Workshops: How to write a business-plan This workshop was conducted in two parts. The first part was conducted by Ms. Purvi Sheth, VP, Shilputsi Consultants, and the second part by Prof. Lagu, IIT Bombay. Ms. Purvi Sheth started by informing the audience that entrepreneurs constantly underestimate the skill they should aim for. She stressed that an entrepreneur must not think just in terms of inches but think in terms of miles. As an entrepreneur, you must think in terms of how far you are going to go. She then pointed out that as you go through life it is the little things that matter and make a huge difference. According to her, one must not look at the purpose or the benefits gained when doing something. She asked the audience to go ahead and do it when they feel like doing it. She pointed out that things that seem totally futile might also make a big difference one day. Once you are an entrepreneur or you have decided to be one, you need a sound business model. A sound business model will look at what kind of services or products you have and how does the real market need it or is it a perceived need. Ms. Purvi then reflected that earlier business models lasted a long time. You made a business model and it stayed. However, today a business model needs to be sound enough only for today and tomorrow because day after tomorrow you might have to change this model. Ms. Purvi highlighted the fact that change is no longer discrete, it is continuous. Informing the audience that today you are there and tomorrow you are redundant, Ms. Purvi suggested the audience to optimise their business for “flexibility and adaptability” before “cost and performance”. She then warned the audience to make sure they were not vulnerable to changes because changes would always happen in the market. She encouraged thinking outside the box but at the same time not forgetting the ground reality. Reminding that sometimes the smaller things matter the most, she stressed not to forget the basic things while thinking huge. According to Ms. Purvi there are two aspects of being an entrepreneur, internal and external. The internal aspect is personality. Commenting on the internal aspects, she asked the audience to question themselves whether or not they have the personality to be an entrepreneur. She questioned the audience whether they had the risk taking capability, whether they believed they had the true talent to bring value to their endeavour. Ms. Purvi expressed that to be an entrepreneur you must be able to sacrifice your lifestyle, your way of living. And coming into the external aspect, she warned that large corporations are really ready to take you on, and would not let you settle. You have very little time before you are under attack by the big giants. And the only way to survive this attack, according to her, is to have a unique and commercially viable business concept. Ms. Purvi reasoned that the business plan is necessary to apply for funding from investors, for bank loans and for the buyers and vendors. She informed the audience that investors want to see your business plan to understand your planning and potential, and decide whether it is a good investment or not. She said that investors wanted a sustainable, well researched and systematised B-plan. Writing a B-plan also crystallises our thoughts and brings questions such as the need to do it, marketing scope and financial viabilities. With even private sector banks coming forward to finance business plans, a sound business plan is very helpful to get a loan. When you are an entrepreneur your vendor might be larger than you. Initially, to attract buyers and vendors, it is important to have a sound business plan. Ms. Purvi said that before starting to write the final B-plan, you should write down the important points. She then pointed out some of the main ingredients of a business plan: 1. Mission statement – how will you make a difference to your customers, employees, shareholders in the long run? 2. Product/Services – what is your product and do you know it very well? 3. Business objectives – what are your business objectives for the future? They need to be accurate and measurable. They could be macro objectives like getting a drug patent, or micro objectives like a sales target. 4. Keys to success – what are the elements that you need to succeed? They could be anything like marketing, operations or finance. 5. Industry analysis – who are the major players in the industry? Do you have a direction? Have you done an economic analysis of the industry perceptive? You need to look at costs of production, pricing related, what will be your profits margin, what kind of cash flows will you have. 6. Market/Competitor analysis – what are your market segments? What kind of competition do you face? Is it direct and/or indirect competition? What is your competitor’s strategy, pricing and promotion strategies, how is your product unique. 7. Strategies and milestones - you need to tell yourself why your customer would buy your product and set yourself goals for revenue and profits. 8. Marketing plan – you must know what your pricing, promotion, distribution strategies are. 9. Management/Organisation structure – you must decide your team and consultants. 10. Operations – you must know about your manufacturing, sourcing strategies. 11. Risk analysis- you must evaluate the risk involved in the financial, market, technical and competition aspects. 12. Forecasting - you must know your revenues, costs and how long it will take you to breakeven. 13. Financial requirements – what are your financial requirements? And will you need them in the short term or long term basis. What is your working capital and how you manage your cash flows? She then said, once you have the key ingredients of a b-plan, you can actually start writing a b-plan. She then described the key components of a business plan as follows: 1. Executive summary – it is the most important part of the B-plan and it must summarize the entire B-plan. It must talk about the company, the product or service being provided and how it is unique, the management and finances required. Ms. Purvi advised the audience to stick to the hard facts and put down only the truth. Also, according to her, the executive summary must be concise and be able to generate enthusiasm. 2. Table of contents – it is very important and must be on a single page. The B-plan must be well organised and numbered. 3. Company and promoter description – tell the entire story. Write about how you started, what your current status is and what your future plans are. Write a story that interests the investor and show yourself properly. Be honest about challenges and problems. Give your friends and teachers a few credits. 4. Products and Services – talk about the functions and benefits of your product. Talk about how it’s going to benefit the world, how it’s going to benefit you. Write the purpose and objective as to why you want to go into business. Write about how your product is unique, pricing issues, patents and equipments needed and the benefit to customers. 5. Industry/Market/Competitor analysis – write the overall industry scenario, market segmentation, who your competitors are and what their strategies are, market shares, what market needs are you looking at for the future, how do you expect customer preferences to be then. 6. Marketing plan – branding, promotion, what kind of branding strategies are you going to use. How do you differentiate your product from other products? What is your target market, what is the price you wish to sell at, distribution, sales and what are the market share forecasts. 7. Operation plan – write about how you are going to manufacture, how you are going to source, what kind of labour do you need and what kind of location you need, like in retail business. 8. Management – what kind of team, consultants, advisors, and mentors will you bring? Be honest. Make sure to write about the teams or consultants you bring in. Some amount of credibility comes with the network you might have or the consultants you may use. Usually entrepreneurs have mentors and it’s a good idea to mention the advisors or mentors. 9. Financial plans – you must write about your assumptions, what your forecasts are for the future, what are your projections, P&I statements, balance sheets, how you will manage cash flows, when do you expect to breakeven and what are the business ratios. 10. Exit strategy – this is for the investor. Write about the exit strategies for the investor to use if he intends to. 11. Risk analysis – how will you counter risk? 12. Financial requirement – write about your needs and kind of funds & about the timeline of your financial requirements and how you expect to manage the cash flow issues. 13. Appendices – write everything else here like product material, promotions material, pictures of your product, teams' resume and your resume. Ms. Purvi warned against the common errors that are made are waiting a B-plan. She said that we tend to wait till the last minute to write a B-plan. According to her, you mustn’t worry about originality of the business plan, as only the presentation of your B-plan and the uniqueness of your product is important. She also requested the audience not to brag. She advised to use proper formatting, colours and chart; keep it short and simple; pay attention to the strengths of your business plan; keep backup data ready; proof read and edit it carefully; have content’s page and a nice covering letter. Ms. Purvi then concluded by saying that an entrepreneur must always remember, especially when things aren't going so well, that “your company's failure doesn’t make u an awful person, likewise, your company's success does not make u genius or superhuman” Taking over from Ms. Purvi Sheth, Prof. Lagu started his session by answering a few questions that the audience had. He then pointed out VC’s, Angel investors, potential senior employees, bankers and attorneys and accountants as the target audience for a business plan. He mentioned that they take share the risk in starting a venture equally and hence, would like to know about your business plan in detail. Then moving on, Prof. Lagu, mentioned that writing a B-plan helped in tangibalizing the vague ideas, quantifying the approximate numbers, freezing the milestones and deliverables, estimating the funding requirements and sizing up the scale of operators. He then detailed on the work that needed to be done prior to writing a B-Plan. He explained on collection of information, validation of the assumptions, analysis and planning and articulation of the basic value proposition. Then Prof. Lagu highlighted what a financer would be looking for in a B-Plan. He mentioned that a financer would be interested in knowing points like the basic value proposition, market size, entry level barriers, alliance and strategic partnerships, promoters, team, marketing and selling plan, equity/capital structure, break even point, risks and most importantly exit strategy. Prof. Lagu then concluded the highly informative session by answering the doubts that the audience had.