Business Plan Outline _LBD

8/3/2019 Business Plan Outline _LBD

1/51

The Business Plan

L B Deshmukh


2/51

Why Plan? And the SME The SME

Not in control

Little point of

planning

Year 1- 2 Year 3-4 Year 5-

Getting established,

finding and keepingcustomers; developingproducts and services.

Consolidation finding and

keeping competent staff,delegating, controlling thebusiness

Attracting investors,

competing with much biggerfirms in the market.


3/51

Why Plan? Identifies areas of the business that are notcompletely under control.

Is an important source of information for funding

organisations. Framework for informing employees and others Better management decisions based on objective

analysis Improvement of management information

systems. Identifying key areas where the firm needs to

improve expertise. Provides a basis for whether a new product would

be a success.


4/51

SURE S Is the plan SOUNDLY based? U Does the market UNDERSTAND

the relationship between externalmarket and internal resources?

R Is the plan REALISTIC?

E Are the previous EXPERIENCEand EXPECTATIONS of the group inline with the requirements of the

plan?


5/51

Will you succeed?

Viable if the SME survives 5 years. Especially the first 3 years

Survival of first five years is closely

related to the amount of planning carriedout.

Research shows an increase in survivalchances of 3% for every 1 day of planning

with a plateau after 14 days. Good business plans help: a fully detailed

plan is 15 times more likely to receivefunding.


6/51

Starting Off! Know yourself

Who you are.

What you can do.

How you can do it.


7/51

General Objectives1. Do we want to grow?2. Do we want to build a long term

business or is our perspective shortterm?

3. Do we want to deal with new

challenges?4. Do we want to maintain control?

5. Do we need a lot of money?

6. Risk Appetite


8/51

Planning as Part of The

Business Operation Planning is a process than never ends for a

business.

It is extremely important in the early stages ofany new venture when the entrepreneur will needto prepare a preliminary business plan.

As the venture grow up to mature business,planning will continue

Plan may be short term or long term, strategic oroperational.

MSME's EDP at DBAR, SSGMCE


9/51

What is Business Plan? The business plan is a written documentprepared by the entrepreneur thatdescribes all the relevant internal andexternal elements and strategies forstarting a new venture.

It is a integration of functional plans such

as marketing, finance, manufacturing, salesand human resources.



10/51

Who should write the

plan? The business plan should be preparedby the entrepreneur.

The entrepreneur may consult withmany other sources in itspreparation, such as lawyers,

accountants, marketing consultants,and engineers.



11/51

Scope and Value of the Business

Plan Who Reads The Plans? The business plan may be read byemployees, investors, bankers, venturecapitalists, suppliers, customers, advisors,

and consultants. There are three perspectives should beconsidered in preparing the plan : Perspective of the entrepreneur Marketing perspective Investors perspective



12/51

Scope and Value The business plan is valuable to the entrepreneur,potential investors, or even new personnel, whoare trying to familiarize themselves with theventure, it goals, and objectives. It helps determine the viability of the venture in a

designated market It provides guidance to the entrepreneur in organizing

his or her planning activities It serves as an important tool in helping to obtain

financing.



13/51

How do Potential Lenders and

Investors Evaluate The Plan? Four Cs of Credit: Characters Cash flow Collateral Equity of Contribution

Another Marketable Payback period

Risk Feasibility, etc



14/51

Presenting The Plan It is often necessary for an entrepreneurto orally present the business plan beforean audience of potential investors.

In this typical forum the entrepreneurwould be expected to provide a short(perhaps 20-minutes or half-hour)

presentation of the business plan.



15/51

Information Needs Before committing time and energy to preparing a businessplan, the entrepreneur should do a quick feasibility study ofthe business concept to see whether there a any possiblebarriers to success.

The information, obtainable from many sources should focuson marketing (segmenting, targeting, and positioning),finance (list of all possible expenditures, demand forecast,revenue), and production (location, manufacturingoperations, raw materials, equipment, labor skills, space,overhead) .

Internet can be a valuable resource.



16/51

Outline of a Business Plan Introductory Page Name and address of business

Name(s) and address(es) of principal(s) Nature of business

Statement of financing needed

Statement of confidentially of report



17/51

Outline Executive Summary Three to four pagessummarizing the complete business plan What is the business concept or model?

How is this business concept or model unique?

Who are the individuals starting this business?

How will they make money and how much?



18/51

Outline Environmental and Industry Analysis Future outlook and trends Analysis of competitors Market segmentation

Industry and market forecasts Description of Venture

Product(s) Service(s) Size of business

Office equipment and personnel Background of entrepreneurs



19/51

Outline Production Plan Manufacturing process (amount subcontracted) Physical plant

Machinery and equipment Names of suppliers of raw materials Operational Plan

Description of companys operations

Flow of orders for goods and/or services Technology utilization



20/51

Outline Marketing Plan Pricing Distribution Promotion Product forecasts Controls

Organizational Plan Form of ownership Identification of partners or principal shareholders Authority of principals

Management-team background Roles and responsibilities of members of organization



21/51

Outline Assessment of Risk Evaluate weakness of business New technologies Contingency Plans

Financial Plan Pro forma income statement Cash flow projections Pro forma balance sheet

Break-even analysis Sources and applications of funds



22/51

Outline Appendix (contains backup material) Letters

Market research data Leases or contracts

Price lists from suppliers.



23/51

Using and Implementing

The Business Plan The business plan is designed to guide theentrepreneur through the first year ofoperations.

Implementation of the strategy containcontrol point to ascertain progress and toinitiate contingency plan if necessary.

Business plan not end up in a drawersomewhere once the financing has beenattained and the business launched.



24/51

Measuring Plan Progress Entrepreneur should check the profit and lossstatement, cash flow projections, and informationon inventory, production, quality, sales, collectionof accounts receivable, and disbursements for theprevious month. Inventory control Production control Quality control

Sales control Disbursements



25/51

Updating the Plan The most effective business plan canbecome out-of-date if condition change.

If the change are likely to affect the

business plan, the entrepreneur shoulddetermine what revisions are needed. In this manner, the entrepreneur can

maintain reasonable targets and goals andkeep the new venture on a course that willincrease probability of success.



26/51

Why Some Business Plans

Fails? Goals set by the entrepreneur are unreasonable. Goals are not measurable The entrepreneur has not made a total

commitment to the business or to the family. The entrepreneur has no experience in the

planned business. The entrepreneur has no sense of potential

threats or weaknesses to the business.

No customer need was established for theproposed product or service.


Steps to a business plan


27/51

Steps to a business planWhat are you planning?

Define external marketconditions, competition andmarket positioning

Define the current status ofthe business

Project costs, revenues, cashflow

Define your core objectives

Refine the strategies intoworking plans

Identify risks andopportunities

Develop a strategy for limitingrisks and exploitingopportunities

Define your businessactivities.

Develop a strategy forachieving the core objectives

Final plans


28/51

key pointers Audience: Who is it meant for? Objectives:

Expression of the planning process Request for funding

A framework for approval

Tool for business management

Short Term or Long Term plan


29/51

Other Elements Size should be as short as possible. Good average 20 40 pages

Depends on the circumstances.

Annexure would include Background material regarding specialist

processes. Detailed product specification

Marketing brochures and leaflets Detailed financial analysis Full Biographies

Always written by the head.

T i l B i Pl C


30/51

Typical Business Plan Contents Contents Small print

Contact, Document control, definitions. List of contents Executive summary Basic data, mission, history Business organisation and management team. Infrastructure, products Market and competitive analysis

Business Strategy Sales Financials Risks Annexures

Sales Forecast Capital outlays

Employee costs Operating costs Expenditure commentary Profit and Loss Account Balance Sheet Cash Flow Etc.


31/51

Basic Document Document Control

Establish a procedure for numbering documents and their revisions Example Document number BP2005.01D released 30th July 2005 Keep a record of who receives which version Make sure the contributors and the recipients have signed confidentiality

agreements. Presentation

Select paper and binding that is both practical and of good quality.

Page Setup Consider formatting the page so that you print on A4 paper. Make the left margin wide so that the text itself is no more than 5 inches Set up headers and footers

Document control information Repetitive information

Choose a font for about three levels of headings

Page Numbering Either 1,2,3 or 1.1, 1.2, 1.3; 2.1, 2.2, 2.3

Cover Contents Page basic headers Contacts Definitions Conclusions


32/51

Other Pointers

Investor Approach, and size of project.

Techniques for multiple business plans Value each of them separately

A master plan

Importance of the executive summary

Responsibilities

Plan the plan Who is responsible for what contributions

Department heads should buy into the strategy


33/51


34/51

SWOT AnalysisPreliminary Analysis

Strengths and Weaknesses areInternal factors over which one has

control or influence.

Opportunities and Threats are

external issues that you cannotcontrol


35/51

Places to look for Strengths andWeakness

Area of Business Strengths Weakness

Processes High Productivity Slow time to market

Management Good at acquisitions Poor staff management

Marketing & Sales Good at direct sales Poor market research

Other skills Excellent R&D Poor maintenance

Experiences Success overseas Fingers burnt somewhere

Intellectual Property Branding, trade secrets Expiring patent

Premises Excellent Location Unwanted Lease

Plant, machinery Specialist equipment Worn out plant

Informationtechnology

Good management information Poor automation

Finance Good cash Flow Burden of debt

Pl t l k f O t iti d Th t


36/51

Places to look for Opportunities and Threats

Area of Business Opportunities Threats

Market Your market is growing rapidly Your market is reaching maturity

Industry Competition is fragmented Competitors have strong R&D

Industry Association Compliance with standardsstrengthens your product

Meeting new standards increasescosts.

Labour Market

Locally available skills Disruptive strikes

Financial Markets Low cost funds Higher borrowing costs will reducecustomer spending power.

Exchange Rates Cheaper imported raw materials Cheaper competing products

Green (Environmental )

Lobby

Opportunity to sell, say water savingdevices

Cost of anti pollution legislation

Economic Trends Economic expansion will boostdemand

Growing unemployment will reducedemand

Government Policies Tax Holiday Incentives for rival company

Natural Disasters Sell specialized equipment or reliefsupplies

Loss of production or data


37/51

Core Competencies

(exercise) What are you really good at?

Special skills, knowledge, experience,

assets Compare these

Continue to keep track of any

strengths, weakness, opportunitiesand threats that you discover


38/51

Top Ten Common Central Objectives1. Maximising shareholder value2. Maximizing profitability (watch for managers with profit

related bonuses).3. Maximizing dividend pay-outs (there goes the working

capital).4. Maximizing market share (common in Japan).5. Maximizing total assets.

6. Minimizing excitement and risks perhaps so that thechief executive has an easy ride during his or her finalfew years in charge.

7. Positioning the company as a takeover target. so thatthe owners can make a quick capital gain.

8. Building an empire measured by number of employees,the range of international subsidiaries or some otherego-inflating statistic.

9. Prudence financial companies often pursue stability andgrowth.

10. Maximizing some altruistic vision such as socialwelfare.

Vi i Mi i Phil h


39/51

Vision, Mission, Philosophy(The rational of your business)

Vision Where you are going.

Not a painful exercise. One or two sentences, four paragraphs at the most. What drives you forward

Worlds most profitable airline. Largest manufacturer of toothbrushes Number 2 manufacturer of a product.

Can be a dependent vision

Mission What you are going to achieve right now. In the next few years In the long run we are all dead Gives a clear indication to employees, business partners or

customers Very clear definition

Why, where, how Customer needs and benefits People do not want shovels, they want holes in the ground

Philosophy How you will behave along the way.


40/51

N b f th b k


41/51

Numbers for the bank

Sales Revenue Gross Profit Gross Profit as a percentage of sales Operating costs by key areas

Interest Paid Net Income (Net Profit) before tax Only required if your company has a history Detailed figures need to go into the annexure Occasionally, try to rectify the figures For additional finance investors like to see

Tangible value A solid core business A reasonable financial situation

l h


42/51

Organisational Chart

Chief Executive

R&D Production Customer Service

Quality

Marketing & Sales Administration

Most business start with a similar structure

Could be by regions or business areas.

Matrix Organisation

People borrowed part time or full time from their place in the main organisation towork on specific projects.

Try to form a new view, new structure.

Think from the point of view of the people reviewing the business plan


43/51

Management Team The business is organised in a way that will allow

everyone to operate successfully.

There is good corporate governance the boardshould be up to its job.

The management team has the required qualities andskills

The necessary supporting structure is in place.

Problems Not a complete organisation, esp. in the case of a

start-up. Is the organisation structured effectively?

Solutions

Document the current situation briefly. Return to it later, with explanations. Keep SWOT in mind Correspond the organisational structure to the

management team.

B i I f t t


44/51

Business Infrastructure

Describe your infrastructure Premises Plant Machinery Computers

Other Assets Dot-com why did it crash? Written down book value may be different

from market value and different from

replacement cost. Write the positives and negatives about theassets.

P d & i


45/51

Products & Services

Detailed description for a businessstart-up, with brand new and unknownproducts.

Less with known products but stilldetail and future strategy isrequired.

One or many products focussed vs.

risky! Include a picture if possible, it helps. and not everyone is a genius!


46/51

Core Competencies

Identify the core competencies Could be from

Manufacturing Intellectual Property Supplier excusive rights Trademark or Servicemark Other areas

Bringing new products to market rapidly Miniaturizing electronic components Managing takeovers and acquisitions Selling to government purchasers or hospitals

Be honest! Rank them


47/51

Core competencies

exercise

Indian Brands


48/51

15 Areas where competenciesmay be found.

1. R&D Capability2. Product Development3. Management of Suppliers/ Supplies4. Production

5. Capacity Management6. Inventory Control7. Branding8. Management of Channels to market9. Market research / understanding10. Sales Techniques/ account management11. Information management12. Negotiating13. Corporate Acquisitions14. International Operations15. Specific areas of management expertise


49/51

Summarize Introduction to Business Plans Basic Business Plan creation Some elements of the plan

Current situation analysis Next week

Competitive Research Business Plan Finance.

Voting on Ideas Discussion on the case study. Questions/ Comments [email protected]


50/51

Questions and Comments



51/51

Thank You

Business Plan Outline _LBD

Documents

Transcript of Business Plan Outline _LBD