CDU – School of Information Technology HIT241 Lecture 11 - Slide 1
The demand for business planning is driven by the need for management processes that:
Identifies business areas where action - especially effort and control - is essential.
Provides a framework to communicate the organisation’s future direction.
Encourages strategic planning, and the evaluation of the strengths and weaknesses of the organisation.
Encourages development of management information systems to support decision-making.
Provides a process for analysing the potential success of a new product or process.
HIT241 - BUSINESS PLANNING
Introduction
CDU – School of Information Technology HIT241 Lecture 11 - Slide 2
Business planning is also important in providing the project and organisational information required by potential sources of finance.
This is particularly critical where organisations are dependent on external sources of finance, such as bank loans or government grants.
Large organisations are generally more successful in obtaining access to finance, often because they are able to provide more detailed justification of their requirements.
HIT241 - BUSINESS PLANNING
Introduction
CDU – School of Information Technology HIT241 Lecture 11 - Slide 3
A business plan is a systematic way of planning for the future.
It is based upon the experience & achievements of an organisation, and aims to set realistic objectives for the future.
A business plan seeks to achieve the most advantageous and workable compromise between what an organisation wants to do, and what it can do. It will show how proposed policies are integrated, and how one issue affects another.
HIT241 - BUSINESS PLANNING
Definition
CDU – School of Information Technology HIT241 Lecture 11 - Slide 4
Any business plan must meet three criteria: It must be simple. It must be accurate. It must be useful.
The benefit of initially developing a relatively simple business plan is that it is easy to identify the limitations, and make allowance for detail that may be collected at a later date.
HIT241 - BUSINESS PLANNING
Criteria
CDU – School of Information Technology HIT241 Lecture 11 - Slide 5
There are things that a business plan cannot do:
Planning is not a cure for all problems - it does not exempt management from making decisions.
Planning should not be seen as a rigid, inflexible answer to all the firms problems. External and internal conditions will change.
Planning is only as good as the people who carry it out, and the use to which it is put.
HIT241 - BUSINESS PLANNING
Limitations
CDU – School of Information Technology HIT241 Lecture 11 - Slide 6
Many organisations treat planning as an annual ritual that must be completed, but make no attempt to develop realistic plans, relevant to the core business.
There is no point in planning if it is not realistic. A plan, once completed, should be the best possible solution to the situation facing an organisation.
Planning takes resources - time and effort - so the results of planning should be used - not discarded at the earliest opportunity.
HIT241 - BUSINESS PLANNING
Pitfalls - What to Avoid
CDU – School of Information Technology HIT241 Lecture 11 - Slide 7
HIT241 - BUSINESS PLANNING
BUSINESSPLAN
• Understanding the Business & providing corporate information.
• Identifying problems and areas of conflict.
• Identifying areas to improve performance.
• Clarify corporate objectives and ensure that they are consistent.
• Coordination of business unit
INFLUENCES
Government Stockholders Marketing Competitors
CDU – School of Information Technology HIT241 Lecture 11 - Slide 8
The business planners should begin by considering the following questions:
Where is the business at present? This leads to information gathering which will also help answer:
What are the objectives and goals that the business is trying to achieve?
What is the most effective way of achieving these goals?
HIT241 - BUSINESS PLANNING
Beginning
CDU – School of Information Technology HIT241 Lecture 11 - Slide 9
A business planners must undertake a series of specific tasks to answer the 3 questions (previous slide). This involves analysing and documenting:
HIT241 - BUSINESS PLANNING
Tasks ...
• History• Goals• Assumptions• Quantification
• Resource allocation• Checking• Sensitivity analysis• Contingency planning
CDU – School of Information Technology HIT241 Lecture 11 - Slide 10
HIT241 - BUSINESS PLANNING
Elements of a Successful Business Plan
• Table of Contents (1 page)
• Executive Summary (1 page)
• Company Overview (1 page)
• Products and Services (1 page)
• Industry and Market Analysis (~3 pages)
• Marketing Plan (~4 pages)
• Operations Plan (~2 pages)
• Development Plan (~2 pages)
• Management Plan (~1 page)
• Financial Plan (~3 pages)
• Offering (1 page)
• Appendices (no more than 15 pages)
CDU – School of Information Technology HIT241 Lecture 11 - Slide 11
The Executive Summary of a Business Plan is a one-page distillation of your entire plan, and often is the last section to be written.
It’s objective is to capture the reader’s interest,so that they want to read the entire plan. It is not a summary of the plan; rather it should be considered a chance to “sell” the reader on the business opportunity.
Remember, most readers will never get any further than your Executive Summary, so make it count!
HIT241 - BUSINESS PLANNING
Executive Summary
CDU – School of Information Technology HIT241 Lecture 11 - Slide 12
Concept Description: The essence of the business.
Opportunity: What is the size of the market & its critical trends?
Solution: Describe the product or service & problem solutions.
Competitive Advantage: What is unique about the product?
Process: How is the product to be produced and delivered?
Positioning: What segment of the market are you addressing and how will customers perceive the product or service?
Financial: What revenues will be achieved in year 3 or 4 and when will the company breakeven? How much funding is required? What is the exit strategy?
Management: Who are they and what is their experience?
HIT241 - BUSINESS PLANNING
Executive Summary
CDU – School of Information Technology HIT241 Lecture 11 - Slide 13
The Company Overview is a brief (one page) description of the company you have founded or want to set up. It should describe the structure of the company, and how will it be organised. It should include:
Introduction - including name, location & business structure.
Mission statement - a short inspirational statement of vision and goals.
History and current status. Objectives as a concise statement.
HIT241 - BUSINESS PLANNING
Company Overview
CDU – School of Information Technology HIT241 Lecture 11 - Slide 14
This section is a detailed description of the products and/or services to be offered.
Begin to sell the idea here by generating some excitement about the product/service.
Be factual, but be enthusiastic. When readers have finished learning about the product or service, they should be primed to wade into the marketing and financial details of the venture.
HIT241 - BUSINESS PLANNING
Products & Services Description
CDU – School of Information Technology HIT241 Lecture 11 - Slide 15
This section should include: An introduction - that evocatively describes the
experience of customers dealing with your company as they purchase the product.
Description - what exactly is the product or service. Market Comparison - position the product or service in
its marketplace. Proprietary rights - what patents, copyrights, trade
secrets, non-competitive agreements are in place? Stage of development - where is the product in its
lifecycle (early, growing, mature, declining)?
HIT241 - BUSINESS PLANNING
Products & Services Description
CDU – School of Information Technology HIT241 Lecture 11 - Slide 16
This section describes and outlines the industry and the marketplace in which you will compete. The focus in this section is on the industry and marketplace as it currently exists – you may not even mention your business here, unless it already a part of the industry.
When finished with this section, the readers should understand the dynamics, problems, and opportunities driving the industry and marketplace.
HIT241 - BUSINESS PLANNING
Industry & Marketplace Analysis
CDU – School of Information Technology HIT241 Lecture 11 - Slide 17
This section should include: An introduction - summarising the industry and
marketplace analysis. Industry Analysis - providing a big-picture overview of
the size and scope of the industry. Marketplace Analysis - carefully and analytically
describe the specific market that it is proposed to operate within.
Marketplace Buyer Analysis - identify and segment the customers in the marketplace.
Marketplace Competitor Analysis - identify potential direct and indirect competitors.
HIT241 - BUSINESS PLANNING
Industry & Marketplace Analysis
CDU – School of Information Technology HIT241 Lecture 11 - Slide 18
The Marketing Plan will make or break the prospects for the venture. A great idea is meaningless if you cannot find customers, & logical financial projections are irrelevant if nobody buys the product.
In the marketing strategy you must convince yourself and the reader, that there is a real market for the product. The strategy is where you show how you are going to fit into the market structure previously described in the Marketplace Analysis.
HIT241 - BUSINESS PLANNING
Marketing Plan
CDU – School of Information Technology HIT241 Lecture 11 - Slide 19
Create a seven-sentence marketing strategy statement:
1. The first sentence tells the purpose of the marketing strategy.
2. The second tells how you’ll achieve this purpose, focusing upon your benefits.
3. The third tells your target market – or markets.
4. The fourth, the longest sentence, tells the marketing weapons you’ll employ.
5. The fifth tells your niche.
6. The sixth tells your identity.
7. The seventh tells your budget, expressed as a percentage of your projected gross revenues.
HIT241 - BUSINESS PLANNING
Marketing Plan - Introduction
CDU – School of Information Technology HIT241 Lecture 11 - Slide 20
This section defines the target market, and describes the unmet needs of the target customers. It should consider:
What segment of the market is targeted? What characteristics define target customers? How big is the target market? What share will we capture? Who are the customers, users, OEM's distributors &
retailers? What needs does the product fulfil with the target market? What problems are we solving for these customers? What evidence is there that potential customers and the
target market wants our product? How will we position our product with our customers?
HIT241 - BUSINESS PLANNING
Marketing Plan - Target Market
CDU – School of Information Technology HIT241 Lecture 11 - Slide 21
Describe how the product has been designed to meet the needs of the target customer, and compete in the target market:
What specific product design characteristics meet the needs of your customers?
What differentiates our product in our target market? How does it differ from that of our competitors? What are the strengths and weaknesses of our product? Why will customers in the target market buy our product rather
than the competitions? Why will customers switch select us? How will we differentiate ourselves from our competitors? How quickly and how effectively can your competitors respond
to our business?
HIT241 - BUSINESS PLANNING
Marketing Plan - Product Strategy
CDU – School of Information Technology HIT241 Lecture 11 - Slide 22
The plan also needs to define the following: Pricing Strategy and why it will be effective with the
target customer in the marketplace. Distribution Strategy and explain why it is the best for
the marketplace. Advertising and Promotion Strategy - it is critical to
inform the target market about the availability of your product or service, and to continue to communicate your benefits to that market.
Sales Strategy - remember, often “Nothing happens until the sale is made”.
HIT241 - BUSINESS PLANNING
Marketing Plan - Other Strategies
CDU – School of Information Technology HIT241 Lecture 11 - Slide 23
Summarise of your marketing expenses and revenue forecasts here. Include enough information to inform, but not so much that the reader is overwhelmed. For example you might include a table summarising revenues for a simple business that looks like this:
HIT241 - BUSINESS PLANNING
Marketing Plan - Forecasts
CDU – School of Information Technology HIT241 Lecture 11 - Slide 24
This section outlines how you will run your business and deliver value to your customers.
Operations is defined as the processes used to deliver products and services to the marketplace and can include manufacturing, transportation, logistics, travel, printing, consulting, after-sales service, and so on.
In all likelihood, about 80% of your expenses will be for operations, 80% of your employees will be working in operations, and 80% of your time will be spent worrying about operating problems and opportunities.
HIT241 - BUSINESS PLANNING
Operations Plan
CDU – School of Information Technology HIT241 Lecture 11 - Slide 25
The plan should include the following parts: Introduction - how you will provide value to your customers. Operations strategy - using operations to fulfil the
marketing strategy. Scope of operations - who, what and why? Ongoing operations - operating into the future. Operating Expenses - a brief summary of anticipated costs:
HIT241 - BUSINESS PLANNING
Operations Plan
CDU – School of Information Technology HIT241 Lecture 11 - Slide 26
In this section, you will outline how you intend to ramp-up your business.
This section is often woefully under-developed in many business plans. Assuming you have a dynamic marketing plan and customers do indeed come flocking for your product or service, you must be able to deliver it to them.
The Development plan is a road map of how you are going to get from where you are now to where you want to be in the future. It commences with a development strategy to launch the company and its products.
HIT241 - BUSINESS PLANNING
Development Plan
CDU – School of Information Technology HIT241 Lecture 11 - Slide 27
This is where a Gantt Chart showing the timetable for product development is appropriate.
HIT241 - BUSINESS PLANNING
Development Plan - Timeline
CDU – School of Information Technology HIT241 Lecture 11 - Slide 28
Include a summary of anticipated development expenses and of the assumptions behind your estimates.
HIT241 - BUSINESS PLANNING
Development Plan
CDU – School of Information Technology HIT241 Lecture 11 - Slide 29
The purpose of the Management Plan is to convince the reader that you have a great management team to complement a great business concept. When readers are finished with this section, you want them to be confident that your venture is in good hands and will be competently managed -- by you! This plan should include:
Company organisation - describe the business structure. Management team - who are they, and what are the key
roles and responsibilities. What additions are planned? Administrative Expenses - a summary of anticipated
administration expenses and of the assumptions behind the estimates.
HIT241 - BUSINESS PLANNING
Management Plan
CDU – School of Information Technology HIT241 Lecture 11 - Slide 30
It is important that you have strong, well-constructed financial plans. It is highly recommend that you start with your revenue projections then create a schedule or timetable of development and operational activities. The financial plans should include:
Financial Statements - income statements, balance sheets, & cash-flow projections, for at least 3 years into the future.
Ratio Analysis - compare critical financial ratios from your plan to those of your industry.
Financial summary - incorporating income, cash flow, balance sheet, and growth.
Financial Assumptions. Funding Requirements, and Sources & Uses of Funds. Business Risks - what are they, & how can they be avoided?
HIT241 - BUSINESS PLANNING
Financial Plan
CDU – School of Information Technology HIT241 Lecture 11 - Slide 31
HIT241 - BUSINESS PLANNING
Summary of Financial Projections
CDU – School of Information Technology HIT241 Lecture 11 - Slide 32
The Offering is where you make your pitch for money. If you are seeking a loan, then you need to indicate to potential lender how the loan will be repaid and what is the interest rate. It is important that you clearly spell out the key terms of the proposal and sell the advantages to the investor/lender.
Investment Requirements - Using your cash flow analysis, what investments do we require to achieve our plans? What is the timing?
Valuation of Business Offer - What is the structure of the deal we are offering or
seeking? How much money do we want? Exit Strategies - What is our preferred exit strategy? How can
investors realise a return on their investment?
HIT241 - BUSINESS PLANNING
Offering (Funding Request)
CDU – School of Information Technology HIT241 Lecture 11 - Slide 33
The appendices are where you should collect all of the documentation that supports the body of your business plan.
HIT241 - BUSINESS PLANNING
Appendices
Required items• Financial Statements
- Income Statement- Balance Sheet- Cash Flow- Monthly and Quarterly - Cash Flow Statements- Break-even analysis- Financial assumptions
• Management resumes
Optional items• Surveys and survey results.• Development timeline.• Operations layout.• Sample menus, web
pages, advertisements, etc.
• Anything else that will help to illuminate and/or sell your plan.
CDU – School of Information Technology HIT241 Lecture 11 - Slide 34
Writing a business plan is an essential step for the growth of every company. It describes the organisational goals, and how to achieve them. The business plan is especially important for:
Developing new technologies and products. Obtaining external financial support. Managing mergers and acquisitions. Arranging strategic alliances. Building relationships with customers & suppliers. Attracting and retaining key employees.
HIT241 - BUSINESS PLANNING
Conclusion