Introduction to Business PlanningSezi Çevik Onar

Outline

What is business planning?

What is the objective of a business plan?

What are the main steps of a business plan?

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Definition of Business Planning and Business Plan

Business planning is to plan a business starting from the phase of thought till the phase of business generation.

A business plan is a written explanation of the companies business model.

A business plan is a summary which shows

• how the enterprise will be organized and• which activities will be implemented for the

venture’s success.Business Planning (3

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Goal of Business Plan

Business plans are

• used internally for management and planning and

• are also used to convince outsiders such as banks or venture capitalists to invest money into a venture.

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Goal of Business Plan

Many people think of business plans only for starting a new business.

But they are also vital for running a business.Businesses need plans to optimize growth and development according to priorities.

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Steps of Business Planning

Opportunity Analysis

Marketing Plan

Organization Plan

Financial Plan

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For a new business plan starts at this step

Opportunity Analysis

Market segmentation

Targeting

Positioning

Define marketing strategy

Pricing

Marketing Plan

Determine manufacturing process, method, flow

Define distribution system

Define after sales service

Define stock control process

Define marketing strategy

Organization Plan

Sales forecasting

Capital expenditure forecasting

Expenditure forecasting

Profit estimation

Balance sheet

Evaluation

Define marketing strategy

Financial Plan

Determine corporate strategy

Define growth ways

Select new business area

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Firm definition

o Firm: Firm Ao Products: Pumps, engineso Customers: Industrial companieso Geographical areas: Turkey

Step 1: Determining firm strategy

o Growth for P (Pump)o Divest for E (Engine)

MGR

RMS

P

E

Comp.

refrigeratorwashing machine

pumpFan

cast iron

HorizontalBackward Forward

Step 2: Determine growth ways (Opportunity analysis)

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Step 3: Determine New Business Area (Opportunity Analysis)

New Business Area: Refrigerator

Econ. Scale Skills Econ. Scale Skill Decision

Refrigerator X X X

Washing Machine

Firm Suppliers

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4.1. Segmentation

For families For singles

Step 4: Market Segmentation

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4.2. Targeting

Refrigerator for families X

Refrigerator for singles

Step 4: Market Segmentation

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4.3. PositioningIdeal

Firm A

Competitor

Standard Luxury

Step 4: Market Segmentation

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Step 5: Marketing Strategy

Message: Affordable luxury products

Media: TV / 10 sec / 50 days / year

Sales promotion: Small scale refrigerator as a toy on sale

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Step 6: Pricing

Price of refrigerator:

Volume * 1 + Number of Doors * 200

Product varieties

Product varieties: D1/V500, D1/V1000, D2/V500, D2/V1000

Price of (D1/1000) = 1000* 1 + 1 * 200 = 1200

Criteria

No Door 1 2

Volume 500 1000

Varieties

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T(21) = 500 + 10 * Period index for S=1.1T(21) = 500 + 10 * 21 = 710Y (21)= T(21) * S = 710 * 1.1 = 781 Sales of D1/V1000/Total Sales=0,50

Sales for D1/V1000= Y(21) * 0.50

X XX X

X

X

Sales

Time (period)20

Step 7: Sales Forecasting

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8.1. Production Process

P1 P2

P3

Raw Material(Part A) Part B

Refrigerator

Step 8: Business Systems

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8.2. Production Method

D1/V1000 D2/V1000PV

Q

Production Type:Product type for D1/V1000 and D2/V1000Process type for others

Step 8: Business Systems

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8.3. Production flow

P1

P2

P3

P1

P2

P3

P1

P2

P3

D1/V1000

D2/V1000

D1/V500

D2/V500

Step 8: Business Systems

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Machine DemandCapacity (Time/year) Required

P1 (for D1/V1000) 781*0.50*100 10000 4

P1 … 2

Machine Required PriceLife time (year) Total

How to finance Interest

P1 6 1000 10 6000 loan

Step 9: Capital Expenditure Forecasting

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Step 10: Expenditure Forecasting

10.1. Variable cost• Unit Variable Cost: Raw Material Cost + Unit

Energy Cost: Unit Raw Mat. * Unit Price of RM + …

= 1 (Part A) * 100 + 1 (Part B) * 100 + …

= 200 + 50 = 250

Total Variable Cost at Year 1 = Total Production* UVC

= 781 * 250

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Step 10: Expenditure Forecasting

10.2. Fixed cost

Item Year1 Year2 Year3

Depreciation for Manuf. 6000 / 10 = 600TV Advertising 50 * 500 = 25000

Promotion

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Step 11: Profit Estimation

Gross Profit = Income – Manufacturing Cost

= [1200 * (781 * 0.50) + …] – (6000 + 781 * 250)

= 100 000

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Current Asset

- Bank 50 000

Loan

- Longterm 10 000

Fixed Asset

- Machines 100 000

Equity

- 50 000

150 000 150 000

Step 12: Balance Sheet

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Step 13: Evaluation

Ratios for Year 1

Profitability for Gross Profit: 100 000 / 150 000

Evaluation ratios:

Decision: Enter Refrigerator business area

Don’t enter refrigerator business area

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