Presentation on theme: "1 The Business Plan: an introduction to preparing for business success Lyn Batchelor MS3024 New Venture Creation Week 2 University of Aberdeen Business."— Presentation transcript:
1 The Business Plan: an introduction to preparing for business success Lyn Batchelor MS3024 New Venture Creation Week 2 University of Aberdeen Business School Lecturer in Management EW S21
Aims of Session.... Understand the importance of planning Be aware of the contents of a business plan The tools for delivering and managing the planning process
Specifically we will ask.... What is a business plan ? What does a business plan cover ? Why prepare a business plan ? Where do you start ? How do you ensure success ?
What is a Business Plan ? Document outlining your business concept Blue print for running a business: – Where are we now ? – Where are we going ? – How will we get there ? – When will we arrive ?
What is a Business Plan? Management tool which can help prevent costly mistakes A selling document ? – The Classic Business Plan / Financial plan It is whatever YOU need it to be
Finance can be a Key Objective (of writing a plan) Lender needs to be convinced of being repaid Instil confidence re management team Demonstrate there is a good market Sell the Idea and the Team
Investors Look For …. Market opportunity and idea Evidence of market research Team, track record, strengths and gaps Convincing case for profitability and high returns Presentation and attention to detail Opportunity must exist and team must be capable of exploiting it
A Business Plan Covers.... Every aspect of a business - not just financial Economic factors Environmental factors Marketplace Customers Suppliers Competitors Production processes Management and employees Training HSE objectives YOUR KEY DRIVERS
Why Prepare a Business Plan ? “Those who fail to plan, plan to fail.” Anon.
Why Prepare a Business Plan ? Increases chance of success Guides the Management team Improves communication (both externally and internally) Means of attracting finance (both externally and internally) Establishes benchmarks to monitor and measure actual performance
Planning increases success by... – Identifying strengths, weaknesses, opportunities and threats – Quantifying and reducing business risks - e.g., under-capitalisation – Understanding internal barriers – Establishing priorities – Anticipating and avoiding problems – Encouraging realism
Plans guide management by.... Helping owners and managers to crystallise and focus their ideas Identifying and quantifying specific business objectives / targets Identifying and resolving problems before you begin
Reasons (excuses) given for not planning.... Time Ignorance Over-confidence Resources – Human – Financial Market place too turbulent
You must show …. What is the product or service What is the market The management team How the product will reach the market The costs involved That customers will come back for more !!
The Plan should address risk Key assumptions Sensitivity What if ? Internal External Management plans to minimise risk Possible rewards
Typical Contents Executive Summary Company/organisation analysis Industry analysis Analysis of customers competition Marketing plan Product design / development plans Operations Plan Management Team Financial Plan Risks and assumptions Appendices
The Structure of the Plan …. Logical – guide reader through the process Structured – but at same time enthusiastic and spontaneous Include key assumptions for financial forecasts Think of the reader – table of contents, glossary, etc
Executive Summary – Preferably one page – Purpose of the plan – Brief description of the business and the marketplace – A statement of how much finance is required – Summary of financial highlights – Calibre of management
Company/business History Length of time in operation and progress to date Ownership structure Legal capital, equity, loans, options involvement of shareholders Location, contact details
Product/Service Detailed description Why it is unique What benefits it offers /potential applications Details of supplier Intellectual property (patents applied for) Status
Market Analysis Description of sector Current size, historic and projected growth, trends Segmentation Special characteristics (e.g.seasonality) Main competitors – identity, market share, strengths, weaknesses, potential new entrants
Market Research Include statistical information Methods
Marketing Strategy Marketing mix Market positioning – quality, price, customer service, brand, image, etc Pricing policy – cost-based, demand based, discounts, warranties Field/product support Advertising and promotion methods – costs, frequencies, web based, etc Distribution channels
Operations Management Premises – location, size, facilities, cost, leasehold v freehold, planning and legal issues, alterations, growth plans Staffing and labour, sub contractors Supply base Plant and machinery
10 Step Guide (adapted from Stutely) 1. Why ? Who ? 2. Define your activities 3. Define current status of business 4. Analysis of external market 5. Core objectives 6. Identify risks and opportunities 7. Develop a strategy which fits 8. Develop a working plan 9. Develop financial plans 10.Final draft and approvals
Some Common Questions.... Who should write the plan ? How long should it be ? How much cushion in the numbers ? The question of risk ? The Format ?
Beware Templates !! Provide structured format Saves time - especially spreadsheets Look professional Useful guide as to what to include Too prescriptive Easy to miss something out Do not suit unusual businesses
Do’s and Don’ts Involve team Keep it short Readable, logical, comprehensive Consider the audience Set specific, measurable, time-bound goals/targets Be market led Articulate critical risks and assumptions Be flexible & anticipate hurdles Over-use professionals Procrastinate Use jargon, be too fancy, too much detail Limit the scope Be too vague or over- optimistic Fail to implement Fail to track progress Fail to revise goals PUT IT ON THE SHELF
Pitfalls Excessive detail Inappropriate emphasis Inflexibility Lack of clarity Lack of commitment
Ten reasons business plans fail at first glance The presentation is too scruffy or too slick – it feels false. The text is too long, with too many generalizations, too much waffle, or The text is too short, too weak and vague. – Whatever the length, there are not enough hard facts and details. There are errors of fact (a major sin). Specific omissions suggest that vital skills, resources or knowledge are lacking – There is not enough what-if analysis? (What if sales drop 10%? Increase 10%? If interest rates rise one-percentage-point?) – The financial projections are unreasonably optimistic, especially if sales or cash flow improve unrealistically smoothly – without seasonal variation or downward blips. The plans are obviously produced to raise finance, not for running the business. The plan was produced by professional consultants, raising doubt about the management's own skills.From Stutely, 2009.
Final Thoughts.... "With careful and detailed planning, one can win; with careless and less detailed planning, one cannot win. How much more certain is defeat if one does not plan at all! From the way planning is done beforehand, we can predict victory or defeat.“ Sun Tzu, The Art of War. C. 400 BC
Resources.... office.microsoft.com/ business/planning_your_business.asp The Definitive Business Plan, Richard Stutely, Prentice Hall, 2003