Business planning primer


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A Short overview into business planning. This was originally designed as a 2 to 3 hour primer for students in other faculties that wanted an overview of business planning.

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Business planning primer

  2. 2. PLANNING – THE COMPONENTS Strategic Plan Financial Goal Customer Goal Processes Goal Learning & Growth Analysis External PEST Internal Ratios Risks Budgets Value Chain TOWS or SWOT Growth Opportunities Marketing & Sales, Service Plan Customer or Market Targets How Reach Them? The Four P’s Operations Plan (Processes) Inbound Logistics Operations Outbound logistics HR Plan Financial Plan Forecasts F/C Cash Flow P & L Budgets 3-5 Yrs Strategic KPI’s Operational KPI’S Financial KPI’sMarketing KPI’S Business Plan
  3. 3. EXTERNAL ANALYSIS Industry Profitability Driving Forces Outlined two key objectives Explain how they are changing the industry Key Success Factors Outline the two most important factors Explain why they are necessary Show industry specificity Industry Profile •Industry Definition •Size •Growth Rate •Stage in Life Cycle •Number of Companies •Customers (Number of Buyers) •Ease of Entry/Exit •Capital Requirements •Economies of Scale •Experience Curve Competitor Profile & Strategic Groups •Two Independent dimensions •Where and how competitors fit the dimensions •Outline Key Competitors or Groups in terms of: •Name •Products •Current Strategy •Strategic Intent •Other Strategic Information Porter’s Five Forces •Threat of new Entrants •Buyer Power •Who are they? •Supplier Power •Who are they? •Substitute Power •What are they? •Rivalry TO ISSUE S
  4. 4. INTERNAL ANALYSIS Strategic Profile •Company Name Which Industry it operates in •Vision •Mission •Goals •Size •Structure •Business Segments •Products / Markets & Industries (Current NOT historical) •Corporate Level Strategy •Business Level Strategy Financial Analysis •Profitability •Liquidity •Gearing Ratios •Strategic Implications (THE SO WHAT!) •Any other relevant information •Overall financial situation VRIO / Value Chain •Key SCA’s, •TCA’s •CD’s •Problems caused by these •Justify why they are this type of CI •Identify and justify any Core Competencies (Or lack of them) ISSUES Key Internal and External Issues Articulated why they are important to the organisation Ranked in order of the overarching issue being your issue followed on with your other issues LINKED TO YOUR ANALYSIS FROM EXTERNAL ANALYSIS
  5. 5. STRATEGY DEVELOPMENT Potential Strategies •Develop and Outline 2 strategies •Explain how they solve the issues •Linked to the analysis Decision Criteria •Explain key reasons for one strategy over another •Included a detailed appendix table on decision criteria which: •Includes key decision criteria (Financial Outcomes; Solves Issues) •Shows a points scale •Explains the points scale •Justifies why each strategy received its respective score Recommended Strategy •Outlined the Chosen Strategy •Explained What’s good about it •Discussed Financial Implications •LINKED TO ANALYSIS Industry Analysis Segments Driving Forces Key Success Factors ISSUES Internal & External Mission & Goals Corporate and Business Strategy Culture INPUTS FROM LINKING TO VISION Mission & Goals Corporate and Business Strategy Culture
  6. 6. STRATEGY IMPLEMENTATION Action Plan •Explained key steps regarding implementation •Given the financial cost/benefit of each stage •LINKED TO THE ANALYSIS •Included a detailed table in the appendix which gives sufficient information •Who, What, When, Deliverables, Key time points, SMART goals. Project management. Conclusion •Sum up the benefits that your strategy brings to the company •SELL IT AND CONCLUDE EXECUTIVE SUMMARY Risk Assessment Overall Implications Any other models/headings/sections as appropriate PRESENTATION: Defence against any objections What questions may be raised Final Report Publication Signoff – Project start
  7. 7. REMEMBER SO..... SO WHAT..... WHAT NOW...... 7
  8. 8. PEST  Political  Economic  Social  Technical Sometimes PESTLE (PEST + Legal and Environment)
  9. 9. SWOT  Strengths  Weaknesses  Opportunities  Threats Strengths Things that are good now, maintain them, build on them and use as leverage Weaknesses Things that are bad now, remedy, change or stop them. Opportunities Things that are good for the future, prioritize them, capture them, build on them and optimize Threats Things that are bad for the future, put in plans to manage them or counter them POSITIVE/ HELPFUL to achieving the goal NEGATIVE/ HARMFUL to achieving the goal INTERNALOrigin facts/factorsofthe organization EXTERNALOrigin facts/factorsofthe environment
  10. 10. NOTE A PEST analysis most commonly measures a market; A SWOT analysis measures a business unit, a proposition or idea.
  11. 11. THE MARKETING MIX (4 PS) Success in the marketplace depends upon the best combination of the following elements: The Marketing Mix Product Price Place (distribution) Promotion Objectives Features/options Range/styles/size s Quality Service Level Guarantee/Warran ty Branding Packaging Objectives Strategies/policies Costs Discounts Allowances Geographical considerations Credit facilities Objectives Channels chosen Extent of coverage Wholesaling Retailing Transportation Location Objectives Budget Advertising Sales promotion Public relations Personal selling Direct marketing
  12. 12. BOUNDARY SCANNING 3. The marketing oriented phase: Research •Customers needs and wants Develop •The product or service •Matching customer needs and wants Provide •The product or service they want
  13. 13. BOUNDARY SCANNING  What are my competitors doing  What is the Market doing  What is happening overseas  What will the impact be here  Economy  National  Global
  14. 14. THE DIFFERENT TYPES OF MARKETS  The three main categories are: 1. Consumer 2. Organisational or business 3. International
  15. 15. SEGMENTING WHO ARE MY CUSTOMERS?  When dividing a large market into sub-markets several segmentation methods may be utilised Segmentation Example An antique shop may deliberately locate in an up-market suburb thus segmenting  geographically (location)  psycho graphically (lifestyle) and  behaviourally– informing customers when new pieces of Royal Doulton become available
  16. 16. THE SEGMENTATION PROCESS  Ways of segmenting an organisational market by:  Geographics – same as consumer markets  Account characteristics – size, loyalty, credit rating  Buying behaviour – purchase formality and criteria, factors of importance  Product usage – assist firms operation, used in production process
  17. 17. WHERE DO I FIND IT ALL?  ools/business-toolbox.aspx
  19. 19. THE USE OF PROMOTIONAL TOOLS – ‘PUBLIC RELATIONS’  Public relations tools – “used to create good will and understanding”  Publicity: news worthy items about the organisation and is not paid for (remember the definition of advertising)  Sponsorship: can be leveraged to be seen as a supporter of a worthy cause (environmental, social responsibility)  Prepared material: newsletters, house magazine, financial reports  Trade shows: variety of expos/fairs to promote image  Hospitality events: Entertaining the Media or trade evenings  Media training/grooming/speech-writing: promoting the right executive approach
  20. 20. THE MARKETING PLAN- CONTROL AND EVALUATION The evaluation and control aspects of the Marketing plan should include critical key performance indicators (KPI’s) to measure and monitor the marketing plan Target Market Surveying Customers Conducting Market Research Analysing Sales Figures The Marketing Mix Product KPI’s Production spot checks for efficiency Quality control check on product Promotion KPI’s Advertising Checking advertising proofs on time Monitoring sales after advertising Sales Promotion Monitoring sales during and after promotion Personal Selling Noting individual staff sales Price KPI’s Checking competitors price Noting Competitor advertising Place KPI’s Shopping at competitors stores Counting in store customer foot traffic
  21. 21. CHANNEL LENGTH TYPES (HOW DO I GET TO MARKET) Producer Consumer Producer Retailer Consumer Producer Wholesaler Retailer Consumer Producer Agent Wholesaler Retailer Consumer Types of distribution channels for the consumer market
  22. 22. PRICING CONSIDERATIONS A number of factors influence the selection of a price Influences On Price Selection Organisational Market Place Firms overall Objectives Marketing Costs Production Costs Distribution Costs Promotional Costs Total Costs Marketing Objectives Competitors pricing strategy Market Supply and Demand Legal regulatory requirements Level of value to customer
  23. 23. THE INFLUENCE OF COST AND MARKETPLACE FACTORS ON PRICE  Consumer perception:  Price may indicate degree of quality?  “If consumers believe extra benefits will be gained by paying more, and those benefits are important to them, then a higher price can be asked for”
  24. 24. ANALYSING COST AND MARKETPLACE FACTORS ON PRICE  Costs:  Total costs are made up of fixed costs and variable costs.  Fixed costs are those which in theory remain constant, regardless of the level of production activity – rent, rates, insurance, salaries of administrators (overheads). Even when no production is taking place, these costs will continue.  Variable costs are those which vary according to the level of production and include direct labour and materials.  Not only should the above costs be taken into account when price setting, so also should R&D and set-up costs.
  25. 25. PRICING STRATEGIES, TECHNIQUES AND ADJUSTMENTS  Cost-related pricing techniques:  Two basic methods can be used to calculate a price on the basis of costs when setting a price: 1. Cost-plus method – most common in the retail sector entails adding a standard mark-up to the cost of goods to provide a profit margin.  Different categories will historically adopt different mark-ups – supermarkets will use 1%-2% for some lines while food service may use 100%-300%!
  26. 26. PRICING STRATEGIES, TECHNIQUES AND ADJUSTMENTS Cost Plus Pricing Continued… Mark ups are determined by:  The speed of stock turn over ie fast turnover of stock and lower margins supermarkets), slow turnover of stock and higher margins  Product type ie cars vs clothes  The cost pricing formula is:  Cost + Mark Up = Sales Price
  27. 27. PRICING STRATEGIES, TECHNIQUES AND ADJUSTMENTS  Break-even pricing:  Rossini Pasta produce a variety of convenience meals. These meals are sold for $8.00 each. Annual fixed costs (overheads) amount to $35,000 and variable costs (direct material and labour) are $3.50 per meal. The number of meals that need to be produced and sold to break-even, is calculated as follows: Fixed costs Price – variable costs, therefore: $35,000 = $35,000 = 7,778 meals ($8.00 - $3.50) $4.50
  28. 28. BREAKEVEN – A QUICK ATTEMPT  FIXED COSTS  Rent $  Machinery Sewing Machines – Computers etc.  Finance $  Depreciation $ TOTAL $  Power $  Phone $  Survival Income $  Admin  Marketing setup costs $  Printing costs $  Office Equipment $ TOTAL $ TOTAL FIXED COSTS $__________
  29. 29. VARIABLE COST  Fabric  # of meters x cost per metre $ (Include an allowance for wastage - offcuts etc. say 10%)  Labour  Hours at $ per Hour $  Accessories / Ancillary Items  Thread, Buttons, Trim, Lace $  Machine Wear  Maintenance per month/max garments $  Packaging / Labelling $  Freight to Customer $_________ TOTAL VARIABLE COST $
  30. 30. BREAKEVEN CALCULATION  FIXED COST $  Variable Cost $  Sell Price (Excl GST) $  Margin per unit $ (Sell – Variable) Unit Sales to Fixed = _______ = Break Even SELL SO, Breakeven Units X Sell = required Turnover in $ What if we drop the sales price by 20% or even 30% (i.e. End of season)
  31. 31. BUDGETED SALES  Prepare three budgets  Worst Case scenario (Break even?)  Best Case Scenario (The Dream Result!)  Most likely (Mid point) The “Most Likely” Budget is done after the worse and best case scenarios.