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ICWAI / ICSI

ICWAI / ICSI. Business Plans 15 November 2011. GJA. Index. Topics. GJA. Index. Topics. GJA. What is a business plan?. A business plan is a comprehensive, written description of the business of an enterprise

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ICWAI / ICSI

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  1. ICWAI / ICSI Business Plans 15 November 2011 GJA

  2. Index Topics GJA

  3. Index Topics GJA

  4. What is a business plan? • A business plan is a comprehensive, written description of the business of an enterprise • It is a detailed report on a company's products or services, production techniques, markets and clients, marketing strategy, human resources, organization, requirements in respect of infrastructure and supplies, financing requirements, and sources and uses of funds • The business plan describes the past and present status of a business, but its main purpose is to present the future of an enterprise. It is normally updated annually and looks ahead for a period of usually three to five years, depending on the type of business and the kind of entity By: UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT GJA

  5. Why a business plan? • Getting an integrated view of your business • Mutual understanding within the management team • Determining financial needs and raising funds • Approval from board of directors/shareholders • Recruiting • Deriving objectives for employees / stake holders GJA

  6. Who are the audience to a business plan? • Current and potential owners • Private equity • Venture capital • HNI • Corporate / strategic player • Current and potential lenders • Commercial banks • Industrial development boards • Top management team • Board of directors • Leadership – corporate level • Governmental and quasi governmental bodies • For technical assistance / grants GJA

  7. Profile of the reader • The profile of the reader of a business plan, under various audience group may wary, so do their expectations Investment committee / Board Looks for : strategic outlook, and key numbers PE / VC / Strategic investor Looks for : Details, data, workings, supportings Deal doers and advisors Board / credit committees Looks for : strategic outlook, and key numbers, track record, owners Lenders Looks for : Details, data, workings, supportings Deal Doers and advisors • A well written business plan should address the needs of all reader profiles GJA

  8. Who prepares the business plan ? • A purpose oriented business plan should not be prepared independently by a consultant • It should be prepared / inspired by : • Start up Established enterprise • The promoter group • Assisted by a professional consultant • Overall responsibility with the CEO • Input from all functional department • CFO to consolidate • Assistance from a professional consultant • For independent review • Grounds of complexity GJA

  9. Index Topics GJA

  10. Components – what are the reader expectations? (1/2) • A good business plan should address almost all the reader expectations • Typical reader expectations (as per Nexus Venture Partners): • Who is behind the company? • Founders • Key Management /Board Members, and • Advisor Profiles • What is the customer pain point that the company is trying to address? • How is your company different from the other companies trying to address similar need? • Customer need and existing solutions available to address the Need • Examples on how your company will address the customer need • Explanation on why your company's solution is better than the existing solution(s) • Any external environment/context that may influence customers towards your company's solution GJA

  11. Components – what are the reader expectations? (2/2) • Typical reader expectations: • What is the product or service of the company? • Functionality and Feature Roadmap • Immediate & proposed products • How will your company make money? • Business model for the company • Financial Plan and Assumptions driving the financial plan (revenue drivers, channel economics, product pricing, etc) Source: www.nexusvp.com GJA

  12. Structure of the business plan (1/9) • Business plan should be arranged in well defined and structured format: • Cover page, index, introduction letter • Human resources 6 1 • Executive summary • Legal, and environmental framework 2 7 • The opportunity / the market / the clients • Financial plan 3 8 • Glossary, Notice to the reader, contacts • Products / Services and pricing 9 4 • The business model • Appendices 10 5 GJA

  13. Structure of the business plan (2/9) • Executive summary - contents 2 • Executive summary • About 5 pages • Fist section, but the last section to be written • Overview (one page) • Legal entity / address / entity type • Promoters • Vision and mission statement • Head lines (one page) • Unique upsides of the business plan • 4Ps – Promoter, Product, Pricing, Profitability • Brief description of the project • What is the project? • Location and its advantage • Project cost • Means of financing • Summary table capturing key financials GJA

  14. Structure of the business plan (3/9) • Market analysis 3 • Market analysis • Opportunity for you • Marketing strategy • Sales projections • Support with independent market reports • Specify sources • Macro economic /Industry / Market analysis • Overall performance of the industry, historical as well as forecast • Industry SWOT • GAPS felt in the industry • Justify the need of a better product / service • Company specific information • Establish the company’s offering meeting the demand GAP • Company SWOT • How are you planning to tap the GAP? • Marketing arrangement / team • Sales projections GJA

  15. Structure of the business plan (4/9) • Products / services, and pricing 4 • Products / services • Pricing and its rationale • Products / services • Current and proposed products / services offering • Product description and history, product attributes, research and development • Quality assurance and control, sourcing • Packaging / shelf life • Production process • Sourcing arrangements • Pricing • Costing and pricing • Pricing strategies GJA

  16. Structure of the business plan (5/9) • The business model 5 • Business model • Organisation structure • Project particulars • Production process • Sourcing arrangements • Goals • Distribution • Organisation structure • Project particulars • Cost of the project • Explanation and break down of each lie of investment • Funding requirements • Borrowings and repayment schedule • Key machineries and technologies • Contingency provision • Risks and mitigation matrix • Process flow chart (and explanation) • Sourcing arrangements • Goals (short, medium, and long term) • Distribution arrangements • Project implementation schedule GJA

  17. Structure of the business plan (6/9) • Human resources 6 • Human resources • Try to bring out the individual and collective strength of the team • Leadership team • Functional management team • Profile of promoters and key management • Detailed write up reflecting relevant experience / successful entrepreneur track record • Functional experience of key personnel • Photographs / contact details preferred • Profile of the consultants involved • Proposed HR plan: • Head count • Average salary • Cost to company GJA

  18. Structure of the business plan (7/9) • Legal framework, and environmental and social factors 7 • Legal framework, and environmental and social factors • Approvals and licensing requirements • Environmental risks • Social compliance • Development and social benefits. GJA

  19. Structure of the business plan (8/9) • Financial plan (1/2) 8 • Financial plan • Historical • Forecast • Historical • Three year historic financial • Product / service realization & margin performance • Historical working capital trends • Forecast • Three to 10 year forecast, depending on the industry • Provide detailed assumptions for each line item • Provide supporting workings for computations such as sales, direct costs, etc • Provide logical and mutually corroborative assumptions and workings GJA

  20. Structure of the business plan (9/9) • Financial plan (2/2) 8 • Financial plan - contents • Forecast • Indicators / KPIs • IRR • Payback period • Break even point • Summary of key ratios (one table) • Financial forecast • Income statement • Balance sheet • Cash flow statement • Capacity utilisation and quantities • Cost of sales • Working capital • Consumption • S,G&A expenses • Income tax GJA

  21. Practical suggestions … • Financial forecast • Provide separate index for financial information • Provide detailed write up for all assumptions • Do not make arbitrary assumptions • Restrict the years of projections to the number of years which allows visibility • Provide cross referencing / page referencing between financials and the assumptions for better navigation GJA

  22. Other important sections 1 9 10 • Cover page • Legal name of the company • Title / project name • Date • Introduction letter • General / specific address to audience • Disclaimer / notice to the reader • bring out the uncertainty around financial forecast • Glossary of terms • Provide either in after the introduction letter OR prior to the disclaimer • Appendix • For external information • Contacts • E-mail, Telephone, fax, address of the enterprise and the promoter GJA

  23. Index Topics GJA

  24. Matters not to forget … • Make it look good – seek professional help if required • Follow a structure • Provide main index and sub indices, especially for financial information • Focus on formatting, language, etc. • Organize financial information in an orderly manner • Top – down approach • Bottom – up approach GJA

  25. Practical suggestions … • Prefer MS Word / MS Power Point • Prepare tables in MS Excel and import to the doc./ppt. file as a link • Define the formatting in the Master Slide to avoid repetitive formatting • Do not copy from another business plan or blindly follow the structure followed by the previous / other document • Do not use overwhelming colors / pictures • Avoid too many photographs. If photographs are used, stick to high resolution files • Do not use confusing graphs. A simple table may explain the contents better • Do not share editable copies with external parties GJA

  26. Financial highlights (1/6) : Tierra is expected to generate positive cash flows from Year1 ____________________________________________________________________ Heading – should convey a message illustration Financial highlights • The key financial highlights of the project during the forecast period is summarized below: Use uniform colors, fonts, bullets across the document Follow standardized graphs/charts Summarize key findings in a text box Provide footnotes Source for tables / charts • Source : information provided by Tierra Note: • Workings for IRR, pay back period, Break even turnover, and details of KPIs and financial ratios are presented in following pages • The detailedd financial forecast along with workings and assumptions are presented under sub section – financial forecasts Tierra is anticipated to generate positive cash flows from second year of operation, achieve break even level of sales in third year, and payback the investments in four years. Net revenues are expected to double in 3 years at INR 1,601.0 lakhs ______________________________________________________________________ Page number Give footer (company logo)

  27. Index Contents GJA

  28. Order of documents • Business plan : Project LakeHouse • Presentation : Project LakeHouse • Teaser : Project LakeHouse GJA

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