1. OVERVIEW OF THE BUSINESS PLAN
LECTURE #7
OVERVIEW OF THE BUSINESS PLAN

2. TOPICS TO COVER IN THIS LECTURE
Purpose of the Business Plan
Elements of the Business Plan
Environmental Analysis Techniques
Competitive Strategies

3. BUSINESS PLANS WHAT IS A BUSINESS PLAN?
A plan developed for a proposed or new business
A document that explains the Who, What, Why, When & How of the business (Bloomberg On Demand)
A business plan is a formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals (Wikipedia encyclopedia).

4. PURPOSE OF THE BUSINESS PLAN
Gives you the opportunity to examine the entire business objectively and give serious thought to chances of its success
The detailed information and analyses help you to:
Work out your policy for key business areas
Identify areas of weakness and strength
Predict possible problems and correct or prepare for them before they eventually occur.

5. PURPOSE OF THE BUSINESS PLAN
In the initial stages of the project, the business plan acts as your “Bible”. It is a working guide against which progress can be measured.
The Plan should be flexible. It details analyses about key aspects of the operation make it easier for you to make adjustments when faced with unexpected changes.

6. PURPOSE OF THE BUSINESS PLAN
The Plan describes the business for
Lending agencies who need to evaluate the feasibility of your business idea.
Professionals who will be involved with the business
Your employees who will join the organization at a future date.

7. 8 REASONS FOR WRITING A BUSINESS PLAN
Obtain loan financing & investment funds
Attracting partners
Arrange strategic alliances/suppliers
Obtain large contracts/customers
Attract key employees/ Management
Complete merger and acquisitions
Motivate and focus employees

8. BUSINESS PLANS BUSINESS PLAN CONTENT / COMPONENTS
The content and format of the business plan is determined by the goals and audience being addressed.
A business plan should contain whatever information is needed to decide whether or not to pursue a goal.

9. BUSINESS PLAN CONTENT / COMPONENTS
The main areas of focus are
The business idea/ concept
Marketing Considerations
Technical/Operational issues
Management & Human resources
Financial Considerations

10. BUSINESS PLAN CONTENT / COMPONENTS
A Topical Outline of its components is as follows:
Executive Summary
Industry Analysis
Definition of the Business
Purpose of the Business Plan
Business Feasibility
Justification of the Business
Organizations and Management

11. BUSINESS PLAN CONTENT / COMPONENTS
A Topical Outline cont’d
Human Resources
Operational Considerations
Marketing Arrangements
Financial Considerations
Critical risks
Implementation Schedule
Appendices
References

12. BUSINESS PLANS Executive Summary
a succinct highlight of the overall plan - Located at the front of the business plan but is the last item to write in the business plan

13. BUSINESS PLANS Executive Summary Explains:
What are you planning to do (business / goal)
What is the Market Opportunity & related Company Strategy
Why your Management team can best execute this plan
What is the proposal & why is it financially compelling to make this investment

14. BUSINESS PLANS Industry Analysis
an overview of the industry, identifying the business opportunity
include consideration of the competition, legal constraints, statutory requirements, regulatory bodies, etc.

15. BUSINESS PLANS Definition of the Business
explanation of the business idea / concept, the current offering, and the projected growth

16. BUSINESS PLANS Purpose of the Business Plan
dominant reason for the preparation of the business plan e.g.
To raise loan funding
To attract investors

17. BUSINESS PLANS Business Feasibility
analysis of the demand, risk, environmental impact

18. BUSINESS PLANS Justification of the Business
State the economic, social, and personal benefits to be gained from introduction / operation of the business

19. BUSINESS PLANS Organization and Management
Details the mission statement, corporate goals, managerial competence, organizational chart

20. The Organization & Management Plan
Building an organization that will last requires careful planning and strategy.
Potential investors are interested in the quality of the management team.
The initial organization design is simple.

21. The Management Team Management team:
Consists of managers and other key persons who give a company its general direction
Characteristics of a Strong Management Team
Capable of securing the resources needed to make business a success
Reassures investors about their investment and the continuity of business
Diversity of talent makes the team stronger than an individual entrepreneur

22. BUSINESS PLANS Human Resources sourcing and staffing considerations
Who are your key staff & Management Team
What skills do they have, what skills will you have to outsource
Arrangements for Training and Development
Performance Evaluation
Occupational Safety and Health
Who are your advisors / Board of Directors

23. BUSINESS PLAN COMPONENTS
Operations

24. BUSINESS PLAN COMPONENTS
Operations
What are your processes
How will you operate to gain a competitive advantage
What facilities, equipment and machinery are needed to carry out these operations
Do you have to spend money or capital to implement these processes or can they be outsourced

25. BUSINESS PLANS Operational Considerations
Looks at facility location, technical requirements, suppliers of raw materials, utilities

26. BUSINESS PLANS
Marketing Arrangements

27. BUSINESS PLANS Marketing Arrangements
target market, definition of the product or service, pricing, distribution, promotion
Who are your customers
Where are they from
How can you reach them
What is their spending power
What are the Products or Services you intend to offer
Highlight important or significant aspects of your products/service

28. BUSINESS PLAN COMPONENTS
Marketing
What is your Marketing Strategy
How will you introduce the product/service to the market?
Who will buy the product/service?
Can the money from sales cover the costs of running the business and will this money come in when needed so you can pay your bills on time? 28

29. THE MARKETING PLAN Pricing Strategy Promotion and Advertising
Product/Packaging
Distribution
Customer Service
Overall – deals with all the seven P’s.

30. THE MARKETING PLAN –Purpose & Timing
The Marketing Plan Section of the BP should focus on strategies for the first three years of the venture:
For the first year, goals and strategies should be projected monthly;
For years 2 & 3, market results should be projected based on longer term goals;
Preparing an annual marketing plan becomes the basis for planning other aspects of the business.

31. BUSINESS PLANS Marketing Arrangements
Includes a discussion about your Competitors
What are their prices
What are their strengths & weaknesses
Their dominant strategies

32. The Financial Plan

33. The Financial Plan Provides a complete picture of:
How much and when the funds are coming into the organization.
How the funds will be used
How much cash will be available
The projected financial position of the firm at the end of specified periods

34. BUSINESS PLANS Financial Considerations
sources of financing, capital cost, pre-operating expenses, working capital requirements, breakeven analysis (where possible), cash budget over three years, budgeted accounting statements over three years.

35. The Financial Plan – its components
Operating and Capital Budgets
Pro forma income statements
Pro forma cash flow
Pro forma Balance Sheet
A Break-even Analysis
Pro forma Sources and Uses of Funds

36. BUSINESS PLAN COMPONENTS
Financial Plan
Shows whether or not the business is financially viable
There are three main financial statements
Balance Sheet
Income Statement ( Profit & Loss)
Cash Flow projection
A brief explanation of these three statements

37. BUSINESS PLAN COMPONENTS
Financial Plan
Balance Sheet
Presents a picture of your business’ net worth at a particular point in time
It summarises all the financial data about your business into three categories
Assets
Liabilities
Capital/ Owner’s Equity

38. BUSINESS PLAN COMPONENTS
Financial Plan
Balance Sheet Cont’d
Assets
The total of all tangible & intangible objects of financial value that are owned by the company
Liabilities
Indebtedness of the company for resources provided by someone other than the owner (i.e. Creditors)
Capital/Owner’s Equity
The total amount of resources supplied by & belonging to the owners of the business
Assets = Capital + Liabilities

39. BUSINESS PLAN COMPONENTS
Financial Plan
Balance Sheet Cont’d
The Capital/Owner’s Equity or Net worth or value of the business is calculated as follows:
Net Worth = Total Assets - Total Liabilities

40. BUSINESS PLAN COMPONENTS
Financial Plan
Income Statement ( Profit & Loss) shows:
Revenues for a given period
Expenses for said period
Profits or loss for the period
Revenues – expenses = Profit / Loss

41. BUSINESS PLAN COMPONENTS
Financial Plan
Cash Flow projection
Shows how cash is expected to flow in & out of the business
Shows expected magnitude & timing of cash inflows & outflows
Shows whether you will be able to meet your bills as they become due for payment
Helps determine the timing & magnitude of financial investments needed to keep the business operating

42. BUSINESS PLAN COMPONENTS
Financial Plan
Cash Flow projection cont’d
Strong positive cash flow projections reduce the risk for investors & loan officers, making them more willing to fund your business venture
Usually done on a monthly basis for period of one year
Non-cash items do not appear on a cash flow statement
Only the actual amount of cash received and paid out by the business are captured by this statement

43. BUSINESS PLAN COMPONENTS
Financial Plan
Cash Flow projection cont’d
Monthly Cash Flow Projections are computed as follows:
Opening cash balance
Plus total cash inflows for the month
Minus total cash disbursements for said month
Equals Closing cash balance for that month
Closing cash balance for January becomes the opening cash balance for February and so on.

44. BUSINESS PLAN COMPONENTS
Financial Plan
A brief explanation of these three statements
Usually appear as notes to the financial statements
Highlights & explains significant features such as unusual expenditures or incomes & gives a brief explanation.
The information contained within the notes not only supplement financial statement information, but they clarify line-items that are part of the financial statements.

45. BUSINESS PLAN COMPONENTS
Critical Risks
Identify your Critical Risks
Availability of Raw Materials
Changes in Technology
Marketing Strategy
Engagement of key personnel
Agreement with key partners
Acquisition of licenses or specific contracts
Discusses assumptions & alternative courses of action in case critical risks are not satisfied

46. BUSINESS PLAN COMPONENTS
Proposal
Desired Financing
How much money is required
When will various sums be required
Offering
What will investors receive in return for their investment
Use of Funds
How will the funds obtained be used
Investor’s return
The extent to which investors can expect to benefit from this investment

47. BUSINESS PLANS Implementation Schedule
stages of activities six months before to six months after the startup date, accompanied by a (Gantt Chart)

48. BUSINESS PLANS Appendices References
tools used in feasibility study; profile of management team, letters of commitment from prospective suppliers and clients; samples of product design, labels, promotional campaigns, floor plan and legal documents
References
bibliography, credits, acknowledgements

49. BUSINESS PLANS
End of the Business plan

50. An Effective Business Plan
Accomplishes its intended purpose
Is clear, unambiguous easy to understand
Addresses its intended audience
Credible – critical risks identified and dealt with
Employed the uses of positive upbeat language

51. Writing an effective Business Plan
The Process
Conduct relevant research using secondary or primary data as necessary
Brainstorm ideas
Discuss with your partners
Decide how to respond to each item in the business plan template
Write a statement or paragraph on each item
Expand the statement as necessary to capture the views of the team on the matter

52. BUSINESS PLANS The Process of Writing the Plan
Helps the entrepreneur to fully analyse and develop the idea into a real opportunity
The actual writing of the plan should result in the improvement of the business idea enabling it to become a real opportunity
May prove that the idea is not viable – in the form it was originally conceived
Could result in the abandonment of the idea

53. The Process of Writing the Plan
Developing the Financial Plan
Use real data where possible, make assumptions about others
Use what-if analyses to come up with different scenarios
Develop best case, normal and worst case scenarios
Ensure contingencies treat with worst case scenarios
State your assumptions in the notes to the financial statements

54. PRESENTING THE BUSINESS PLAN
Ensure all members of the team read and fully understand the plan
Add graphs, charts and pictures to enhance clarity & attractiveness
Ask a trusted colleague or advisor to review the plan
Be sure to make adjustments where necessary

55. Environmental Analysis Techniques
Tools used to analyse the business environment
PESTL Analysis
SWOT Analysis

56. Environmental Analysis Techniques
PESTL Analysis
Political
Economical
Social
Technological
Legal
Considers the environment in which the business will operate.
Used the develop appropriate business strategies

57. Environmental Analysis Techniques
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
May be done for the business and for competitors

58. Examples of SWOT Factors
Internal
Strengths
Core Competencies
Financial strength
Well-planned strategy
Skilled management
Weaknesses
Production inefficiencies
Inadequate financial resources
Poor management
Poorly planned strategy
External
Opportunities
Untapped market potential
Favourable shift in market
Emerging technologies
New product
Threats
New competition
Rising demand
Increased government regulations

59. Competitive Strategies
Michael Porter’s Generic Competitive Strategies
Porter’s Five Forces Analysis

60. Competitive Strategies
Porter’s Five Forces Analysis
Rivalry from existing competitors
Threat of new entrants
Technical threat of substitutes
Bargaining power of buyers
Bargaining power of suppliers

61. Competitive Strategies
Michael Porter’s Generic Competitive Strategies
Cost leadership
Differentiation
Focus or niche marketing

62. End of the lesson