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Making a Business Plan Romit Dasgupta (Globsyn)


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Making a Business Plan Romit Dasgupta (Globsyn)

  1. 1. 1) Should we admit our weakness ? My Take: With business plans, one needs to be real. You can assume that the people evaluating your plans have met similar people before, perhaps even been in your shoes at some point. Therefore, if you/ your organization have/has any weakness, talk about it, but more importantly emphasize on how you have gone about addressing that issue. 2) Is there a fixed formula for VC’s ? My Take : Not to my knowledge. Unlike Angel Investors (who are often entrepreneurs) VC’s are more structured. They would often have a team of specialists who would evaluate your plan. Most of the time, they comprise of people with very strong Financial Background and Industry Knowledge. Having said that, I would also say that once you have gone through 4 to 5 VC firms, you would start getting an idea about what they are looking for. Most of the time VC firms specialize on certain verticals, it would be worth the while to do some research and have some knowledge about the firm before you meet them. Areas like Who are the partners/their background, What have they funded in the past, what has been the performance of those companies
  2. 2. 3) How do you calculate your market cap ? My Take: Business schools would teach you that Market Capitalization is the multiplication between the number of outstanding shares and current stock price. But unfortunately that is only for Listed entities. For private companies, I can suggest 2 options. First, make some strong justified assumptions about your business look at the corresponding players in the same market and gauge what percent of the entire market you are dominating, though this will not give you an exact figure, it would give a sense of where you are vis-a-vis your business universe. The second option is to compare yourself to a similar listed company. Look for those who have similar exposure in debt, customer base, growth prospects, profits etc. You might have to work out the PE ratio for your company (with some assumptions) to get to an actual valuation. 4) Cash Generation in BCG vs GE Matrix? My Take : There are two instances in the market where you can generate cash. First when the industry is attractive even though your competency is low, i.e. “Easy Cash Business” this is what you would see in GE Matrix. Else in a situation when your product has a high market share in a slow growing market, which means that the unit generates far more revenue than what is needed to sustain it .. i.e. “Milking the Cash Cow” – BCG Matrix !
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  4. 4. A Student Business Executive Family Business Owner Entrepreneur Romit
  5. 5. A Student Assignment for a class ? Thinking of getting into their own business ? B-Plan competition ? Business Executive Planning growth or expansion of their division ? Require funding from the management ? Raising debt/equity from the market ? Romit
  6. 6. Family Business Owner Diversification of business ? Professionalizing the business ? Role of 2nd / 3rd Generation in the Family Business? Entrepreneur Put their thoughts on a piece of paper ? Impress the VC’s / Angel Fund ? To understand the viability of their thoughts ? Raise Funds ? . . Romit Dasgupta Others…
  7. 7. Romit
  8. 8. The Business Background The Market Operations The Management The Proposal The Sales Forecast Financial Information The Summary Romit
  9. 9. The Business : What is it ? What does it do ? How was it established ? By whom ? Why ? Has it been successful ? Why ? Learning from the past (Company Traits) The Product & Service: Broadly explain how the product/service works Any unique features it has ? Any IP ? How is it supplied/distributed/sold Romit
  10. 10. The Market : Market structure (Monopoly/Multiple suppliers/Customer base etc) Who do you sell to ? Why do they buy ? Why from you ? What is the distribution network ? Competitors ? How did you get there / Why are you doing what you are doing ? You can either talk about your journey else if you are a start up you can talk about your involvement in the market, how you came across the idea of the business etc.. Romit
  11. 11. The Business Background The Market Operations The Management The Proposal The Sales Forecast Financial Information The Summary Romit
  12. 12. Overview – briefly outline the market you compete in/ propose tocompete in. Define and explain it. Why will people buy yourproducts and services ? What benefits does it offer ? How big isyour market ? Who is your customer ? – Describe them.Market StructureThis section would define the attractiveness of your offering inthe market that you are offering your service. If it’s amonopolized market how do you plan to sell your product?Else, if it’s an open market with multiple service providers howdo you differentiate ? Romit DasguptaPorter’s 5 Force AnalysisPorter’s five force analysis sometimes gives a snap shot of themarket which would help you understand how the forceswould impact your business (Forces – Buyers, Suppliers,Internal competition, Substitute, and new entrants )
  13. 13. Romit Dasgupta The 5 force analysis is typically used to underline the strategy with which you should enter the
  14. 14. PEST /PESTLE Analysis – A PEST Analysis helps us get a perspective of external factors and their impact on our business (Political, Economical, Social and Technological, Legal & Environment) Political Factors- The degree of government intervention in the economy (tax, labor laws, trade restrictions etc) Economic Factors – Economic growth, Interest rates, Inflation rate Social Factors – cultural aspects, population growth rate, age distribution etc Technological Factors – Technological change, R&D, Automation Romit Dasgupta Legal Factors – Consumer Law, Employment Law, Health & Safety Law Environment Factors – Climate Change, Environmental
  15. 15. Market Segmentation Markets often fall into different segments with their own characteristics. (Say you are a Car Repair Center vs a Car Repair Center for only BMW cars); Therefore its always a good idea to break the market as per the service that you are offering SWOT Analysis : Used as a strategic planning tool to evaluate the Strength, Weakness, Opportunity and Threats involved in a business. Another way to use the SWOT is matching & converting. Strengths +Opportunity = Competitive Advantage (MATCHING) Romit Dasgupta Weakness +Threats = Point of Vulnerability (CONVERTING)
  16. 16. STRENGTH WEAKNESS The traditional format for SWOT Analysis given on the Left. Remember that SWOT OPPORTUNITY THREATS Changes with time Other areas : In addition in this section areas like Distribution, Romit Dasgupta Differentiation, Barriers to entry, Pricing of product, New Technologies should be
  17. 17. Romit Dasgupta BCG matrix is often used to prioritize which products within company product mix get more funding and
  18. 18. Increase Giving existing consumption customers more choice Get into new Get new Markets and customers in competitors Romit Dasgupta Ansoff Matrix is a growth strategy tool
  19. 19. High Industry Attractiveness LEADER GROWTH CASH GENERATION PHASED TRY HARDER PROCEED WITH WITHDRAWL CARE DOUBLE PHASED WITHDRAWAL Low Or QUIT WITHDRAWL High Business Strength Low Romit DasguptaThe GE Matrix is an alternative technique for product management to helpa company decide what product(s) to add to its product portfolio, andwhich market opportunities are worthy of continued investment.
  20. 20. Objective Strategy Tasks Ownership Highlight the strategy Break theWrite one of the required to achieve strategy to tasks. <Name ofobjectives of the the objective – T1 Person/Team>organization Strategy 1 Break the <Name of strategy to tasks. Person/Team> T2 Highlight the strategy Break the <Name of required to achieve strategy to tasks. Person/Team> the objective – T1 Strategy 2 Break the <Name of strategy to tasks. Person/Team> T2 Highlight the strategy Break the <Name of required to achieve strategy to tasks. Person/Team> the objective – T2 Strategy 3 Romit DasguptaOST Chart - Is a marketing strategy tool, which would help you togo from the Objective of the organization to the tasks it needs to undertaketo achieve those objectives
  21. 21. The Business Background The Market Operations The Management The Proposal The Sales Forecast Financial Information The Summary Romit
  22. 22. In this section you will have to describe how you effectively run/want torun your business. Some of the things you could focus on are :1) Describing Processes- These would include buying process, Stock control, New Store Development, Store Design, regulatory controls, Product display & promotion etc..2) Demonstrate Control – How do you manage inventory ?, How do you identify slow moving/aging stock, how do you manage staff overtime3) Highlight Differences – highlight if you are trying to do anything differently which might lead to less administrative burden/ reduce staff time / automate etc.4) Show Experience – Though team experience is covered in detail in the Romit Dasgupta management section, in this section you can highlight what specific team experience would help you achieve the above mentioned points in operations
  23. 23. The Business Background The Market Operations The Management The Proposal The Sales Forecast Financial Information The Summary Romit
  24. 24. This is a very important section, not only for existing businesses, but morefor the Start Ups. You have to SELL YOURSELF and you TEAM here. Some ofThe things you can focus on are :a) What experience that you and your team bring is relevant to the business ? Give Brief Bio of the Team/ Attach Detail CVb) What weakness do you have as a team and how you plan to address them?c) Can you show some evidence from past experience ?d) What skills (Technical/Financial/Marketing/HR/Operational) are required to run your organization. How do you plan to address these ?e) It is also a good idea to show an Organizational Structure (Typically Romit Dasgupta Tree Structure)
  25. 25. The Business BackgroundThe MarketOperationsThe ManagementThe ProposalThe Sales ForecastFinancial InformationThe Summary Romit Dasgupta
  26. 26. This is your SELLING PITCH !Here you have to clearly explain what you propose(WHAT/HOW/WHERE/WHEN)Focus on including :1) Give SMART Objective – Simple, Measurable, Attainable, Relevant, Time-Bound2) Explain why you think you will succeed ?3) Ask for what you want ..4) What have you invested ? (Money/Time/Effort..)5) What is in it for the investors ? Why should they invest ? Romit Dasgupta6) The Exit for Investors
  27. 27. The Business BackgroundThe MarketOperationsThe ManagementThe ProposalThe Sales ForecastFinancial InformationThe Summary Romit Dasgupta
  28. 28. In this section, you will have to project NUMBERS for the sale of your products/ Services. For start Ups this section would be completely assumption based, Which is why Sensitivity Analysis needs to be done on the numbers Actual Forecast Year 1 2 3 4 Product 1 100 120 130 140Projection Product 2 0 0 20 30 Sensitivity Analysis Pessimistic (60%) Actual (80%) Optimistic (100%) 2011 2012 2013 2011 2012 2013 2011 2012 2013 Total Capacity 900.00 1600.00 1600.00 900.00 1600.00 1600.00 900.00 1600.00 1600.00 Utilization 540.00 960.00 960.00 720.00 1280.00 1280.00 900.00 1600.00 1600.00 Total Revenue 1512.00 2688.00 2880.00 2016.00 3584.00 3840.00 2520.00 4480.00 4800.00 Operating Cost 1410.00 2375.00 2660.00 1410.00 2375.00 2660.00 1410.00 2375.00 2660.00 PBIDT 102.00 313.00 220.00 606.00 1209.00 1180.00 1110.00 2105.00 2140.00 Interest 150.00 200.00 180.00 150.00 200.00 180.00 150.00 200.00 180.00 Cash Profit (48.00) 113.00 40.00 456.00 1009.00 1000.00 960.00 1905.00 1960.00 Romit Dasgupta Depreciation 160.00 200.00 210.00 160.00 200.00 210.00 160.00 200.00 210.00 PBT (208.00) (87.00) (170.00) 296.00 809.00 790.00 800.00 1705.00 1750.00 Provision Tax 0.00 0.00 0.00 130.00 200.00 325.00 130.00 200.00 325.00 PAT (208.00) (87.00) (170.00) 166.00 609.00 465.00 670.00 1505.00 1425.00
  29. 29. The Business Background The Market Operations The Management The Proposal The Sales Forecast Financial Information The Summary Romit
  30. 30. The amount of financial information required for B-Plan would depend on the circumstance, the audience, business complexity, etc. However given below are a list of documents which should be considered: 1) Profit & Loss Statement (Sum of income – deduct cost) 2) Balance Sheet – a statement of assets and liabilities 3) Cash Forecast – Detailed cash flow statement 4) Funding requirement and flow Romit
  31. 31. CASHFLOW STATEMENT Most Important for day to day operations Romit Dasgupta
  32. 32. Must Match ! BALANCE SHEET STATEMENT Annual StatementRomit Dasgupta
  33. 33. Profit &Loss Statement Gives us an idea how a business performs in a given period. Also Called Income Statement Romit Dasgupta
  34. 34. The Business Background The Market Operations The Management The Proposal The Sales Forecast Financial Information The Summary Romit
  35. 35. The summary though written at the end of the B-Plan is often a document which is read first. This is the elevator pitch equivalent for the B-Plan. You have to assume that the investors that you are targeting are VERY BUSY AND SELFISH PROPLE !! Therefore your summary MUST be short and precise and must cover all critical areas of the plan. The Summary in a nut shell is the “hook” for the investor to be interested in your B-Plan. Areas that you should cover in the Summary are : •The Business •The Team •The Proposal / Why it will succeed / Rewards •Any Major Risks •What you want from the Investor Romit
  36. 36. 1) Make sure that the business plan is presentable 2) Make sure you do proper research before referring / quoting any data or fact , people reading your B-Plan are often very well informed 3) Try and be to the point and do not write just to fill pages 4) Always Summarize your plan well. Often that is the first piece which is read 5) If you are presenting your business, be smartly dressed, remember the Investor is investing money on you and not on your business (For Start Ups) 6) Internalize your B-Plan, the investors could ask you questions from any part Of your plan, and in no particular order 7) Do not sell yourself cheap ! Romit Dasgupta 8) Believe in yourself and your capabilities . That makes all the difference !