Vietnam Master in Management – HCMC dec 2003 BP Techniques Business Plan The Techniques Our Case :...

Vietnam Master in Management – HCMC dec 2003BP Techniques

Business PlanThe Techniques

• Our Case : The Red Line Saigon Hotel

• Mission and Vision• SWOT Analysis• The Financial Plan Step by Step

Initial Balance Sheet Year 1

• Profit and Loss• Balance Sheet• Calculation of financial debt and interest• Cash Flow Statement

Year 2 Etc.


Hanoi Hotel : Mission and Vision

• What we are A medium size high level hotel in the centre of HCMC

• 130 rooms• Average income per night/room in 2003 : 80 US$

• Mission We want to deliver excellent service to our business

(40%) and leisure (60%) customers and want them to come back

• What we want to become Possibility to add 60 additional rooms

• Vision We want to become immediately after the Rex the

reference hotel for people who want a unique experience and not the standard (high level) service provided by international chains


SWOT Analysis

STRENGTHSGood imageExcellent location (centre)Experienced management and personnel

WEAKNESSESNot a member of an international chainQuite old building (we should renovate all rooms for a total capex of 3Mio US$)

OPPORTUNITIESNew building with 60 rooms (total capex of 4Mio US$)Become member of international network (license of 1 MioUS$)

THREATSA lot of new hotels are coming on the marketCompetition try to hire our personnel


Step 1 : Initial Balance Sheet

• last available figures for existing company

• opening Balance Sheet for new venture Liabilities = only equity Assets = only cash

BPcons.xls - STEP1!A1


Step 1bis : Simplified Balance Sheet

• Calculation of Working Capital R + S - DSTop

• Calculation of Capital Employed FIX + WC + CASH

BPcons.xls - STEP1bis!B1


Step 2 : Profit & Loss Year 1

based on • P&L of last year• Operational assumptions

for year 1 Turnover Margins (Cost of sales) Costs of goods and

services Salaries and productivity

of labor• Fixed assets table

depreciation• Balance Sheet of last year

calculation of interests on debt



Step 2bis : Fixed assets & depreciation

based on • Fixed assets at the end of

last year• Depreciation rules• Capex of the year

Tangible Intangible

BPcons.xls - STEP2bis!A111


based on • Balance Sheet of Year 0• P&L of Year 1

EAT & DIV for EQ Depreciation for FIX

• Operational assumptions Change in Working Capital

• Duration of inventories• Duration of collection• Etc.

Capex for FIX• Financial assumptions

New LT debt Capital increase for EQ Reimbursed LT debt

• Short term fin debt to balance

Step 3 : Balance Sheet Year 1



How to do to finance the company ?

• Cash Flow from financing activities• First : use the existing cash or credit lines• Second : seek additional debt provided by banks

Duration should depend on needs but …• Always seek long term to reduce the risks

Limits for the bankers • Future Cash flows• Cover of interest ratio must be respected• Cover of debt must be respected

• Finally : seek new capital provided by shareholders Is it an interesting investment for them ?


Step 4 : Cash flow statement Year 1

based on • Cash Flow from operations

P&L of the year • EAT• Depreciation

Operational assumptions • Changes in components of

WC

• CF from investing activities Fixed assets assumptions

• Capital expenditures• Assets sales

• CF from financing activities Financial assumptions

• New and reimbursment LT• Calculation short term debt

• Sanity check : the cash



Step 5 : Profit & Loss Year 2

based on • P&L of Year 1• Operational assumptions

for Year 2 Turnover Margins (Cost of sales) Costs of goods and services Salaries and productivity of

labor• Fixed assets table

depreciation• Balance Sheet of Year 1 & 2

calculation of interests on debt



Iterative Process

• Step 5 : P&L for year 2

• Step 6 : Balance Sheet for year 2

• Step 7 : Cash flow statement for year 2

• Step 8 P&L for year 3

• Steps 9 Balance Sheet for year 3

• Step 10• ……


How to build the Financial Plan

Balance Sheet t

Profit & Loss t+1

Balance Sheet t+1

Cash Flow Statement t+1

BPcons.xls - STEPfoll!A1




Sensibility studies

• We can see immediately all the consequences of changing one assumption occupancy rate or load factor unit price additional capital expenditures

• more rooms, more planes, more shops• fixed and variable costs

interest rate exchange rate etc.

BPcons.xls - SENSIB!A1

Vietnam Master in Management – HCMC dec 2003 BP Techniques Business Plan The Techniques Our Case :...

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