Oct 14 ecd lecture 4 importance of the business plan (student)

1

Enterprise Creation & Development

Lecture 4:

Importance of

a Business Plan

Mr Khoo Chen En

(6460 8016; [email protected])

ECD Oct 14/Lecture 4/kce 1

ECD Assignment 1

• Due Wed, 26 Nov 2014, 3pm.

• Drop it at the project box, blk 72 level 9.

• Marks will be deducted for late submission.

2ECD Oct 14/Lecture 4/kce

Lecture Objectives

• What is a business plan?

• Purpose of a business plan

• Pitfalls to avoid in planning

• Benefits of a business plan

• A guideline on developing a business plan

• Effective presentation of a business plan


Recommended Reading

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• Donald F. Kuratko ENTREPRENEURSHIP –THEORY, PROCESS AND PRACTICE, 9th Edition, CENGAGE, Chp 12

ECD Oct 14/Lecture 4/kce

Additional Resources

• www.business.gov.sg

• Gives advice on how to plan a business, tips on writing business plans & building a network of contacts

• www.gmarketing.com

• www.bplans.com

• www.ace.sg


http://www.business.gov.sg/

http://www.gmarketing.com/

http://www.bplans.com/

http://www.ace.sg/

We thought we’ll put in the details later.


What is a Business Plan?

It is a written document prepared by the entrepreneur that describes all the relevant internal & enternal elements involved in starting a new venture.


Purpose of a Business Plan

Marketing

R&D

Manufact-uring

Mgmt

Critical Risks

Financing

Milestones

It is often an integration of functional plans, like:



1) A business plan describes current status, expected needs & projected results of the new business.



2) Allows the entrepreneur entrance into the investmentprocess.

3) Describes to investors & financial sources all of the events that may affect the proposed venture.

4) Used internally as a ‘roadmap’ for the operations.


Recent Trends

Increasingly important to include

in your business plan:

• How your business will impact

the environment

• What will people do with your

product when they have

finished using it?

• Eg TVs, plastic bottles


Critical Factors in Planning

Realistic goals – these must be specific, measurable and set within time parameters

Commitment –supported by all involved-family, partners, employees, team members

Milestones – sub-goals must be set for continual and timely evaluation of progress

Flexibility – obstacles must be anticipated and alternative strategies must be formulated


Pitfalls to avoid in Planning

Pitfall 1:

Goals are unrealistic and/or immeasurable.

Pitfall 2:

Failure to anticipate roadblocks eg threats or weaknesses to business.

Pitfall 3:

No commitment or dedication.


Pitfalls to avoid in Planning

Pitfall 4:

Lack of demonstrated experience & knowledge.

Pitfall 5:

No market niche. Customers’ needs not established.


Benefits of a Business Plan

FOR THE INVESTOR:

1) To assess the

entrepreneur’s planning

& managerial ability.

2) Provides a

comprehensive overview

of the entire operation

(i.e. through business

and financial evaluation)


Benefits of a Business PlanFOR THE INVESTOR:

3) Illustrates the venture’s

ability to service debt or

provide an adequate return

on equity.

4) Provides details of the

market potential & plans for

securing a share of that

market.

5) Identifies critical risks and

crucial events



Analyses all aspects of the venture

Prepares strategy for uncertainties

Forces critical and objective view

Closely scrutinises entrepreneur’s assumptions (i.e. competitive, economic )

For the

entrepreneur



Develops & examines operating strategies & expected results

Quantifies objectives & provides measurable benchmarks (i.e. forecasts vs actual results)

Provides a communication tool for outside financial sources

Provides an operational tool for guiding the venture toward success

For the

entrepreneur

(cont’d)


No Standard Business Plan Format• Plans vary from industry to industry.

• Craft your plan to correspond to your specific conception of your business.

• Use sample plans mainly to stimulate your thinking.


Who Reads your Business Plan?

• Venture capitalists, bankers, angel investors, potential corporate customers, lawyers, consultants and suppliers.

• 3 MAIN VIEWPOINTS

• YOU, the entrepreneur

• YOUR CUSTOMERS – what benefits do they get?

• YOUR POTENTIAL INVESTORS - $$$ -Financial projections


Executive Summary: 1 or 2 pages

Table of contents: List sections & mark the pages

Cover & Title Page:Visible contact detail. Well-designed

Length: No more than 20 pages

Appearance: Binding & printing must not be sloppy

Putting the Package Together


10 Guidelines to Remember!

1. Keep the Plan Respectably Short2. Organise and Package the Plan

Appropriately3. Orient the Plan towards the future4. Avoid Exaggeration5. Highlight Critical Risks6. Give Evidence of an Effective Entrepreneurial

Team7. Do Not Over Diversify8. Identify the Target Market 9. Keep the Plan Written in the Third Person10.Capture the Reader’s Interest


Outline of a Business

Plan

1. Cover Page/Table of Contents2. Executive Summary3. Company & its Industry4. Product/Service5. Market & Competitive Analysis6. Marketing Plan7. Manufacturing & Operations8. Management Team9. Financial Plan10. Critical Risks11. Harvest Strategies

12. Milestones13.Appendices


Elements of a Business Plan1. Executive Summary

• Written after the entire business plan has been completed

• A clever snapshot of the complete plan

• Lets the reader know if:

• Your basic business concept makes sense & has been thoroughly planned

• The management is capable

• A clear-cut market exists

• Your business has significant competitive advantages

• Your financial projections are realistic

• Investors or lenders have an excellent chance to get their money back


Elements of a Business Plan

2. Business Description

• Name of the venture

• Industry background presented in terms of current status & future trends

• Venture to be thoroughly described, along with its proposed potential.

• Potential competitive advantages egpatents, special technological or market advantages

DESCRIBE WHY YOUR SOLUTION MAKES CUSTOMERS VERY HAPPY.



3. Marketing

(Lecture 8 – Developing the Business)

• Research, design & development

• Market niche & market share

(BIGGER IS BETTER!)

• Competitive analysis

• Marketing strategy

• Pricing Policy

• Advertising Plan


Markets andCompetitive Analysis

Customers

• Who are your customers and what are their needs?

• Be precise in the specific groups of customers.

• What are the customer-buying patterns?

Note: Questionnaires be drawn up to conduct surveyon customers’ needs and preferences.

Competition

• Who are your direct/indirect competitors ?

• Compare and contrast your competitors with your product/service

Note: Competitive analysis table be set up to show the comparisons.


Competitor Analysis for Car Wash (adapted from Entrepreneurship Ideas in Action

by Cynthia L. Greene)


Target Customer ProfileWith Market Segmentation, develop a profile of the potential target customer.

Sample Customer Profile For A Sporting Goods Store in Jurong Point

Individual 23 to 52 years of age

Participates in sports regularly

Wants good-quality sports equipment

Lives in western Singapore

Average income of $50,000 per year.(Source : Entrepreneurship Ideas in Action by Cynthia L. Greene)


Marketing – 4 P’s

• Product/Service

• Place - Selling/Distribution policy

• Promotion - Advertising, Sales Promotion, Public Relations, Personal Selling

• Pricing/Service Policy

NOTE : As far as possible, make use of guerillamarketing tactics. It would be useful to prepare marketing materials (samples, brochures, etc).



4. Manufacturing & Operations

• Location

• Labour availability

• Wage rate

• Proximity to suppliers & customers & community support

• Local taxes

• Facilities (plant, warehouse, offices)

• Equipment (machinery, computers & vehicles)



5. Management

• Organisational structure

• Management team & critical personnel

• Experience & technical capabilities of the personnel

• Ownership structure & compensation agreements

• Board of directors & outside consultants & advisors



6. Financial

(Lecture 7 – Financing the Business II)

• Potential viability of the venture

• Pro forma balance sheet

• Income statement

• Cash-flow statement



7. Critical Risks – potential risks that could cripple the business.

• Potential risks should be identified:

• Effect of unfavourable trends in the industry

• Design or manufacturing costs that have gone over estimates

• Difficulties of long lead times encountered when purchasing parts or materials

• Unplanned –for new competition

• Regulatory risks

• Weather-related physical risks

• Reputational risks



7. Critical Risks

• In addition, Cover the what-ifs

• What if the competition cuts prices?

• What if the industry slumps?

• What if the market projections are wrong?

• What if the patents do not come through?

• What if the management team breaks up?

• Suggestions for alternative courses of action



8. Harvest (Exit) strategy (Lecture 5 – Starting the business)

• Management succession and investor exit strategies

• Capital cow, employee stock ownership plan, merger, outright sale, public offering

“Build a great company but do not forget to harvest”

Think harvesting as a vehicle to reduce risk & create future entrepreneurial choices & options.

9. Milestone schedule

• Provides investors with a timetable for the various activities to be accomplished



10. Appendix and/or bibliography

• Additional information not appropriate in the main parts of the plan.

• diagrams, blueprints

• Operations manuals

• resumes of management team

• financial data

• Evidence of market research activity –competitor’s analysis, questionnaires & responses

• Marketing brochures


Effective Presentation of a Business Plan

Important points to note as you prepare for an oral presentation of your business plan.

1. Hook the readers, especially in the Executive Summary

• Have a compelling opportunity where you can:

• Identify a need/opportunity in a large and growing market

• Conceptualize a business that will fill that need or take advantage of that opportunity.

• Demonstrate that you have the know-how and the team to effectively build a profitable and sustainable business.



2. Prioritise the points you are making into 3 categories:

• Essential - without this the plan makes no sense.

• Good to know - directly supports and gives context to your essential points.

• Interesting - provides a higher level of understanding of market dynamics, industry, etc.



3. Articulate the size of your market:

who are your customers, why they will purchase your product or service, how much they will buy at what price.

4. Include evidence of customers.

5. Discuss the competition and why they will buy your product/ service vs the others.

6. Articulate your marketing strategy:

How will they become aware of your product/service, and how will you communicate the benefits?



7. Be specific when discussing your team.

8. Edit for the details – clarity and typos – a sloppy presentation says a lot!

9. Know the outline thoroughly.

10. Utilise key words – in the outline that help recall examples, visual aids, or other details.

11. Rehearse the presentation.


Last but not least….

• DON’T GIGGLE

• DON’T TALK AMONGST YOURSELVES WHEN YOUR MEMBER IS PRESENTING

• DON’T MUMBLE

• DON’T COME IN SLIPPERS AND/OR SHORTS

• DON’T FIDGET OR SLOUCH WHEN YOUR MEMBER IS PRESENTING

• DON’T BE LATE!


Recall Lecture Objectives

• What is a business plan?

• Purpose of a business plan

• Pitfalls to avoid in planning

• Benefits of a business plan

• A guideline on developing a business plan

• Effective presentation of a business plan


Oct 14 ecd lecture 4 importance of the business plan (student)

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