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FOUNDING A NEW VENTURE: THE BUSINESS PLANNING PROCESS

FOUNDING A NEW VENTURE: THE BUSINESS PLANNING PROCESS. JEAN CLARKE LEEDS UNIVERSITY BUSINESS SCHOOL. AIMS OF THE LECTURE. Understand difference between “Push”/“Pull” factors Understand SWOT analysis Conduct a SWOT analysis in groups

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FOUNDING A NEW VENTURE: THE BUSINESS PLANNING PROCESS

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  1. FOUNDING A NEW VENTURE: THE BUSINESS PLANNING PROCESS JEAN CLARKE LEEDS UNIVERSITY BUSINESS SCHOOL

  2. AIMS OF THE LECTURE • Understand difference between “Push”/“Pull” factors • Understand SWOT analysis • Conduct a SWOT analysis in groups • Understand the importance of the business planning process • Understand how plans can help you get funded • Understanding that planning is an important process both for new and growing businesses • Group Exercise - develop your own business plan

  3. FOUNDING A BUSINESS VENTURE: PUSH AND PULL FACTORS (Chell, 2001) • Push Factors • Unemployment • Redundancy • Social marginalisation • Pull Factors • Having an innovative idea • Wanting to be your own boss • Desiring Independence • New businesses must be based on • Need for goods or service in market place? • Skills and competencies of founder to deliver?

  4. SWOT ANALYSIS • One tool which may be used to systematically examine the above questions is a SWOT Analysis • Strengths: attributes of organisation will help the business venture • Weaknesses: attributes of organisation that may hinder the business venture • Opportunities external conditions that are favourable for the business venture • Threats: external conditions that are unfavourable for the business venture

  5. UNDERSTANDING YOUR STRENGTHS AND WEAKNESSES • What are your own strengths and weaknesses? • Are you good at leadership and communication? • What are the strengths and weaknesses of your product/service? • How good are your people and your facilities? • What do you lack currently that you will need if you are to grow? • What will be the critical problem areas if you grow? • Do you have money of your own to put into your business?

  6. UNDERSTANDING THE OPPORTUNITIES AND THREATS • Are market tastes changing? • Is the market growing? • Are people moving away from your product/service? • Are there changes in the social, legal, economic, political or technological environment that will affect your project? • How easy is it for competitors to come into your industry?

  7. SWOT ANALYSIS: Strengths, Weaknesses, Opportunities, Threats

  8. GROUP TASK • Sabeer Bhatia and Hotmail • Students should have read short case study before class • Divide into groups of five individuals • Do SWOT analysis on case study Sabeer Bhatia • Nominate one individual to present to class and discuss difference between presentations

  9. IMPORTANCE OF PLANNING: IDEA DEVELOPMENT (Delmar and Shane, 2003) • Important precursor to action in new ventures • Helps firm founders make decisions • Balance resource supply and demand • Turn abstract goals into concrete operations and steps • Reduces likelihood of venture disbanding • Accelerates product development and venture organising activity

  10. IMPORTANCE OF PLANNING: SURVIVAL • “A business doesn’t plan to fail, it fails to plan” • Successful firms do more planning than similar failed firms (Perry, 2001) • Entrepreneurial firms plan more than small businesses (Matthews and Scott, 1995) • Rapidly changing environments need plans the can change and are flexible

  11. IMPORTANCE OF PLANNING: ESTABLISHING AIMS • Aims of both you and your business • Planning how to get there • Develop strategies to achieve objectives – how to statements • Develop a marketing plan • Develop a financial budget – what financial resources are needed, profit and cash flow forecasts, etc. • Life—style business or growth business? (Carland et al, 1984)

  12. FORMAT FOR BUSINESS PLAN(Chell, 2001) • Overview/Summary • The Company and its Industry • The Products/Services • Markets • Marketing • Design and Development (If Applicable) • Manufacturing and Operations • Management

  13. FORMAT FOR BUSINESS PLAN CONT. • Financial Requirements • Financial Highlights, Risks and Assumptions • Detailed Financial Plan (Quarterly for 3-5 years) • Appendices e.g. Technical Data on Products, Details on Patents Etc, Order and Enquiry Status, CV of Key Managers, Audited Accounts

  14. GETTING PLANS FUNDED (Chell, 2001) • For new start-ups plan is likely to be simpler and not include all elements • Can vary in length from 10-50 pages but average 15 • Shifting from idea to production major step! • Investors often emphasise production facilities, control over management processes and achieving high standards (Chell, 2001) • Emphasise these aspects in business plan

  15. GETTING PLANS FUNDED(MacMillan and Narasimha, 1987) • Financial Forecast – Attractive yet Credible – unrealistic plans go unfunded • Accompany financial projections by set of comparative rations for similar firms • Strike a balance - Plans where marketing, finance, production and management are over or under-reported don’t get funded • Watch for financial over-reporting – mindless production of spreadsheets hinders process • Sell your idea not your ratios!

  16. PLANNING AS PROCESS (Chell, 2001) • Once a business starts to grow planning will occur at different levels and to different time scales • Strategic Plan • Policies • Procedures • Single-use plans • Projects

  17. PLANNING AS PROCESS CONT:PLANNING LEVELS

  18. PLANNING AS PROCESS CONT. (Chell, 2001) • Planning fundamental management process – doesn’t stop once business is funded • Important to understand tools to plan systematically: • Forecasting • Scenario planning • Benchmarking • Participative planning • Staff planners

  19. GROUP TASK: BUSINESS PLAN • Divide into groups of 5 individuals • Come up with an idea for a business, this does not have to be an original idea but rather you see a need for it in the market place e.g. slight variation, movement into new market etc… • Develop business plan based on Chell’s (2001) format • Do not attempt a financial section – this would require more time than available • Present business plans to class

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