Business Basics for Alberta Food Processors - Business Planning

 
 
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 Why plan? | Gathering information | What do lenders look for?

Why Plan?

A business plan helps you formalize the thinking and planning process. Developing and recording a plan helps you systematically think through the steps involved in your business development. By completing a business plan you will better understand the markets, costs and competitive factors that will influence the future of your new business. A well thought out plan gives you increased confidence and prepares you to obtain necessary financing and resources. Think of a business plan as a working document, one that changes, expands and shifts with the times.

The business plan that you develop as a working tool does not need to be a formal document, but there are times when a formal business plan is a requirement. If you need a loan from a financial institution, then you will likely be asked for a business plan. If you want processing assistance from the Alberta Agriculture and Rural Development, Food Processing Development Centre in Leduc, a business plan is required. Depending on who is going to read the plan, you may need to emphasize different aspects.

Gathering Information

Business plans can take many forms. What follows is a series of questions. You will probably know the answers to many of the questions from your ongoing work. If you created files as suggested in the Introduction to this Guide, you will have the answers to many of these questions. Once you have answered the questions, you will be in a good position to write your business plan.

1. Describe your product or service

  • Describe the benefits of the product or describe what your service will do for people.
  • What makes your product or service different?
  • How does it help a consumer?
  • Why would someone buy your product?
  • Is it easy to use?
  • What is the shelf life of your product?
  • How will you package your product?
2. Do a market analysis
  • Who are your customers by age, income, sex, preferences, etc.
  • Where are they located geographically?
  • Describe your industry trends (past, current, future predictions).
  • How do you know these people want your product?
  • What market share do you expect to get, and why?
  • What are potential problems in meeting this goal and how will you deal with them?
  • Who are your competitors now and in five years? How does your product compare with theirs and how can you best compete with their products?
3. Marketing strategy
  • How will you set your price, and how does your price relate to competitors prices?
  • How will you get the word out about your company and your product?
  • How will you get your product to them (by mail, distributor, broker, direct delivery)? What are the costs of using this method?
  • What service and warranty policies will you have?
4. Describe yourself and your management team
  • List your personal data: age, where you live and have lived, special abilities and interests and your reasons for starting the business.
  • What is your business background and experience? Do you have directly related experience?
  • State your educational background.
  • Do you have any managerial experience?
  • Who else is on your management team?
  • What are their backgrounds?
  • What functions will be performed by the team? Indicate who will be responsible for finances, marketing, human resources and production. Do you have the skills needed?
  • How are decisions made (i.e. board, owner)?
5. Describe your operating system
  • What are your facility requirements for size/capacity, location and type of premises?
  • What equipment do you have? What equipment do you need to purchase? What are the costs involved?
  • How will you produce your product? What is the work flow?
  • How will you assure quality?
  • What is your capacity and production volumes?
  • What are your day-to-day operations like including hours of operation, seasonality of business, suppliers and their credit terms?
  • Describe your space for work in progress inventory and finished goods storage. What about expansion possibilities?
  • What are the alternatives for production? Could the products be custom processed and packaged?
  • What regulation do you need to comply with and how have you accomplished this (i.e. food safety, business licenses, environmental standards, etc.)?
6. Describe your personnel
  • What are your personnel needs, now and in the future?
  • What skills must they have and are these people available in the area?
  • Will you need to train your employees? If so, how much will it cost, in both time and money?
  • How many full-time and part-time workers will you have?
  • What will your pay scale and benefits program be?
7. Describe your financial needs
  • Prepare a 3 year financial projection
  • balance sheet
  • income statement
  • cash flow
  • How much will you seek from lenders/investors?
  • How much are you prepared to put in?
  • How is the money to be spent (working capital, new equipment, inventory, supplies, etc.)?
8. Describe your risk management strategies
  • What events could affect your customers demand for products?
  • How will you limit the impact?
  • What other risks could impact your business?
What Do Lenders Look For?
  • Your management team – who’s responsible for financial planning, production, marketing, human resources?
  • How much cash/capital is available?
  • What is the market?
  • Is there demand for your product?
  • Who is going to buy it and how are you going to distribute it?
  • Do you have a sustainable competitive advantage?
  • What is unique about your product and why?
  • Is your plan realistic?
Although investors and lenders like to back businesses with high growth potential, they are skeptical when the projections seem too good to be true. This is a flag to them that you may be overly optimistic or naive.

Consider these general pointers as you create your business plan:
  • Be prepared to spend weeks or months planning your business and preparing your plan.
  • Aim for a plan that is brief and succinct, but includes everything important to the business.
  • A business plan is a living document.
  • Update the plan as your knowledge grows and your strategies become more concrete.
  • Do not make vague or unsubstantiated statements.
  • Back up your statements with underlying data and market information.
You may need two sets of business plans, one internal, and one external. To be an effective management tool, internal business plans usually are more detailed than those presented externally.

More information on developing business plans is available from provincial government departments, the federal government, business service centres, chartered banks, libraries, universities and consulting companies. See the Sources of Assistance section.

More information on the elements of a business plan, including a business plan template, is available at http://www1.agric.gov.ab.ca/$department/deptdocs.nsf/all/agp4957
 
 
 
 

Other Documents in the Series

 
  Business Basics for Alberta Food Processors
Business Basics for Alberta Food Processors - Preface
Business Basics for Alberta Food Processors - Introduction
Business Basics for Alberta Food Processors - Starting Out
Business Basics for Alberta Food Processors - Business Planning - Current Document
Business Basics for Alberta Food Processors - Business Considerations
Business Basics for Alberta Food Processors - Food Processing Regulations
Business Basics for Alberta Food Processors - Facilities
Business Basics for Alberta Food Processors - Product Development
Business Basics for Alberta Food Processors - Processing and Packaging Equipment
Business Basics for Alberta Food Processors - Packaging and Labeling
Business Basics for Alberta Food Processors - Distribution and Sales
Business Basics for Alberta Food Processors - Promotion
Business Basics for Alberta Food Processors - Financing
Business Basics for Alberta Food Processors - Sources of Assistance
Business Basics for Alberta Food Processors - Additional Resources
 
 
 
 
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This information published to the web on June 1, 2005.
Last Reviewed/Revised on March 31, 2012.