

maintaining of financial records?Who will be responsible for accounting?What plan do you have for periodic

financial analysis?

Insurance and liability concernsWhat new exposure do you have? Is your system willing to deal with a new

level of exposure?What kinds of insurance will you carry? Is the current coverage adequate for the

new PPS?What will it cost and who will you use for a

carrier if new insurance is required?

Security and ReliabilityDoes the new PPS pose any new

security issues?What are the projected costs if any? Is the new PPS as reliable as your core

business?Will it have a negative impact on core

service delivery?

Financials

Cost models Revenue models Pricing Budgets Forecast Financial Reporting

Financials

Cost categories, especially…CapitalO&M

This is a function of service definition and participation rates

Provide case scenarios Cases must match

Financials

Revenue modelShould reflect market research Identify local constraints

FinancialPoliticalCultural

Again – provide case scenariosDo not overstate revenue potential!!!

Financials

PricingCurrent pricing options based upon market

conditionsWhat will technology, service or customer

changes do to the pricing modelForecasts consistent with case

developmentThis is likely new territory for most public

power systems

Financial RequirementsBudget impacts

Present Forecast

Why you are asking for financial resources?

How much capital you need?

Financials

Budget This document projects what your Business Plan

means in terms of dollars. It shows cash inflow and outflow over a period of time and is used for internal planning

It is of prime interest to the governing board and shows how you intend to recover your costs

Cash flow statements show both how much and when cash must flow in and out of your business

Financials

o 3 Year Forecasto A Pro Forma Income Statement showing

your projections for your PPS for the next three years.

o Use the revenue and expense totals from the Budget for the 1st year's figures and forecast the next two years according to expected economic and industry trends

o Cases must match

Financials

Break Even Analysis The break-even point is the point at which a

company's expenses exactly match the sales or service volume

It can be expressed in: Total dollars or revenue exactly offset by total

expenses -or- Total units of delivery (cost of which exactly equals

the income derived by their sales) A picture is worth a thousand numbers

Financial Reporting Balance Sheet -Shows the condition of the

PPS as of a fixed date. It is a picture of your PPS’s financial condition at a particular moment and will show you whether your financial position is strong or weak. It is usually done at the close of an accounting period.

P&L Statement - Shows your PPS financial activity over a period of time. It is a moving picture showing what has happened in your PPS and is an excellent tool for assessing your PPS.

Financials

Marketing and Communications

• Marketing Plan • The Marketing Plan covers the details of the

plan for researching and reaching your target market.

• It includes information about the total market with emphasis on your specific target market.

• It will identify your customers and tell the channels you will utilize to make your PPS available to them.

Target Market Identify characteristics of your

customers.Tell how you arrived at your results.Back up information with demographics,

questionnaires, and surveys.Project size of your market.

CompetitionEvaluate indirect and direct competition. Show how you can compete. Evaluate competition in terms of

location, market, and business history.

Delivery Tell about the manner in which PPS will be

made available to the customer. Back up decisions with statistical reports,

rate sheets, etc.

Marketing and Communications Channels

How will you get the message to your customers? Include concepts for spec sheets, promotional material, and time lines for your advertising campaign.

Explain why you have chosen those channels, how your message will reach your target market, how much your campaign will cost, and when you will begin.

Describe the impact on current M&C activities.

Market EntryTell when you plan to enter the market.Provide information on how you arrived

at your decision.

Industry trendsGive current trends and their

projected impact on your PPSProject how the market may changeState plans for keeping up with future

trends

Exit Strategy

When will you exit the new PPS?Trigger pointsBefore you sell the first unitHold fast No new PPS should be implemented

without an exit strategy

PUTTING YOUR PLAN TOGETHER

WHEN YOU ARE FINISHED: Your Business Plan should look

professional, but the governing board needs to know that it was done by you.

A business plan will be the best indicator that can be used to judge your potential for success. It should be no more than 30 to 40 pages in length, excluding supporting documents.

Putting Your Plan Together Continued

Include only the supporting documents that will be of immediate interest to the person examining your plan.

Keep the others with your own copy where they will be available on short notice.

Have your plan neatly bound. Make copies for each potential decision maker. Keep track of each copy.

KEEP YOUR BUSINESS PLANUP-TO-DATE!!!

Your business plan will work only if you update it frequently to reflect what is happening in your business

Measure what you have projected against what has actually happened in your company

Use the results to analyze for effectiveness and plan for the implementation of changes that will make your business more effective