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Developing a Business Plan. BIT Final Year Project. Learning Outcomes. Understand the objectives of the business planning process for a start up venture. Gain an insight into how to write such a business plan.

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Developing a business plan

Developing a Business Plan

BIT Final Year Project


Learning outcomes
Learning Outcomes

  • Understand the objectives of the business planning process for a start up venture.

  • Gain an insight into how to write such a business plan.

  • Understand what the various audiences who will see the plan will be looking for.


Presentation structure
Presentation Structure

  • Business plan overview

  • Content of a Business Plan


Why prepare a business plan
Why prepare a Business Plan?

  • The primary objective of many business plans is to set out a convincing case to secure financing, either internal or external, for the start-up or expansion of a business venture.

  • However, just as importantly, business plan is a ‘living document’ that should be updated on a regular basis.


Useful websites
Useful Websites

  • www.investni.com - Student EnterpriseAwards

    - Kauffman Fellowships

  • www.nibusinessinfo.co.uk

  • www.nisp.co.uk


Audience
Audience

Internal Audience

  • Self

  • Management team

  • Board of Directors

  • Employees


Audience1
Audience

External audience (potential funders).

  • Banks

  • Government agencies

  • Business Angels

  • Venture Capitalists

  • Corporate Partners


Bank

  • Banks provide loan capital.

  • Overdraft, short term, payable on demand.

  • Business Loan, fixed term.

  • SFLGS, reduces risk to bank

  • Key issues: Security, interest & capital repayment therefore not suitable for hi-tech start-up ventures, little security and no early cashflow.


Government agencies
Government Agencies

  • Invest NI, provides grant support.

  • Business Development

  • Revenue, Marketing, Management Salary, Preference Shares.

  • R&D

  • COMPETE, SMART

  • Key issues: Additionality, Admissibility, percentage contribution, export focus.


Business angels
Business Angels

  • Business Angels provide risk capital seeking a return over 5-10 years.

  • High net worth individual

  • Probably ‘exited’ from previous venture

  • Brings skills, expertise and cash.

  • Key issues: <£100k, ‘hands-on’ role, capital growth.


Venture capital
Venture Capital

  • Investment fund of risk capital, which will seek a return in circa 5 years.

  • Local funds: Crescent Capital, Enterprise Equity, Viridian Growth Fund (Clarendon).

  • May bring sectoral expertise, contacts and experience of similar ventures.

  • Relatively high investment threshold, high fixed costs.

  • Key issue: >£400k, capital growth, Board seat, focus.


Other funders
Other Funders

  • Seed Capital Funders: QUBIS Ltd & University Challenge Fund (NI). Basically a VC investing £10k to £100k.


Return on investment
Return on Investment

  • Investors, whether business angels, venture capitalists, banks will all be looking for a return on their investment.

  • The size of that return and the cost of their money is governed by the risk of the project.


Key elements within a business plan
Key Elements within a Business Plan

  • Executive Summary

  • Background

  • Corporate Objectives

  • Product/Technology

  • Manufacture

  • Market

  • Marketing/Sales

  • Management Team/Structure

  • Finance/Funding


Corporate objectives
Corporate Objectives

This section should set out objectives for 3/5 years:

  • Financial projections - sales

    - profits

    - return on investment

  • Markets - geographic

    - market segments

  • Customers

  • Products

  • Management and organisation


Product technology
Product/Technology

This section should answer the following questions:

  • What are you going to make/will there be a product range?

  • How much will the product cost to produce?

  • What are the product features/how does it work?

  • What are the product applications?

  • What is the R&D plan and cost?

  • How long/much will it take to get the product to market?

  • What is novel about your product/IP?

  • What associated services are being offered?


Product vs service
Product Vs Service

  • A product based business model is scalable; a service based business model is not.

  • To increase sales in a service business you have to add bodies.

  • To increase sales in a product business you don’t.

  • Ideally service based businesses should be profitable from day 1.

  • Services can be useful in reducing risk during the product development phase.


Technology ve
Technology -ve

  • Unproven technology, this will require a lot of product development, i.e. time and money before there is a product which can be sold.

  • Frequent problem with hi-tech start-up proposals which can often be ‘technology’ and not ‘market’ led.


Technology ve1
Technology +ve

  • Early stage sales, especially ‘good quality’ early stage sales, i.e. blue chip customers who appreciate the technology/product.

  • Provides an endorsement of technology,especially if the product has been sold to a ‘knowledgeable’ customer.


Manufacture
Manufacture

This section should answer the following questions:

  • In-house or sub-contract manufacture?

  • What is the production process?

  • What are the plant and equipment requirements?

  • What is the capital spend and timetable?

  • What are the production inputs – premises, labour, suppliers, raw materials?

  • What are the production and quality control procedures?


Manufacture checklist
Manufacture Checklist

  • How will you make the product and what inputs are required?

  • What plant and machinery is required and what are the costs?

  • What management and labour skills are required?

  • What management/quality controls are in place?


Market
Market

This section should answer the following questions:

  • What is your target market?

  • What size is the market and is it growing?

  • What market segments will you target?

  • What is the market structure and how does the market operate?

  • Who are your customers, where, how many, how big, purchasing power?

  • What are your customers’ requirements and how do your customers buy?

  • Who are your competitors, where, market share, strengths/weaknesses?


Market research sources
Market Research Sources

  • Libraries – Invest NI, Belfast Central Library,

    Queen’s, UU

  • Internet

  • Published reports

  • Customers/potential customers

  • Competitors – annual reports, promotional material, product manuals

  • Magazines/newspapers

  • Trade Associations

  • Companies Registry


Market ve
Market -ve

  • #1 turn off

  • Gaining a small % of a BIG number

  • Plan to achieve 1% of the UK/EU/US etc market within one/two/three years will result in sales of £10m


Market ve1
Market +ve

  • Clear knowledge of the existing marketplace and a ‘channel to market’.

  • Knowledge of the existing competitors, i.e. who they are and their strengths and weaknesses.

  • Awareness of the potential end user/customer needs, i.e. what they want and how the existing products/services fall short.


Route to market checklist
Route to Market Checklist

  • What is the geographic scope of the market: world, Europe, local?

  • What is the market value in terms of units and value?

  • How fast is the market growing and where are the opportunities?

  • Which market segments will you concentrate on & why?

  • What is your target market share?


Route to market checklist1
Route to Market Checklist

  • If there is no existing market or if the market is being developed, what is the expected take up rate?

  • How will your company’s entry affect the market?

  • What is the market structure?

  • What are the key customer requirements?

  • How will you meet these?


Route to market checklist2
Route to Market Checklist

  • Who are your major competitors?

  • What are their strengths and weaknesses?

  • What is their pricing, profitability etc?

  • How will they react to your entry?

  • What are your competitive advantages?


Bottled water the uk market
Bottled Water – the UK market

  • 2001 – 1.6 billion litres; £900 million

  • 12% growth on 2000; £1.1 billion forecast for 2003

  • 10-12% growth to 2006 => 2.6 billion litres

  • Average consumption/person/year – UK 26 litres; French 139 litres; Italians 183 litres; Euro average 93 litres

  • 40+ producers Top five producers = 52% of market

  • Customers – supermarkets (50% of total); independent grocery outlets; petrol station forecourts; CTN’s; sandwich bars; kiosks; department stores; variety stores;on-trade (pubs, restaurants, hotels); off licences

  • End customer needs – healthier lifestyles; convenience; working lunches; hot(!!) summers

  • Own label; branded; packaging and labelling

  • Planned; impulse

  • Spring; mineral; flavoured Still 82%; sparkling 18%

  • End market segments – young professionals, especially females; children; sports people; housewives; office workers; diners; drivers


Marketing sales
Marketing/Sales

This section should answer the following questions:

  • What are your target market segments?

  • What are your competitive advantages?

  • How will you sell to your customers?

  • What promotional activities will you undertake ?

  • What prices will you charge/discounting?

  • How will you transport your products?

  • What customer service will you offer?

  • Will you brand your products?

  • What packaging and labelling will be used?


Marketing ve
Marketing -ve

  • Waiting for the telephone to ring.

  • Developing the ‘perfect’ product.

  • Note: only sales generate income; everything else is a cost.


Marketing ve1
Marketing +ve

  • Knowing your customers and markets.

  • Being proactive, persistent and professional.

  • Note: customers will only buy from suppliers they believe will have a long term market presence.


Marketing checklist
Marketing Checklist

  • Who are your customers and what are their needs?

  • What are your competitive advantages?

  • How will you sell and support that sales effort through promotional activities and customer service?

  • What pricing and distribution strategies will you use?


Management team structure
Management Team/Structure

This section should answer the following questions:

  • Who will execute the plan and deliver the projected returns?

  • How will the various individuals fit together/what roles will they play?

  • What are their strengths?

  • What are their weaknesses and how will they be addressed?

  • What is the balance of company ownership?

  • What is the organisational structure?

  • What are the management control systems?


An a quality team
An ‘A’ Quality Team

  • Investors will invest in an ‘A’ quality team and a ‘B’ quality product, but not the other way around.

  • An investment decision is based on many things but one of the main elements is the combination of individuals who make up the team


Management ve
Management -ve

  • ‘All conquering hero’.

  • Not prepared to acknowledge areas of weakness.

  • Note: hi-tech start-up businesses have a certain level of business naivety.


Management ve1
Management +ve

  • ‘Previous’.

  • Substantial previous business experience, possibly specific experience.

  • Ability to bring together a strong team and address areas of potential weakness.


Management team checklist
Management Team Checklist

  • Who are the key team members?

  • What are their skills and experience?

  • What are their roles and responsibilities?

  • What are the gaps in the team?

  • How are you going to plug those gaps?


Finance
Finance

  • Cash flow

  • Balance Sheet

  • Profit & Loss Account

    Note: Financial forecasts within start–up venture business plans are heavily discounted.






Finance ve
Finance -ve

  • ‘Hockey stick’ projected sales growth.


Finance ve1
Finance +ve

  • Cash investment from promoters.

  • Cash investment from other ‘knowledgeable’ investor.


Raising funding
Raising Funding

  • 3Fs, Friends, Family & Fools

  • Self, from your own resources

  • Revenue generated

  • Grants

  • J/V or Commercial Partner

  • Business Angels

  • Venture Capital


Finance checklist
Finance Checklist

  • What is the project cost?

  • How will the project be funded?

  • When will income begin?

  • What are the costs?

  • When will profitability be achieved?

  • What is the level of profitability?


Executive summary
Executive Summary

This section is critical, it may be the only part of the plan that an investor reads!

  • The purpose of the plan

  • The business opportunity

  • The market the product is aimed at

  • The competitive advantages

  • The management team

  • Financial profile


Executive summary checklist
Executive Summary Checklist

  • What is the business name and activity?

  • Who are the key contacts?

  • What is the scope of the business and the market potential for its products?

  • What are the competitive advantages?

  • What resources (human & financial)are needed for the venture to succeed?

  • What skills and expertise do the team bring?


Appraisal of the business plan
Appraisal of the Business Plan

  • Management team: capability, experience and balance.

  • Market: size, potential for growth, competitive nature.

  • Finance: funding, realism of projections and profitability.

  • i.e. Man/Market/Money

  • Ideally have some initial sales


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