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First EBN Spring University April 1999 Business and Financial Planning Principles-Methods-Software DESMOND RYAN Dublin Bus...
Presentation Objectives <ul><li>To Provide an Overview of Strategic Planning </li></ul><ul><li>To Relate Strategic Plannin...
The essence of a BIC Business Planning Access to Funds Incubation Space BIC Deliverables
<ul><li>“ Plans Are Nothing </li></ul><ul><li>Planning is Everything” </li></ul><ul><li>Dwight D. Eisenhower </li></ul><ul...
<ul><li>Truisms of planning </li></ul><ul><li>Framework for planning </li></ul><ul><li>Strategic v operational plans </li>...
<ul><li>Provides a framework for  management </li></ul><ul><li>Used to communicate about the  company </li></ul><ul><li>Se...
Strategic Business Planning Must.... <ul><li>1.  Take a medium term  </li></ul><ul><li>  view, e.g. 2 to 4 years </li></ul...
Business Strategy Planning <ul><li>4. Be separated from day to day issues </li></ul><ul><li>5. Be Realistic, Detached & Cr...
Business Strategy Planning <ul><li>6. Not to be viewed as another form of budgeting </li></ul><ul><li>7. Be written down <...
Truisms of Planning <ul><li>BIC Clients should understand </li></ul><ul><li>Planning is a means and not an end </li></ul><...
Truism of Planning <ul><li>“ In this world nothing is certain except death & taxes” </li></ul><ul><li>Murphy’s first law: ...
Strategic Vs Operational Planning <ul><li>Strategic planning is : </li></ul><ul><li>- Visionary & conceptual </li></ul><ul...
Business Strategy Planning <ul><li>Framework For Planning </li></ul>FORMULATE VISION DEVELOP MISSION SET OBJECTIVES PREPAR...
Mission Statements <ul><li>What Business   - Industry </li></ul><ul><li>  - Activity </li></ul><ul><li>Products and Servic...
Take Stock And Redefine <ul><li>REFORMULATE YOUR VISION </li></ul><ul><li>REVIEW YOUR MISSION </li></ul><ul><li>REDEFINE Y...
Assessing Strengths & Weaknesses <ul><li>Cut through the symptoms and identify </li></ul><ul><li>internal strengths and we...
Assessing Strengths & Weaknesses (cont’d) <ul><li>R&D effort/direction/resources </li></ul><ul><li>Management resources/ex...
Determining Threats & Opportunities <ul><li>Identify critical threats & main opportunities </li></ul><ul><li>due to: </li>...
Determining Threats and Opportunities (cont’d) <ul><li>Competitors </li></ul><ul><li>Identities </li></ul><ul><li>Performa...
Preparing A Business Plan? <ul><li>Why Prepare a Business Plan? </li></ul><ul><li>Because they are designed to:- </li></ul...
What will the Plan do for BIC Clients ? <ul><li>It Acts as a Map for the Business </li></ul><ul><li>It Supports Management...
Tips When Preparing a Business Plan <ul><li>Own the Contents </li></ul><ul><li>Ensure the Plan fits You </li></ul><ul><li>...
The Structure of the Business Plan <ul><li>Executive Summary </li></ul><ul><li>Background & Description of the Business </...
Check List Management: Have you clearly stated  how the Business will be  Managed? Market: Have you clearly shown  that th...
The Operations Plan <ul><li>Describe the Service or Process </li></ul><ul><li>Include a Layout Drawing Manufacturing </li>...
The Financial Plan <ul><li>Financing a Business  </li></ul><ul><li>Strategy and Raising Finance </li></ul><ul><li>Types of...
The Financial Plan <ul><li>Total Funding & Sources of Funds </li></ul><ul><li>Three years Cash Flow Forecasts </li></ul><u...
Management & Organization Structure <ul><li>Current Structure & Organization </li></ul><ul><li>Organization Charts </li></...
Projections and Assumptions <ul><li>Three year Projections </li></ul><ul><li>Market Demand & Sales growth </li></ul><ul><l...
Financing a Business <ul><li>Key Questions </li></ul><ul><ul><li>What are you trying to do ? </li></ul></ul><ul><ul><li>Wh...
Strategy and Raising Finance <ul><li>Typical Start-Up Problem </li></ul><ul><ul><li>Lack of Capital </li></ul></ul><ul><li...
Types of Project Finance <ul><li>Capital </li></ul><ul><ul><li>Equity:  Cash  vs  In Kind </li></ul></ul><ul><ul><li>Seed ...
Capital Financing <ul><li>Promoter’s Money </li></ul><ul><ul><li>Putting Your Money Where . . . ! </li></ul></ul><ul><ul><...
Putting a Value on Equity <ul><li>No Hard and Fast Rules </li></ul><ul><li>Important to Know . . . </li></ul><ul><ul><li>I...
Getting Over Financing Obstacles <ul><li>Be Practical and Realistic About What you Need </li></ul><ul><li>Be Careful in Ju...
Effective Business and Financial Planning are  critical functions for  BICs This presentation and other relevant informati...
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  1. 1. First EBN Spring University April 1999 Business and Financial Planning Principles-Methods-Software DESMOND RYAN Dublin Business Innovation Centre IDA Enterprise Centre, The Tower, Pearse Street, Dublin 2, Ireland. Tel No: +353-1-671 3111 Fax No: +353-1-671 3330 E-Mail: desryan@dbic.ie WWW: www.dbic.ie
  2. 2. Presentation Objectives <ul><li>To Provide an Overview of Strategic Planning </li></ul><ul><li>To Relate Strategic Planning to Business Planning </li></ul><ul><li>To Relate the Business Plan to Financial Planning </li></ul><ul><li>To Show how Software will assist BIC Executives </li></ul>Theme of today's presentations Basics of BIC Management
  3. 3. The essence of a BIC Business Planning Access to Funds Incubation Space BIC Deliverables
  4. 4. <ul><li>“ Plans Are Nothing </li></ul><ul><li>Planning is Everything” </li></ul><ul><li>Dwight D. Eisenhower </li></ul><ul><li>BICs must help clients to plan effectively </li></ul>Business Strategy Planning
  5. 5. <ul><li>Truisms of planning </li></ul><ul><li>Framework for planning </li></ul><ul><li>Strategic v operational plans </li></ul><ul><li>Mission statements </li></ul><ul><li>Developing strategies </li></ul><ul><li>Setting long-term objectives </li></ul><ul><li>Assessing strengths & weaknesses </li></ul><ul><li>Determining threats & opportunities </li></ul><ul><li>Implementation </li></ul><ul><li>The Business Plan </li></ul>Why BIC Clients Need Strategic Planning?
  6. 6. <ul><li>Provides a framework for management </li></ul><ul><li>Used to communicate about the company </li></ul><ul><li>Serves as a monitor </li></ul><ul><li>Strategic Business Plans are important BIC deliverables </li></ul>Why Do Strategic Planning?
  7. 7. Strategic Business Planning Must.... <ul><li>1. Take a medium term </li></ul><ul><li> view, e.g. 2 to 4 years </li></ul><ul><li>2. Be developed by </li></ul><ul><li>owners/directors </li></ul><ul><li> </li></ul><ul><li>3. Focus on matters of strategic importance </li></ul>
  8. 8. Business Strategy Planning <ul><li>4. Be separated from day to day issues </li></ul><ul><li>5. Be Realistic, Detached & Critical </li></ul>
  9. 9. Business Strategy Planning <ul><li>6. Not to be viewed as another form of budgeting </li></ul><ul><li>7. Be written down </li></ul><ul><li>8. Be reviewed periodically </li></ul>OUR STRATEGIC PLAN DETAILS OUR SALES AND PROFITS FOR THE NEXT FIVE YEARS SO THAT EVERYBODY KNOWS HOW MUCH THEY CAN SPEND Here Lies the Fourth Business Plan of XYZ Ltd.
  10. 10. Truisms of Planning <ul><li>BIC Clients should understand </li></ul><ul><li>Planning is a means and not an end </li></ul><ul><li>Planning is not a procedure </li></ul><ul><li>Process is as important as the plan </li></ul><ul><li>Planning must be done by the client from top down </li></ul><ul><li>Think strategically and act operationally </li></ul><ul><li>A plan is a business’s most important document </li></ul><ul><li>The plan belongs to the client not to the BIC </li></ul>
  11. 11. Truism of Planning <ul><li>“ In this world nothing is certain except death & taxes” </li></ul><ul><li>Murphy’s first law: </li></ul><ul><li>‘ If anything can go wrong, it will’ </li></ul><ul><li>Murphy’s fourth law: </li></ul><ul><li>- if there is a possibility of several things going wrong, the one that will cause the most damage will be the one to go wrong </li></ul><ul><li>“ If you don’t know where you are going, any road will do” </li></ul>
  12. 12. Strategic Vs Operational Planning <ul><li>Strategic planning is : </li></ul><ul><li>- Visionary & conceptual </li></ul><ul><li>- Directional </li></ul><ul><li>- Broad </li></ul><ul><li>Operational planning is: </li></ul><ul><li>- Short-term, tactical & specific </li></ul><ul><li>- Action orientated </li></ul><ul><li>- Focused on Implementation & results </li></ul>
  13. 13. Business Strategy Planning <ul><li>Framework For Planning </li></ul>FORMULATE VISION DEVELOP MISSION SET OBJECTIVES PREPARE STRATEGIES ASSESS INTERNAL STRENGTHS & WEAKNESSES DETERMINE EXTERNAL THREATS & OPPORTUNITIES REDEFINE FUNDAMENTALS & SELECT SPECIFY GOALS PREPARE PROGRAMMES IMPLEMENT PROJECTS
  14. 14. Mission Statements <ul><li>What Business - Industry </li></ul><ul><li> - Activity </li></ul><ul><li>Products and Services </li></ul><ul><li>Processes and Technologies </li></ul><ul><li>Customers, Clients and Users </li></ul><ul><li>Markets and Segments </li></ul><ul><li>Channels and Outlets </li></ul>
  15. 15. Take Stock And Redefine <ul><li>REFORMULATE YOUR VISION </li></ul><ul><li>REVIEW YOUR MISSION </li></ul><ul><li>REDEFINE YOUR STRATEGIES </li></ul><ul><li>REVISE YOUR OBJECTIVES </li></ul>BUILD ON STRENGTHS EXPLOIT OPPORTUNITIES MINIMISE WEAKNESSES AVOID THREATS
  16. 16. Assessing Strengths & Weaknesses <ul><li>Cut through the symptoms and identify </li></ul><ul><li>internal strengths and weaknesses in the </li></ul><ul><li>following key areas: </li></ul><ul><li>Sales/marketing/distribution </li></ul><ul><li>Product features/range/competitiveness </li></ul><ul><li>Manufacturing efficiency/capacity </li></ul><ul><li>Financial position/resources/performance </li></ul>
  17. 17. Assessing Strengths & Weaknesses (cont’d) <ul><li>R&D effort/direction/resources </li></ul><ul><li>Management resources/expertise </li></ul><ul><li>Purchasing and materials - sources/supply cost </li></ul><ul><li>Systems and organisational effectiveness </li></ul><ul><li>Seek to establish the outstandingly good features, achievements and unique qualities of your proposed company. Summarise and rank the good/bad points. </li></ul>
  18. 18. Determining Threats & Opportunities <ul><li>Identify critical threats & main opportunities </li></ul><ul><li>due to: </li></ul><ul><li>Industry Features </li></ul><ul><li>Size and segmentation </li></ul><ul><li>Growth pattern and maturity </li></ul><ul><li>Established practices </li></ul><ul><li>Emergence/contraction of niches </li></ul><ul><li>International Dimension </li></ul><ul><li>Changes In Market Place </li></ul><ul><li>Customers </li></ul><ul><li>Distribution channels </li></ul><ul><li>Economic factors </li></ul><ul><li>Social/Demographic/Political </li></ul>
  19. 19. Determining Threats and Opportunities (cont’d) <ul><li>Competitors </li></ul><ul><li>Identities </li></ul><ul><li>Performance </li></ul><ul><li>Likely plans </li></ul><ul><li>Capacity to make/sell/innovate </li></ul><ul><li>Market shares </li></ul><ul><li>Strengths/weaknesses </li></ul><ul><li>Technology </li></ul><ul><li>New materials/processes </li></ul><ul><li>New products/applications </li></ul><ul><li>Infringement/overlapping by other sectors </li></ul>
  20. 20. Preparing A Business Plan? <ul><li>Why Prepare a Business Plan? </li></ul><ul><li>Because they are designed to:- </li></ul><ul><li>Help an entrepreneur clarify, focus and research his project usually over a 3-5 year period </li></ul><ul><li>Act as a framework within which a business can develop and pursue medium term business strategies </li></ul><ul><li>Serve as a basis for third party discussions with banks, investors, government and other agencies </li></ul><ul><li>Provide benchmarks against which actual performance can be assessed </li></ul>
  21. 21. What will the Plan do for BIC Clients ? <ul><li>It Acts as a Map for the Business </li></ul><ul><li>It Supports Management Control </li></ul><ul><li>It is a Briefing Document for Key </li></ul><ul><li>Staff </li></ul><ul><li>It Helps Secure Finance </li></ul>
  22. 22. Tips When Preparing a Business Plan <ul><li>Own the Contents </li></ul><ul><li>Ensure the Plan fits You </li></ul><ul><li>Be Realistic </li></ul><ul><li>Be Clear in Your Objectives </li></ul><ul><li>Be Concise and Clear, Avoid Padding </li></ul><ul><li>Well Presented, Typed and Bound </li></ul><ul><li>Remember not everything goes as Planned </li></ul>
  23. 23. The Structure of the Business Plan <ul><li>Executive Summary </li></ul><ul><li>Background & Description of the Business </li></ul><ul><li>Management & Organisation Structure </li></ul><ul><li>Market Research </li></ul><ul><li>Marketing and Sales Plan </li></ul><ul><li>Operation Plan </li></ul><ul><li>Financial Plan </li></ul>
  24. 24. Check List Management: Have you clearly stated how the Business will be Managed? Market: Have you clearly shown that there is a market for your Product or Service? Operations: Have you thought through the day to day Operational Issues to make your Business a Success? Finance: Have you clearly demonstrated the Financial viability of the Business?
  25. 25. The Operations Plan <ul><li>Describe the Service or Process </li></ul><ul><li>Include a Layout Drawing Manufacturing </li></ul><ul><li>Describe Procedures for Monitoring and </li></ul><ul><li>Controling Quality </li></ul><ul><li>Sources of Raw material, Terms of Trade, </li></ul><ul><li>possible Vulnerability </li></ul><ul><li>Employment and Training </li></ul><ul><li>How Competitors do it </li></ul>
  26. 26. The Financial Plan <ul><li>Financing a Business </li></ul><ul><li>Strategy and Raising Finance </li></ul><ul><li>Types of Project Finance </li></ul><ul><li>Approaching Sources of Finance </li></ul><ul><li>Capital Financing </li></ul><ul><li>Putting a Value on Equity </li></ul><ul><li>Debt Financing </li></ul><ul><li>Banks and Debt Financing </li></ul><ul><li>Grants and Subsidies </li></ul>
  27. 27. The Financial Plan <ul><li>Total Funding & Sources of Funds </li></ul><ul><li>Three years Cash Flow Forecasts </li></ul><ul><li>Projected Profit and Loss Accounts </li></ul><ul><li>Projected Balance Sheets </li></ul><ul><li>Costing & Pricing details </li></ul>
  28. 28. Management & Organization Structure <ul><li>Current Structure & Organization </li></ul><ul><li>Organization Charts </li></ul><ul><li>Key Management Functions </li></ul><ul><li>Profiles of Promoter & Key Managers </li></ul><ul><li>Remuneration & Contracts </li></ul><ul><li>External Professional Advisors </li></ul>
  29. 29. Projections and Assumptions <ul><li>Three year Projections </li></ul><ul><li>Market Demand & Sales growth </li></ul><ul><li>Prices & Costs achieved </li></ul><ul><li>Stocking Levels </li></ul><ul><li>Creditor & Debtor Days </li></ul><ul><li>Equipment available, and Lease or Buy </li></ul><ul><li>Productivity, staff & plant </li></ul><ul><li>Quality Levels & Yields </li></ul><ul><li>Research & Development </li></ul><ul><li>Can Buy Technology </li></ul>
  30. 30. Financing a Business <ul><li>Key Questions </li></ul><ul><ul><li>What are you trying to do ? </li></ul></ul><ul><ul><li>What do you estimate it will cost to do it ? </li></ul></ul><ul><ul><li>Can you or should you finance it yourself ? </li></ul></ul><ul><li>Business Planning is the Key Activity </li></ul><ul><ul><li>Matching Plans with Probable Outcomes </li></ul></ul><ul><ul><li>Reconciling Planned Sales and Expenditures </li></ul></ul><ul><ul><li>Simulation of Business Process </li></ul></ul><ul><li>Evaluation of Financing Options </li></ul><ul><ul><li>Resources Required </li></ul></ul><ul><ul><li>Cash Required </li></ul></ul><ul><ul><li>Sources of Cash </li></ul></ul><ul><ul><li>In-Kind Options </li></ul></ul>
  31. 31. Strategy and Raising Finance <ul><li>Typical Start-Up Problem </li></ul><ul><ul><li>Lack of Capital </li></ul></ul><ul><li>A Problem Well Stated ! </li></ul><ul><ul><li>Objectives in Securing Needed Finance </li></ul></ul><ul><li>Money . . . </li></ul><ul><ul><li>What for exactly ? </li></ul></ul><ul><ul><li>When is it needed ? </li></ul></ul><ul><ul><li>Where might it come from ? </li></ul></ul><ul><li>Cost of Finance </li></ul><ul><ul><li>Interest and Borrowing Degrees of Freedom </li></ul></ul><ul><ul><li>Dilution of Ownership, Control, and Returns </li></ul></ul><ul><ul><li>Cost of Capital </li></ul></ul>
  32. 32. Types of Project Finance <ul><li>Capital </li></ul><ul><ul><li>Equity: Cash vs In Kind </li></ul></ul><ul><ul><li>Seed / Venture </li></ul></ul><ul><li>Bank Finance </li></ul><ul><ul><li>Term Loan </li></ul></ul><ul><ul><li>Overdraft </li></ul></ul><ul><ul><li>Commercial Mortgage </li></ul></ul><ul><li>Grants & Subsidies </li></ul><ul><ul><li>State Schemes </li></ul></ul><ul><ul><li>Enterprise Organisation Dublin </li></ul></ul><ul><ul><li>Business Innovation Centre </li></ul></ul><ul><ul><li>Others (e.g., First Step) </li></ul></ul><ul><li>Creditors ? </li></ul>
  33. 33. Capital Financing <ul><li>Promoter’s Money </li></ul><ul><ul><li>Putting Your Money Where . . . ! </li></ul></ul><ul><ul><li>Shortage of Cash ! </li></ul></ul><ul><ul><li>Abundance of In-Kind ? </li></ul></ul><ul><li>Investor’s Money </li></ul><ul><ul><li>Identifying Appropriate Investors </li></ul></ul><ul><ul><li>Negotiating Mutually-Agreeable Exchange </li></ul></ul><ul><ul><li>Mechanisms for Offering Returns </li></ul></ul><ul><ul><li>Equity/Preference Shares/Loans/Options </li></ul></ul><ul><ul><li>Business Expansion Scheme (BES) </li></ul></ul><ul><li>Seed/Venture Capital </li></ul><ul><ul><li>Few Sources </li></ul></ul><ul><ul><li>Get to Know Evaluation Criteria ? </li></ul></ul><ul><ul><li>Don’t Expect Quick Fix ! </li></ul></ul>
  34. 34. Putting a Value on Equity <ul><li>No Hard and Fast Rules </li></ul><ul><li>Important to Know . . . </li></ul><ul><ul><li>Investment to Date - Both Cash and In-Kind </li></ul></ul><ul><ul><li>Development Investment Required </li></ul></ul><ul><ul><li>Realistic Evaluation of Cash Needs and Scheduling </li></ul></ul><ul><ul><li>Realistic Estimation of Profits and Returns on Equity </li></ul></ul><ul><li>Balancing . . . </li></ul><ul><ul><li>Resourcing the Business </li></ul></ul><ul><ul><li>Retaining Ownership </li></ul></ul><ul><ul><li>Retaining Control </li></ul></ul><ul><ul><li>Realising Immediate vs Future Value </li></ul></ul><ul><ul><li>Attracting / Retaining Critical Skills </li></ul></ul><ul><ul><li>Developing Strategic Alliances </li></ul></ul>
  35. 35. Getting Over Financing Obstacles <ul><li>Be Practical and Realistic About What you Need </li></ul><ul><li>Be Careful in Justifying Figures </li></ul><ul><li>Be Vigorous in Validating Your Assessments </li></ul><ul><li>Be Creative About Options and Sources </li></ul><ul><li>Be Considerate of What Others Require of You </li></ul><ul><li>Be as Persistant as You Need Be </li></ul><ul><li>Be Always Conscious of What YOU Need and Want </li></ul>
  36. 36. Effective Business and Financial Planning are critical functions for BICs This presentation and other relevant information can be downloaded at www.dbic.ie Conclusion
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