The document provides guidance on developing an effective business plan. It discusses that a business plan clarifies a company's direction, allows a company to acquire capital and financing, and identifies goals. It recommends including an executive summary, company description, products/services, marketing plan, operational plan, management overview, financial plan, capital needs, risks/opportunities, and appendices. The marketing plan should include research on the target market and competition, as well as sales forecasts. The operational plan outlines daily operations, location, inventory, legal needs, staffing, and policies.

1. How to Develop an Effective
Business Plan

2. Why a Business Plan?
The preparation of a business plan is a
systematic approach to timely identify
strengths and weaknesses of a business
opportunity and to pinpoint (further)
opportunities and risks to allow for
maximum identification of risk mitigation
Often emphasized reasons of entrepreneurs to write a business plan:
• Clarifying the direction of the company both internally as well as externally
• Put the company “down to paper”
• Requirement to acquire capital, bank-financing
• Identifying what the company can and wants to achieve with the specific business
opportunity

3. Goals to make a business plan can be internal
as well as external
INTERNAL EXTERNAL
- To provide clarity on the - Potential investors
goals and prioritization of - Bank-financing – credit team
a business opportunity to - Suppliers
PLAN all personnel involved - Customers
- Steakholders
- Subsidy providers
- To change attitudes of - PR (Public Relations)
certain key figures within - Effective way to introduce the business
the company opportunity to potential partners and
PROCESS candidates for key roles/jobs
This presentation will mainly take the internal, planning perspective

4. Business Plan – 10 Key Components
1. Executive Summary
2. General Company Description
3. Products and Services
4. Marketing Plan
5. Operational Plan
6. Management and Organization
7. Financial Plan
8. Capitalization
9. Further opportunities, threats and the
mitigation of risks
10. Appendices

5. 1. Executive Summary: Pointers
The Executive Summary aims to explain the fundamentals of the
proposed business
• Write this section last
• Make it two pages or fewer. Include everything that you would cover in
a five-minute interview
• Make it enthusiastic, professional, complete, and concise
• If applying for a loan, state clearly how much you want, precisely how
you are going to use it, and how the money will make your business
more profitable, thereby ensuring repayment.
Include key numbers in the executive summary to
summarize the opportunity as tangible as possible

6. 2. Company and Industry Description
1. What business will you enter / expand?
2. Where do you plan to make money? What will you do?
3. How can profits be raised quickly?
4. How to build long term value?
5. Is it a good industry to be in?
6. What do / would customers think?
7. How strong are your competitive positions?
8. What about the competitors?
Describe your company’s core strengths and competencies,
key success factors. Quantify objectives and goals

7. 2. Clarify competitive strength of the proposition
• Is it a growth industry?
• What changes do you
foresee in the near and
long-term future?
• How can the company
take advantage of
anticipated changes in
the industry?
Porter’s five forces model

8. 3. Products and Services
Describe in depth your products or services in terms of what it is that you will offer to
(each) of the (different) target customer(s).
• Explain what needs of the target customer are
fullfilled by the product / services.
• Describe the benefits of the product / services.
What is special about it?
• What factors will give you competitive advantages
or disadvantages?
• Include level of quality, unique or proprietary features.
• Explain (potential) substitutes of the products and services.
• Technical specifications, drawings, photos, sales brochures, and other bulky
items belong in Appendices

9. 4. Marketing Plan
Describe the market that you will act in.
After you have described your targeted product / market combinations, it’s important to
put the marketing plan into its perspective:
• What is the total size of your market?
• What percent share of the market do you target?
• Detail the current demand in the target market.
• Trends in target market—growth trends, trends in consumer preferences, and trends
in product development.
• Growth potential and opportunity for a business of your size.
• What barriers to entry do you face in entering this market with your new company?
• And of course, how will you overcome the barriers?
Also detail the target customers here in terms of their characteristics,
geographic locations, other demographic factors etc.

10. 4. Marketing Plan: 5 P’s
In light of your niche, the unique corner of the market that you intend to occupy; define the different
components of your marketing strategy in addition to the product / services you plan to offer:
• Pricing Strategy
- What prices do you plan to set?
- How does it compare in the market?
- Differentiation of pricing for different customers
- Fee structure, commissions, e.g. leasing structure of your products and services.
• Proposed Location and Distribution Channel Strategy
- If your locations are a key component of your market strategy, explain/define the profile of the
(sought) locations.
- Direct / indirect sales (internet, agents, own stores, other stores)
- How to approach the customer
• Promotion Strategy
- Explain how you plan to launch and further support the product / services into the market.
- Promotional budget
• Packaging and quality control

11. 4. Marketing Plan: Research to support your
marketing strategy
• Market research – Why?
You need to do market research to make sure you’re on track. Use the business planning
process as your opportunity to uncover data and to question your marketing efforts.
• Market research – How?
There are two kinds of market research: primary and secondary.
Secondary research means using published information such as industry profiles,
trade journals, newspapers, magazines, census data, and demographic profiles.
Primary research means gathering your own data.
In most of the markets represented relatively little quantitative research is being
conducted to support business. Governments and banks are usually the most complete.

12. 4. Marketing Plan: Sales forecast
The forecast should be based on your historical sales, the marketing strategies
that you have just described, your market research, and industry data, where
available.
You will want to prepare at least two forecasts:
1) a "best guess", which is what you
really expect,
2) a "worst case" low estimate that you
are confident you can reach no matter what happens.
The sales forecast encompasses a period of at least three years
with a high degree of detail for the first year, while addressing
the different targeted product / market combinations.

13. 4. Marketing Plan: Analyse your competition
What products and companies will compete with you? List your major competitors.
Factor Me Strength Weakness Competitor A Competitor B Importance to Customer
C Products
o Price
m
Quality
p
e Selection
t Service
i
t Reliability
i Stability
v
Expertise
e
Company
A Reputation
n Location
a
Appearance
l
y Sales Method
s Credit Policies
i
s Advertising
Image
Add any further factors where appropriate

14. 5. Operational Plan
Explain the daily operation of the business, its location, equipment, people,
processes, and surrounding environment.
• Production: How and where are your products or services produced?
• Suppliers
• Sales or Distribution / Location: What qualities do you need in a location?
Describe the type of location(s) you’ll have.
• Inventory
• Legal Requirements
- Licenses permits
- Trademarks
• Number of employees as Full Time Equivalent
• Credit Policies
- Managing Your Accounts Receivable
- Managing Your Accounts Payable
• What is your foreign currency exposure?

15. 5. Operational / Delivery Principles
Delivery principles define where you will put emphasis and focus for each of the key
processes in your company. They tie into your overall and into you marketing
strategy; for example:
• Product Delivery; Supply Chain
• this maybe only ‘make’, only ‘buy’ or both, describe conditions for potential
change over time
• e.g. Leveraging your other business(es)
• Sales and distribution process
• through wholesalers, partners, agents, stores, internet. Explain why and how
and the conditions how to divide up the business
• Discount policy, which discounts in which situations
• the use of internet, social media
In delivery principles the entrepreneur (s) can demonstrate their well-
understanding of the market, the business they want to enter in

16. Proposed Organization of the Business
Opportunity
• Provide the organogram at key-milestone moments in
the development of the company and include an
overview of the amount and development of functions /
key roles over time.
• Describe the hiring process if this is a key point to your
business proposition
•Think through the profile and training / education needs.
• Use industry retention – rates in personnel – intense
business propositions.
Key roles Period 1 Period 2 Period 3 Period 4 Period 5 Period 6
Total
New hires

17. 6. Management and Organization: The
Entrepreneur(s)
Who will manage the business on a day-to-day basis? What experience do that
key-person(s) bring to the business? What special or distinctive competencies? Is
there a plan for continuation of the business if this person is lost or incapacitated?
List the following professional and advisory support:
• * Board of directors
• * Management advisory board
• * Attorney
• * Accountant
• * Insurance agent
• * Banker
• * Consultant or consultants
• * Mentors and key advisors

18. 7. Financial Plan: 12 month P&L
IND. % YEARL
% Oca.08 B/A Feb-08 % Mar-08 % Apr-08 % May-08 % Jun-08 % Jul-08 % Aug-08 % Sep-08 % Oct-08 % Nov-08 % Dec-08 % Y %
Revenue (Sales)
Category 1 - - - - - - - - - - - - 0 -
Category 2 - - - - - - - - - - - - 0 -
Category 3 - - - - - - - - - - - - 0 -
Category 4 - - - - - - - - - - - - 0 -
Category 5 - - - - - - - - - - - - 0 -
Category 6 - - - - - - - - - - - - 0 -
Category 7 - - - - - - - - - - - - 0 -
Total Revenue (Sales) 0 0,0 0 0,0 0 0,0 0 0,0 0 0,0 0 0,0 0 0,0 0 0,0 0 0,0 0 0,0 0 0,0 0 0,0 0 0,0
Cost of Sales
Category 1 - - - - - - - - - - - - 0 -
Category 2 - - - - - - - - - - - - 0 -
Category 3 - - - - - - - - - - - - 0 -
Category 4 - - - - - - - - - - - - 0 -
The financial plan
Category 5 - - - - - - - - - - - - 0 -
Category 6 - - - - - - - - - - - - 0 -
Category 7 - - - - - - - - - - - - 0 -
Total Cost of Sales 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 -
is at the heart of Gross Profit
Expenses
0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 -
the viability of the
Salary expenses - - - - - - - - - - - - 0 -
Payroll expenses - - - - - - - - - - - - 0 -
Outside services - - - - - - - - - - - - 0 -
Supplies (office and
business
operating) - - - - - - - - - - - - 0 -
Repairs and maintenance - - - - - - - - - - - - 0 -
Advertising - - - - - - - - - - - - 0 -
opportunity Car, delivery and travel
Accounting and legal
Rent
Telephone
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0
0
0
0
-
-
-
-
Utilities - - - - - - - - - - - - 0 -
Insurance - - - - - - - - - - - - 0 -
Taxes (real estate, etc.) - - - - - - - - - - - - 0 -
Interest - - - - - - - - - - - - 0 -
Depreciation - - - - - - - - - - - - 0 -
Other expenses (specify) - - - - - - - - - - - - 0 -
Other expenses (specify) - - - - - - - - - - - - 0 -
Other expenses (specify) - - - - - - - - - - - - 0 -
Misc. (unspecified) - - - - - - - - - - - 0 -
Total Expenses 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 -
Net Profit 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 - 0 -

19. 7. P & L, Cash Flow, Balance Sheet!
• Three-Year Profit Projection
The 12-month projection is the heart of your financial plan. External investors demand a
longer time horizon and it provides for good business and planning practise to project at the
least 3 years.
• Projected Cash Flow
If the profit projection is the heart of your business plan, cash flow is the blood. Businesses
fail because they cannot pay their bills. Suppliers may demand extra guarantees that lock
up capital, customers may demand certain privileges at startup and the like.
• Opening Day Balance Sheet and Following Annual Balance Sheets
A balance sheet shows what items of value are held by the company (assets), and what its
debts are (liabilities). The balance sheet development process forces to check the internal
consistency and integrity of the projections and by ways of ratio comparison identifies
potential opportunities and threats.

20. 7. Financial Plan: Break Even Analysis for
Start up Business
A break-even analysis predicts the sales volume, at a given price, required to
recover total costs.
Expressed as a formula, break-even is:
Sales = Fixed + Variable Cost
Under different sales forecasts the anticipated time to break even (‘Payback
period’) will differ. It is important to ensure acceptable levels; this is another
viability check.

21. 8. Capitalization of your business proposition
In case of a startup business, you will have many expenses before you even
begin operating your business. It’s important to estimate these expenses
accurately and then to plan where you will get sufficient capital. This is a
research project, and the more thorough your research efforts, the less chance
that you will leave out important expenses or underestimate them.
Explain your research and how you arrived at your forecasts of expenses. Give
sources, amounts, and terms of proposed loans. Also explain in detail how much
will be contributed by each investor and what percent ownership each will have.
Provide a start up cash-injection overview, over time and run
scenario’s if sufficient capital is key to the start up of the business.

22. 8. Capitalization: Personal Financial
Statement
Owners will often have to draw on personal
assets to finance the business. These
statements will show what is available.
Bankers and investors usually want this
information as well.

23. 9. Sensitivity Analysis
Play around with your financial excels to understand which differences have the
largest impact. Then go back to the earlier chapters in your plan to address these
potential opportunities and threats.
- Check on different sales outcomes (lower realized price, less customers, smaller
basketsize per customer).
- Possible actions of other players
- Changes in enviroment (legal, technology, ..)
Create a negative scenario set of financials and check capitalization and return
on capital versus your opportunity cost.
Put your money in the bank or in this business opportunity?

24. 10. Appendices
Include details and studies used in your business plan; for example:
 Brochures and advertising materials
 Industry studies
 Blueprints and plans
 Maps and photos of location
 Magazine or other articles
 Detailed lists of equipment owned or to be purchased
 Copies of leases and contracts
 Letters of support from future customers
 Any other materials needed to support the assumptions in this plan
 Market research studies
 List of assets available as collateral for a loan

25. 11. Refining The Plan: Manufacturing
business
• Planned production levels
• Anticipated levels of direct production costs and indirect (overhead) costs-how do
these compare to industry averages (if available)?
• Prices per product line
• Gross profit margin, overall and for each product line
• Production/capacity limits of planned physical plant
• Production/capacity limits of equipment
• Purchasing and inventory management procedures
• New products under development or anticipated to come online after startup

26. 11. Refining The Plan: Service business
• Service businesses sell intangible products. They are usually more flexible than
other types of businesses, but they also have higher labor costs and generally very
little in fixed assets.
• What are the key competitive factors in this industry?
• Your prices
• Methods used to set prices
• System of production management
• Quality control procedures. Standard or accepted industry quality standards.
• How will you measure labor productivity?
• Percent of work subcontracted to other firms. Will you make a profit on
subcontracting?
• Credit, payment, and collections policies and procedures
• Strategy for keeping client base

27. 11. Refining The Plan (Continued)
• High Technology Companies
High-tech companies sometimes have to operate for a long time without profits and
sometimes even without sales. If this fits your situation, a banker probably will not want to
lend to you. Venture capitalists may invest, but your story must be very good. You must do
longer-term financial forecasts to show when profit take-off is expected to occur. And your
assumptions must be well documented and well argued.
• Retail Business (Retail = Detail)
oLocation
oCompany image
oPricing
oInventory
oCustomer service policies
oPromotion
oCredit

28. Next Steps: Seek Mentoring
Please send in your business plan
per latest 20 February 2011 to
receive mentoring and guidance from
your Invest for the Future team

29. THANK YOU

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