Transcript Continuous Improvement.

Writing a Business Plan
A workshop for Extended Schools
January 2007
Presented by:
RAYMOND BELL
© RMB Consulting 2007
WORKSHOP OBJECTIVES
By the end of this workshop, you should be able to:
• Understand the role of the business plan.
• List several reasons for developing a business plan.
• Identify the type of information to include in the
business plan.
• Prepare an outline for a business plan.
• Identify sources where you can get help in
developing a business plan.
© RMB Consulting 2007
What is a Business Plan?
 A document that conveys your organisation’s
prospects and growth potential. It describes:
– Your products and services
– The market
– How products will be made or services performed
© RMB Consulting 2007
When is a Business Plan needed?
 Starting a new venture (organisation, product
or service)
 Expanding a current organisation, product or
service
 Buying a current organisation, product or
service
 Working to improve the management of a
current organisation, product or service
© RMB Consulting 2007
The Business Plan:
Two Essential Functions
 It serves two essential functions:
– Guiding the organisation by charting its future course and defining
its strategy for following it
– Attracting lenders and investors who will provide needed capital
© RMB Consulting 2007
Note to Nonprofits:
To translate For-Profit Plans to Nonprofit Plans
 For-profit and nonprofit business plans are very similar.
(Nonprofits have "sales", "markets", "competitors", etc, too.)
 When reading about for-profit business plans:
1. Substitute "balance sheet" for "statement of financial
position"
2. Substitute "profit and loss statement" for "statement of
financial activities".
3. Substitute "customer" for "client"
4. Substitute "investor" for "funder"
5. Substitute "product" for "programme" or "services"
© RMB Consulting 2007
Key Elements of a Business Plan
 Executive Summary
 Business Overview
 “Industry” and Marketplace
Analysis
 Marketing Plan
 Operations Plan
 Management Plan
© RMB Consulting 2007
Key Elements of a Business Plan
 Financial Plan
 Appendices
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1 to 3-yr Profit &Loss
1 to 3-yr Balance Sheet
3-yr Cash Flow
1-yr monthly Cash Flow
Other support docs
10-15 pages in length
(excluding any supporting
documents)
© RMB Consulting 2007
How to write a plan?
Linear Model
Mktg
Ops
Mgt
Iterative Model
Append
Management
Marketing
Operations
Business Plan
Financials
© RMB Consulting 2007
Done?
Key Elements of a Business Plan
 Executive Summary
 Business Overview
 “Industry” and Marketplace Analysis
 Marketing Plan
 Operations Plan
 Management Plan
Written last!
© RMB Consulting 2007
Executive Summary
 Highlight the most important points of your business
that will convince potential investors/partners that
your venture will succeed
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Business purpose
Market: Customer issue(s) that will be addressed
Competitive Advantages
Marketing & Selling-what compels people to buy, how you
will address
– Management, structure & responsibilities
– Financial highlights/metrics
Length: ½ to 1 page
© RMB Consulting 2007
Key Elements of a Business Plan
 Executive Summary
 Business Overview
 “Industry” and Marketplace
Analysis
 Marketing Plan
 Operations Plan
 Management Plan
© RMB Consulting 2007
Business overview
 Introduction (1 paragraph)
– Name, location, organisation
 Mission Statement
 History and Current Status (1 paragraph)
 Markets and Products
 Competitors
 Objectives
Length: about 1 to 11/2 pages
© RMB Consulting 2007
Mission Statement
 What is a Mission Statement?
 What makes a good Mission Statement?
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Mission Statement
Avis Car Rentals
To become the fastest growing
company with the highest profit margin
in the business of renting and leasing
vehicles without drivers
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Mission
“We shall offer a wide range of furnishing
items of good design and function, at prices
so low that the majority of people can afford
to buy them”
IKEA’s Ideal
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Mission Statements
Fast Food Industry
To make, distribute and sell the finest quality
all-natural ice cream and related products in
a wide variety of innovative flavours made from
Vermont dairy products.
Ben & Jerry‘s
To satisfy the world's appetite for good food,
well served, at a price people can afford.
McDonald’s
© RMB Consulting 2007
Mission Statement
Mother Bear Child Care
To ensure quality care that will contribute to
all aspects of the children’s growth and to
provide fun educational opportunities while
enhancing the Secwepemc culture, language
and history, and operating as a profit and
growth oriented business
© RMB Consulting 2007
Mission Statements
What makes a good mission statement?
 Compelling
 Inspiring
 Clear, measurable objectives
 Concise
© RMB Consulting 2007
Key Elements of a Business Plan
 Executive Summary
 Business Overview
 “Industry” and Marketplace
Analysis
 Marketing Plan
 Operations Plan
 Management Plan
© RMB Consulting 2007
“Industry” and Marketplace Analysis
 Overview of the industry and marketplace
– Trends, dynamics, problems, opportunities
– Demonstrate need or hole in marketplace
– Show how trends lead inevitably to your concept
 Tone of dispassionate analysis
– Arms-length viewpoint, outsider looking in
Not the place to describe your concept or
organisation
– This is not where you present your market strategy
Length: 4 to 5 pages
© RMB Consulting 2007
Organisation of Analysis Section
Industry Analysis
Marketplace Analysis
Customer Analysis
Competitor Analysis
© RMB Consulting 2007
Conceptual Picture
Save for
Marketing Plan
Your “Industry”
Your Marketplace
X
Buyers
You Sellers
© RMB Consulting 2007
-- Industry analysis
 Overview of “industry” organisation
– Pure competition, oligopoly, …
 Focus on major and important trends
© RMB Consulting 2007
Industry Questions
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How do we define our industry?
How is the industry segmented?
What are current trends and important developments?
Who are the largest and most important players?
What problems is the industry experiencing?
What national and int’l events influence our industry?
What are growth forecasts?
© RMB Consulting 2007
-- Marketplace Analysis
 Define and describe your marketplace
– Niche, geographic area, subset of larger industry
 What’s happening in your market?
 Network! – talk with the marketplace
– Customers, competitors, vendors, suppliers,
salespeople, …
– Chambers of commerce
– Industry trade groups
– Other “Influencers”
© RMB Consulting 2007
Marketplace Questions
 How do we define our marketplace?
 How large is it and how fast is it growing?
 How is our marketplace segmented?
 What organisations currently service this
market?
 What trends are important in our
marketplace?
© RMB Consulting 2007
-- Customer Analysis
 Identify current buyers in your marketplace
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Segment these customers
What “problems” are not being solved?
What needs are not being met?
Which customer segments are currently ignored?
 Talk with current buyers!
© RMB Consulting 2007
Customer Questions
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Who are the traditional customers in this market?
How is the market segmented?
What motivates buying decisions?
What channels of distribution are used? What
channels are being ignored
 In what ways are customers dissatisfied with current
offerings in the marketplace?
 What customer needs are currently unmet by the
market?
 What emerging customer groups are being ignored?
© RMB Consulting 2007
-- Competitor Analysis
 Identify current sellers in your marketplace
– Niche and focus
– Target customers
– Strengths and weaknesses
 Talk with current marketplace sellers!
– Sellers themselves
– Vendors
– Customers
 Competitive Matrix Comparison
© RMB Consulting 2007
Competitive Matrix
Competitive Matrix Chart
Product or
Service
Production
/ Quality
Unique
Features
Strengths &
Distribution Marketing / Geographic Weaknesse
System
Advertising
Location
s
Competitor A
Competitor B
Competitor C
Competitor D
Competitor E
Competitor F
© RMB Consulting 2007
Market
Share
Competitor Questions
 Who are current sellers in the marketplace?
 What are the attributes and characteristics of these
sellers and their products/services?
 What is there size, location, target market, and other
important characteristics?
 For their products or services, identify price, quality,
features, distribution, and other important attributes.
 What problems and concerns do customers have with
these sellers?
© RMB Consulting 2007
Key Elements of a Business Plan
 Executive Summary
 Business Overview
 “Industry” and Marketplace
Analysis
 Marketing Plan
 Operations Plan
 Management Plan
© RMB Consulting 2007
Marketing Plan Objectives
 Most important piece of your plan
 Build on industry and marketplace analysis – define
your niche
 Identify your customers
 Demonstrate how you will solve problems for
customers
 Describe how you will reach customers – advertising
sales
Convince reader that there is an eager market
for your product or service
© RMB Consulting 2007
Marketing Plan Outline
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Introduction
Target Market
Product/Service Strategy
Pricing Strategy
Distribution Strategy
Advertising and Promotion
Sales Strategy
Sales and Marketing Forecasts
 Length: 2 to 3 pages
© RMB Consulting 2007
Introduction
 Seven sentence introduction
1.
2.
3.
4.
5.
6.
7.
The first sentence tells the purpose of the marketing strategy.
The second tells how you’ll achieve this purpose, focusing upon
your benefits.
The third tells your target market – or markets.
The fourth, the longest sentence, tells the marketing weapons
you’ll employ.
The fifth tells your niche.
The sixth tells your identity.
The seventh tells your budget, expressed as a percentage of
your projected gross revenues.
© RMB Consulting 2007
Introduction – Example
1. The purpose of Prosper Press is to sell the maximum
number of books at the lowest possible selling cost per
book.
2. This will be accomplished by positioning the books as
being so valuable to free-lancers that they are
guaranteed to be worth more to the reader than their
selling price.
3. The target market will be people who can or do engage
in free-lance earning activities.
4. Marketing tools to be utilized will be a combination of
classified advertising in magazines and newspapers,
direct mail, sales at seminars, publicity in newspapers
and on radio and television, direct sales calls to
bookstores, and mail-order display ads in magazines.
© RMB Consulting 2007
Introduction – Example
5. The niche to be occupied is one that stands valuable
information that helps free-lancers succeed, the
ultimate authority for free-lancers.
6. Our identity will be one of expertise, readability, and
quick response to customer requests.
7. Thirty percent of sales will be allocated to marketing.
© RMB Consulting 2007
Target Market Strategy
 Identify the market niche you will serve
 Be as specific as possible
– Better to be too specific
 Benefits to target market
– What problems do you solve?
– What needs do you fulfill?
© RMB Consulting 2007
Talk to Your Customers
 Imperative that you talk with customers!
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Casual conversations
Interviews
Surveys
Focus groups
 Identify needs
 Listen!
© RMB Consulting 2007
Target Market Questions
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What do you buy now? How do you get this service?
Would you be interested in …?
Demographics
Newspapers, magazines, TV
Would you buy X?; Y?
Where would you expect us to advertise?
Who do you consider to be our competition?
Other comments?
© RMB Consulting 2007
Product/Service Strategy
 Describe how the design of your product/service fulfills unmet
marketplace needs
 Differentiate your product/service from the competition
 Explain why and how customers will switch to your product or
service
 Describe how you will defend your product or service from
competition
Use this section to sell your concept!
© RMB Consulting 2007
Pricing Strategy
 Describe and justify your pricing strategy
 Provide evidence that your target market will accept
your price
 Position your strategy relative to current and potential
competition
 NOTE: Low price often (usually) is NOT a good
strategy for a startup!
© RMB Consulting 2007
Advertising/Promotion
 Describe how you will communicate with current and potential
customers
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Advertising
Public relations
Personal selling
Printed materials
Other means of promotion
 Explain why this strategy will be the most effective in reaching
your target market
© RMB Consulting 2007
Distribution Strategy
 Explain how you will deliver your product or service to
your customers
– How will your customers acquire your product or service
 Describe and justify the distribution channels you will
use
 Describe how you will gain access to your planned
distribution channels
© RMB Consulting 2007
Sales Strategy
 Describe to whom you must sell your product or
service (not always obvious)
 Explain how you will “sell”
 Describe how you will support your sales effort
– internal staff
– service operations
© RMB Consulting 2007
Goals for Marketing Plan
 Compelling “story” that there is a need in the market
 Need flows logically from industry analysis
 Product/service designed to fulfill market needs
 Advertising, price, distribution, and sales all flow
logically, convincingly from characteristics of the
market
© RMB Consulting 2007
Differentiation Road Map
Delivery
Warranty
Installation
Time of sale
Service
After sales
Special terms
Brand
Communications Features
Trademark
Packaging
Bundling
Augmented Benefits
Quality
Tangible Benefits Colour
Size
Core Benefits
Style
Options
Timeliness
What’s it for?
Customise
What’s it do?
© RMB Consulting 2007
Key Elements of a Business Plan
 Executive Summary
 Business Overview
 “Industry” and Marketplace
Analysis
 Marketing Plan
 Operations Plan
 Management Plan
© RMB Consulting 2007
Operations Plan
 Introduction (1 paragraph)
 Operations Strategy
(~1/2 page)
 Scope of Operations (~1/2 page)
 Ongoing Operations (~1/2 page)
Length: 2 to 3 pages
© RMB Consulting 2007
Operations Plan
Operations Strategy
 Added Value
– How will we use operations to add value for customers in our
target market?
 Operations Emphasis
– How will we win in the marketplace on the dimensions of
cost, quality, timeliness, and flexibility?
– Which dimensions will we stress and which will we deemphasise?
 What comparative advantages do we have with our
operational design?
© RMB Consulting 2007
Operations Plan
Scope of Operations
 Make vs. Buy
– What will we do in-house and what will we purchase (make
vs. buy?) Why does this make sense for our business?
 Partnerships
– What will be our relationship with vendors, suppliers,
partners, and associates?
 Personnel
– What kind of people will we need to hire?
© RMB Consulting 2007
Operations Plan
Ongoing Operations
 Execution
– Describe ongoing operations
– Specific to your business
– What will you be doing on a day-to-day basis?
 Critical success factors
– Key performance indicators
 Include detail in an appendix, as necessary.
© RMB Consulting 2007
Key Elements of a Business Plan
 Executive Summary
 Business Overview
 “Industry” and Marketplace
Analysis
 Marketing Plan
 Operations Plan
 Management Plan
© RMB Consulting 2007
Management Plan
 3 most important attributes of start-up
 Organisation, Organisation
 Management Team
© RMB Consulting 2007
Management Plan
 3 most important attributes of start-up
 Management, management, management
 Organisation, Organisation
 Management Team
© RMB Consulting 2007
Management Plan
 3 most important attributes of start-up
 Organisation, Organisation
– Organisational structure
– Ownership structure
– Board of directors/advisors
 Management Team
© RMB Consulting 2007
Management Plan
 3 most important attributes of start-up
 Organisation, Organisation
 Management Team
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Key managers
Duties and responsibilities
Unique skills
Compensation
Planned additions to the team
© RMB Consulting 2007
Management Plan
 3 most important attributes of start-up
 Organisation, Organisation
 Management Team
 Length: 2 pages
© RMB Consulting 2007
Key Elements of a Business Plan
(continued)
 Financial Plan
 Appendices
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1 to 3-yr Profit &Loss
1 to 3-yr Balance Sheet
3-yr Cash Flow
1-yr monthly Cash Flow
Other support docs
© RMB Consulting 2007
Financial Plan
 Income Statement
 Balance Sheet
 Cash Flow
 Profit & Loss
 Summary
 Assumptions
Length: 1 to 2 pages
© RMB Consulting 2007
Operating Expenses
Year 1 Year 2 Year 3
30
45
65
Marketing
R&D
Administration
Total
60
90
140
Cost of Goods
Direct
Indirect
Total
Year 1 Year 2 Year 3
70
130
160
30
70
90
100
200
250
Income Statement
Year 1 Year 2 Year 3
Revenue
250
350
500
COG’s
100
200
250
Oper Expenses 60
90
140
© RMB Consulting 2007
Fixed Assets (Plant)
Year 1 Year 2 Year 3
Assets
200
300
400
Depreciation 140
210
260
Fixed Assets 60
90
140
Working Capital
Year 1 Year 2 Year 3
Receivables 100
200 300
Inventory
50
75 125
Balance Sheet
Year 1 Year 2 Year 3
Receivables 100
200 300
Inventory
50
75
125
Fixed Assets
60
90
140
© RMB Consulting 2007
Revenue Drivers
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Number of customers, transactions or units
Price per customer, transaction or unit
Average revenue per customer or transaction
Distribution channel discount
Market penetration
Response rate
Churn rate
Growth rate
New services or product
© RMB Consulting 2007
Cost of Revenue Drivers
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Personnel costs (labour and/or salary)
Materials costs
Website operating costs
Systems costs
Warehouse and shipping expenses
Returns
Outsourcing expenses
Lease and/or rental expenses
Cost reductions
Depreciation large capital expenditures
© RMB Consulting 2007
Operating Expense Drivers
 Sales & Marketing
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Customer acquisition cost
Personnel expenses
Sales commissions
Exhibitions
Brand building
Tech support
Customer service
© RMB Consulting 2007
Operating Expense Drivers
 Research and Development
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Personnel expenses
Time to market
Patent and copyright application
Prototyping
Subcontracting
 General and Administration
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Personnel expenses
Recruiting expenses
MIS expenses
Office rent and utilities
© RMB Consulting 2007
Financial Dynamics
 Who does the financial projections?
 Investor questions
 Drivers
 Optimism vs. Pessimism
© RMB Consulting 2007
How much money do we need?
 Review cash flow statements
 Find periods with negative cash balances
 Schedule cash infusion(s) to eliminate negative
balances
 Add safety cushion (~10-25%)
 Develop funding strategy
– E.g., staged funding “tranches”
© RMB Consulting 2007
Sources of Funds
 Equity funding
 Debt
 Non-traditional
© RMB Consulting 2007
Equity Funding
 Private Placement
– Friends, family, and fools
– Well to-do investors
 Angels
– “Professional” investors working alone
 Venture Capitalists
 Most “expensive” form of financing
 Advantages and disadvantages
© RMB Consulting 2007
Debt
 Credit cards
 Bank loans
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Typically want to make secured loans
Second mortgage on house or property
Can use equipment & facilities to secure loan
Revolving lines of credit
 Investment banks
 Less “expensive” than equity
 Advantages and disadvantages
© RMB Consulting 2007
Nontraditional Funding Sources
 Customers
– Development
– Prepay
– Co-invest
 Vendors
 Leasing
 Factor receivables
 Other sources e.g. grants
and subsidies from
government agencies
 Advantages &
disadvantages
© RMB Consulting 2007
Financial Plan
 Statements (appendices)
 Written Financial Plan
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Monthly Income (1 yr)
Monthly Cash Flow (1 yr)
Annual Income (5 yrs)
Annual Balance Sheet (5
yrs)
– Annual Cash Flow (5 yrs)
© RMB Consulting 2007
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Introduction
Financial Summary
Financial Assumptions
Funding Requirements
Sources & Uses of Funds
Business Risks
Presenting your Plan
 Tell a story!
– “Tell them what your going to tell them. Tell them. Tell them
what you’ve just told them”.
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organisation?
Length?
Pictures?
Exhibits/props/demonstrations/examples?
Q&A?
© RMB Consulting 2007
Publishing your Plan
 Tell a story!
 Colour?
 Binding?
 Paper?
 Length?
 Appendices?
© RMB Consulting 2007
Writing Good
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Be succinct
Be logical
Be assertive
Revise, revise, then revise
Remember your purpose
Let your passion show
Tell a story!
Be memorable
© RMB Consulting 2007
Writing a Business Plan
THANK YOU !
© RMB Consulting 2007