2 Planning as Part of The Business Operations Planning is a process than never ends for a business.It is extremely important in the early stages of any new venture when the entrepreneur will need to prepare a preliminary business plan.As the venture grow up to mature business, planning will continue …Plan may be short term or long term, strategic or operational.
3 What is Business Plan?The business plan is a written document prepared by the entrepreneur that describes all the relevant internal and external elements and strategies for starting a new venture.It is a integration of functional plans such as marketing,finance,manufacturing,sales andhuman resources.
4 Definition-Business Plan Document that can convince the financial institutions and public that the business can produce enough revenue to make a satisfactory profit and therefore attractive as an investment opportunity
5 Who should write the plan? The business plan is prepared by the entrepreneur.The entrepreneur may consult with many other sources in its preparation, such aslawyers,accountants,marketing consultants and engineers.
6 Who is it for? Self Investor/Venture capitalists Key employees DebtEquityKey employeesSignificant others ( suppliers, bankers…)
7 Scope and Value of the Business Plan – Who Reads and Needs The Plan? The business plan may be read byemployees,investors, venture capitalistsbankers, supplierscustomers, advisors, and consultants& by the entrepreneur himselfThere are three perspectives should be considered in preparing the plan :Perspective of the entrepreneurMarketing perspectiveInvestor’s perspective
8 Scope and Value …The business plan is valuable to the entrepreneur, potential investors, or even new personnel, who are trying to familiarize themselves with the venture, it goals, and objectives.It helps determine the viability of the venture in a designated marketIt provides guidance to the entrepreneur in organizing his or her planning activitiesIt serves as an important tool in helping to obtain financing.
9 How do Potential Lenders and Investors Evaluate The Plan? Four Cs of Credit:CharactersCash flowCollateralContribution of EquityAnother …MarketablePayback periodRiskFeasibility, etc
10 Presenting The PlanIt is often necessary for an entrepreneur to orally present the business plan before an audience of potential investors.In this typical forum the entrepreneur would be expected to provide a short (perhaps 20-minutes or half-hour) presentation of the business plan.
11 Information NeedsBefore committing time and energy to preparing a business plan,the entrepreneur should do a quick feasibility study of the business conceptThe information, obtainable from many sources should focus onmarketing (segmenting, targeting, and positioning),finance (list of all possible expenditures, demand forecast, revenue),and production (location, manufacturing operations, raw materials, equipment, labor skills, space, overhead) .Internet can be a valuable resource.
12 Outline of a Business Plan Introductory PageName and address of businessName(s) and address(es) of principal(s)Nature of businessStatement of financing neededStatement of confidentially of report
13 Outline …Executive Summary – Three to four pages summarizing the complete business planWhat is the business concept or model?How is this business concept or model unique?Who are the individuals starting this business?How will they make money and how much?
14 Outline … Environmental and Industry Analysis Future outlook and trendsAnalysis of competitorsIndustry and market forecastsDescription of VentureProduct(s)Service(s)Size of businessOffice equipment and personnelBackground of entrepreneurs
15 Outline … Production Plan Operational Plan Manufacturing process (amount subcontracted)Physical plantMachinery and equipmentNames of suppliers of raw materialsOperational PlanDescription of company’s operationsFlow of orders for goods and/or servicesTechnology utilization
16 Outline … Marketing Plan Pricing Distribution Promotion Product forecastsControlsOrganizational PlanForm of ownershipIdentification of partners or principal shareholdersAuthority of principalsManagement-team backgroundRoles and responsibilities of members of organization
17 Outline … Assessment of Risk Evaluate weakness of business New technologiesContingency Plans
18 Outline … Financial Plan Pro forma income statement Cash flow projectionsPro forma balance sheetBreak-even analysisSources and applications of fundsIRR and NPV projectionsBudget
19 Outline … Appendix (contains backup material) Letters Market research dataLeases or contractsPrice lists from suppliers.
20 Using and Implementing The Business Plan The business plan is designed to guide the entrepreneur through the first year of operations.Implementation of the strategy containcontrol point to ascertain progress andto initiate contingency plan if necessary.
21 Measuring Plan Progress Entrepreneur should checkthe profit and loss statement,cash flow projections, andinformation on inventory, production, quality, sales, collection of accounts receivable, and disbursements for the previous month.Inventory controlProduction controlQuality controlSales controlDisbursements
22 Updating the PlanThe most effective business plan can become out-of-date if condition change.If the change are likely to affect the business plan, the entrepreneur should determine what revisions are needed.In this manner, the entrepreneur can maintain reasonable targets and goals and keep the new venture on a course that will increase probability of success.
23 Why Some Business Plans Fails? Goals set by the entrepreneur are unreasonable.Goals are not measurableThe entrepreneur has not made a total commitment to the businessThe entrepreneur has no experience in the planned business.The entrepreneur has no sense of potential threats or weaknesses to the business.No customer need was established for the proposed product or service.
24 Packaging the Plan It is a ”living” document No right/wrong way: the need of reader is essentialWhat are the challenges/ questions that can be raised by reader: answer these.
25 Packaging the Plan Include supporting materials Don’t make unsupported statementsDesignate an outside reviewer/ reader that can critique plan