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Business plans

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INTRODUCTION …

INTRODUCTION
A business plan is an important document for any business and it can be written for a variety of reasons.
Internally, it can help owners and managers crystallise their ideas, focus their efforts and monitor performance against established objectives.
Externally, the business plan can act as a medium for attracting finance for start-ups or expansion.
INTRODUCTION
For many people, the experience of raising finance is a new one.
Many opportunities presented to financiers are subsequently rejected.
It is essential, therefore, that the entrepreneur prepares a quality document.
The objective of this work-pack is to help you prepare just such a document by providing you with the headings which need to be covered.
CONTENTS
The business plan should summarise the proposed activity and the prospects for success for the venture, paying particular attention to factors that are critical to success or failure.
The contents should be tailored to the particular individual requirements, circumstances or characteristics of the proposal.
In general, they have the following categories:
CONTENTS
Executive Summary
Current position
Objectives
Product/Service and Operations
Marketing and Sales Plan
Competition
Management and Staff
Financial plan
Information and control
Risk factors and mitigation

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  • 1. Presented By Himansu S M
  • 2. INTRODUCTION  A business plan is an important document for any business and it can be written for a variety of reasons.  Internally, it can help owners and managers crystallise their ideas, focus their efforts and monitor performance against established objectives.  Externally, the business plan can act as a medium for attracting finance for start-ups or expansion. 2
  • 3. INTRODUCTION  For many people, the experience of raising finance is a new one.  Many opportunities presented to financiers are subsequently rejected.  It is essential, therefore, that the entrepreneur prepares a quality document.  The objective of this work-pack is to help you prepare just such a document by providing you with the headings which need to be covered. 3
  • 4. CONTENTS  The business plan should summarise the proposed activity and the prospects for success for the venture, paying particular attention to factors that are critical to success or failure.  The contents should be tailored to the particular individual requirements, circumstances or characteristics of the proposal.  In general, they have the following categories: 4
  • 5. CONTENTS  Executive Summary  Current position  Objectives  Product/Service and Operations  Marketing and Sales Plan  Competition  Management and Staff  Financial plan  Information and control  Risk factors and mitigation 5
  • 6. WHOSE RESPONSIBILITY  The business plan should be written by the management, albeit with the help of professional advisers.  The investor is backing the management and the plan must be an expression of your objectives.  Experience has shown that the advisers provide a useful role to determine the overall structure of the plan and can provide helpful ideas and reactions. 6
  • 7. HOW TO WRITE IT  Do keep the length of the plan under control and remember that the reader is unlikely to know the sector as well as you!  Avoid jargon and use plain & simple language  Explain acronyms / abbreviations – in some cases a Glossary is a good idea.  Do include a title page containing address and contact details, together with an Index. 7
  • 8. EXECUTIVE SUMMARY  Although preferably written last, the Summary should appear at the front of the proposal.  It is essential that the Summary 'catches the eye' and grasps the imagination of the reader by providing enough information for him to decide in principle if he would be interested in the deal.  Financiers have different preferences and are looking to invest in different situations. The Summary must be clear enough for them to establish from the start whether or not the case is worth pursuing. 8
  • 9. EXECUTIVE SUMMARY  The Summary should include:  What your product or service is, in a clear, concise description;  What your market is;  The unique aspects (USP) of your product;  Why customers will buy from you rather than your competitors; 9
  • 10. EXECUTIVE SUMMARY  In the case of new or innovative products, what barriers there are to prevent competition entering the market;  Management experience and funding input;  The financial highlights, both achievements to date (if appropriate) and expectations of growth;  The finance required;  The potential 'Exit" route / returns for the investor or the ability of the business to service borrowings. 10
  • 11. CURRENT POSITION  This section should be a brief resume of the stage the business has reached and how the company has developed in the last few years, with reference to factual information.  The following questions should be addressed:  What is the corporate structure?  Who owns the company and shareholdings?  Who are the senior managers? 11
  • 12. CURRENT POSITION  What is the management structure?  How many employees are there?  What is the location?  What is the trading history?  What are the key financial ratios?  What are the strengths and weaknesses of the business?  What is the detailed SWOT analysis? 12
  • 13. OBJECTIVES  A clear and concise statement of the current objectives.  Some factors are easily measured such as turnover or profitability targets.  Others are qualitative in nature and these should not be disregarded simply because of their subjective nature.  The performance will be monitored against these targets by external investors at a later stage; consequently they must be achievable.  Future positive and negative variances will have to be explained. 13
  • 14. OBJECTIVES STATEMENT  Any turnover targets by product, if relevant;  Any profit or cost reduction target;  Any market share target;  Any non-financial objectives such as improving your:  - customer service;  - industry reputation;  - product quality;  Any relevant personal objectives. 14
  • 15. PRODUCT/SERVICE AND OPERATIONS  This section gives manufacturing & operational details of the business, as following:  Existing products & services.  How each can be improved, developed or replaced to maintain competitiveness.  New goods or service is being offered with its side effects. For example, more staff and production space may be required; raw materials purchased and stocks held may need to be increased, or specialist staff recruited.  Describe the following in details: 15
  • 16. PRODUCT/SERVICE AND OPERATIONS  Products or Services;  Unique qualities and any intellectual property rights;  Regulatory issues (if appropriate);  For a new product, the path to launch;  Any plans for diversification;  Facilities;  Manufacturing processes;  Plant and machinery used in processing;  Organisational structure and identify key positions, roles and responsibilities. 16
  • 17. MARKETING AND SALES PLAN  This is a vital area, which should be explained in detail. The location and size of your market will need to be defined, together with your share of the total. It has to be very accurate - guesswork will not do!  The specific steps you are going to take in marketing your business and the impact you expect these to have.  If you are assuming that your market share will increase then explain why.  Explain the following details: 17
  • 18. MARKETING AND SALES PLAN  Absolute size of your domestic market;  Absolute size of your export market (if appropriate);  Trends and developments expected in the market in the future;  Your target market and share;  The factors influencing the market;  The risks associated with new markets;  Results of market research;  Routes to market;  Sales pipeline. 18
  • 19. COMPETITION  How influential are your competitors and to what extent are they in a strong position to influence your market share?  Is your market dependent on external factors over which you have no control? These need to be pre- planned by identifying:  Who they are;  What their strengths and weaknesses are;  What the response of the competition will be;  How your product is superior;  The relative importance of each competitor. 19
  • 20. MANAGEMENT AND STAFF  It is said in the industry that financiers back people not businesses.  The quality of the management team is recognised as the key factor in any investment decision.  This should be borne in mind both when preparing the plan and during negotiations with potential backers.  Demonstrate that the team can work together and that there are unlikely to be conflicts or confusion of roles in the future. 20
  • 21. MANAGEMENT AND STAFF  Evidence of the track record of key individuals and their experience in the industry;  Future executive requirements;  Curricula vitae for senior managers (usually relegated to appendices);  Identification of the key function areas e.g. marketing, finance etc. and that each of these is covered by management with appropriate experience;  The financial rewards to the senior executives;  The ages of the senior executives. If they are likely to retire soon, what provisions have been made for succession; 21
  • 22. FINANCIAL PLAN  Many business plans fail to raise finance due to the inadequacy of the financial information provided.  Investors will be assessing the projected funding requirement and the anticipated profitability to establish whether the proposition is commercially viable, and the potential return sufficient.  Ensure that the financial plan reflects the objectives set out in the other constituent parts of your business plan.  Give details of the following: 22
  • 23. FINANCIAL PLAN  The funding requirement;  A summary of the projections;  A summary of key financial statistics;  The detailed assumptions behind the forecasts;  A summary of the sensitivity of the forecasts to the key assumptions.  The detailed projections for up to 3 years including profit and loss accounts, cash flow statements, and balance sheets;  The most recent financial statements; and  Details of any sensitivity analysis. 23
  • 24. INFORMATION AND CONTROL  Writing a business plan is not a one-time exercise. It becomes a more valuable management tool by being used and reviewed regularly as the business develops.  Internal review of the business is only possible by ensuring that adequate management information and control systems are in place.  Furthermore, external investors are likely to require that regular financial information is forthcoming from the company. 24
  • 25. INFORMATION AND CONTROL  The business plan should therefore contain the following:  An outline of the transaction recording systems;  Details of the regular management reports;  A demonstration that the business has staff with adequate financial skills;  Details of how the business will be managed on a day to day basis 25
  • 26. RISK FACTORS AND MITIGATION  It may seem strange to include risk factors in what is intended to be a selling document; however, it has the definite advantage of lending credibility to the proposal.  Including the major risks, financial and otherwise, that are likely to affect the business demonstrates that the entrepreneur understands that all businesses have potential stumbling blocks and has taken steps to identify these and developed a strategy to overcome these problems. 26
  • 27. RISK FACTORS AND MITIGATION  The best method to consider risk factors is by a sensitivity analysis of the forecasts. Most forecasting software is capable of being used extensively in this way.  The main results of such analysis should be incorporated into the plan particularly with regard to sales not reaching budgeted levels and the resultant effect on cash flow which is the demise of many new ventures. 27
  • 28. Himansu S M 15-07-2013 28

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