BusPlan1.ppt PGDM 7

7/29/2019 BusPlan1.ppt PGDM 7

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What Is a Business Plan?

IDENTIFICATION AND ARTICULATION OF:

Opportunity, Market, Customers

Management Capable of Seizing It

Minimal Required Resources

Entry Strategy & Tangible Vision for Growth

Financial Requirements, Cash Flow & Deal

Critical Risks & Assumptions

Harvest Options

Source: Ed Marram, Babson College


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Questions Addressed in a Business

Planl

Questions:

l What are my motivations for owning a business?

l Should I start or buy a business?

l What and where is the market for my productor service?

l How much will it cost to own the business,

where will I get the money?l Should my company be domestic or global?

l How will growth be managed?

l What is involved in running a successful family

business?

5.5


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Questions to Consider When Deciding to Start a

Business

l Questions:

l Is there a way to begin the enterprise in

stages or with a limited investment?

l Can I run the company at first as a

home-based business?

l Can I continue working for someone else and

put in time after hours for my own business?

l To what extent can I draw on relatives to

help me?

5.6


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Goals of a Business Plan

l Evaluate feasibility of the idea

l Development of strategy

l Entry, early growth, acquisition, LBO,

harvest, etc.

l Assist in obtaining resources/approval

l Establish credibility


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Sample Business Plan Outline

l Table of Contents

l Executive Summary

l Industry, Products or

Services

l Market Research

l Marketing Plan

l Management Team

l Development Plan

l Operations Plan

l Schedule

l Critical Risks

l Financial Plan

l Proposed Offer

l Appendices

Financial Projections

Start-up Costs

Breakeven Chart


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Elements of a Successful Plan

l Clear description of the idea

l Overview of industry to suggest need/opportunity

l Evidence that demand exists (or can be created orstolen)

l Clear description of resource requirements:

marketing, operations, financingl Background of management team

l Schedule

l Discussion of risks, rewards, and offer


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Business Plans: Investor Decision Process

Market AttractivenessMarket NeedSize of MarketMarket GrowthAccess to Market

Managerial CapabilitiesManagement Skills

Marketing SkillsFinancial SkillsReferences

Resistance to ThreatsBarriers to EntryObsolescence Risk

Downside RiskEconomic Cycle Risk

Product Differentiation

UniquenessProduct LifeProfit MarginValue Added

Expected

Return

Perceived

Risk

Decision

to Invest

+

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Entrepreneurship: Strategies and Resources


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Key Points to Remember

l General Guidelines

l Clear, concise, professional style

l Well-researched and documented

l Consistent and cohesive

l Business plans are:

l Very specific

l Not promotional tools, selling is subtle


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Industry Section

l Industry Overview

l Size, growth rate, segmentation, trends,

regulatory environment

l Opportunity

l Product Overview

l Competitive Advantage

l Fit with Corporate Objectives

l Entry and Exit Strategies


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Market Research

l Identify Market Area and Size

l Description of Primary Customersl Who, how many, what they want, what they do

l Research and Support for Demand

l Competitor Analysis

l Positioning map, strengths, weaknesses, likely

competitive response


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Marketing Plan

l Mission Statement

l Product Characteristics

l Features

l Pricing

l Sales/Channel Strategies

l Promotional Strategy

l Support Policiesl Sales Projections

l On-going Evaluation

The key is to build on your market research ...


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Management Team

l Managerial Positions Required

l Responsibilities

l Biography

l Ownership Structure

l Key Advisorsl Professional Support


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Design and Development Plans

Development Status and Tasks

Costs

Difficulties and Risks

Proprietary Issues (partial, not complete) Product Improvement and New Products


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Operations Plan

l Facility and Location

Requirements

l Equipment Requirements

l Non-managerial staffing

l Sources of Supply

l Production Process and

Controls

l Distribution logistics

l Regulatory and other

compliance issues


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l Identify major risks (7-10 is typical)

l

Look beyond the simplistic (sales fall short)l Evaluate impact should risk occur

l Describe how the risk will be mitigated and

how you will respond should it happen

Critical Risks:

Identification, Evaluation, Mitigation

Ask others what holes they see in your plan. What can go wrong ?

Entrepreneurs frequently get too close to their ideas.

You need unbiased views here ...


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Critical Risks:

An Example

Key Member of the Management Team is Injured

Evaluation: Management is in excellent health and will refrain

from dangerous activities. Thus, it is considered unlikely that amember of the management team will be incapacitated.

Contingency: The company will ensure that key members of

the management team undergo physical examinations

annually.

In addition, the company will provide key-man life insurance

sufficient to protect outside investors capital in the event of an

emergency.


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Financial Plan

l Start-up Requirements (Investment required)

l Review of Financial Characteristics

l Sales, margins, profits

l Return Measures (IRR, ROI, EVA)

l Be careful not to promise

l

Breakeven Concernsl Sales level, time to cash stability

l Extraordinary financial events

Avoid describing your assumptions. The goal here

is to convey the characteristics of your business briefly.


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Executive Summary

l Clear description of idea

l

Arguments for successl Overview of Industry, Market, Need, Demand

l Benefits to Customer / Company

l Fit with Company Objectives

l Team

l Financial Characteristics

l

Sales, profits, investment, risk and returns


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Appendices:

(Could Include Such Items As)

Lists, specs, pictures of products, systems, software

List of customers, suppliers, references

Appropriate location factors, facilities or technicalanalysis

Independent reports by technical expert, consultants

Detailed resumes of founders, key managers

Any critical regulatory, environmental or othercompliance, licenses or approvals

Sales or other financials assumptions (in brief)

Source: Ed Marram, Babson College


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Key Considerations

l Have a story to tell

l Be confident but objective and dispassionatel Understand the financial characteristics of your

business

l

Avoid promises and self-aggrandizementl Tease to stimulate interest, never bore


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Miscellaneous Concerns

l Length is typically 20-40 pages, excl. exhibits

l Required appendices

l Financial statements (3-5 years)l Statement of Start-up Costs

l Breakeven Chart

l Resumes

l Use bullet points, tables, and small charts

l Dont use first person (I, We, Our)

l Format and Spelling Count (a lot)


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Remember:

A business plan is a

specific plan to open anew business or to

expand an existing

one, not the writerswishes and dreams !


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Pitfalls and Omissions:

Venus Fly Traps for Entrepreneurs

l Seeking premature approval

l Believing Plan is more important than Orders

l Develop Complete Business Plan First v.

Floating Trial Balloons

l Selling the plan to the wrong audience

l Selling the plan to the right audience poorly

Source: Stephen Spinelli, Babson College


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Pitfalls and Omissions:

Venus Fly Traps for Entrepreneurs

l Phantom or Gingerbread Advisors

l Spreadsheet Diarrhea (Financials = Business)l Poor understanding of product acceptance

l Under-estimation of competitive reaction

l Pricing strategy too low

l Capital requirements too low or undefined



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Business Plans:

What Investors Look For

l Evidence of Customer Acceptance: Orders

l Evidence of Focus / Nichel Appreciation of Financial Goals

l Proprietary Position, Exclusivity

l Team with experience, commitment, and

integrity



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Business Plans:What Turns Investors Off

Great Mousetrap Fallacy

Projects which deviate excessively from

industry norms

Unrealistic growth projections

Inadequate management experience / depth

Source: Stephen Spinelli Babson College

BusPlan1.ppt PGDM 7

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