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Business Planning

Revised: 8/12/2010. 8. Business Planning. Contents. Introduction to business planning Business plan outline Key things to Consider in preparing a business plan Business plan section review. …See Lateral Thinking Exercise Below. Introduction to Business Planning. A Business Plan provides:.

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Business Planning

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  1. Revised: 8/12/2010 8 Business Planning

  2. Contents • Introduction to business planning • Business plan outline • Key things to Consider in preparing a business plan • Business plan section review …See Lateral Thinking Exercise Below CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  3. CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  4. CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  5. CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  6. CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  7. Introduction to Business Planning CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  8. A Business Plan provides: • a Framework for planning, developing and managing a business. • a Comprehensive View which helps to determine the feasibility of the business. • a Strategy to guide ‘well managed’ growth of the business. CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  9. Role of the Business Plan • First, it is a Feasibility study • WILL the Business Work? • Does it have a minimum Threshold Market Size? • What are the relative strengths/weaknesses of the Competition? • What are the required Operations Parameters? • Are the Economics of the proposed business feasible? • What Management Capabilities are required? Do you have them? • Second, it is a ‘Road map’ • HOW will the Business Work? • It lays out your Strategy .. & • guides you from where you are… …to to where you want to be CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  10. A TYPICAL Business Plan’s Content & STRUCTURE • Answer the following questions: • What are your products/services? What makes them unique? • What are the dynamics of the business sector you will be operating in? • Who are the potential customers? How many are there? • How do your customers behave: how, where, when, and at what price will customers buy your products/services? • What facilities, materials, equipment, and human resources are needed to operate our business? • How, when, and what amount of money will come into and go out of the Business in Year 1; and, from where? What is the overall strategy and what are the key tactics that you plan to use to achieve success? CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  11. Different Audiences & Purposes • Relatives, friends • Gain support, financial and otherwise • Employees • Gain enthusiasm, commitment to success • Suppliers • Positive terms, credit on purchases • Bankers/Lenders • Credibility…get the financing! • Yourself! • Confidence, commitment, energy CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  12. What Business Planning Doesn’tDo: • Provide a perfect “crystal ball” to predict the future • Guarantee that mistakes won’t be made • Guarantee that success will be achieved • Eliminate adaptability and stifle creativity • Set a business up for ‘failure’ by establishing strict criteria for success • Waste time and effort that could be better used starting the business CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  13. What Business Planning DoesDo: • CREATEs A SOLID BASIS FOR ESTIMATING THE POTENTIAL OF THE BUSINESS. • Minimizes elements of surprise. • Provides opportunities to think through the implications of key decisions. • Enables integration of business activities. • Helps in reacting positively to changes by providing an overall context for business activities. • Enhances opportunities for creativity. • Identifies resources that will be required to carry out plans, and the timing of those needs. • Makes efficient use of time/resources up front to avoid losses later. CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  14. Exercise: Soap and Lotion • Ibu Susi purchased a wholesale soap and lotion supply company with her life savings + a bank loan. • She was in business for 2 years, selling to hotels. • Her original Purchase included a large, dated inventory that was too old to sell. • After 1 year, she need an injection of more operating capital, but could not raise it. • She also Encountered difficulties with suppliers – and that resulted in inventory shortages and a failure to deliver to customers on time. • She was in a Competitive, changing market –and eventually, the business failed. How could business planning have helped IbuSusi? CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  15. Business Planning: When? • It’s time to develop a business plan when: • You think a proposed business venture may be viable, but would like some evidence before investing money and making a strong commitment; • you are not sure you possess, or have available the necessary technical, business, and management skills – combined with the capability to garner adequate financial, human and physical resources to make the business work. CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  16. A Strategic Business Plan deliberates: CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  17. Business Plan Contents CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  18. Business Plan Outline • Quick summary to capture main points, establish credibility [write last]. • Introductory Summary • Brief description of the opportunity • Objectives • Success factors • Products/Services • Description • Competitive advantage & positioning • Marketing plan • Market research and analysis • Target market • Advertising & promotion • Distribution • Sales plan & forecast • Operations Plan • Facilities, equipment, personnel • Operating procedures • Project schedule • Implementation schedule • Key milestones • Risks, Assumptions • Management • Business Legal Structure/Ownership • Management Structure/Organization • Financial Plan • Cash flow forecast • Break-even point • Explains the reasons for the business right up front. • Demonstrates that you know how you will get the product/service to market that is big enough to support you. • Shows you know how to build the product/service and meet quality standards; operational feasibility. • Shows realistic timing, priorities. • Understanding of risks and mitigation • The right people in place. • Brings all the elements together. • Demonstrates the FINANCIAL VIABILITY. CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  19. Course Modules & The Business Plan • Introductory Summary • Brief description of the opportunity • Objectives • Success factors • Products/Services • Description • Competitive advantage & positioning • Marketing plan • Market research and analysis • Target market • Advertising & promotion • Distribution • Sales plan & forecast • Operations Plan • Facilities, equipment, personnel • Operating procedures • Project schedule • Implementation schedule • Key milestones • Risks, Assumptions • Management • Business Legal Structure/Ownership • Management Structure/Organization • Financial Plan • Cash flow forecast • Break-even point CIPSED/UNG Entrepreneurship ToT Program: Introduction to Entrepreneurship Identifying & Evaluating Potential Opportunities Techniques for Conducting Market Analysis Leadership & Communications Business Planning Developing Winning Marketing Strategies Preparing Cash Flow Projections Risk Assessment/Risk Management Basic Bookkeeping Techniques Approaching a Lender CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  20. Components of a Typical Business Plan • b • u • Market analysis • S • I • N • e • Cash flow projection • s The Market Analysis and the Cash Flow Projection are THE TWO CRITICAL COMPONENTS of any Business Plan. One substantiates a Threshold Market for the Product[s]/Service[s]; the other determines whether or not that Threshold Market can sustain the business being proposed. Both need to be supported with solid evidence.

  21. Key Things to Consider when Preparing a Business Plan CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  22. Market Analysis: • Exhaustive Primary/secondary research • The existence of a ‘proven’ threshold market THIS: NOT THIS:

  23. Cash Flow Projections: • Be very cautious about estimates of sales/income; but err on the generous side with your projections of expenses. • Every Entry in the Cash Flow is Supported by Notes/Assumptions. … remember, liars may figure; but figures don’t lie!!

  24. Evidence versus Speculation • Your business plan should rest on evidencenot speculation • Examples: • ‘Everybody needs to eat, so our restaurant is likely to be profitable.’ VS • ‘An estimated 700-800 people work within 2 blocks of our location. 40% of those surveyed said they would be likely to eat in a restaurant like ours, which is close by, at least once per week.’ • ‘We expect sales to grow 10% per month for the first year.’ VS • ‘Based on interviews with store owners in non-competing locations, we expect sales growth of 10% for the first 2 months as we establish ourselves, then we expect a levelling off of sales for the next 3 months due to seasonal trends for this product.’ • ‘We will find a store manager who is competent and committed.’ VS • ‘Pak Usri will join us as store manager. He has 18 years of retail management experience.’ CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  25. Do's and Don'ts CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  26. Business Plan Section Review CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  27. Scuba Dive Case Study CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  28. 1. Introductory Summary • Brief introduction to the proponents of the business opportunity • Brief description of the opportunity • Build on the ‘Business Opportunity Profile’ • Objectives • Explain your goals & objectives in starting and operating the business • Set ‘SMART’ goals • Success factors • Identify key factors for success in this business • Explain how you plan to ensure these factors are in place Review & refine the introductory summary after other sections are complete ... CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  29. 2. Products/Services • Describe in detail the products and/or services you will be selling • Refer to the attributes, features, unique benefits • Describe competitive advantage[s] of the products/services • Describe positioning of your products/services in the marketplace relative to competitors CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  30. 3. Strategic Marketing Plan • The heart of your business plan! • Summarize findings of market analysis • Describe your target market[s] • advertising & promotion plans • What type of advertising and how often? • How will advertising & promotion appeal to your target market? • location and distribution strategy • How will it fit the needs of your target market? • Describe your sales approach • Prepare sales forecast • Monthly for 1 year CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  31. 4. Operations Plan • Description of facilities • Physical resources [equipment] required • Human resources required • Production plans • Production cycles • Inventory control systems • Quality control • Operational policies • Operating hours • Customer service policies • Ensuring Regulatory compliance CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  32. 5. Project Schedule • Provide calendar of key activities • Steps required to start business. • Timing of key activities. • Changes/growth projections anticipated in production, human resource development, hiring, etc., over time. • Build in Flexibility ... • Key milestones • Opening of business. • Timing for reaching sales and production targets. • Corporate Social Responsibility guidelines/goals. • Other goals. CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  33. 6. Risks & Assumptions • Be realistic, be prepared • Deal with risks head-on – work to identify risks and reduce your exposure to them – forewarned is forearmed • Make assumptions explicit CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  34. 7. Management People make your business! • Describe the key personnel & their duties • Capabilities. • Responsibilities/Job Descriptions • Describe the organization’s structure. CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  35. 7. Management (cont.) • 3 essential roles from module 1: • Who will be responsible for each? • What are their qualifications? • Get outside help if needed • Advisory board: • Consider other advisors that may be able to provide valuable input on an on-going business. Make Sell Count CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  36. 8. Financial Plan • A credible, realistic financial plan is essential! • It is a distillation of all the other business plan elements. • Cash is king • Focus on cash flow forecasting & planning. • Overestimate costs while underestimating income. • Show Break-even calculations • Helpful in setting targets and understanding the impact of your business decisions. • Determine start-up requirements • Amount & timing of cash needs. • Clearly identify sources & uses of capital CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

  37. Those who fail to PLAN… …Plan to FAIL! THANK YOU! CIPSED Project State University of Gorontalo [UNG] Entrepreneurship ToT Program

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