Your Faith-Based Business Part Four

 

Last week we had a deep dove into your marketing plan, and how to get the “good news” of your business to the masses. We looked at market research, marketing goals and objectives, defining your target customer, and marketing budget and timeline. As we are going on another deep dive this week, it will be into the waters of financial planning. Your financial plan is a statement that is also meant to convince not only you but potential investors or lenders of how profitable your business will be. A solid financial plan will include the goals that your business will have and will explain how these goals will be achieved. What is included in this section of your business plan we will explain in detail:

• Personal Financial Statement
• Cash Flow Statement
• Startup Expenses
• Profit and Loss Projection (12 Month)
• Three Year Financial Projection
• Break-Even Analysis/Exit Strategy
• Repayment Plan

 

Personal Financial Statement

Your personal financial statement is primarily for lenders or investors. For lenders, it will include your credit reports, as lenders want to look at what is considered the five c’s of credit:

• Credit- Each owner’s credit reports
• Capacity – The owner’s debt-to-income ratio
• Capital – The amount of cash the owner must put into the business
• Collateral – Any assets that can be used to secure any loan
• Conditions – The term of the loan and the interest rate

It may be required that you may need to use some of your savings to assist in financing the business, so it is important that you are transparent in this section.

 

Cash Flow Statement

Your cash flow statement is an explanation on how funds are coming into the business every month. If you are a service business, you may not get paid for up to ninety days, so you must take this into consideration that revenue often will trail sales, depending on the type of business you are operating. It shows your behavior with money, are you conservative or spend heavy.

 

Startup Expenses

This section will require extensive research before you can open the doors of your business. This will be an estimation of all your costs that will be needed to open the doors of your business. Your business may cost more than you might have anticipated, so it is imperative that you have created a cushion in your budget for contingencies. Be sure that you mention this as its own line item, so that it is not over inflating your costs. It is suggested that 20 percent of your total startup costs. It is also suggested that you provide as much information on how you arrived at these costs and how much is needed to begin operations.

 

One Year Profit and Loss Statement

P&L Statement is the abbreviated name for the cornerstone of your plan. It contains the combination of ALL your revenue and expenditures, and it contains the blueprint for what you expect the next 365 days will look like. You will show what monthly sales, cost of goods payroll expenses. It is best explained in a written statement and assumptions foremost, followed by your spreadsheet with the numbers listed and calculated. It is a good idea to tailor your P&L statement based on the type of business that you have, sole proprietorship or LLC for example.

 

Three Year Projection

With the three-year projection you will want to include how you explain the growth of your business. It is recommended that you are conservative when you are calculation what your growth rate is. Having a 10-15% rate is highly recommended, but you also should consider using a conservative rate on expenses as well, to attribute for inflation. If you are seeking to raise capital for your business, this will provide bankers and investors a clearly defined roadmap of how to expect their Return on Investment (ROI). It will lay out how the loan or investment will render profits to pay off loans and investors. It will also have written statement and spreadsheet data like the twelve-month P&L statement.

 

Your projection should analyze the following:

• Your Checking account balances forwardly
• Cash flow; Sales and inventory purchases especially seasonal inventory
• Working capital adequacy – how much cash on hand is needed for daily operations
• How do you make money? Is revenue daily or with services rendered?
• Loan payments
• Quarterly tax payments
• Maintenance costs of assets and purchasing costs of equipment
• Owner’s draw – How much will you pay yourself?
• Retainers’ fees – attorney, and accountant fees

 

Break-Even Analysis

The break-even point is when your business has recovered all costs. It is the threshold when your business has passed the line of operating at a loss versus operating at a profit. Daniel Richards mentions that for a startup business, this is not expected to happen overnight, but potential investors want to see that you have a date in mind and that you can support that projection with the numbers you’ve supplied in the financial section of your business plan.

 

References:

1. (2022, August 23). How to write the Financial Plan in Business Plan? Wise Business Plans®. Retrieved September 27, 2022, from https://wisebusinessplans.com/financial-plan-in-business-plan/#Sales_Forecast
2. Segal, T. (2022, September 8). 5 Cs of Credit: What they are, how they’re used, and which is most important. Investopedia. Retrieved September 27, 2022, from https://www.investopedia.com/terms/f/five-c-credit.asp
3. Davidson, E. (2016, October 26). Examples of three-year business projections. Small Business – Chron.com. Retrieved September 27, 2022, from https://smallbusiness.chron.com/examples-threeyear-business-projections-22351.html
4. (n.d.). photograph. Retrieved from https://missionwealth.com/wp-content/uploads/2019/04/shutterstock_7323363791.jpg.

 

 

 

 

 

Last week we spent our time discussing your marketing plan, operational plan, and the management and organizational plan. We will solely focus the attention of our plan on the marketing plan. It is imperative that you understand that no matter how great your idea may be, your business will not be as successful as it would be without a marketing plan. The holy scriptures tell us that without a vision, the people perish. You can apply that philosophy to your marketing plan. Churches conduct marketing every Sunday by preaching the Gospel of Jesus Christ. You have to have a plan in place to let the world know the “good news” about your business. There are several components of your marketing plan which we will discuss:

• Market Research
• Marketing Goals and Objectives
• Defining Your Target Customer
• Budgeting and Timeline

When working on the marketing plan, there are no short cuts that you should take here as it is the most important component of your business plan. It requires attention to the details, as the adage mentions that the devil is in there. Any oversight can cause you business plan not to succeed. Being cognizant of the techniques your predecessors and competition failed, you must not! So let us jump into success!

Market Research

Your marketing plan begins here with market research. It is the beginning of a thoughtful, careful, and systematic research. A bad idea is to think you know who your intended target audience is and that you know everything about your market. You must research existing market publications, 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.

You should also conduct your own research, such as looking at traffic counts for your future location. How many people travel around your location? Will they know where you are located? Conduct surveys to look at your competition’s customer’s pain points are so where they have failed, you will succeed. Be sure to give statistics, numbers, and data to support your marketing research.

Marketing Goals and Objectives

Once you’ve completed your research, you will need create your marketing goals and objectives. Those are SMART:

• Specific
• Measurable
• Attainable
• Realistic
• Time-Bound

Your SMART goals can be “to increase revenue by 15% for 3Q”, or it can be to drive website traffic to your online retail store where you offer free shipping for orders over $50 for 4Q sales. These objectives are very specific, they can be measured, are attainable, and realistic, and are time focused. It will allow you to realistically evaluate what you are trying to achieve by assessing what actions to take to reach your goal.

Defining Your Target Audience

You will need to completely understand your ideal customer, who they are, how old they are, gender, race, income, and how their buyer behaviors are. Building your target audience consists of knowing the goals, desires, interests, and pain points of your ideal customers. Some examples of target audience could be Mothers 24-35 who have discretionary income, who like to travel, and exercise. Another example is married males 35-45, who like cooking and sports. These are the group of people who are the most likely to buy your product or service. They are the group of people who need to see your advertisements. As a faith-based business, your target audience should also share your faith as well.

Budgeting and Timeline

Be sure to have a budget set aside to get the message of your business out to your target audience. By knowing your audience, you know the best media to use to reach them, when and where to reach them. You will know that if they are not television watchers, TV ads will be a waste of your budget. If they are active on social media, such as Instagram or TikTok, creating and using paid ads may be a more cost-efficient method to reach your target audience. Your budget should also follow the SMART guideline mentioned before.

Your timeline is how you plan to get your campaign on the market. For example, you may want to increase sales for the holiday season, you will want to have a timeline that will have your ad content reaching the target audience in by mid 3Q, so your timeline begins at conception around 2Q, production will begin in 3Q and ready to begin advertising by the end of 3Q. Your timeline should also follow the SMART guidelines for success in your marketing plan.

 

Next week we will discuss the financial plan and how to get funding based on your start-up costs and how to look at your financial projections. Stay tuned!

 

References:

1. Buttle, R. (2022, April 14). Five essential elements of a marketing plan for a small business. Forbes. Retrieved September 19, 2022, from https://www.forbes.com/sites/rhettbuttle/2021/01/12/five-essential-elements-of-a-marketing-plan-for-a-small-businesses/?sh=7f0324a6259c
2. Roberts, S. (n.d.). What is a target audience? definition and examples. Cyberclick. Retrieved September 19, 2022, from https://www.cyberclick.net/numericalblogen/what-is-a-target-audience-definition-and-examples#:~:text=Your%20target%20audience%20might%20be,age%2C%20gender%2C%20and%20interests.
3. Evolution, M. (n.d.). How to find your target audience: Marketing evolution. How to Find Your Target Audience | Marketing Evolution. Retrieved September 19, 2022, from https://www.marketingevolution.com/marketing-essentials/target-audience

Your Faith-Based Business Plan

So, you have completed your Executive Summary, General Business Description, and Products and Services, what is next? Do you know how you will let the world know you are in business, and that you have the product or service solution compatible to their need. How will you conduct business daily? What is the structure of the business? Do you know what composition of your staff of employees will look like and how will its hierarchy or chain of command be structured? Having a structured and effective daily plan on how to run your business in place is essential and another group of questions we will review in today’s post. We shall cover the following components of your plan:

1. Marketing Plan
2. Operational Plan
3. Management and Organization

Marketing Plan

The late 1800’s magazine The Chautauquan, proposed the question, “If a tree were to fall on an island where there were no human beings would there be any sound?” The answer to the philosophical question was, “No. Sound is the sensation excited in the ear when the air or other medium is set in motion.” Marketing is merely creating a sensation of need when the medium is set in motion. The greatest of businesses have failed due to getting the message to where no one is listening. It is the strategy of communicating the message of your products or services effectively to the right people who will benefit the most from what you are offering.
How do you know who is your target audience? Research! In your marketing plan, be as specific as possible; give statistics, numbers, and sources. Visit your local library to look at their business information resources. Visit your local Chamber of Commerce and the local division of the Small Business Association for information on your competition and industry trends and economic values such as:
• The size of your market.
• The share of the market you plan to have.
• How you plan to adapt to changes in technology, government regulations, and your industry.

Your marketing plan should describe what is in it for the customer. You should clearly explain your product or services’ benefit and features and how you plan on conveying these to your prospective customers. It serves as a roadmap of your message to customers, specifically your target customers. Who are your target customers? Buyer personas are a great tool to identify your ideal customer and their journey. A buyer persona is a fictional visual representation of someone who represents your target audience. It should contain the following statistics:
• Age
• Location
• Language
• Spending power and patterns
• Interests
• Challenges
• Stage of life

Now that you know who you are trying to reach, it is time to figure out the medium you plan to use and determine the cost of using the medium. If your research indicates the persona uses Facebook, then consider paid ads on it. With over two billion users you can be sure to reach your market.

Operational Plan

This is the section you will describe what is the location, process of the business’ daily schedule. And surrounding environment. You will need to explain the following in this section:
• Accessibility
• Production and costs of production
• Legal regulations
• Licensing and Insurance
• Zoning codes
• Personnel
• Inventory and supplies
• Credit policies
• How you will manage daily accounts receivable and payable

Your operational plan will allow you to have a clear expectation of what your employees must do every day to ensure the successful operations of your business when you are not able to be there. It is the integrity of the business. It will also minimize internal and external risk to the business.

Management and Operation

This section of your plan will address the following questions:
• 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?

Should you have a larger number of employees, and organizational chart is effective in establishing the chain of command from the owner down. You will also need to list your professional and advisory support. These would include attorneys, accountants, insurance agents, bankers, and tax advisory board members.

Next week’s blog will be focused on the financial planning of your business. Stay tuned!!!

References
1. The Chautauquan, June 1883, Volume 3, Issue 9, p. 543
2. Qayum, A. (2022, April 29). 10 examples of marketing plan and Key Takeaways (2022). Oberlo. Retrieved September 12, 2022, from https://www.oberlo.com/blog/marketing-plan-examples