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Business Plan Guide . Hamid Houshmand. Purpose of a Business Plan . Large company: Business plan from each division/subsidiary or operating unit Merger: A business plan Acquisition: A business plan Selling off a unit: A business plan New project/Product: A business/project plan

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Business Plan Guide

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    Presentation Transcript
    business plan guide

    Business Plan Guide


    purpose of a business plan
    Purpose of a Business Plan
    • Large company: Business plan from each division/subsidiary or operating unit
    • Merger: A business plan
    • Acquisition: A business plan
    • Selling off a unit: A business plan
    • New project/Product: A business/project plan
    • Acquiring financing for a new growing business
    • Due diligence: Once buying a company
    • Reverse due diligence: Once acquiring a new company
    business plan functions
    Business Plan Functions
    • Business plan: Map out the course of company over a period of time
    • Determining future projects
    • Performance over time: Determining how well goals have been met
    • Raising money: A dynamic plan can facilitate financing
    • Business planning is a continuous activity
    who read the business plan
    Who Read The Business Plan
    • Lender/Investor

    _ Character

    _ Cash flow

    _ Collateral

    _ Equity Contribution

    • Venture capital funds

    _ Quality of the individual entrepreneur

    _ Functionality balanced team

    _ Proprietary Characteristics

    • Time table

    _ Week 1-2 . Initial contact

    _ Week 3. Mailing executive summary or the complete plan

    _ Week 4-6. An Initial meeting

    _ Week 7-18. Follow-up

    _ Week 18. An offer from a financing source

    _ Week 19-26. Negotiation of the deal

    _ Week 26. Closing

    • Self, family, friends
    • Angles
    • Vendors
    • Corporate venture capitalists
    partnership agreement
    Partnership Agreement
    • Legal
    • Tax issue
    • Division of duties
    • Operating rights and responsibilities
    • Partnership structure
    due diligence
    Due Diligence

    Valuation (shareholder value analysis) of the acquisition/merger linked to below act ivies with focus on risks

    • Compatibility audit
    • Financial audit
    • Macro-environment audit
    • Legal/environmental audit
    • Marketing audit
    • Production audit
    • Management audit
    • Information systems audit
    • Reconciliation audit
    reverse due diligence
    Reverse Due Diligence
    • Valuation of a company to be kept
    • Positioning a company for potential sale
    • Positioning a company for potential financing
    • Positioning a company for initial public offering
    looking for investors
    Looking for investors
    • How responsive is the investor
    • What help, beyond financial, do they provide
    • Do they provide strategic advice
    • Transparent and share information
    • How they behave in a crisis _ Calm reaction to pressure
    • How involved do they get with your business - try to keep this open ended so you don’t lead the other founder to the answer you want to hear. One founders “very helpful” could be another’s ”smothering.”
    • Do they prepare for board meetings
    • Do they make helpful introductions (customers, potential members of the team, other funding sources)
    • Have they been transparent with their time frame to exit
    business plan contents
    Business Plan _ Contents
    • Table of contents
    • Executive summary
    • General company description
    • Products and services
    • Marketing plan
    • Operational plan
    • Management and organization
    • Structure and capitalization
    • Financial plan
    executive summary recommendation
    Executive Summary _ Recommendation
    • Be different- solving the problem with a new way
    • Focus on the things you can do
    • Be clear on what you want to accomplish
    • Capitalize on past achievements
    • Learn from your and others’ mistake
    • Enlist the help of experts
    • Check out your ideas with sceptics
    • Network, Network, Network
    • Load your mind with a great deal of information
    • Look forward and never give up
    executive summary
    Executive Summary
    • The essence of the report _ micro version of the entire plan
    • Should provide a good understanding of the Plan’s concept, finance, and metrices
    • Generate an immediate interest
    • Section by section format is one common format
    • Functional areas: Product profile, marketing plan, operational plan (major milestones), business competence, financial plan
    • Brief sales and profit history
    • Brief on silent data: anticipated break-even points, return on equity
    • Offering a message: a personal assessment on the business performance or optionally a message on the cover letter
    general company description
    General Company Description
    • A few pages
    • Fundamental activities and nature of the company
    • Manufacturer, retailer, or service business
    • Where is doing business
    • Where is it located
    • What customer is it attempting to serve
    • What stage the company has reached
    • Business objectives (realistic and attainable)
    • Plan to go public, seek to be acquired, develop new line of business
    • Brief on the management team
    • Availability of capital
    • Evaluation of risks and liquidity of company’s investments
    product and services
    Product and Services
    • Attention to company’s products & services
    • Physical description
    • Use and appeal
    • Stage of development
    • Demonstration of prototype
    marketing plan
    Marketing Plan
    • Not a simple concept: Interesting and thought provoking
    • The most critical to a company’s success
    • A real market need
    • Market intensive business: elaborate presentation (compelling market plan)
    marketing plan 2
    Marketing Plan 2
    • Market definition and opportunity
    • Competition and other influences
    • Marketing strategy: distribution, advertising, promotion, pricing, selling incentives
    • Market research
    • Sales forecasts
    • Support material: Industry studies, letter of support, brochures, reviews or articles
    market definition and opportunity
    Market Definition and Opportunity
    • Summary of industry growth, Trade association, trade literature, industry studies
    • The source of demand
    • The way demand is satisfied
    • Market share required for success determine the degree of detail
    • Identify relevant target markets, their natures and their importance
    competition and other influences
    Competition and other influences
    • Degree of competition
    • Future sources of competition
    • Other influences: Regulation, Terrorist or other threats
    marketing strategy
    Marketing strategy
    • How organize and implement its marketing plan
    • Sales and distribution strategy
    • Pricing strategy
    • Advertising, public relations, and promotion
    • Site analysis
    • Related marketing budgets
    • Future marketing activities
    market research
    Market Research
    • Preliminary market research
    • Cost/benefit analysis to see the most effective market research
    • In some market: secondary research
    • Databases are available on line by subscription
    sales forecasts
    Sales Forecasts
    • Sales by periods
    • Three forecasts: Typically, conservative, most likely
    • Sales by product or service
    • Sales by customer group
    • Market share
    • Support material
    operational plan
    Operational Plan
    • What is the general approach to manufacturing
    • Which processes will be used in manufacturing
    • What are the labour requirements
    • How will suppliers and vendors be used?
    operational plan1
    Operational Plan
    • Product development: The gap between design and an actual product. More detail on technical team and on the technology
    • Manufacturing: plant, equipment, material labour, techniques and process, and output
    • What processes in-house and what outsourced
    • Maintenance and services
    operational plan2
    Operational Plan
    • External influences:

    _ Changing technology

    _ Factors affecting productive resources (labour and raw materials)

    _ Customers

    _ Regulations

    _ IP protection, patents and licenses

    _ Risk of imitation

    management and organization
    Management and Organization
    • Addressing the company’s personalities :

    _ Will management be participative or autocratic

    _ Will personnel share in the company’s financial success

    _ Will responsibility be sharply defined or will be more flexible

    _ Will management be able to set a tone to entire organization

    management and organization 2
    Management and Organization 2
    • Management team and principals
    • Organizational chart: name, title, years of hiring, and salary
    • Policy and strategy: Timing, Selection of employees, and Compensation
    management team principals
    Management Team & Principals
    • Founding entrepreneurs
    • Active investors
    • Key employees
    • Directors
    • Advisory board assisting technical, planning, marketing , operation
    • Key advisors such as lawyer or accountant
    major milestones
    Major Milestones
    • Offer date in a generic manner
    • Financial commitments
    • Prototype development
    • First market test
    • Initiation of production and sales
    • Attaining break even performance
    • Expanding operation
    • Past events
    • Ambitious but achievable
    • Leave a margin of comfort in planning
    structure for capialization
    Structure for Capialization
    • Legal form
      • Sole proprietorship
      • Partnership
      • Limited partnership
      • LLC
      • S corporation
      • C corporation
    structure for capitalization
    Structure for Capitalization
    • Financial participation
      • Capital requirements, how much is invested and how much is needed
      • Term loans
      • Line of credit
      • Convertible bond
      • Bond with a stock warrant
      • Preferred stock
      • Cumulative preferred stock
      • Convertible preferred stock
      • Common stock, voting stock and non-voting stock
    financial plan
    Financial Plan
    • Company’s anticipated financial performance:
      • Reliable data
      • More than one financial scenario, due to uncertainty of data
      • To review periodically
      • When necessary revise the projection
      • Alignment with other part of the business plan
    assumptions on which the projection is based on
    Assumptions on which the projection is based on
    • Income statement: typically for five years, reflect quarterly performance
    • Cash flow statement: in great details in the first two years, quarterly or annual cash flow
    • Current balance sheet: typically for five years
    • A break-even analysis
    projected or historic performance
    Projected or Historic Performance
    • Liquidity ratios: Current assets / current liabilities
    • Asset management ratios: inventory turnover and accounts receivable turnover
    • Debt ratios: debt-to-equity ratio