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Module 5 - Business Plan Methodology.ppt

Module 5 - Business Plan Methodology.ppt






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    Module 5 - Business Plan Methodology.ppt Module 5 - Business Plan Methodology.ppt Presentation Transcript

    • Entrepreneurship and New Product Development Business Plan Methodology
    • Objectives
      • Understand the business planning process
      • With practice, be able to develop your own start-up business plan to suit different purposes
      • Understand how a business plan can be used to raise finance
      • Be able to critically analyse a business plan
    • Contents
      • Why you need a business plan
      • The planning process
      • The SWOT analysis
      • What a business plan looks like
      • The investors view
      • Presenting a case for finance
      • Pro forma business plan
    • Why you need a business plan
      • One of the most important steps in setting up any new business is to develop a business plan
      • It forces the entrepreneur to think through the opportunity and anticipate problems
      • It sets clear aims and objectives
      • It can act as a tool to attract external finance
    • The Planning Process
      • Planning is a 3 stage process
        • Understanding where you are
        • Deciding where you want to go
        • Planning how to get there
    • Understanding where you are
      • Understanding your product or service and how it is better or worse than that of your competitors - your competitive advantage
      • Understanding who your customers are and why they will buy from you
      • Understanding your own and your firms strengths and weaknesses
      • Understanding the opportunities and threats that the market might present you with
    • Decide where you want to go
      • Decide the general aims for the business
      • Formulate the aims in a ‘Mission Statement’
      • Set specific objectives that can be quantified, bounded in time and realistically achievable
      • Objectives tell you where you are going and let you know when you have arrived
    • Planning how to get there
      • Develop a strategy, i.e. a list of tasks and how-to statements to enable you to achieve your objectives
      • Develop a marketing plan that produces a consistent and coherent marketing mix to address how to sell the product or service to different customers
      • Draw up financial budgets - cash flow statements and profit and loss. Determine what financial resources are required to implement the plan
    • The business planning process Personal Aims Mission Statement Business Objectives Customer Analysis Market segmentation Marketing Strategy Marketing Plans Marketing Mix Product/Service Price, Promotion Place, People Operating Needs Financial plans Cash flow Profit statement Break-even Funding requirement External appraisal Market research Business environment: Opportunities, Threats Internal appraisal Company analysis Company capabilities: Strengths, Weaknesses Feedback Loops: Strategies and plans need to be modified because of resource limitations
    • The SWOT Analysis
      • A shorthand way of looking at the business
        • strengths and weaknesses
      • A shorthand way of looking at the market environment in which the business operates
        • opportunities and threats
      • The SWOT process tries to overlap the business environment and the firms resources i.e. a match between the firms strategic or core competencies and a market opportunity
    • The SWOT Analysis
      • The SWOT is a summary of the key issues emanating from the marketing audit and should contain clear indicators of the key determinants of success
    • Business Plan Structure
      • Promotion
      • Product
      • Production
      • Marketing
      • Finance
      • Profitability
      • Executive Summary
      • Introduction
      • Market Analysis and Research
      • SWOT Analysis
      • Competition
      • Competitive Strategy
      • Critical Success Factors
      • Cashflow Statement
      • Forecast P+L
      • Forecast Balance Sheet
      • Sensitivity Analysis
      • Executive Summary
      • Introduction and Background
      • Project Outline
      • Ownership, Management and Employment
      • Marketing and Market Strategy
      • Production
      • Financial
      • Funding Proposal
      • Detailed Projection
      EI Student Awards Deakins et al Immick & O’Kane
    • What a business plan looks like
      • Business details - name, address, legal form, business activity
      • Business aims and objectives
      • Market information - size, growth, competitors
      • The firm’s strengths and weaknesses as well as competitive advantage
      • Customers
    • What a business plan looks like
      • Marketing strategy - advertising, promotion, pricing etc
      • Premises and equipment needs
      • Key people, their functions and background
      • Financial highlights - turnover, profit, break-even, funding details
      • Detailed profit forecast
      • Detailed monthly cash flow forecast
    • The investors view
      • If you need to arrange finance, whether from the bank or equity finance,
        • You need to establish a relationship of trust and respect with the investor
        • You will need to present them with a business plan
      • Investors ultimately invest in individuals, not in businesses or plans!
    • The investors view - Banks
      • Two thirds of external finance for small firms comes from banks
      • Banks are risk adverse, they are looking for a certain rate of interest over a specified period of time and see their loan repaid
      • Bank managers will be particularly interested in the cash-flow statement, the break-even analysis and the gearing ratio
    • The investors view - Equity investors
      • Only 1 in 20 proposals sent to investment companies reach negotiation - so the quality of the business plan, especially the executive summary is vital
      • The sums involved when dealing with equity investors tend to be higher than when dealing with banks so business plans tend to be more comprehensive
    • The investors view - Equity investors
      • An equity investor needs to be convinced of two things:
        • That a business opportunity exists with the potential to earn a high return (>25%), within a timeframe that is acceptable and an exit route within 5 to 10 years
        • That the company and its management can execute the plan. This depends on the firm’s competitive advantage and the quality of management
    • Presenting a case for finance
      • At some point the entrepreneur will be required to present the business plan to potential investors
        • Rehearse thoroughly
        • stress the market and firm’s competitive advantage
        • stress the competencies of the management
      • Demonstrate motivation, enthusiasm, integrity, a genuine desire to succeed against all adversity
    • Pro forma business plan
      • The business plan is a description of what the entrepreneur wants it to become over the next 12 months
      • It should contain targets, estimates and projections and describe how they will be achieved
      • It should help the entrepreneur think ahead systematically and raise finance
      • It is an invaluable route map to help the business succeed