Engineering paper

(Be sure to include this cover sheet for your project)

IET-317

Industrial Economic and Financial Analysis

Business Plan

Company Logo (If you have one)

Your Business Name

Business Address

City, State, Zip Code

Telephone

Fax

E‐Mail

OWNERS

Name1

Name2

Name3

Etc.

I. Table of Contents

I. Table of Contents ...................................................................................................

II. Executive Summary ...............................................................................................

III. General Company Description ............................................................................

IV. Products and Services............................................................................................

V. Marketing Plan .......................................................................................................

VI. Operational Plan ..................................................................................................

VII. Management and Organization .........................................................................

VIII. Startup Expenses and Capitalization ................................................................

IX. Financial Documents...........................................................................................

Income Statement........................................................................................................

Balance Sheet............................................................................................................

Cash Flow Statement ………………………………………………………...

Statement of Financial Need ………………………………………………….

X. Breakeven Analysis………………………………………………………………

XI. References ...........................................................................................................

XII. Appendices ...........................................................................................................

II. Executive Summary

The executive summary is often considered the most important section of a business plan. This section briefly tells the financial institution or investor where your company is, where you want to take it, and why your business idea will be successful. The executive summary is the first part of your business plan that people will see, so each word should count. If you are seeking financing, the executive summary is also your first opportunity to grab a potential investor’s interest. Make it enthusiastic, professional, complete, and concise.

Although it appears first in your business plan document, the executive summary should be written last. You will not have enough information to write the executive summary until you finish the rest of the plan. It should be one to two pages long. Include everything that you would cover in a five‐minute interview.

What to Include in Your Executive Summary

Below are several key points that your executive summary should include:

· The Mission Statement – This explains what your business is all about. The length should be between several sentences and a paragraph.

· Company Information – Include a short statement that covers when your business was formed, the name of the company, names of the founders and their roles, your number of employees, and your business location(s).

· Financial Information – In applying for a loan, you need to state clearly how much you want, precisely what the money is going to be used for, and how the money will make your business more profitable, thereby ensuring repayment.

· Summarize future plans – Explain where you would like to take your business in five years.

III. General Company Description

Company Description

This section of your business plan provides a high-level review of the different elements of your business. This is similar to an extended elevator pitch and can help potential investors quickly understand the goal of your business and its unique proposition.

What to Include in Your Company Description

· Describe the nature of your business and list the marketplace needs that you are trying to satisfy.

· Explain how your product will meet these needs.

· List the specific customers, organizations or businesses that your company will 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.

· Company Goals and Objectives: Goals are destinations—where you want your business to be in 5 years. Objectives are progress markers along the way to goal achievement. For example, a goal might be to have a healthy, successful company that is a leader in customer service and that has a loyal customer following. Objectives might be annual sales targets and some specific measures of customer satisfaction.

· Legal form of ownership: Sole proprietor, Partnership, Corporation, Limited liability corporation (LLC)? Why have you selected this form?

IV. Company Product

Describe in detail (in words) your product.

Include a professional drawing of your product (AutoCAD, Solid Works, etc. Show all dimensions).

What factors of your product will give you competitive advantages or disadvantages? Examples include level of quality or unique or proprietary product features.

What is the price of your product?

Describe the product’s most important features. What is special about it?

Describe the benefits. That is, what will the product do for the customer?

How will the product be produced? What types of machines and equipment will be used to produce the product?

Note the difference between features and benefits, and think about them. For example, a house that gives shelter and lasts a long time is made with certain materials and to a certain design; those are its features. Its benefits include pride of ownership, financial security, providing for the family, and inclusion in a neighborhood. You build features into your product so that you can sell the benefits.

V. Marketing Plan

Market research

No matter how good your product is, the venture cannot succeed without effective marketing. And this begins with careful, systematic research. It is very dangerous to assume that you already know about your intended market. You need to do market research to make sure you’re on track. Use the business planning process as your opportunity to uncover data and to question your marketing efforts. Your time will be well spent.

There are two kinds of market research: primary and secondary.

Secondary research means using published information such as industry profiles, trade journals, newspapers, magazines, census data, and demographic profiles. This type of information is available in public libraries, industry associations, chambers of commerce, from vendors who sell to your industry, and from government agencies.

Start with your UD library. You will be amazed at what is there. There are more online sources than you could possibly use. Your chamber of commerce has good information on the local area. Trade associations and trade publications often have excellent industry‐specific data.

Primary research means gathering your own data. For example, you could do your own traffic count at a proposed location, use the yellow pages to identify competitors, and do surveys or focus‐group interviews to learn about consumer preferences.

In your marketing plan, be as specific as possible; give statistics, numbers, and sources. The marketing plan will be the basis, later on, of the all‐important sales projection.

Economics

Facts about your industry:

• What is the total size of the market for similar products?

• Current demand in target market.

• Trends in target market—growth trends, trends in consumer preferences, and trends in product development.

• Growth potential and opportunity for a business of your size.

• What barriers to entry do you face in entering this market with your new company? Some typical barriers are:

o High capital costs

o High production costs

o High marketing costs

o Consumer acceptance and brand recognition

o Training and skills

o Unique technology and patents

o Unions

o Shipping costs

o Tariff barriers and quotas

• And of course, how does your team plan to overcome the barriers?

• How could the following affect your company?

o Change in technology

o Change in government regulations

o Change in the economy

o Change in your industry

What after‐sale services will you give? Some examples are delivery, warranty, service contracts, support, follow‐up, and refund policy.

Customers

Identify your targeted customers, their characteristics, and their geographic locations, otherwise known as their demographics.

The description will be completely different depending on whether you plan to sell to other businesses or directly to consumers. If you sell a consumer product, but sell it through a channel of distributors, wholesalers, and retailers, you must carefully analyze both the end consumer and the middleman businesses to which you sell.

You may have more than one customer group. Identify the most important groups. Then, for each customer group, construct what is called a demographic profile:

• Age

• Gender

• Location

• Income level

• Social class and occupation

• Education

• Other (specific to your industry)

• Other (specific to your industry)

For business customers, the demographic factors might be:

• Industry (or portion of an industry)

• Location

• Size of firm

• Quality, technology, and price preferences

• Other (specific to your industry)

• Other (specific to your industry)

Competition

What products and companies will compete with you? List your major competitors:

(Names and addresses)

Will they compete with you across the board, or just for certain products, certain customers, or in certain locations?

Will you have important indirect competitors? (For example, video rental stores compete with theaters, although they are different types of businesses.)

How will your products or services compare with the competition?

Now, write a short paragraph stating your competitive advantages and disadvantages.

Niche

Now that you have systematically analyzed your industry, your product, your customers, and the competition, you should have a clear picture of where your company fits into the world.

In one short paragraph, define your niche that is your unique corner of the market.

Strategy

Now outline a marketing strategy that is consistent with your niche.

Promotion

How will you get the word out to customers?

Advertising: What media, why, and how often? Why this mix and not some other? Have you identified low‐cost methods to get the most out of your promotional budget?

Will you use methods other than paid advertising, such as trade shows, catalogs, dealer incentives, word of mouth (how will you stimulate it?), and network of friends or professionals?

What image do you want to project? How do you want customers to see you?

In addition to advertising, what plans do you have for graphic image support? This includes things like logo design, cards and letterhead, brochures, signage, and interior design (if customers come to your place of business).

Should you have a system to identify repeat customers and then systematically contact them?

Promotional Budget

How much will you spend on the items listed above?

Before startup? (These numbers will go into your startup budget.) Ongoing? (These numbers will go into your operating plan budget.) Pricing

Explain your method or methods of setting prices. For most small businesses, having the lowest price is not a good policy. It robs you of needed profit margin; customers may not care as much about price as you think; and large competitors can underprice you anyway. Usually you will do better to have average prices and compete on quality and service.

Does your pricing strategy fit with what was revealed in your competitive analysis? Compare your prices with those of the competition. Are they higher, lower, the same? Why?

How important is price as a competitive factor? Do your intended customers really make their purchase decisions mostly on price?

What will be your customer service and credit policies?

Proposed Location

Probably you do not have a precise location picked out yet. This is the time to think about what you want and need in a location. Many startups run successfully from home for a while.

You will describe your physical needs later, in the Operational Plan section. Here, analyze your location criteria as they will affect your customers.

Is your location important to your customers? If yes, how?

If customers come to your place of business:

Is the parking convenient?

Not out of the way? Is it consistent with your image?

Is it what customers want and expect?

Where is the competition located? Is it better for you to be near them (like car dealers or fast food restaurants) or distant (like convenience food stores)?

Distribution Channels

How will you sell your products or services? Retail

Direct (mail order, Web, catalog)

Wholesale

Your own sales force

Agents

Independent representatives

Bid on contracts

Sales Forecast

Now that you have described your products, services, customers, markets, and marketing plans in detail, it’s time to attach some numbers to your plan. Use a sales forecast spreadsheet to prepare a month‐by‐month projection. The forecast should be based on the marketing strategies that you have just described, your market research, and industry data, if available.

Remember to keep notes on your research and your assumptions as you build this sales forecast and all subsequent spreadsheets in the plan. This is critical if you are going to present it to funding sources.

References

In the Appendix include a list of references that shows where you got your market Research data.

VI. Operational Plan

In the Operational Plan you will explain the daily operation of the business, the facility, equipment, people, processes, and surrounding environment.

Cost:

Estimate your expenses for occupying your facility, including rent, maintenance, utilities, insurance, and any other costs to make the space suit your needs. These numbers will also become part of your financial plan.

Production

How and where are your products or services produced?

• Production costs (COGS)

• Quality control

• Customer service

• Inventory control

• Product development

Facility

What qualities do you need in a facility? Describe the type of facility you’ll have. Physical requirements:

• Amount of space

• Type of building

· Is it important that your facility be convenient to transportation or to suppliers?

· Do you need easy walk‐in access for your customers?

· What are your requirements for parking and proximity to freeway, airports, railroads, and shipping centers?

Include a layout drawing of your proposed facility.

Personnel

• Number of employees

• Type of labor (skilled, unskilled, and professional)

• Where and how will you find the right employees?

• Pay structure

•

Inventory

• What kind of inventory will you keep: raw materials, supplies, finished goods?

• Average value in stock (i.e., what is your inventory investment)?

• Seasonal buildups?

Societal, Global, and Environmental Impacts

Impact assessment is a type of evaluation that determines what difference in terms of positive and/or negative consequences your product has made to society, the global environment, or to the environment. It is the process of identifying, predicting, evaluating and mitigating the effects of your product prior to major decisions being taken and commitments made. The purpose of this assessment is to ensure that your team considers the societal, global, and environmental impacts when deciding whether or not to proceed with a project.

· Global impacts means – are there impacts beyond the US – will your product be used or sold in other countries and if so what are the effects?

· Will manufacture of your product have any negative effects on the environment?

Evaluate the positive or negative consequences that your program will have on each of the three subject areas.

· Explain the effect in detail – do not just say “There are no negative effects.”

· If there are no negative impacts, you must explain why.

· For any negative impact, your plan must propose measures to adjust the negative impact to acceptable levels or to investigate new technological solutions.

VII. Management and Organization

Who will manage the business on a day‐to‐day basis? What experience does that person bring to the business? What special or distinctive competencies? Is there a plan for continuation of the business if this person is lost or incapacitated?

Create an organizational chart showing the management hierarchy and who will be responsible for key functional areas.

Include the resumes of owners.

VIII. Startup Expenses and Capitalization