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ICWAI / ICSI Business Plans 15 November 2011 GJA.

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Presentation on theme: "ICWAI / ICSI Business Plans 15 November 2011 GJA."— Presentation transcript:

1 ICWAI / ICSI Business Plans 15 November 2011 GJA

2 2 Index Business plan – what?, why?, and who? Components of a business plan How to make a compelling business plan – Live case How to make a presentation on business plan – Live case GJA Topics

3 3 Index Business plan – what?, why?, and who? GJA Topics

4 4 What is a business plan? >A business plan is a comprehensive, written description of the business of an enterprise >It is a detailed report on a company's products or services, production techniques, markets and clients, marketing strategy, human resources, organization, requirements in respect of infrastructure and supplies, financing requirements, and sources and uses of funds >The business plan describes the past and present status of a business, but its main purpose is to present the future of an enterprise. It is normally updated annually and looks ahead for a period of usually three to five years, depending on the type of business and the kind of entity GJA By: UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT

5 5 Why a business plan? >Getting an integrated view of your business >Mutual understanding within the management team >Determining financial needs and raising funds >Approval from board of directors/shareholders >Recruiting >Deriving objectives for employees / stake holders GJA

6 6 Who are the audience to a business plan? >Current and potential owners >Private equity >Venture capital >HNI >Corporate / strategic player >Current and potential lenders >Commercial banks >Industrial development boards >Top management team >Board of directors >Leadership – corporate level >Governmental and quasi governmental bodies >For technical assistance / grants GJA

7 7 Profile of the reader >The profile of the reader of a business plan, under various audience group may wary, so do their expectations GJA PE / VC / Strategic investor Investment committee / Board Deal doers and advisors Looks for : strategic outlook, and key numbers Looks for : Details, data, workings, supportings Lenders Board / credit committees Deal Doers and advisors Looks for : strategic outlook, and key numbers, track record, owners Looks for : Details, data, workings, supportings >A well written business plan should address the needs of all reader profiles

8 8 Who prepares the business plan ? >A purpose oriented business plan should not be prepared independently by a consultant >It should be prepared / inspired by : GJA Start upEstablished enterprise >The promoter group >Assisted by a professional consultant >Overall responsibility with the CEO >Input from all functional department >CFO to consolidate >Assistance from a professional consultant >For independent review >Grounds of complexity

9 9 Index Components of a business plan > Components > Structure GJA Topics

10 10 Components – what are the reader expectations? (1/2) >A good business plan should address almost all the reader expectations >Typical reader expectations (as per Nexus Venture Partners): GJA >Who is behind the company? >Founders >Key Management /Board Members, and >Advisor Profiles >What is the customer pain point that the company is trying to address? >How is your company different from the other companies trying to address similar need? >Customer need and existing solutions available to address the Need >Examples on how your company will address the customer need >Explanation on why your company's solution is better than the existing solution(s) >Any external environment/context that may influence customers towards your company's solution

11 11 Components – what are the reader expectations? (2/2) >Typical reader expectations: GJA >What is the product or service of the company? >Functionality and Feature Roadmap >Immediate & proposed products >How will your company make money? >Business model for the company >Financial Plan and Assumptions driving the financial plan (revenue drivers, channel economics, product pricing, etc) Source:

12 12 Structure of the business plan (1/9) >Business plan should be arranged in well defined and structured format: GJA >Cover page, index, introduction letter >Executive summary >The opportunity / the market / the clients >Products / Services and pricing >The business model >Human resources >Legal, and environmental framework >Financial plan 1 2 3 4 5 6 7 8 >Glossary, Notice to the reader, contacts 9 >Appendices 10

13 13 Structure of the business plan (2/9) >Executive summary - contents GJA >Executive summary >About 5 pages >Fist section, but the last section to be written >Overview (one page) >Legal entity / address / entity type >Promoters >Vision and mission statement >Head lines (one page) >Unique upsides of the business plan >4Ps – Promoter, Product, Pricing, Profitability >Brief description of the project >What is the project? >Location and its advantage >Project cost >Means of financing >Summary table capturing key financials 2

14 14 Structure of the business plan (3/9) >Market analysis GJA >Market analysis >Opportunity for you >Marketing strategy >Sales projections >Support with independent market reports >Specify sources >Macro economic /Industry / Market analysis >Overall performance of the industry, historical as well as forecast >Industry SWOT >GAPS felt in the industry >Justify the need of a better product / service >Company specific information >Establish the company’s offering meeting the demand GAP >Company SWOT >How are you planning to tap the GAP? >Marketing arrangement / team >Sales projections 3

15 15 Structure of the business plan (4/9) >Products / services, and pricing GJA >Products / services >Pricing and its rationale >Products / services >Current and proposed products / services offering >Product description and history, product attributes, research and development >Quality assurance and control, sourcing >Packaging / shelf life >Production process >Sourcing arrangements >Pricing >Costing and pricing >Pricing strategies 4

16 16 Structure of the business plan (5/9) >The business model GJA >Business model >Organisation structure >Project particulars >Production process >Sourcing arrangements >Goals >Distribution >Organisation structure >Project particulars >Cost of the project >Explanation and break down of each lie of investment >Funding requirements >Borrowings and repayment schedule >Key machineries and technologies >Contingency provision >Risks and mitigation matrix >Process flow chart (and explanation) >Sourcing arrangements >Goals (short, medium, and long term) >Distribution arrangements >Project implementation schedule 5

17 17 Structure of the business plan (6/9) >Human resources GJA >Human resources >Try to bring out the individual and collective strength of the team >Leadership team >Functional management team >Profile of promoters and key management >Detailed write up reflecting relevant experience / successful entrepreneur track record >Functional experience of key personnel >Photographs / contact details preferred >Profile of the consultants involved >Proposed HR plan: >Head count >Average salary >Cost to company 6

18 18 Structure of the business plan (7/9) > Legal framework, and environmental and social factors GJA >Legal framework, and environmental and social factors >Approvals and licensing requirements >Environmental risks >Social compliance >Development and social benefits. 7

19 19 Structure of the business plan (8/9) > Financial plan (1/2) GJA >Financial plan >Historical >Forecast >Historical >Three year historic financial >Product / service realization & margin performance >Historical working capital trends >Forecast >Three to 10 year forecast, depending on the industry >Provide detailed assumptions for each line item >Provide supporting workings for computations such as sales, direct costs, etc >Provide logical and mutually corroborative assumptions and workings 8

20 20 Structure of the business plan (9/9) > Financial plan (2/2) GJA >Financial plan - contents >Forecast >Indicators / KPIs >IRR >Payback period >Break even point >Summary of key ratios (one table) >Financial forecast >Income statement >Balance sheet >Cash flow statement >Capacity utilisation and quantities >Cost of sales >Working capital >Consumption >S,G&A expenses >Income tax 8

21 21 Practical suggestions … >Financial forecast >Provide separate index for financial information >Provide detailed write up for all assumptions >Do not make arbitrary assumptions >Restrict the years of projections to the number of years which allows visibility >Provide cross referencing / page referencing between financials and the assumptions for better navigation GJA

22 22 Other important sections >Cover page >Legal name of the company >Title / project name >Date >Introduction letter >General / specific address to audience >Disclaimer / notice to the reader > bring out the uncertainty around financial forecast >Glossary of terms >Provide either in after the introduction letter OR prior to the disclaimer >Appendix >For external information >Contacts >E-mail, Telephone, fax, address of the enterprise and the promoter GJA 19 10

23 23 Index Others … GJA Topics

24 24 Matters not to forget … >Make it look good – seek professional help if required >Follow a structure >Provide main index and sub indices, especially for financial information >Focus on formatting, language, etc. >Organize financial information in an orderly manner >Top – down approach >Bottom – up approach GJA

25 25 Practical suggestions … >Prefer MS Word / MS Power Point >Prepare tables in MS Excel and import to the doc./ppt. file as a link >Define the formatting in the Master Slide to avoid repetitive formatting >Do not copy from another business plan or blindly follow the structure followed by the previous / other document >Do not use overwhelming colors / pictures >Avoid too many photographs. If photographs are used, stick to high resolution files >Do not use confusing graphs. A simple table may explain the contents better >Do not share editable copies with external parties GJA

26 26 Financial highlights (1/6) : Tierra is expected to generate positive cash flows from Year1 ____________________________________________________________________ ______________________________________________________________________ Financial highlights ► The key financial highlights of the project during the forecast period is summarized below: Source : information provided by Tierra Tierra is anticipated to generate positive cash flows from second year of operation, achieve break even level of sales in third year, and payback the investments in four years. Net revenues are expected to double in 3 years at INR 1,601.0 lakhs Note: ► Workings for IRR, pay back period, Break even turnover, and details of KPIs and financial ratios are presented in following pages ► The detailedd financial forecast along with workings and assumptions are presented under sub section – financial forecasts illustration Follow standardized graphs/charts Heading – should convey a message Use uniform colors, fonts, bullets across the document Summarize key findings in a text box Provide footnotes Source for tables / charts Give footer (company logo)Page number

27 27 Index Live cases > Order of documents > Documents GJA Contents

28 28 Order of documents >Business plan:Project LakeHouse >Presentation:Project LakeHouse >Teaser:Project LakeHouse GJA

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