7 - Effective Business Plan

8/3/2019 7 - Effective Business Plan

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Writing an Effective Business Plan:Crafting a Roadmap to Success


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Summary YesterdayHuman Resources

Need for balanced teams

Personalities

Due Diligence in Recruitment

Indicators of Deception

Team Organisation / Roles / Communication

Temporary / Full Time Employees

FinanceInformation needs

Uncertainty and Collateral

Venture Funding

Cash, Debt, Equity and Sponsorship


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Examination Exercise

y In your groups think about the topics we have covered

yesterday and:

yWrite two questions that are suitable for inclusion inthe final examination.


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The Business PlanThere is real magic in enthusiasm. It spells the

difference between mediocrity and accomplishment.

-Norman Vincent Peale,The Power of Positive Thinking 1961


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Group Exercisey Research shows that you can only expect audiences to

retain three (3) key messages in an presentation

yWhat do you think the three (3) key messages shouldbe in your business presentation?


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Why do I need a Business Plan?y Abusiness plan is often the entry-level requirement to

getting government money, investor capital or bank

loans.y Although you may have a complete picture of the

business in your head, investors and bankers need tosee if you have an understanding of the business and

have thought it through.y The plan provides you with the direction of your

company and is a guidepost for your employees, too.


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Business Plany Aformal, written expression of the entrepreneurs

vision for converting ideas into a profitable, going

business

y The entry card for serious consideration by venturecapitalists, banks, and other sources of funding


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A Living Documenty Abusiness plan changes often as a new business

develops.

y Refine the plan with information gathered fromrunning the new venture.


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Prepare a

relatively

straightforward

plan

Start the

business

Refine the

business plan

Continue to

grow the

business

Model of Successful

Business Planning


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Business Plan ComponentsyWhat is the basic idea?

yWhy is the new product appealingand to whom?

y How will the idea be realized?yWho are the entrepreneurs?

y How much funding is needed?

y What type of funding?

y How will it be used?

y How will you realize a return?


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A Successful Plan

y Aserious document prepared by serious people

y Orderly

y Succinct

y Persuasivey Accurate


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Executive Summary

y Your overview

y Provides a brief, clear, and persuasiveoverview of the new venture

y Target 2 to 3 pages


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Business Plan Sectionsy Background and purpose

y Marketing

y Competitiony Development,

production, and location

y Management

y Financial information

y Risk factors

y Harvest or exit strategiesy Scheduling and

milestones

y Appendices


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Background, Product, and PurposeyWhat is the nature of the idea driving your company

and how did it arise?

yWhat does the product have to offer?

yWhat is the basic nature of the company?

yWhat is the companys mission?


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Market AnalysisyWhat have you done to identify the market?

y How large is the market?

y

How will products or services be promoted?yWhat do you know about competing products and

companies?

y How will the product or service be priced?


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Development, Production, and LocationyWhere are the products or services in the development

process?

yWhat are the projected costs and timetable for makingthe product or delivering the service?

yWhat steps have been taken to assure quality andsafety?


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Management Teamy Do team members have the experience, expertise,

skills, and personal characteristics needed?

yDo team members having good working relationships?


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Financial Plans and Projections

y Proforma balance sheet

y Proforma income statement

y Cash flow statement

y Break-even analysis


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Group Exercisey Your business plan needs to show that you have

considered the risks involved and the possibility of

failure

yWhat are the critical risks of business start up?


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Critical Risksy Difficulties raising financing

y Unforeseen trends and events

y Sales projections not achievedy Unforeseen industry trends

y Price cutting by competitors

y Costs exceed estimates

y Schedules not met

y P E S T


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Harvest and Exit

y Management succession

y Exit strategies


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Scheduling and Milestonesy Formal incorporation

y Completion of design

y Completion ofprototypes

y Hiring of initialpersonnel

y Product displays

y Agreements

y Moving into productiony Receipt of orders

y First sales

y Profitability


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The Intangibles

y The extra something?

y The extra value?

y Pay attention to organization, clarity, wordchoice, and style

yHave good writers read your plan

y Revise according to their suggestions


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Seven Deadly Sins1. Plan is poorly prepared

2. Plan looks too slick

3. Executive summary is too long4. Development stage of product is unclear

5. Fails to answer Why would anyone ever want to

buy one?6. Doesnt state management qualifications

7. Financial projections are wishful thinking


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Summary The Plan will at least include:y Table of Contents

y Executive Summary:

y

In one or two pages, summarize your business idea. Remember, oneof the purposes of your plan is to persuade investors or financersthat your business idea is a solid one.

y Make your Executive Summary interesting and positive so that yourreaders will continue past the first page.

y Vision, Mission and Objectives:y Explain the purpose of your business and what you hope to

accomplish.


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Summaryy Company and Industry:

y Give background information on the origins and structure of yourventure and the industry you'll be competing in.

y Development: List the name, date of formation, legal structure,

subsidiaries and degrees of ownership within your business.y Location: Describe the location and its appeal to your target

market.

y Operation:Hours of operation.

y Products and Services:

y Give a complete but concise description of your product(s) and /orservice(s), focusing on what makes your product unique.

y What benefits will customers gain from your product that yourcompetitors do not offer?


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Summaryy Market and Competition:

y Provide information that shows potential investors or financers that youunderstand your target market well enough to succeed.

y

Be sure to identify strengths and weaknesses of your competitors.y Management:

y Summarize the background, experience and qualifications of theprincipals, directors, and key management personnel in your company.

y How will they contribute to the success of the company?

y

Marketing Strategy:y Provide projections of sales and market share, and outline a strategy for

identifying and contacting customers, setting prices, providing customerservice, advertising & PR

y e.g. Multi-media, specialized publications, billboards, networking etc.


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Summaryy Design and Development Plans:

y If your product requires design or development, describe the nature andextent of what needs to be done, including costs and possible problems.

y Operations Plan:y Provide information on the facilities, equipment, and labour needed.

y Organizational chart: Who are the key individuals and planned staffadditions? How many and of which type will you need at the differentstages of the business cycle?

y Overall Schedule:

y Forecast completion dates for major aspects of the business plan.

y Critical Risks and Problems:

y Identify all negative factors and discuss them honestly.


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Summaryy FinancialProjections and Requirements:

y DO NOT expect the lender to tell you how much money you canborrow. Explain how much money you need and WHY.

y Include a detailed budget of start-up and operating costs, as well as projections ofincome, expenses, and cash flow for the first three five years of the business.

y Identify the company's financial needs and potential sources of capital.

y Production

y Describe how production or delivery of services will beaccomplished.y Describe the capacity of the operation - physical facilities, suppliers, patents,

labour and technologies that exist or will be used.

y Type and amount of machinery and durable equipment needed to operate thebusiness.

y Describe where and how you will obtain your components and day-to-daysupplies and services.


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Summaryy Harvest / Exit Strategy:

y Explain how investors will be able to cash out or sell their investment, suchas through a public stock offering, sale of the company, or buyback of the

investors' interests etc..y Identify clear exit points

y When covering these points, remember that the audience wants short,concise information and realistic projections for growth


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The Presentationy Remember: This is important!

y Prepare, prepare, prepare

y Choose content carefullyy Persuade, dont overwhelm

y Show enthusiasm tempered with reality

y Rehearse

y Dont overlook the basicsy Respond positively to questions


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Examination Exercisey In your groups think about the topics we have covered

today and:

yWrite two questions on the business plan that aresuitable for inclusion in the final examination.


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Case Studyy In groups: Read and critique the case studyGarbos

Restaurant & Lounge..

y Consider what elements of this business plan would beuseful to your group?

y What could be added deleted amended?

y

Would you invest in Garbos based on this businessplan?

y As an investor what additional information would yourequest?


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Thursday 23rd Julyy Class-time is for group work on your business plan and

rehearsal of presentation

y If you need advice we will be available in our offices

7 - Effective Business Plan

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