Download pdf - Busines Plans

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Business Plan

By Anjan Mohapatro

By Anjan Mohapatro


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What

When

Who

Where

Why

How

What is a Business Plan


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Business Plan

A Business Plan (BP) can be defined as a document that describes

an organization's current status and forecasts / plans for thegrowth in the times ahead..

How it intends to Produce, market and sell a product or service

profitably

It is a selling document

Who You are, what you do, how you will do it, financial resourcesare required to carry it, how you intend to secure these resources


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Business Plan

initial planning document for a new business

serves as a tool to communicate the idea of the new

venture to potential investors, bankers, key employees

serves as a record to monitor and compare results

consider important aspects and decide whether to go

or not to go


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Business Plan

It can be used by managers and executives forinternal planning

It can be used as the basis for loan applications

from banks and other lenders

It can be used to persuade investors that acompany is a good investment.

For start-up ventures, the process of preparing abusiness plan serves as a road map to the future


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Primary Reason - Business Plan

Business Plan

ProvideDirection

Provefeasibility

AttractCapital


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Business Plan-How it helps

obtain bank financing

seeking investment funding: this is the document most venture capitalists first askfor

arranging strategic alliances: small/large companies

obtaining large contracts: proof of recognition to large companies checking outsmall ones

attracting key employees: can help an executive come over to your side

completing mergers and acquisitions: for selling and buying companies

motivating management team: causes everyone to be working toward the samegoal, reduces customer confusion, lays out financial, marketing and production goals


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Business Plan

Attract Necessary financing by demonstrating feasibility of your venture

First step Establish Goals

Goals to be reviewed and approved by the Board

Allocation of resources

Filter to screen wide range of possible business opportunities

Goals may seek to achieve

Revenue Generation

Employment Generation

Neighbor hood Development Strategy

Clearly identified and Quantifiable Goals


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Business Plan

Advantage Disadvantage

Board

May have important skills and insights regarding

business planning or Industry May have limited time and availibility

Staff

Greater Sense of ownership of plan

details,free,will be responsible for

implementation of the plan

May not have the time ,may not have the

expertise, may detract from ongoing tasks

and workload

Has knowledge of the organisation and good

expertise,No additional cost May not have the planning skills

Consultant

Expected to devote full time and attention to

the product,has necessary skills and knowledge

of business planning and the industry

May not know the organizations capacities,

No ownership of the plan, no involvement in

implementation, high cost

Volunteers Free,May bring knowledge and Skills Limited involvement in implementation

l f l


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10

5. Marketing and sales

6. Business system and organisation

7. Implementation schedule

Businessconcept

Draft

businessplan

Final

businessplan

Focus of this phase

Part of this phase

Importance

1. Executive summary

2. Product or service

3. Management team

4. Market and competition

8. Opportunities and risks

9. Financial planning and financing

Elements of Business Plan


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11

Executive Summary

Who r u (describe ur organisation

What you are planning (Describethe product or service)

Why u r planning it (Discussdemand and supply )

How you will operate ur business

When u will be inoperation,expected net profit


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Executive Summary

Business Concept

What is your business idea? Inwhat way does it fulfil thecriterion of uniqueness?

Who are your target customers?

What is the value for thosecustomers?

What market volumeand growth rates do

you forecast?

What competitiveenvironment do you face?

What additional stages ofdevelopment are needed?

How much investment isnecessary (high level estimation)?

What long term goals have you

set?

Draft Business Plan

What do you estimate yourfinancing needs to be?

What are the sales, cost and profitsituations?

What are the most importantmilestones along the way to yourgoal?

What test customers have you

approached/could you approach?

What distribution channels willyou use?

What partnerships would you liketo enter into?

What opportunities and risks doyou face?

What is the picture on patents

Final Business Plan

What are the results of yourdetailed business planning?

What are your exact financingneeds?

How will you delegate managementtasks?

How much production capacity isnecessary?

How will the implementation ofyour business idea be organised?

What are your next concrete steps?


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Company Description

CompanyDescription

What type of business you are planning?

Home ownership development

Wholesale

Retail

Manufacturing or service

Legal structure Corporation or Partnership

Brief overview of Industry and current growth

trends

Documents supporting trend analysis


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Product or Service

Product/Service

What are the features or functions of the

product/service? Who are the target customers?

What value propositions does the product/serviceprovide to the customers? (e.g., tabulate

customers unfulfilled needs and ways the

product/service addresses those needs)

Define customer base or market for yourproduct/service

Describe Competition

Location where you will produce or distributeyour product or services.

Discuss advantage of location


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Product or Service

Product/Service

What is the development status of the product?What remains to be done to convert the business

idea into a tangible product or service?

Has this business model been proven elsewhere?What are some successful examples?

What is the plan to maintain the loyalty ofcustomers?

Provide a realistic estimate of the price for yourproduct or service and discuss the rationale

behind it.

Where it positions you in the market place :at thehigh end, low end or in the middle of the existing

range of prices for a similar product or service


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Management Team & Staffing

ManagementTeam/Staffing

Who are the founders/founder groups and what are

their qualifications, experience and pastachievements

How critical is the idea originator to the future successof the venture?

How are the management responsibilities sharedamong the team? (e.g., a table of team members with

their position and key activities/responsibilities)

What is the plan to reinforce management team in thefuture? (e.g., schedule of future management hiring

and skills required)

Staff required to operate your business

Tasks they will carry out

Skills they need

Recruitment process

Initial and ongoing training


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Equipment and Materials

Equipment &

Materials

What kind of equipment will you need.

Describe machinery and vehicles necessary inthe production ,packaging and distribution of

product.

Type of material and its sourcing.

FacilityDescribe the type of facility- building/land


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Market & Competition

Market &Competition

What is the potential market size for the product/service?(e.g., calculation derived from number of target

customers, units sold, value of sales)

What is the expected market growth and which majorfactors influence that growth?

Who are the likely competitors? What do they offer?

What are the strengths and weaknesses of competitors?What is your competitive positioning vis--vis

competitors?)

How will you inform your target market about yourproduct or services and how will you convince customers

to purchase it. Characteristics of target Markets

Demographic

Geography

Socioeconomic status


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Marketing & Sales

Marketing &Sales

What are the specific plans to promote theproduct/service?

How will the product/service be distributed? Whichpartners will be needed in the distribution channel?

What will be the pricing strategy? (e.g., how much will youcharge for different customer segments, quantities)

Present an estimate of how many people you expect willpurchase your product or services

Estimate should be based on the size of the market

Characteristics of your customers

Share of market you will gain over your competition

Year should be broken down monthly/quarterly

Account for initial presentation and market penetrationand seasonal variations in sales


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Business Organization and systems

Business

Organization

and Systems

What is the proposed organisational structure of the

company? How will this organisational structure help achieve

business goals?

What skills will be required and what is the hiring plan?(e.g., a table that shows total number of positions and the

functional description of positions, skills required for top

3 positions in each department)

What is the scope of the business? (i.e. what will beperformed internally and what will be outsourced?)

Have strategic partnerships been identified? If yes, howwill these partners be secured? If no, what is the plan to

get partners?

Have key vendors been identified? If yes, how will thesevendors be secured? If no, what is the plan to get

vendors?

l h d l


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Implementation Schedule

Implementation

Schedule

What is the detailed short term implementation plan?(e.g., Gantt chart showing detailed activities by month)

Who is responsible for each of the tasks?What are major milestones?

What are interdependencies between tasks? What is the 5-year implementation plan? (e.g., Gantt

chart showing activities by quarter)

Who is responsible for each of the tasks?What are major milestones?

What are possible long term options for the business?

l i h d l


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Implementation Schedule

Activity M1 M2 M3 M4 M5 M6 M7 M8 M9 M10 M11 M12

Filing of Legal

Incorporationdocuments

Identifying and securing

suitable space

Designing and

developing the product

Requird license or

permits

Securing necessary

Financing

Leasing or purchasing

equipment

Training staff

Purchasing materials

marketing activities

Opening


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P i l P bl /Ri k d i i


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Potential Problems/Risks and opportunities

The competition drops its priceNot enough customers

Production costs exceeds estimates

Difficulty in finding qualified employees

Environmental or Governmental Changes

POTENTIAL PROBLEMS

Risk and Opportunities

What are the best case and worst case scenarios for the 5-year financial projections? What are the key assumptions

on the key parameters? (e.g., market shares, profit margin)What does the sensitivity analysis show? (i.e., by varying

key assumptions in isolation)

What mitigating steps are planned in order to minimiserisks?

Fi i l Pl i


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Financial Planning

For the next 5 years (and at least 1 year beyond breakeven point),what are the projections for

Income statementCash flow statementCompany valuation, utilising

Discounted cash flow analysis

Revenue multiplesBalance sheet

What are the key assumption used in the financial performance?(e.g., cost of capital, market share, margin)

What are the financial requirements for the business and whatsources of financing have been identified? (e.g., financial

schedule with amount needed and possible financing sources

C h Fl


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Cash Flow

CashflowShows the amountof money a

business has: onhand at the

beginning of a timeperiod receiptscoming into thebusiness money

going out of thebusiness during thesame period

Ca

shflow

Show a cash flowstatement: bymonth for the firstyear of operations,

by quarter for thesecond and thirdyears

C h Fl


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Cash Flow

I t t t


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Income statement

P&LA

ccountShows sales

revenues,expenses, and netprofit or loss

P&LA

ccountObjective is to

come up with anapproximation ofwhat sales

revenues andexpenses

P&LA

ccountwill be Helpful to

break sales downby product line(or services) to

determine:

a best-case scenario

a worst-case scenario

a most likely scenario(somewherebetween the two

extremes)

I t t t


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Income statement

B l Sh t


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Balance Sheet

BalanceSheetA financial

document thatshows theassets,

liabilities, andowners equity

for a business Balan

ceSheetDifference

between assetsand liabilities isthe net worth

of the business also calledcapital B

alanceSheetUsed to

calculate keyratios, such asdebt to equity

and currentratio todetermine thefinancial healthof the business

Balance Sheet


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Balance Sheet

Breakeven Analysis


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Breakeven Analysis

Breakev

enAnalysis Point at which

sales and costsare equal and abusiness is

neither makingnor losingmoney

Breakev

enAnalysis Reinforce

financialprojections bycomparing

them toindustryaverages foryour chosenindustry

Breakev

enAnalysisUsed to

compareprojectedfinancial ratios

to industryaverages toestablish abenchmark

Breakeven Analysis


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Breakeven Analysis


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THANK YOU