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Business Plan DevelopmentPresented By : Wissam N. Saleh

Presentation OutlinePurpose of a Business Plan Executive Summery Company Overview Product of Service Plan Market and Industry Analysis Marketing Plan Operations Plan Risks Financial Plan

Purpose of A business plan

Who Should Write ? Why Write ? What Are the Uses of a Plan ?

• Action Plan

• Road Map

• Fund Raising

• Sales Tool

Executive Summary I

Objective : Capture the reader’s interest . The last section to be written . The reader should be able to tell what your plan is all about . Max of two pages.

Executive Summary II1. Concept Description 2. Opportunity 3. Product Service 4. Value Proposition 5. Marketing Strategy 6. Competitive Advantage 7. Management 8. Financial 9. Funding

Product or Service PlanThe reader is excited to hear about your operations, marketing and financial planning . Sources of Information :

1. Technical Specifications and Drawings . 2. Prototype 3. Competitor Product/Service Matrix 4. Interviews 5. Surveys 6. SWOT Analysis

Business Model

Product/Service Plan IIFeatures :

Key Attributes

• Function , Speed, Taste, Cost Reduction, Stability , Reliability , Responsiveness ... Etc

Enhancements :

• Unique Process, Delivery Method, Location, Packaging, Tech Support , Delivery , Warranty , Payment Terms .

Product/Service Plan IIIProduct or Service Strategy :

What is the extend of the product/service mix ?

What will be introduced initially ? 3 years ? Five years ?

Show your Evidence .

Milestones of Development .

Differentiation ( Bundling , Warranty , Packages , Price Matrix ... etc .

Product/Service Plan IV

Benefits to the Customer Easier to use , delivery on time , used based on demand , quality , durability , appearance . Are the customers aware of these benefits ? Are they really benefits ?

Market and Industry Analysis

Objective : Prove that there is an Opportunity . No passion , just data . No mention of your business. You should be able to Validate the need for your product/service .

Market AnalysisHow Large is your market ?

Large ? Number of Products/ Services Or Customers

Growing ? The Growth Rate

Segmentation ? Trends and Opportunities?

Market Analysis IIAddressable Market

You can target various sectors and various segments . Usually, Capturing the entire market is hard . Example : Consumer Products .

Market Analysis III

Entry Point : Based on your Segmentation , Choose your Entry Point . However, Do they really need your Product/Service ? Do They Understand the Benefits ? What Future Segments Would Join ? Why ?

Market Analysis Process

Industry Analysis IObjective : Know you competitors and how they compete . Understand the nature of the market Elements :

Industry Organization What are the goods ? Where are they produced ?Supply Chain ?How do your competitors see themselves ?

Competitive Environment How do they compete ? Service ? Quality ? Price ? Technology ? Customer Support ? Highly Competitive ? Price based ? Profit Margins ? Net Profit Margins ? How do they deal with new comers ?

Industry Analysis IIBarriers to Entry

Legal ? Economy of Scale ? Customer Loyalty ? Agreements with Suppliers ? Control of Distribution Channels ? High Cost of Entry ? Social Conventions ?

Industry Analysis IIIControl

How much control do you have over : Prices , Costs , Channels of Distribution , Buying your way in .

Competition Direct Indirect Future

Financial Analysis

Objective : Project your Revenues and calculate key Ratios . Method : Excel Modeling

Risk Management

OutlineRisk Concepts

Risk Management:

Risk identification

Risk Analysis (Qualitative and Quantitative)

Risk Response Planning

Risk Monitoring and Control

Risk Management Techniques

PERT, Mont Carlo Simulation, Decision Trees,...

Sample Applications

Concepts

Risk: The possibility of suffering loss (or harm) and the impact of that loss on the involved party. Risk can be characterized in terms of its Severity where:

Severity = Likelihood of Occurrence x Magnitude of the Impact.

Risk: Any event which is likely to affect (adversely) the ability of project to achieve the defined objectives.

Concepts II

Risk: A measure of the probability and consequence of not achieving a defined project goal (Kerzner 2001).

Risk=ƒ[Si,Pi,C] i=1,2,3,......Si: is a scenario of events that lead to hazard exposure (unwanted change);Pi: is the likelihood of scenario i; andCi: is the consequence of scenario.

Risk = ƒ [hazard, safeguard]! Risk increases with hazard but decreases with safeguard.

Concepts III

Opportunity: The possibility of realizing a favorable outcome and the impact this outcome has on the involved party. Opportunity is positive risk and can be identified and managed in a similar way.

Uncertainty: The gap between the information required to estimate an outcome and the information already possessed by the decision maker.

Concepts IV

Risk Analysis: The process of identifying risk factors and the quantification of those factors (estimating likelihood and magnitude of impacts).

Risk Mitigation: The process of developing a plan to respond or deal with risk on a project.

Why Risk Analysis ?

1. Minimize management by crisis 2. Minimize surprises and problems 3. Increase probability of project success 4. Better handling of true costs and schedules by properly estimating

contingencies...

Risk ManagementDefinition: RM is the act or practice of dealing with risk. It is the process by which risks to the project (e.g., to the scope, deliverables, schedule, resources,...) are formally managed during the project.

Processes: RM includes planning for risk, identifying and analyzing risk, developing risk handling options, and monitoring risks to determine how risks have changed.

Goal: minimizing potential risks while maximizing potential opportunities and if properly conducted, reducing not only the likelihood of an occurred event, but also the magnitude of its impact.

Characteristics of Risk

1. For risk to be an issue, the event and/or its outcome must be associated with a certain degree of uncertainty (the possibility).

2. In practice it is virtually impossible to avoid all risks. 3. Risks can be reduced and sometimes transferred (e.g. through

contracts, financial agreements, allowances, insurance policies).

Potential Risks and Knowledge Areas

Knowledge Area Potential risks

Scope Poor definition of scope or work packages; incomplete definitions of quality requirements; inadequate scope control.

Time Errors in estimating time or resource availability; poor allocation and management of float; early release of competitive product.

Cost Estimating errors; inadequate productivity, cost, change, or contingency control; poor maintenance, security, purchasing,...etc.

Quality Poor attitude toward quality; substandard; design / materials / workmanship; inadequate quality assurance program.

Communication Carelessness in planning or communication; lack of consultation with key stakeholders.

Risk Ignoring risk; unclear assignment of risk; poor insurance management.

Process of Risk ManagementGenerally involves the following steps: 1. Risk Management Planning

2. Risk Identification

3. Risk Analysis :

Qualitative & Quantitative.

4. Risk Response Planning

5. Risk Monitoring and Control

1- Risk Management PlanningDeciding how to approach, plan and execute the risk management activities for a project.

Output: Risk Management PlanDescribes how risk management will be structured and performed in the project. It includes:

Methodology.

Roles & responsibilities.

Budgeting.

Timing.

Risk categories .

Definition of risk Probability & impact.

Probability and impact matrix.

Revised stakeholders tolerance.

Reporting formats.

Tracking.

2- Risk IdentificationDetermining which risks might affect the project and determining their characteristics.

Example :

Inflation Rate

Tax Increase

Technical Error

........

3- Qualitative Risk AnalysisPrioritizing risks for further analysis by assessing and combining their probability of occurrence & impact.

Using Surveys to Classify the Risks Based on Their Severity .

What is Severity ? It is the Product of the Probability and The Impact

What is the Impact ?

Given in the Following Table :

S<=0.05 0.05<S<-0.1 0.1<S<= 0.3 0.3<S<=0.5 S>0.7

0% 2.5% 7.5% 15% 30%

3- Qualitative Risk Analysis IIOutput :

4- Quantitative Risk AnalysisNumerically analyzing the effect of identified risks on overall project objectives.

The objective is to get the numerical value of risk .

How ?

Through Surveys , Surveys quantify how probable the event is to occur and what is the impact of its occurrence on the business .

Probability ?

Probability Distributions .

Simulate Answers .

Probability Distributions IIn probability and statistics, a probability distribution assigns a probability to each of the possible outcomes of a random experiment. Examples : Random , Poisson , Kai ... Etc

Simulate Answers .

With computer packages ( Crystal Ball , now you can use the answers of your surveys to fit a probability distribution and simulate an unlimited amount of answers . Thus, Converging to the true risk figure .

4- Quantitative Risk Analysis

Risks Estimated Cost

Exchange Rate

Probability Impact Severity Cost if Happens

Imports 100,000 0.3 0.3 Probability * Impact

If S<0.05 Then ) * Estimated Cost

OR ...... If Statements

Operations 500,000 0.2 0.1 Probability * Impact

If S<0.05 Then ) * Estimated Cost

OR ...... If Statements

Outputs 800,000 0.4 0.15 Probability * Impact

If S<0.05 Then ) * Estimated Cost

OR ...... If Statements

Based on Surveys Remember the Table ?

.............

Total Additional Cost

Total Cost

% Additional

Quantitative Example - Crystal Ball

5- Risk Response PlanningDeveloping options and actions to enhance opportunities and reduce threats.

Tools and Techniques :

Avoid : Change Scope

Transfer : Insurance , Warranties , Guarantees

Mitigate : using less complex process, conducting more tests or choosing more stable suppliers

Acceptance .

6- Risk Monitoring and Control

Tracing identified risks, monitoring residual risks, identifying new risks, executing risk response plans, and evaluating their effectiveness throughout the project life.

Thank You