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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 Consultancy 2009. PREPARING AN EFFECTIVE BUSINESS PLAN. CONTENTS

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PREPARING AN EFFECTIVE BUSINESS PLAN

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  1. PREPARING AN EFFECTIVE BUSINESS PLAN PRESENTED BY Kenneth W. K. Adokoh (BSc. Hons Mathematics, AeCP Financial Mgt) Policy Implementation & Strategy Manager phf International Housing Consultancy 2009

  2. PREPARING AN EFFECTIVE BUSINESS PLAN 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

  3. PREPARING AN EFFECTIVE BUSINESS PLAN Social Housing and Regeneration Specialists Sustainable Neighbourhood Development BACKGROUND OF phf International Housing Consultancy Housing Management Community Regeneration Packaging Urban Renewal Social Care Packaging Rural Housing Management

  4. PREPARING AN EFFECTIVE BUSINESS PLAN WHAT IS A BUSINESS PLAN

  5. 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.

  6. WHAT IS A BUSINESS PLAN “ 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.

  7. WHAT IS A BUSINESS PLAN 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.

  8. WHAT IS A BUSINESS PLAN 4 “ It is a detailed description of the plans of an existing business and its expansion plans , or a new business, with financial projections.

  9. 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.

  10. 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.

  11. BUSINESS PLAN AND FEASIBILITY STUDY Remember: There is a difference between a Business Plan and a Feasibility Study.

  12. 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.

  13. 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.

  14. 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.

  15. PURPOSES OF A BUSINESS PLAN

  16. 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.

  17. PURPOSES OF A BUSINESS PLAN 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.

  18. PURPOSES OF A BUSINESS PLAN 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.

  19. DETAILS OF THE BUSINESS PLAN

  20. 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

  21. DETAILS OF THE BUSINESS PLAN THE COVER PAGE The 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

  22. DETAILS OF THE BUSINESS PLAN THE COVER PAGE – Example STELCO LIMITED BUSINESS PLAN Prepared by RDA Investment Consultants P.0. Box 16816 Accra North Tel: 021 3043 41 MAY, 2008

  23. DETAILS OF THE BUSINESS PLAN Section 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.

  24. DETAILS OF THE BUSINESS PLAN Section 1 – Executive Summary The 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

  25. DETAILS OF THE BUSINESS PLAN Section 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

  26. 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 )

  27. DETAILS OF THE BUSINESS PLAN Section 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 )

  28. DETAILS OF THE BUSINESS PLAN Section 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

  29. DETAILS OF THE BUSINESS PLAN Section 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,

  30. DETAILS OF THE BUSINESS PLAN Section 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)

  31. DETAILS OF THE BUSINESS PLAN Section 5 – Technical Aspect This section will cover four major sub heading: 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

  32. DETAILS OF THE BUSINESS PLAN Section 5 – Technical Aspect 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.

  33. DETAILS OF THE BUSINESS PLAN Section 5 – Technical Aspect 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

  34. DETAILS OF THE BUSINESS PLAN Section 5 – Technical Aspect Example : Project Time Table

  35. DETAILS OF THE BUSINESS PLAN Section 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

  36. DETAILS OF THE BUSINESS PLAN Section 6 – Financial Analysis and Plan 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

  37. DETAILS OF THE BUSINESS PLAN Section 6 – Financial Analysis and Plan Example: Project Cost Summary

  38. DETAILS OF THE BUSINESS PLAN Section 6 – Financial Analysis and Plan Example : Working Capital Break Down

  39. DETAILS OF THE BUSINESS PLAN Section 6 – Financial Analysis and Plan Example : Financial Plan

  40. DETAILS OF THE BUSINESS PLAN Section 6 – Financial Analysis and Plan Example : Viability Analysis

  41. DETAILS OF THE BUSINESS PLAN Section 7 – Risk and Socio Economic Impact Risk and Mitigating Factors There 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.

  42. 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

  43. DETAILS OF THE BUSINESS PLAN Section 7 – Risk And Socio Economic Impact Example of Risk and Mitigation Measures

  44. DETAILS OF THE BUSINESS PLAN Section 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

  45. DETAILS OF THE BUSINESS PLAN Section 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

  46. WHY BUSINESS PLANS FAIL TO ATTRACT FUNDING

  47. WHY BUSINESS PLANS FAIL TO ATTRACT FUNDING 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

  48. WHY BUSINESS PLANS FAIL TO ATTRACT FUNDING 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

  49. WHY BUSINESS PLANS FAIL TO ATTRACT FUNDING 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

  50. WHY BUSINESS PLANS FAIL TO ATTRACT FUNDING 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

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