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7 steps in business planning

An easy and logical approach to business planning

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TRACKER

 Unit of measure




                   7 steps in business plans
                      Incorporating the winning strategies



                              Arriffin Mansor
                                     © 2008




1 Footnote

SOURCE: Source                                               11
TRACKER

 Unit of measure
                     7 steps to business planning
                 1. Determine economical size of your business in terms of variable
                    costs, fixed, volume and targeted profit.
                 2. Determine the minimum amount of working capital required based
                    on the operating and trading strategies.
                 3. Determine the minimum amount of fixed assets required based on
                    the size and capacity of the business.
                 4. Arrive at the amount of equity and loan financing required based on
                    the working capital and fixed asset. The debt equity ratio should
                    not the exceed that of the market.
                 5. Determine the targeted return on equity based on the Du Pont
                    business structure format. Ensure compliance with growing healthy
                    business.
                 6. Estimate the cash flows from the beginning of the performance
                    period to the end.
                 7. Estimate the income statement and balance sheet of the business.




1 Footnote

SOURCE: Source                                                                            22
TRACKER
 7 steps business plans include workbook and excel
 Unit of measure
 templates
                                                  Computer aided approach
                 Work book approach
                                                 Prepared templates and models that
             Systematic and efficient learning
                                                 make learning effective and efficient.


                                                 Learning are not bogged down to
              Background Reading References      calculations. More focus on strategic
                Formats or forms are provided    decisions.


                                                 Enable sensitivity and simulation
       Sequential fill up the blanks answers     analysis where impact study are
                                                 highlighted



             Documentary evidence of learning    Take back templates for work
                                    mistakes     applications with little modification
1 Footnote

SOURCE: Source                                                                            3
TRACKER
                          7 steps in business plans
 Unit of measure



                   •
                   1   Costs volume profit analysis


                   •
                   2   Working capital required.


                   •
                   3   Fixed Asset Strategies

                   4
                      Equity and Loan leveraging

                   5
                   •   Du Pont ROE format.


                   
                   6   Cash flow projections


                   
                   7   Financial statements
1 Footnote

SOURCE: Source                                        4
TRACKER

 Unit of measure
     Step 1 : Cost volume profit analysis
             • Determine the suggested product
               prices (external)
             • Determine the volume of sales that
               could be generated from the
               targeted market.
             • Separate fixed from variable costs
               (internal)
             • Arrive at the profit margin.
             • Are you happy with the targeted
1 Footnote     profit?
SOURCE: Source                                      5
TRACKER

 Unit of measure



                     STEP 2 WORKING CAPITAL
                      •   Cash (days sales)
                      •   Stocks (days purchase)
                      •   Debtors (days sales)
                      •   (Creditors (days
                          purchase) )
                 Preference should be given to working capital rather than fixed asset investment




1 Footnote

SOURCE: Source                                                                                      6

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7 steps in business planning

  • 1. TRACKER Unit of measure 7 steps in business plans Incorporating the winning strategies Arriffin Mansor © 2008 1 Footnote SOURCE: Source 11
  • 2. TRACKER Unit of measure 7 steps to business planning 1. Determine economical size of your business in terms of variable costs, fixed, volume and targeted profit. 2. Determine the minimum amount of working capital required based on the operating and trading strategies. 3. Determine the minimum amount of fixed assets required based on the size and capacity of the business. 4. Arrive at the amount of equity and loan financing required based on the working capital and fixed asset. The debt equity ratio should not the exceed that of the market. 5. Determine the targeted return on equity based on the Du Pont business structure format. Ensure compliance with growing healthy business. 6. Estimate the cash flows from the beginning of the performance period to the end. 7. Estimate the income statement and balance sheet of the business. 1 Footnote SOURCE: Source 22
  • 3. TRACKER 7 steps business plans include workbook and excel Unit of measure templates Computer aided approach Work book approach Prepared templates and models that Systematic and efficient learning make learning effective and efficient. Learning are not bogged down to Background Reading References calculations. More focus on strategic Formats or forms are provided decisions. Enable sensitivity and simulation Sequential fill up the blanks answers analysis where impact study are highlighted Documentary evidence of learning Take back templates for work mistakes applications with little modification 1 Footnote SOURCE: Source 3
  • 4. TRACKER 7 steps in business plans Unit of measure • 1 Costs volume profit analysis • 2 Working capital required. • 3 Fixed Asset Strategies 4  Equity and Loan leveraging 5 • Du Pont ROE format.  6 Cash flow projections  7 Financial statements 1 Footnote SOURCE: Source 4
  • 5. TRACKER Unit of measure Step 1 : Cost volume profit analysis • Determine the suggested product prices (external) • Determine the volume of sales that could be generated from the targeted market. • Separate fixed from variable costs (internal) • Arrive at the profit margin. • Are you happy with the targeted 1 Footnote profit? SOURCE: Source 5
  • 6. TRACKER Unit of measure STEP 2 WORKING CAPITAL • Cash (days sales) • Stocks (days purchase) • Debtors (days sales) • (Creditors (days purchase) ) Preference should be given to working capital rather than fixed asset investment 1 Footnote SOURCE: Source 6
  • 7. TRACKER Unit of measure STEP 3: FIXED ASSET INVESTMENT 1. Asset could preferably be leased or rented. 2. Control is good enough. There is no need to own. 3. Alternatively own assets through bank loans or financing. 4. Internal rate of return and net present value is the tool used in long term investment ( more than 1 year) 1 Footnote SOURCE: Source 7
  • 8. TRACKER Unit of measure STEP 4 : EQUITY AND LONG TERM LOANS • Financing the business through equity or loans or a combination of both. • The mix between equity and loans is called leveraging. • In Malaysia, the bank is willing to give you RM2 for every RM1 you invested as equity. 1 Footnote SOURCE: Source 8
  • 9. TRACKER Unit of measure STEP 5: TARGETED RETURN ON EQUITY • Set the business goal in term of return on equity (ROE) • Structure the business based on the Du Pont format. • Ensure all KPIs comply to a healthy growing company. • Ensure that your strategies are incorporated in the fundamental structure. 1 Footnote SOURCE: Source 9
  • 10. TRACKER Unit of measure STEP 6: PROJECTED CASH FLOWS • Project inflows and outflows for the business • Detailed cash flows for the initial period with summary for the subsequent period. • Show material items such as loan receipts and repayment • Ensure liquidity at all times 1 Footnote SOURCE: Source 10
  • 11. TRACKER Unit of measure STEP 7: CONSTRUCT THE FINANCIAL STATEMENTS • Based on all the previous steps the income statement and balance sheet could now be constructed. • The balancing items could be the borrowed loans and equity. • Ensure that the financial statements are in consistent with your stated strategies. 1 Footnote SOURCE: Source 11
  • 12. TRACKER Unit of measure A business plan is the collective involvement and commitment of the members of a team. 1 Footnote SOURCE: Source workshops on business plans 12
  • 13. TRACKER Unit of measure 7 STEPS IN BUSINESS PLANS 1 COSTS VOLUME • Set the right costs and volume of business PROFIT ANALYSIS • Set the right pricing strategies WORKING 2 • Winning trading and operating strategies CAPITAL FIXED • Minimum Fixed Asset Strategies 3 ASSETS • Rent lease or LT loans EQUITY • Own or borrowed funds 4 • Leveraging or gearing ratio LT LOANS 5 ROE CHART • Return on equity as ultimate objective • Realistic assumptions 6 • Ensure liquidity at all times CASH FLOWS • Loan repayment calculations 1 Footnote FINANCIAL • Income Statement and Balance Sheet 7 • Comply with basic key performance indicators STATEMENTS SOURCE: Source 13 13
  • 14. The fundamental structure is now complete. The descriptive frills can be completed by looking at the check list. 7 steps in business plans 14
  • 15. 7 steps in business plans Cost volume profit analysis INCOME STATEMENT WORKING Balance CAPITAL Sheet Liquidity management F/A Land & Buiding & loan repay (3) Furniture and fittings Plant and Machinery Equity and CHECKING THE Loan OBJECTIVE Leveraging (4) 7 steps in business plans 15

Editor's Notes

  1. 7 STEPS IN BUSINESS PLANNING
  2. 7 STEPS IN BUSINESS PLANNING
  3. 7 STEPS IN BUSINESS PLANNING SIN-AAA123-20090609-
  4. 7 STEPS IN BUSINESS PLANNING
  5. 7 STEPS IN BUSINESS PLANNING KLA-KL0153-20090430_Driving delivery of outcomes
  6. 7 STEPS IN BUSINESS PLANNING