BUSINESS PLAN

BUSINESS PLAN

You have identified a serious shortage of good cookies readily available on the Belmont campus. You could use some extra cash to support both academic and other ventures. And you know a good cookie when you taste one. There is a glimmer of a plan here.

Since your personal cash position will not support any new ventures, you decide to approach your grandmother for a loan. You call her right up. While she is enthusiastically supportive of your spirit of enterprise, she’s no fool! She tells you to prepare a business plan that demonstrates how you will make a go of this business. She wants to be sure that you have assessed the risk associated with her investment. And she wants some evidence that the business will generate a return on her investment to compensate her for the risk that she takes.

Prepare a business plan for your cookie company. You don’t have time to be making cookies, so one of your first tasks will be identifying a supplier and negotiating a price and delivery schedule. You will need some supplies for selling the cookies, like food sacks and napkins. You will need to find a place (or places) to sell your cookies. Since you live off campus, this will require some kind of rent. You will have some utilities expenses for your location. You will have some equipment, like a computer and/or a cash register. You want to sell cookies during the hours when students are likely to want cookies (i.e., almost all hours), but you obviously aren’t available at all hours. So, you will have to hire some employees to help out.

Your business will be new on campus. You will have to do some marketing to get your name out there. You decide to hire a fellow student who is a whiz at marketing as a consultant to design your marketing campaign.

You are beginning to get an idea about the kind of document you need to prepare for your grandmother. First, she will want a description of the company and its basic activities. Then, she will want to see your marketing plan, including how you will create a demand for your cookies and how you will interact with market conditions.

Third, your grandmother will want some information about the operations of the organization. This section will describe your arrangements with your suppliers and service providers. Preparing this section will help you think through all the details of your day-to-day operations. You have to admit that it will likely be helpful to you.

Finally, you will have to provide a financial plan. Of course, one element of that plan will be a demonstration of how much cash you will need and when you will need it. But, the determination of your cash needs will depend on a whole array of assumptions about sales, expenses and other financial commitments. Templates for the financial plan are provided for you on Blackboard.

When talking with you, your grandmother provided you with three pieces of advice in preparing your business plan. First, she suggested you look at your accounting text for some guidance in developing your plan. Second, she warned you that she would look carefully at your assumptions. Consequently, you must be explicit and clear about each and every assumption that you make. (Use the form in Exhibit One to summarize your assumptions.) Finally, she cautioned that the whole plan must “hold together.” She suggested that one way to make sure the financial piece is consistent is to use formulas whenever possible and link across spreadsheets. “Never type in a number, when you can use a formula instead.”

You decide to surprise and delight your grandmother with the professionalism of your plan. You know you have a great idea, and you want her to be just as sure. You make up your mind to proofread carefully to make sure there are no typographical or grammatical errors. You know any such mistakes would sink you before you even get started.

You decide to put each component of the plan (description of the company, marketing plan and description of company operations) on a separate page, appropriately headed. Knowing your grandmother values language that is precise, concise and grammatically correct, you decide to limit each section to 400 words. If you can say it in fewer words, you know that will be appreciated by your grandmother (i.e. no less than one full page double-spaced). After some thought, you also realize that your assumptions are critical. You realize your grandmother knows this, too. So you determine that you will identify all assumptions in both the appropriate section (e.g., your sales assumptions in the marketing plan or your inventory assumptions in the description of company operations) and in Exhibit One.

Given your grandmother’s caution about everything “holding together,” you decide to provide two paper copies of your financial plan spreadsheets, one with numbers and the other with formulas. You are sure she will love this.

 

 
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