PREPARING AN EFFECTIVE BUSINESS PLAN

PREPARING AN EFFECTIVE BUSINESS PLAN

PRESENTED BY

Kenneth W. K. Adokoh(BSc. Hons Mathematics, AeCP Financial Mgt)

Policy Implementation & Strategy Manager

phf International Housing Consultancy2009


CONTENTS

BACKGROUND OF phf International Housing Consultancy

WHAT IS A BUSINESS PLAN AND ITS PURPOSES

THE BUSINESS PLAN DETAILS

WHY BUSINESS PLANS FAIL TO ATTRACT FUNDING


BACKGROUND OF phf International Housing

ConsultancySocial Housing and Regeneration Specialists

Housing Management

Urban Renewal

Sustainable Neighbourhood Development

Community Regeneration Packaging

Social Care PackagingRural Housing Management


WHAT IS A BUSINESS PLAN


1 “ A business Plan is a document that highlights the operational and financial

objectives of a business Entity.

The Business Plan contains the individual detailed plans and budgets showing how

the objectives would be achieved.


2 “ Is a comprehensive planning document, which clearly describes the business developmental objectives of an existing or proposed business and

its plans for several years into the future.


3 “ A business Plan is a strategic top level plan or budget expressed in financial

terms looking forward at least one year, often five years or more.

The business plan is usually implemented using individual plans such as

operational and Marketing Plans.


4 “ It is a detailed description of the plans of an existing business and its

expansion plans , or a new business, with financial projections.

A BUSINESS PLAN AND INVESTMENT PROPOSAL

How does a business plan differ from Investment Proposal ?

The business plan differ from Investment proposal, but the difference is not

much.

The business and the Investment proposal have the same contents, you can think of an investment proposal as

a business plan with a different audience.

A BUSINESS PLAN PROPOSAL

How does a business plan differ from Investment Proposal ?

The business plan is considered as an internal document, while the

investment proposal , which is designed to be presented to external agencies such as lenders, banker and

other investors.

BUSINESS PLAN AND FEASIBILITY STUDY

Remember:There is a difference between a

Business Plan and a Feasibility Study.

A FEASIBILTY STUDY

A Feasibility Study is an expert document, which advises on the commercial or technical viability of a project or a

venture.

The Feasibility study is one of the key input documents used in the

preparation of a business Plan. But it is not a business Plan.

A FEASIBILTY STUDY

A Feasibility Study is an expert document, which tell the commercial or technical

viability of a project or a venture.

The Feasibility study may contain headings or sections as in business plan, it is not a business plan, but

rather one of the key input documents used in the preparation of a business

Plan.

A FEASIBILTY STUDY

Examples of Feasibility Study

• Market facility Study• Production or Technical Feasibility

study

These two feasibility studies reports are essential in a well developed business plan for major funding.

PURPOSES OF A BUSINESS PLAN

TYPES OF BUSINESS PLAN

THERE ARE MANY TYPES OF BUSINESS PLANS. THE PURPOSE OF THE BUSINESS PLAN DICTATES ITS

TYPES:

BROADLY SPEAKING,THERE ARE TWO TYPES:• Business Plans Prepared for the Purposes of

Internal operations• Those used for external Purposes such as

raising capital.


Reasons why a business plan is prepared include:

•It defines and focus the business objectives using appropriate information

and analysis•It contains detailed financial projections, forecast about a business’s performance, and a marketing plan, it is a useful tool

for business planning.


• The business Plan can be use as selling tool in dealing with Investors, Lenders

and Banks

• It can be used to solicit opinions and advice from people including, internal

managers and external experts such as Accountants.

•The business Plan may uncover omissions or weakness in the company’s

planning process.

DETAILS OF THE BUSINESS PLAN


There is no standard Contents Or Details of a business plan.

The contents or details will usually be determined by the preparer/Consultant. The length of the business plan depends on the complexity of the business and

may be as many as 30 – 40 pages.However, most business plans will cover

six or seven sections


THE COVER PAGEThe cover page of the should include:

•The legal name of the company•The name of the document

•Name, address and Phone of the individuals or business who prepared the

plan•Date of Preparation of the Document

DETAILS OF THE BUSINESS PLANTHE COVER PAGE – Example

STELCO LIMITED BUSINESS PLANPrepared by

RDA Investment ConsultantsP.0. Box 16816

Accra NorthTel: 021 3043 41

MAY, 2008

DETAILS OF THE BUSINESS PLANSection 1 – Executive Summary

The Executive Summary is normally the first part of any business plan. The summary allows the company to tell its story without disclosing all

the detailed information.

The Executive Summary should be brief covering ( 5 pages ) or less and should pique the

reader interest.

This Executive Summary section highlights the main points covered in the body of the business

plan and its written upon its completion.


Section 1 – Executive SummaryThe summary will cover the following:

• The Purpose of the Business Plan• The Project Concept

•The Company, Governance and Management

• The Industry Market and Marketing Plan• Technical Aspect of the Project

• Financial Analysis and Plan•Risk and Socio Economic Analysis

DETAILS OF THE BUSINESS PLANSection 2 – The Project Concept

• What the projects is all about ie The project involves the completion of the newly

constructed three star hotel resort located in Accra.

• It provides more detailed description of the business venture ( product and services )

• Product protection and exclusive rights, copy rights, Trade marks

•Uniqueness of the product or services

DETAILS OF THE BUSINESS PLAN Section 3 – The Company,

Governance and Management

cover the following:• Mission , Vision , Objective, Values

• The Incorporation of the Company and its authorised business, Certificate to Commence Business

• Promoters Ownership of the company ( Sole proprietorship,

Partnership, Limited )

• Directors of the Company ( Name and Role Summarized Cv )

•Background of Key Management Personnel ( Brief Resume )

DETAILS OF THE BUSINESS PLANSection 3 – The Company, Governance and Management

•Summary of planned staff numbers and recruitment plans

• Training Policies

•Organizational Chart ( Identify Reporting Relationship

•Duties and Responsibilities of Key Personnel ( Brief Job description to indicate who is responsible for what

• Contracts with Professional or Consultants ( External Assistance )

DETAILS OF THE BUSINESS PLANSection 4 – The Industry and the Market

This section will cover the industry in which the company operates, its market and competition

in the market. Details will include• Regulations in the industry

• Industry outlook and growth, industry trends and new developments

•Analysis of the forces and the impact on the industry

•Analysis of the opportunities and threats in the industry

DETAILS OF THE BUSINESS PLANSection 4 – The Industry and the Market

• National and economic trends ( population shifts, consumers trends, relevant economic

indicators ) ii The market and customer ( Size of the market,

market trends and new requirements )• Analysis of Competition ( market share )

•Demand and supply iii Marketing Plan which will indicate marketing

positioning ie critical product / service characteristics or uniqueness in relation to

competitors, pricing polices, selling and distribution policies, advertising and promotion,

DETAILS OF THE BUSINESS PLANSection 4 – The Industry and the

Market

•Sales Strategy (sales objectives and targets, agent, commission sales staff,

sales support, sales tools )•Product / service support policies

•Interest shown by prospective customers or existing customers

• Tracking Methods ( methods for confirming who your customers are and

how they heard about the company)

DETAILS OF THE BUSINESS PLANSection 5 – Technical Aspect

This section will cover four major sub heading:

(i) Manufacturing and Operations• Premises location

• Other facilities such as electricity, water, telephones

• Manufacturing capacity• Sources of raw materials• Use of Subcontractors

• Brief description of production processes


This section will cover three major sub heading:

• Machinery and equipment ( new or used, leased or purchased )

• Cost of facilities, equipments and materials• Capital estimates for start up or expansion

ii Regulatory Requirements• Food and Drugs Certificate, Tourism

Certificates• EPA

• Health and Safety etc.


This section will cover three major sub heading:

iii Quality Control Measures and Procedures

iv Personnel Requirements ( full time, Part time, skills level, availability, training

requirements)

v Project Time Table


Example : Project Time Table

Table 7: Project Timetable. Project Timetable I tem Action 2007 May

- J une- J uly

July

Purchase of Equipment & Furniture

Placing and arrival of orders

Installation of Equipment

Installation of Equipment

Advertising and Recruitment & Training

Commission

Commissioning of the Project

DETAILS OF THE BUSINESS PLANSection 6 – Financial Analysis and Plan

The financial plan contains detailed operating forecast for the period of the plan including cash

flows etc. This section would include the following:

•The History financials, with comments• The purpose of the loan, Timing and Deal offer

•Detailed description of assets to be financed (Capital Expenditure & Working Capital )

•Equity Contribution


•Summary of the loans terms including repayment terms, purposes, security to be

provided•Current operating line of credit (amount,

security, )

•Financial Forecast ( Analysis of projected income, cash flow and Balance sheet statements

detailing profitability , liquidity and financial viability analysis Break Even and sensitivity

Analysis


Example: Project Cost Summary


Example : Working Capital Break Down


Example : Financial Plan6.4 Financial Plan

I t is proposed that the project be financed by 54% and 46% equity and medium term loan respectively as shown in the table below: Table 12: Proposed Financial Plan

Sources % Amount

(US$) Sponsors Equity

54 413,260

Medium Term Loan

46 350,000

Total 763,260 The sponsor’s equity of 54% represents the total investment made in the project to date of $413,260. I t is anticipated that the debt finance will be over five year period at 9%, with 1 year moratorium. The loan will be secured on a charge on the fixed Assets of the company.


Example : Viability Analysis

DETAILS OF THE BUSINESS PLAN Section 7 – Risk and Socio Economic

Impact

Risk and Mitigating FactorsThere are many risk factors when not

properly identified and mitigating factors put in place at the on set of the project

will affect its sustainability. The risk may come from management, competition

and others.

DETAILS OF THE BUSINESS PLAN Section 7 – Risk and Socio Economic

Impact

The socio economic impact of the project will include:

• Employment Creation

•Tax Revenue ( Direct and Indirect )

•Environmental Impact

DETAILS OF THE BUSINESS PLAN Section 7 – Risk And Socio Economic

Impact

Example of Risk and Mitigation Measures

Table 16: Risk and Mitigating Measures

RISK MITIGATING MEASURES

Competition and market Provide reliable service, adopt competitive prices and use advertising and promotional strategies described in the business plan.

Supply of Raw materials Enter long term supply agreements with the supplier and also source raw materials from different supply sources.

Management Appoint qualified and experienced personnel for the management of project.

Cost over run Appoint qualified Engineers and Architect to complete the project on time. Contingency cost has been catered for in the cost estimates.

DETAILS OF THE BUSINESS PLANSection 8 – Appendices:

•Financial Data : Details of financial Assumptions & Projections

5 Year Projected Profit and Loss Accounts, Cash flows, Net Present Value, Internal Rate of Returns, Pay Back Period, Projected 5 Year

Balance Sheet, Break Even Analysis• Feasibility Study Reports

• Physical Valuation Report e.g. Quantity Surveyors, Land Economists

•List of Important Suppliers or Trade References

DETAILS OF THE BUSINESS PLANSection 8 – Appendices:

•Name of Accountants , Solicitors and Bankers• Copy of Incorporation documents

•Copy of Other Regulatory documents i.e. EPA, Fire Service, Food and Drugs Board, Building

Permits, AMA permits, •Details of Board and Management Cv’s •Copy of Memorandum of Understanding

• Copy of Contracts•Orders and Enquiry Status

•Technical Details on products



Business Plans are turned down by financing Companies, Bankers and Others Investors due to

some of the following reasons:

Management: • An incomplete team or an over reliance on one

team member •Inexperience in the required fields and an

inability to take the company through the next business cycle

•lack of commitment


Business plan: •Poorly presented, unrealistic, lacking in

research and not thought through

•Inability to define the company’s uniqueness of product, service or technology and to define

barriers to entry


Market:

•Inability to demonstrate the understanding of the Industry

•No clear demonstration in the business plan that the market is strong enough, or big enough, to support the company or its plans for growth

and expansion


Technical Analysis:•Inability to demonstrate the technical

understanding of the Product, Machinery

• Inconsistencies between technical or Expert Report Relied on and that presented in the

business plan.

•Inconsistencies of Technical Reports and Financial Projections in the business Plan without

explanations


Other Reasons or Common Mistakes Include:

•Invalid or unsubstantiated assumptions •Overly optimistic projections

•Inconsistencies between text and projections •Unprofessional document - poor organization

•Too much/too little detail •Underestimating capital requirements

•Underestimating the competition


END OF PRESENTATION

Thank YOU

PREPARING AN EFFECTIVE BUSINESS PLAN

Documents

business plan proposal

business plan details

developed business plan

business plans

existing business

new business

proposed business

business planwhat