How to Prepare Business Plan- Mar 09
Transcript of How to Prepare Business Plan- Mar 09
-
8/8/2019 How to Prepare Business Plan- Mar 09
1/36
How to prepare aHow to prepare a
Business Plan ????Business Plan ????
-
8/8/2019 How to Prepare Business Plan- Mar 09
2/36
Your Offering
Financial Plan (source, cost, availability,adequacy)
Marketing Plan(size, Entry,Sustenance)
Enterprise Idea
Individual attributes
Attitude, Tech. Skills, Knowledge pool/network
individual/group)
Operational Plan
-TechnicalAttractiveness
Strategy
(Existing/new
technology and
products/services)
-Ecosystemanalysis
-
8/8/2019 How to Prepare Business Plan- Mar 09
3/36
THE BUSINESS PLANTHE BUSINESS PLAN
The design of the business plan depends onThe design of the business plan depends onthe kind of venture envisaged and what thethe kind of venture envisaged and what the
plan should accomplishplan should accomplish
Impress with CLARITYImpress with CLARITY
Convince with its OBJECTIVITYConvince with its OBJECTIVITY
Create INTERESTCreate INTEREST
SIMPLE and understandable by technical laymanSIMPLE and understandable by technical layman
Written in one CONSISTENT styleWritten in one CONSISTENT style
REALISTIC assumptionsREALISTIC assumptions
Writing a business plan forces you into disciplined thinking. An idea
may sound great, but when you put down all the details and numbers,it may fall apart --Eugene Kleiner, Venture Capitalist
-
8/8/2019 How to Prepare Business Plan- Mar 09
4/36
Stake holderStake holder Concept creatorConcept creator
Preparing a detailed business planPreparing a detailed business planhelpshelps Clarify the thoughts/ ideasClarify the thoughts/ ideas
Synthesize a successful plan of actionSynthesize a successful plan of action
Helps not to miss out anythingHelps not to miss out anything
Provides a road map for achieving the goalProvides a road map for achieving the goal
Helps in identifying gaps in resourcesHelps in identifying gaps in resources
Helps in phasing/ scheduling implementationHelps in phasing/ scheduling implementation
Put down a set of assumptions that can bePut down a set of assumptions that can be
revisitedrevisited
Helps to understand the risk profileHelps to understand the risk profile
Communicates effectively and evoke interestCommunicates effectively and evoke interest
in investorsin investors
-
8/8/2019 How to Prepare Business Plan- Mar 09
5/36
Stake holderStake holder -- Venture Capitalist/investorsVenture Capitalist/investors
They want to grow their money andThey want to grow their money and
exitexitINNOVATIVE product or service rangeINNOVATIVE product or service range
WellWell--defined (even quantifiable) CUSTOMERdefined (even quantifiable) CUSTOMER
BENEFITBENEFIT
Experience and competence of theExperience and competence of the
MANAGEMENT TEAMMANAGEMENT TEAM
Growing or Large market size/ potentialGrowing or Large market size/ potential
Possibility to protect/ sustain the innovationPossibility to protect/ sustain the innovation
Effective strategy for capturing the targetEffective strategy for capturing the target
customercustomer
Analysis of competitionAnalysis of competition
Careful weighing of risks and opportunitiesCareful weighing of risks and opportunities
Possible exit routesPossible exit routes
-
8/8/2019 How to Prepare Business Plan- Mar 09
6/36
Stake holderStake holder -- Debt financierDebt financier
They want secured returns (both of interestThey want secured returns (both of interest
and principal) and look forand principal) and look for
Experience and competence of the promotersExperience and competence of the promoters
Market size/ potentialMarket size/ potential Effective strategy for capturing the targetEffective strategy for capturing the target
customercustomer
Analysis of factors of productionAnalysis of factors of production
Weighing of risks and opportunitiesWeighing of risks and opportunities ProfitabilityProfitability
CollateralCollateral
-
8/8/2019 How to Prepare Business Plan- Mar 09
7/36
Elements of a Business PlanElements of a Business Plan
1.1. Executive summaryExecutive summary
2.2. Product or serviceProduct or service
3.3. Management teamManagement team
4.4. Operations and implementationOperations and implementationscheduleschedule
Business system and organisationBusiness system and organisation
5.5. Market and competitionMarket and competition
6.6. Marketing and salesMarketing and sales
7.7. Enterprise IdeaEnterprise Idea8.8. Financial planning and financingFinancial planning and financing
9.9. Opportunities and risksOpportunities and risks
10.10. Exit planExit plan
-
8/8/2019 How to Prepare Business Plan- Mar 09
8/36
Common PitfallsCommon Pitfalls
Only a summary of a project and its potentialOnly a summary of a project and its potential
Wait for all analysis to be completedWait for all analysis to be completed
Become a prisoner of the plans and the contentsBecome a prisoner of the plans and the contents
therein, hence difficulty in deviating from the plantherein, hence difficulty in deviating from the plan
Push with the plan, hiding weaknesses under thePush with the plan, hiding weaknesses under the
carpetcarpet
Making unrealistic assumptionsMaking unrealistic assumptions
Quality of a strategy is as good as itsQuality of a strategy is as good as its
implementationimplementation
-
8/8/2019 How to Prepare Business Plan- Mar 09
9/36
Common pitfallsCommon pitfalls ProjectPer SeProjectPer Se
Typical mental attitude of promotersTypical mental attitude of promoters I have a good product / service; others will buyI have a good product / service; others will buy
Everybody is waiting to help meEverybody is waiting to help me
Their priorities are same as mineTheir priorities are same as mine
Others (all stakeholders) will stick to their promisesOthers (all stakeholders) will stick to their promises Customer will pay and give me feedback for me toCustomer will pay and give me feedback for me to
improve the product / serviceimprove the product / service
Environment / government policies will remain theEnvironment / government policies will remain the
same (blinkers of an entrepreneur)same (blinkers of an entrepreneur) Lack of contingency plans for time and cost overrunLack of contingency plans for time and cost overrun
Blind faith in consultantsBlind faith in consultants
Failing to understand Regulatory environmentFailing to understand Regulatory environment
-
8/8/2019 How to Prepare Business Plan- Mar 09
10/36
Elements of business planElements of business plan -- ExecutiveExecutive
summarysummary -- Ch. 1Ch. 1
Should contain the most important aspectsShould contain the most important aspects Value to the customer, market opportunity andValue to the customer, market opportunity and
growth prospectsgrowth prospects
Innovativeness, uniqueness of the offeringInnovativeness, uniqueness of the offering
Management expertise/ competenceManagement expertise/ competence
Financing requirements and ProfitabilityFinancing requirements and Profitability
Readiness to launch the projectReadiness to launch the project Risk analysis and mitigation measuresRisk analysis and mitigation measures
A good executive summary gives me a sense of why this is an interesting
venture. I look for a very clear statement of long-term mission, anoverview of people, the technology and the fit to market
Ann Winblad, Venture Capitalist
It is not an abstract of your business plan but is an opportunity to presentyour case clearly, compellingly and concisely
-
8/8/2019 How to Prepare Business Plan- Mar 09
11/36
Elements of Business PlanElements of Business Plan-- Product /Product /
ServiceService Ch. 2Ch. 2
The product/ service conceptThe product/ service concept
What customer need is proposed to be fulfilledWhat customer need is proposed to be fulfilled
How your product/ service differs from thoseHow your product/ service differs from those
that are now or will be available in the marketthat are now or will be available in the market
Ability to protect/ sustain the innovationAbility to protect/ sustain the innovation--
IPR/Entry barriersIPR/Entry barriers
Stage of development of the product/ servicesStage of development of the product/ services
Quality specifications / regulatory requirementsQuality specifications / regulatory requirements
Pitch on what customer will require and how you
will continuously provide
-
8/8/2019 How to Prepare Business Plan- Mar 09
12/36
Elements of Business PlanElements of Business Plan -- ManagementManagement
teamteam Ch. 3Ch. 3
Capability of the management team to runCapability of the management team to runa promising businessa promising business
The core entrepreneur(s)The core entrepreneur(s)-- passion & zealpassion & zeal
Professional experience and past successesProfessional experience and past successes
Genesis of the project ideaGenesis of the project idea
The company descriptionThe company description
Legal name and form of ownershipLegal name and form of ownership
Mission and objectivesMission and objectives
Location and geographical informationLocation and geographical information
I invest in management and not in their plans
Eugene Kleiner, Venture Capitalist
-
8/8/2019 How to Prepare Business Plan- Mar 09
13/36
Common pitfallsCommon pitfalls The teamThe team
Not seeing life after the honeymoonNot seeing life after the honeymoon
Not having rules relating to decision makingNot having rules relating to decision making
Absence of the buck stops here authorityAbsence of the buck stops here authority
Lack of role clarity among team, once projectLack of role clarity among team, once project
growsgrows
Lack of policy and understanding on the role andLack of policy and understanding on the role and
importance of family membersimportance of family members
-
8/8/2019 How to Prepare Business Plan- Mar 09
14/36
No opportunity mythsNo opportunity myths
Already supply more than demandAlready supply more than demand
Market is full of big playersMarket is full of big players
Existing customers are totally satisfied andExisting customers are totally satisfied andloyal to available productsloyal to available products
-
8/8/2019 How to Prepare Business Plan- Mar 09
15/36
Elements of Business PlanElements of Business Plan
OperationsOperations Ch. 4Ch. 4
The nittyThe nitty--gritty of the supply chain managementgritty of the supply chain management
LocationLocation
Sources with their reliabilty quotient (SWOT)Sources with their reliabilty quotient (SWOT)
Complexity of technology, manufacturingComplexity of technology, manufacturing
processprocess
Plant, equipment, facilities, infrastructurePlant, equipment, facilities, infrastructure
Recruitment, training and retaining personnelRecruitment, training and retaining personnel
Input materialsInput materials -- sources, costssources, costs
Production, capacity utilisationProduction, capacity utilisation
Regulatory frameworkRegulatory framework
-
8/8/2019 How to Prepare Business Plan- Mar 09
16/36
Wastages, pilferage.Wastages, pilferage.
Assumptions on output rates, costsAssumptions on output rates, costs
Order fulfillment, returns and customerOrder fulfillment, returns and customer
serviceservice
Quality controlQuality control
Safety, health and environmentalSafety, health and environmental
concernsconcerns Research and DevelopmentResearch and Development
Management information systemsManagement information systems
Elements of Business PlanElements of Business Plan --
OperationsOperations Ch. 4Ch. 4
-
8/8/2019 How to Prepare Business Plan- Mar 09
17/36
Common pitfallsCommon pitfalls -- TechnologyTechnology
InIn--househouse Challenges of prototyping andChallenges of prototyping and
commercialisingcommercialising
Technology expertise with only one personTechnology expertise with only one person(partner or employee)(partner or employee)
CollaborationCollaboration Proven technology: costly but reliableProven technology: costly but reliable
Untested technology: cheapUntested technology: cheap
Exclusivity, technical feasibility, economicExclusivity, technical feasibility, economicviabilityviability
AbsorptionAbsorption (acquisition, assimilation, fine(acquisition, assimilation, finetuning, further development) and IP relatedtuning, further development) and IP related
issuesissues
-
8/8/2019 How to Prepare Business Plan- Mar 09
18/36
Services SectorServices Sector
Perfecting the operations management,Perfecting the operations management,Setting up service parameters or serviceSetting up service parameters or service
quality norms, QoS management,quality norms, QoS management,
insufficient detailing of value linksinsufficient detailing of value links
Common pitfallsCommon pitfalls -- TechnologyTechnology
-
8/8/2019 How to Prepare Business Plan- Mar 09
19/36
Elements of Business PlanElements of Business Plan -- ImplementationImplementation
scheduleschedule Ch. 4Ch. 4
Prepare a realistic threePrepare a realistic three--toto--five year planfive year planto inspire credibilityto inspire credibility
Identify major milestonesIdentify major milestones
Plan for aggregating resourcesPlan for aggregating resources
Ramp up plan (scale and scope)Ramp up plan (scale and scope)
Human resources planningHuman resources planning
Investment schedulingInvestment scheduling
Strategic partnershipsStrategic partnerships
Market launch, sales campaignsMarket launch, sales campaigns
Prepare a Gantt chart for tracking the progressPrepare a Gantt chart for tracking the progress
Business is like chess. To be successful, anticipate & plan several moves in
advance
anonymous
-
8/8/2019 How to Prepare Business Plan- Mar 09
20/36
Common pitfallsCommon pitfalls Roll outPlanRoll outPlan
Implications for implementing the marketingImplications for implementing the marketing
strategystrategy
LocationLocation -- poor homework on availability, suitability, costpoor homework on availability, suitability, cost
and further development costand further development cost
Availability of quality inputsAvailability of quality inputs workforce, power, water,workforce, power, water,transport, parking spacetransport, parking space
EquipmentEquipment right equipment, scalability, installation & afterright equipment, scalability, installation & after
sales support, consumablessales support, consumables
PersonnelPersonnel Attracting (why should they join?), training,Attracting (why should they join?), training,
and retainingand retaining
Supply chainSupply chain identification, negotiation, managementidentification, negotiation, management
Systems & procedures, handling exceptions from ruleSystems & procedures, handling exceptions from rule
-
8/8/2019 How to Prepare Business Plan- Mar 09
21/36
Elements of Business PlanElements of Business Plan Business SystemBusiness System
& Organisation& Organisation Ch. 4Ch. 4
The business system model maps outThe business system model maps out
activities required to deliver a final productactivities required to deliver a final product
to a customerto a customer
Improve the efficiency of operations through
specialisation
concentrating on core activities
outsourcing business activities
Organisation
principal / key employees
delegation of tasks and responsibilities
Research &Development Production Services
SalesMarketing
-
8/8/2019 How to Prepare Business Plan- Mar 09
22/36
ElementsElements of Business Planof Business Plan -- TargetTargetmarketmarket Ch. 5Ch. 5
Foundation of every successful business is clearFoundation of every successful business is clearunderstanding of customer and their needs.understanding of customer and their needs.Hence provide details ofHence provide details of
Purchasing patterns/ requirementsPurchasing patterns/ requirements
Demographic/ geographic profileDemographic/ geographic profile
Buying sensitivities and behaviorBuying sensitivities and behavior
Market segment(s) being targetedMarket segment(s) being targeted
Potential revenues in each market segment *Potential revenues in each market segment *
Special strategies required to reach out to the segmentSpecial strategies required to reach out to the segment
Value ParametersValue Parameters
If you dont know for whom you toil, how will you survive? anonymous
-
8/8/2019 How to Prepare Business Plan- Mar 09
23/36
Elements of Business PlanElements of Business Plan -- MarketMarket
analysisanalysis Ch. 5Ch. 5
The company can achieve a dramaticThe company can achieve a dramaticincrease in value only if the market holdsincrease in value only if the market holdsgreat potential. Hence describe:great potential. Hence describe: Size and growth trends and forecastsSize and growth trends and forecasts
Maturity of the industryMaturity of the industry Vulnerability to economic factorsVulnerability to economic factors
Seasonality factorsSeasonality factors
Technological factorsTechnological factors
Regulatory issuesRegulatory issues
Supply and distribution requirementsSupply and distribution requirements
Influencing factors that will have an impact onInfluencing factors that will have an impact on
your businessyour business
-
8/8/2019 How to Prepare Business Plan- Mar 09
24/36
Elements of Business PlanElements of Business Plan --
CompetitionCompetition Ch. 5Ch. 5
Show how sustainable your competitiveShow how sustainable your competitive
advantage isadvantage is
Competing products/ servicesCompeting products/ services Competitive position, market share distributionCompetitive position, market share distribution
Strengths and weaknesses of competitorsStrengths and weaknesses of competitors
Barriers to entryBarriers to entry
Possible future competitionPossible future competition
Positioning visPositioning vis----vis the competitionvis the competition
C
apitalising on th
e Need GapC
apitalising on th
e Need Gap
If there is no competition, there is probably no market
Brian Wood
-
8/8/2019 How to Prepare Business Plan- Mar 09
25/36
Elements of Business PlanElements of Business Plan -- Marketing & SalesMarketing & Sales
StrategyStrategy Ch. 6Ch. 6
WellWell--planned marketing and salesplanned marketing and salesactivities are imperative for success of theactivities are imperative for success of theprojectproject Product features for different market segmentsProduct features for different market segments
Pricing of products/ services (value pricing/Pricing of products/ services (value pricing/skimming strategy/ penetration strategy)skimming strategy/ penetration strategy)
Distribution channel (Internet/ Franchising/Distribution channel (Internet/ Franchising/WholesalerWholesaler-- Retailer network/ Own sales staff/Retailer network/ Own sales staff/Direct marketing/ Own stores etc.)Direct marketing/ Own stores etc.)
Promotion (Internet/ Direct mailing/Promotion (Internet/ Direct mailing/Advertisement/ Trade fairs etc.)Advertisement/ Trade fairs etc.)
Strategic partnershipsStrategic partnerships
Obtaining order before startingObtaining order before starting
Sales targets and assumptionsSales targets and assumptions
-
8/8/2019 How to Prepare Business Plan- Mar 09
26/36
Common pitfallsCommon pitfalls -- MarketMarket
Everybody is waiting for my product / serviceEverybody is waiting for my product / service
Lack of clarity on dimensions of dissatisfactionLack of clarity on dimensions of dissatisfactionand product or service positioning accordinglyand product or service positioning accordingly
Insensitivity to potential competitionInsensitivity to potential competition --
underestimating response or reaction fromunderestimating response or reaction from
incumbent playersincumbent players No clear appreciation of the entry barriersNo clear appreciation of the entry barriers
Inability or lack of planning in creating entryInability or lack of planning in creating entry
barriersbarriers
UnderUnder--rating bargaining power of distributionrating bargaining power of distributionchainchain
Underestimating the implication of seasonality onUnderestimating the implication of seasonality on
the supply chainthe supply chain
What stage of product life cycle you are enteringWhat stage of product life cycle you are entering
-
8/8/2019 How to Prepare Business Plan- Mar 09
27/36
How to get market knowledgeHow to get market knowledge
Gut feel is not good enoughGut feel is not good enough
Behaviour determinationBehaviour determination qualitativequalitative
analysis (simple to complex tools)analysis (simple to complex tools)
Data collectionData collection primary sources (direct,primary sources (direct,mail, phone), secondary sources (reports)mail, phone), secondary sources (reports)
Volume determinationVolume determination quantitativequantitative
analysis (simple to complex tools)analysis (simple to complex tools)
Questionnaire design @ step 2Questionnaire design @ step 2
Careful extrapolation after validationCareful extrapolation after validation
-
8/8/2019 How to Prepare Business Plan- Mar 09
28/36
Review implications for the marketingReview implications for the marketing
strategystrategy
If the market is attractive, how toIf the market is attractive, how toimplement it by adapting roll outimplement it by adapting roll out
-
8/8/2019 How to Prepare Business Plan- Mar 09
29/36
Enterprise IdeaEnterprise Idea -- Ch. 7Ch. 7
What does your organisation stand for?What does your organisation stand for?
What could you offer to meet customerWhat could you offer to meet customer
expectations from what you stand for ?expectations from what you stand for ? Brand Extensions/ Line Extensions etc.Brand Extensions/ Line Extensions etc.
Diversification thoughtsDiversification thoughts
Feeder streams of revenueFeeder streams of revenue
Creating Metaphors for your offeringCreating Metaphors for your offering
-
8/8/2019 How to Prepare Business Plan- Mar 09
30/36
Financing the VentureFinancing the Venture Ch. 8Ch. 8
How much will be needed forHow much will be needed fordevelopment of the product or service?development of the product or service?
How much will be needed for setting upHow much will be needed for setting upoperations?operations?
How much will be needed for workingHow much will be needed for workingcapital?capital?
Where will the money come from? WhatWhere will the money come from? Whatif more is needed?if more is needed?
-
8/8/2019 How to Prepare Business Plan- Mar 09
31/36
emen s o us ness anemen s o us ness an -- nanc ananc a
PlanPlan Ch. 8Ch. 8 Is the business concept profitable and worthIs the business concept profitable and worth
investing ininvesting in Plan for investment, sources of funds, cashPlan for investment, sources of funds, cash
flow liquidity and steps for improvingflow liquidity and steps for improvingprofitabilityprofitability
PreparePrepare
Project Cost and Sources of fundsProject Cost and Sources of funds
Projected Income & Expenditure statementsProjected Income & Expenditure statements
BreakBreak-- even analysiseven analysis
Projected cash flow statementsProjected cash flow statements Pro forma Balance SheetsPro forma Balance Sheets
Return on investment, sales, equityReturn on investment, sales, equity
Debt service coverageDebt service coverage
Details of assumptions and sensitivity analysisDetails of assumptions and sensitivity analysis
-
8/8/2019 How to Prepare Business Plan- Mar 09
32/36
Which assumptions in the financialWhich assumptions in the financialforecasts are most uncertain?forecasts are most uncertain?
How do the returns (equity, investment)How do the returns (equity, investment)compare with the rest of the industry?compare with the rest of the industry?
When and how will investors get theirWhen and how will investors get theirmoney back?money back?
What will be needed from the bank, andWhat will be needed from the bank, andwhat is the banks response likely to be?what is the banks response likely to be?
Elements of Business PlanElements of Business Plan --
Financial PlanFinancial Plan Ch. 8Ch. 8
-
8/8/2019 How to Prepare Business Plan- Mar 09
33/36
Common pitfallsCommon pitfalls -- FinanceFinance
Optimistic assessment of project cost and fundingOptimistic assessment of project cost and funding
Lack of budgeting of trial production & trialLack of budgeting of trial production & trialproduction expenses, incidental and invisibleproduction expenses, incidental and invisible
expensesexpenses
Not taking fully into account the cost implications ofNot taking fully into account the cost implications of
the business activities and operating plansthe business activities and operating plans Not including cost implications of regulatoryNot including cost implications of regulatory
compliancecompliance
Improper assessment of components of workingImproper assessment of components of working
capitalcapital The gap between sanction and disbursementThe gap between sanction and disbursement
Lack of efforts in confidence building with investorsLack of efforts in confidence building with investors
Lack of contingency plans for time and costLack of contingency plans for time and cost overrunsoverruns
Sensitivity analysis limited to spreadsheetSensitivity analysis limited to spreadsheet
-
8/8/2019 How to Prepare Business Plan- Mar 09
34/36
Opportunities and risksOpportunities and risks-- Ch. 9Ch. 9
Scenario PlanningScenario Planning Identify and analyze major trends (tech., socioIdentify and analyze major trends (tech., socio--
political, regulatory, economic..) in the externalpolitical, regulatory, economic..) in the external
environmentenvironment
Identify major competitive forces operating on theIdentify major competitive forces operating on the
firmfirm
Possible impact of the forces on the firmsPossible impact of the forces on the firms
competitiveness in futurecompetitiveness in future
Which are the most likely scenarios and what areWhich are the most likely scenarios and what are
their implications to ustheir implications to us
-
8/8/2019 How to Prepare Business Plan- Mar 09
35/36
Elements of Business PlanElements of Business Plan Ch. 9Ch. 9
Risk evaluationRisk evaluation
Prepare bestPrepare best--case and worstcase and worst--case scenarios with keycase scenarios with keyparameters of the business to help assessparameters of the business to help assess
Market risksMarket risks
Competition risksCompetition risks
Technology risksTechnology risks
Regulatory risksRegulatory risks
Financial risksFinancial risks Management risksManagement risks
Political risksPolitical risks
What measures are proposed to counter these risksWhat measures are proposed to counter these risks
Sensitivity analysis of key factors to simulate the impact ofSensitivity analysis of key factors to simulate the impact of
changeschanges
All sane people want to avoid risks
anonymous
-
8/8/2019 How to Prepare Business Plan- Mar 09
36/36
Elements of Business PlanElements of Business Plan -- ExitExit
plansplans Ch. 10Ch. 10
The investors look for returns.The investors look for returns.
Provide details ofProvide details of
Companys long term goalsCompanys long term goals
Growth StrategiesGrowth Strategies
Milestones in achievementsMilestones in achievements
Exit plansExit plans