Module 5 - Business Plan Methodology.ppt
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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