Financial Planning and Management
Writing Your School's
Business Plan
Getting A Loan To Start
Up A New Montessori School
Writing
Your School's Business Plan
Preparing an effective business plan for your school
takes time, careful planning, and analysis. It is not
something you can do between phone calls and parents
who stop by the school office to chat.
An effective business plan includes seven
key elements:
The Executive Summary
Most experts agree that you should write
the Executive Summary after you've done everything else.
Here you summarize the most important points of your
plan (e.g., sales forecasts and growth strategies; why
you need funding & what you will use the funds for;
highlight the products or services you will sell, market
growth and trends, key personnel).
Keep it brief and simple: You can copy
and paste many of the sentences and charts already included
throughout your business plan.
2) Mission statement
Write a few sentences explaining why your
school is in business. Focus on the customer needs that
your programs are designed to satisfy. Many schools
will include some statement about the relationship they
enjoy with their faculty and staff.
3) School history and description
What I the legal form of your school, where is it located,
what is its history?
Describe your current programs and services
.Also list any future programs or services
that you plan to introduce.
What is your school's competitive advantage?
Explain why families choose your school over other opt
ions
4) Market analysis
a. What markets are you serving? Define your demographics
by types of people (e.g., mothers with small children,high
income families), and geography (e.g., communities and
neighborhoods).
b. What is the size of your potential
market? Use local chamber of Commerce or U.S. Census
Bureau data to estimate your market size.
c. What are the trends driving demand
in your marketplace? Identify the changing demographics
(e.g., smaller families, more second marriages raising
a new set of children and wishing to give these children
the best education available, new businesses attracting
in highly paid and well educated families, conditions
in the local schools, etc), that are affecting your
market.
d. What are the normal patterns found
among the programs and decision making behavior of families
in your market? Do parents make decisions based on price,
trust, school reputation, or perceived quality?
e. Who are your competitors, direct or
indirect (for example, local church schools, public
elementary programs, child care centers, etc)?.
5) Marketing plan
a. Marketing mix. How will you generate
leads? Will you rely on word of mouth and networking,
direct mail, your web site, print ads, radio and cable
TV, press releases? Detail what marketing campaigns
you will launch and when.
b. Marketing budget. Estimate marketing
campaigns costs and write out a monthly or quarterly
budget.
c. Pricing strategy. Are you going to
be the low cost leader, the 'best value' or the most
expensive/highest quality school in your market?
6) Management summary and personnel plan
Who will be the Head of School, Educational
Coordinator, Admission Director, and faculty members?
Who will be on your board? Write out a job description
for each critical function.
If you will be working alone, schedule
time to perform all management or production functions.
You might choose a time each day, or a day each week
to do bookkeeping, marketing, sales, product development,
or you can break each day into segments. Or, you should
identify employees, contractors or consultants who will
perform these jobs for you. How much will you pay? What
are the legally required and other benefits you will
provide? Create a personnel budget, and schedule regular
reviews to ensure that all functions are being performed
as delegated.
7) Financial statements.
Include a Balance Sheet, Profit &
Loss statements (historical and projections), a Breakeven
Analysis and Cash Flow projections. Get financial templates
from business planning or accounting books, web sites
or software programs.
The software program Business Plan Pro,
by Palo Alto Software, includes worksheets for all financial
statements. There are also a few online services such
as http://www.FundablePlans.com that provide similar
support on the web. A great book that contains business
plan financial statement examples is The Business Planning
Guide: Creating a Plan for Success in Your Own Business,
by David H. Bangs, Jr. Another good source is Accounting
for Dummies, by John A. Tracy, CPA.
The U.S. Small Business Administration
also has good instructions for creating business plan
financial statements. Go to www.sba.gov and click on
'Business Plans' underneath 'Starting Your Business'
You'll find some sections of your business
plan more challenging than others. Don't hesitate to
ask for business planning help from the Montessori Foundation
and International Montessori Council staff (1-941-379-6626).
You can also turn to local small business development
counselors, your accountant, market researchers, or
business coach. Focus on completing one section of your
business plan at a time until you are done.
Getting
A Loan To Start Up A New Montessori School
Many new Montessori schools are founded
by a small group of families who feel a strong need
to have a new Montessori school to meet the needs of
their children and those of their friends. Others may
get started when one or two Montessori teachers feel
a strong enough desire to build a school of their own.
Nontraditional Financing
Just like many other small businesses,
new schools often start small and are funded through
loans borrowed from friends, families, or that core
group of families who so desperately want to see a new
school open.Most people, including those friends and
family members who often make the loans, borrow against
the equity in their homes, life insurance policies,
or 401-K plans. Several loans of $5,000 to $25,000 can
often get a new school off the ground, albeit on a shoe
string. Most new schools get by because they are a labor
of love, demanding long hours and many sleepless nights
as the founder(s) struggle to recruit enough students
and balance the first few years' budget.
This seat of the pants approach works
best if your new school has found inexpensive space
to rent, such as a room in a church's educational wing
or part of your house. Anything else is likely to be
considerably more expensive. How expensive? It all depends
on conditions such as the type of space, local lease
rates for that sort of space, and how much you need
the owner to spend on improvements and repairs to fix
the space to meet your needs and local building codes.
In situations like these, you will need
to find more capital than most people can get from their
friends and families. In this case, you will need some
form of small business loan. For the moment, let's set
aside SBA loans from the Small Business Administration
(www.sba.gov). SBA is an excellent source of financing,
and I would recommend that anyone organizing a new school
start by visiting their website. However, the SBA is
only aimed at supporting small for profit businesses,
and many Montessori schools are nonprofit by design.
Here are some basics that you should keep
in mind if you ever do seek commercial financing, whether
for a for profit or non profit school.
A lender looks at a loan request in three sections known
as the 'three Cs'. The 3 Cs stand for:
1. Credit. Did you pay previous lenders
back as contracted?
2. Capacity: Can you afford to pay back
this loan?
3. Collateral: If you don’t pay
back the loan from what asset can the lender recover
their principal?
There are five basic steps in getting
a commercial loan:
1. Identify your strength and weaknesses in the '3 Cs'.
Do this as would a lender, with a very critical eye.
Identify your loan to value ratio and your debt service
coverage ratio. If you have reason to believe that your
credit is less than sterling, get a copy of your credit
report including your credit score.
Each lender has different criteria with
the cost of the loan being higher as your strength in
the '3 Cs' is lower.
2. Identify lenders who lend to your level
of borrower and to your industry type. Call lenders
to get their criteria. Learn about the SBA 504 program
and 7A loan guarantees. Find out which lenders other
schools in your community have used for financing.
If there is a gap between your borrowing
ability and lenders' criteria, a loan broker may be
able to help. They spend their working hours finding
second and third tier (more aggressive and more expensive)
lenders and establishing relationships with them. They
can act as a salesperson for your project in ways that
you as a principal cannot.
3. If you cannot find lenders on your
own, consider hiring a commercial mortgage broker. Be
careful MN in many areas there is little or no protection
under the law for commercial transactions. While a small
up front fee for out of pocket expenses is reasonable,
shy away from any that want large up front payments.
If they can do the deal they will be paid very well
at settlement. If they can’t do the deal they
shouldn’t be taking your business at all.
Once you identify a list of potential
lenders or hire a broker, get prepared. Do not think
that the business loan process is merely a matter or
forms and paperwork. While there is more paperwork than
you’d ever want to see, it is more of an inquisition.
4. Be an expert salesperson for your project.
Build a strong business plan and use it as a written
proposal. There have been many books, articles written
about writing effective business plans. You can also
turn to consultants, your brother in law the MBA, and
several software packages, such as Business Plan Builder
by Palo Alto Software and online services such as http://www.FundablePlans.com
to build your own business plan.
Whatever approach you use, know your numbers
and be able to defend them. Understand your market and
be able to speak competently about it. Know your competition.
Most importantly, (from step one) know your strengths
and weaknesses as a borrower and be able to maximize
the strengths and minimize the weaknesses.
5. Don’t give up. Where one lender might have
too many loans of your type in her portfolio, the next
may need exactly your loan to meet his goals (loan officers
are paid to lend). This is not to say that you should
'beat a dead horse', but if you have a viable project,
a good presentation and good Cs, you will be able to
get financing.
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