Docstoc

Start Your Own Business

Document Sample
Start Your Own Business Powered By Docstoc
					Start Your Own Business




           Session 6
           The Business Plan
Agenda

   Why Complete A Business Plan
   Contents of A Business Plan
    –   Executive Summary
    –   The Business and the Product
    –   The Marketing Plan
    –   Management Team & Management Control
    –   Operations
    –   Financial Forecasts
    –   Financing Requirement & Risk Assessment
    –   Appendices
   Presenting the Business Plan
Why Complete a Business Plan

   Support a loan application
   Raise equity funding
   Define objectives and describe programs to achieve
    those objectives
   Create a regular business review and course
    correction process
   Define a new business
   Define agreements between partners
   Set a value on a business for sale or legal purposes
   Evaluate a new product line, promotion, or expansion
Executive summary

   The executive summary outlines your whole business
    proposal.
   Although it is the last section to be written, it goes on
    the first page of the business plan.
   It will be read by people unfamiliar with your business,
    so avoid technical jargon.
Executive Summary

   The executive summary highlights the most important
    points. It should sum up six areas.
    –   Your product or service and its advantages.
    –   Your opportunity in the market.
    –   Your management team.
    –   Your track record to date.
    –   Financial projections.
    –   Funding requirements and expected returns.
   Bank managers and investors often make provisional
    judgements based on the executive summary.
   The main body of the business plan is then read to
    confirm the initial impression.
   The appendices at the back of the plan carry detailed
    information to support the main text.
The business and the product

   Explain the background to your business idea, including:
     –   The length of time you have been developing the business idea in its
         present form.rk carried out to date.
     –   Any related experience you have.
     –   The proposed ownership structure of the business.
   Explain, in plain English, what your product is or what your
    service offers.
   Make it clear how:
     –   It will stand out as different from other products or services.
     –   Your customers will gain through buying your product or service.
     –   The business can be developed to meet customers’ changing needs
         in the future.
   Explain any key features of the industry
             special regulations
             effective cartels
             major changes in technology).
Marketing Plan - Segmentation

   Focus on the segments of the market you plan to
    target — for example, local customers or a particular
    age group.
   Indicate how large each market segment is and
    whether it is growing or declining.
   Outline the key characteristics of buyers in each
    segment (eg age, sex or income).
    Mention customers you have already lined up and any
    sales you have already achieved.
Marketing Plan - Competition Analysis

   What are the competing products and who supplies
    them?
   List the advantages and disadvantages of all your
    competitors and their products.
   Explain why people will desert established competitors
    and buy from you instead.
   Show you understand your competitors’ reaction to
    losing business
   Show how you will respond to it.
   Unless you know how you are going to beat the
    competition your business will be vulnerable.
   Show you have done the market research
   You need to justify what you say in the plan
Marketing Plan - Product

   How will your product or service meet your customers’
    specific needs?
   How will you position your product?
    –   Product
            Quality,
            Design features
            Product benefits
    –   Price
    –   Response time
    –   After-sales service
   And how does the competition do all this
   Quote minimum order figures if appropriate1
Marketing Plan - Distribution

   How will you sell to customers?
    –   By phone
    –   Through your website
    –   Face-to-face
    –   Through an agent.
   The key sales points for your product or service
   Show how long you predict each sale will take.
   New businesses underestimate the time involved in winning each
    order
   In year one you may spend up to 80 per cent of your time making
    contacts and selling.
   Will you be able to make repeat sales?
    –   If not, it will be hard to build up volume.
Marketing Plan - Promotion

   Principle is Identify Customer Segment & Target
   Who are my customers
   What are their interests
   Where do they go
    –   Leisure Habits   Exhibitions   Trade Fairs
   What are their media habits
    –   TV       Radio Newspapers      Magazines
   Target Advertising & Promotion
   Make the message attractive
   Detail the promotion plan
Marketing Plan – Securing Customers

   Who will your first customers be?
    –   Which customers
            have expressed an interest
            Have promised to buy from you
    –   What is the value of sales they represent.
   How will you identify other potential customers?
   Unless you can demonstrate that you have a clearly
    defined pool of potential customers starting your
    business is likely to be a struggle
   Your business plan will not be credible
Where is the Gross Profit Coming From

   What contribution to profit will each part of your business make?
   Most businesses need
     –   more than one product,
     –   more than one type of customer
     –   more than one distribution channel.
   Look at each and examine likely
     –   sales,
     –   gross profit margins
     –   costs.
   Identify
     –   where you expect to make profits
     –   where there may be scope to increase either margins or sales.
   Services and intangible products (eg computer software) are more
    difficult to market.
   Start-ups must pay special attention to marketing in their business
    plans.
Sales Forecasts - Reality Checks

   Keep it real
     –   Sales forecasts for new businesses are often wildly over-optimistic.
   A How soon can you start selling?
     –   Will potential customers hold off for a year before they take you
         seriously and place an order?
   B How often will you be able to sell?
     –   How many days a year can you spend selling?
     –   How long will each lead take to line up?
     –   What percentage of leads will turn into sales?
   C How much will you be able to sell?
     –   What will the average sale value be?
     –   Will most people give repeat orders
     –   Must you find a new customer for every sale?
   D How long after a sale will it be before you can collect payment?
   So how much income to realistically expect each
    month?
Marketing Plan - Implementation Plan

   Steps
   Responsibility
   Deadlines
   Budget
    –   Advertising / media
    –   Direct mail
    –   Databases
    –   Printing/production
    –   Mailing
Marketing Plan - Control

   Success measures
    –   Completion of action dates
    –   Accomplishment of goals and strategies
    –   Results
            New / repeat customers
            Win rate on sales
            Average size of contracts
            Revenue
Management Roles

   People Buy People
   Outline the management skills within your team.
   Define each management role and who will fill it.
   Show your strengths and outline how you will cope with any
    weaknesses.
   Describe the background and experience of each team member.
   Clarify how you intend to cover the key areas of
    –   Production
    –   Sales
    –   Marketing,
    –   Finance and administration.
   Show how many ‘mentors’ and other supporters you will have
    access to.
Management - Commitment

   How committed are you?
   Banks and any other potential investorswill want to be
    sure you are committed to the business.
   Show how much time and money each of the
    management team will contribute,
   What your salaries and benefits will be.
Controlling the Business

   Demonstrate how you will keep track of your business
   Bookkeeping system
   Budgets & Budgetary Control
   Sales and marketing planning records
   Customer records & Contact Management System
   Purchasing Controls and Systems
   Inventory Control
   Production control information
   Personnel files
Operations

   Explain what facilities the business will have
   How it will deliver the product or service to the
   customer.
   Show the pros and cons of the location.
   Indicate the facilities you will need to start (eg equipment and
    machinery).
     –   Some startup businesses only need a desk and a phone.
   Consider any potential limits to production capacity
   If you are going to manufacture or distribute products
     –   show how and where you are going to warehouse them
     –   For how long.
   Provide a list of employee roles you need to fill and the skills
    required to fill them.
   Show how you have selected your suppliers.
Financial Forecasts

   Your financial forecasts translate what you have already said
    about your business into numbers.
   A realistic sales forecast forms the basis for all your other figures.
     –   Break the total sales figure down into its components
     –   different types of products
     –   sales to different types of buyer
   The cash flow forecast shows how much money you expect to be
    flowing into and out of your bank account and when.
   You must show that your business will have access to enough
    money to survive.
   Demonstrate that you have considered the key factors affecting
    cash flow and timing of sales revenue, wages.
   Show when there will be more money coming in than going out
    (‘cash-positive’)
Financial Forecasts P&L & Breakeven

   Your profit and loss (P&L) forecast gives a clear
    indication of how the business will move forward.
   Summarise the annual P&L forecast for each of the two
    or three years of trading
   Calculate the turnover you need to break even:
   If your gross margin is 25 per cent, your sales must be
    four times as large as fixed costs to break even.
   Compare the breakeven level of sales with the sales
    you are forecasting.
   Indicate what market share this represents
Breakeven Calculation

1                               2
a)   Number of customers        e)   Fixed Costs
           20000                        £120000
b)   Number of annual           f)   Variable Costs per Unit
     purchases each
     customer                               £10
               4                g)   Average Price
c)   Each Purchase                          £25
               £25              h)   Number of sales to break
d)   Annual Market Value             even
           £2,000,000                       8000


     3   i)   Total value of sales for breakeven £200,000
         j)   Percentage Market Share            10%
Financial Forecasts - Other

   If you are launching a larger start-up, you will also need projected
    balance sheets.
   These will show you the financial state of your business on day
    one and at each year end, perhaps for the first two or three years.
   Do not get too protective about your forecasts. You may need to
    revise them.
   For every forecast, list all your key assumptions
     –   Prices
     –   sales volume
     –   timing
   Small business advisers at banks, Business Link and Enterprise
    Agencies will often help you put together your financial forecasts
    free of charge.
Financing Requirement

   The cash flow forecast will show how much finance the business
    needs. Your assessment of the risks will determine whether or not
    you need to arrange contingency financing.
   Say how much finance you will want, when and in what forms.
   For example, you might want
     –   A fixed-interest loan
     –   overdraft facility.
   B State what the finance will be used for.
     –   Buying equipment
     –   Working capital (financing stock and debtors).
   C Confirm that you will be able to afford it.
   If you want a loan, will your business generate the cash flow to
    make the capital and interest payments?
Risk Assessment

   Look at the business plan and isolate areas where something
    could go wrong
     –   if your main supplier closes down
     –   If one of your customers delays payment
   What you would do if it actually happens?
   Consider a range of what-if scenario
     –   what happens to your cash flow
             If sales are 20 per cent lower
             If 15 per cent higher
   If there are serious risks:
     –   You can arrange contingency funding to cover the finance you may
         need.
   You may decide that the business is too risky and abandon the
    whole project.
   Assessing risk clearly will minimise problems and help build up
    your credibility with any investor or bank.
Appendices

   Detailed financial forecasts (monthly sales, monthly cashflow,
    P&L, any balance sheets)
   Include a detailed list of assumptions
     –   Profit margin on each product
     –   Debtor collection period
     –   Creditor payment period
     –   Stock turn
     –   Interest and exchange rates,
     –   Timing of funding injections, equipment purchases.
   Other relevant information.
     –   Detailed CVs of key personnel
             (essential if you are seeking outside funding).
   Market research data.
   Product literature or technical specs.
   Names of target customers.
   A list of external data sources used in your research will add
    credibility
    Presentation

   The more solid information you can gather for your own use, the
    better the business plan will be.
   But a banker or financier will not have time to read all the details.
   Keep your business plan short.
     –   Most business plans are too long.
     –   Focus on what the reader needs to know.
   Make it professional.
     –   Put a cover on the business plan
     –   Give it a title.
     –   Include a contents page.
   Test it.
     –   Re-read it yourself. Would reading your plan give an outsider a good
         feel for your business and a grasp of the key issues?
     –   Show the plan to friends and expert advisers and ask them for
         comments.
   The time spent rewriting and polishing the plan now will save time
    when arranging finance and launching the business
Presentation

   Your business plan your calling card
   It will get you in the door to convince investors you can
    put your plan into action.
   You want your calling card to look impressive
    –   make sure
            your business plan is printed on good quality paper,
            you have checked the spelling and grammar
            that your numbers add up
   Anyone who sees errors while reading your plan will
    wonder whether similar errors will be made running
    your business.
   A great business plan shows you are worth supporting.
   Make sure that your plan is clear, focused and realistic.
   Show that you have the tools, talent and team to make
    it happen.
Practise Oral Presentation

   Getting someone interested in your business plan is only half the
    battle in raising funds
   The other half is oral presentation
   Financiers will insist on seeing the team involved presenting and
    defending its plans—in person.
   They know that they are backing people every bit as much as the
    idea.
   You can be sure that any investors you are presenting to will be
    well prepared.
     –   They see many presentations and know the questions
     –   If this is not your first business venture, they will know about your past
   Be well prepared, with one person (you) orchestrating individual
    inputs.
   But you must also come across as a team.
Oral Presentation

   Use visual aids and rehearse beforehand.
   Explain, and when appropriate defend,
     –   your business concept,
     –   the product,
     –   the market,
     –   your organization's appropriateness for this venture.
   Listen to the comments and criticisms made and acknowledge
    them politely.
   You need to appear receptive without implying that you have too
    many areas of ignorance in your plan.
   Appear businesslike
   Demonstrating That You Understand
     –   competitive market forces at work in your industry,
     –   the realistic profits that can be achieved
     –   the cash required to implement your strategies.
   Demonstrate the product if at all possible—or offer to take the
    investors to see it in operation elsewhere.
Oral Presentation

   What empathy is there between the investors and the
    entrepreneurs?
   You may not be able to change your personality
   Take a few tips on public speaking.
   Eye contact, tone of speech, enthusiasm, and body
    language all play their part in making the interview go
    well
   Rehearse the presentation before an audience.
People Buy People

   First rule of meeting – Sell Yourself
    –   Be yourself
   Business Plan Presentation is a conversation directed
    by the Business Owner
   Appearance?
   Honesty
    –   If you don’t know the answer say so
    –   Agree to find out and come back
    –   Complete on your agreements
   Allowed lies
    –   It’s my Fault
    –   You’re right
Overcoming Objections

   Acknowledgement
     –   Be courteous and Acknowledge you have heard me objection
     –   Do not dismiss it out of hand
   Clarification
     –   Do not assume you have understood the question.
     –   Allow the customer to express it fully.
     –   Use open and probing questions, reflecting and summarising
         skills
     –   Demonstrate listening
   Explanation
     –   Respond to their concerns and the points they raised in terms of
         benefits to them.
     –   Link back to what might have been stated before.
     –   Make clear links between their points and the benefits
   Close
     –   Restate your proposition
What is the Audience Looking For?

   A business plan should prove that the business will generate
    enough revenue to cover expenses
   If you are writing a plan for your Partners to expand business
     –   focus of the plan more operational than financial.
   If you are writing a business plan for a bank
     –   bank manager wants to see that your ideas are well thought out
     –   most important aspect is the financials.
     –   Are your assumptions realistic?
     –   And will the cash flow of the business sufficient for debt service
   Most venture capitalists seek obvious trends and market niches.
   But the most important factor in a decision to invest in a company
    is the quality of the people.
   The venture capital axiom is "people, people and people."
     –   how experienced are the people
     –   their knowledge of the industry
     –   Have they started successful ventures in the past?
CAMPARI

   Character
   Ability to Borrow and Repay
   Margin of profit for Financier
   Purpose of Loan
   Amount of Finance
   Repayment Terms
   Insurance Against Non-Payment (Security)
What makes a successful business plan?

   Presents a well thought out idea
   Contains clear and concise writing
   Has a clear and logical structure
   Illustrates management's ability to make the business a
    success
   Shows profitability
   Demonstrates competency of PEOPLE
On The Website

   Today’s Presentation
   A Handout Indicating a Comprehensive List of Subjects
    which may be covered in a business plan
   A Sample of A Simple Business Plan with Financial
    Schedules
   A New Weblink to a US Website which has a number
    of sample Business Plans

				
DOCUMENT INFO