Business Planning

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Business Planning

• How to create a Business Plan
• by
• Mag. Maria Peer

2
Business Planning Definition

• A business plan is a document designed to provide
  sufficient information about a new or existing
  business to convince financial backers to invest
  in the business

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Purposes of a business plan

• Clarify the idea
• To gain finance professional providers of
  venture capital will demand evidence of careful
  planning
• To monitor progress over time the business plan
  can be used as a working document for the owner
  (objectives, forecasts, monitoring process)

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What is in a business plan?

• Introduction
• Personal information
• Objectives
• Marketing plan
• Production plan
• Financial information
• Calculating break-even revenue
• Collateral

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Introduction

• Brief summary of what the business will do
• Where it will be done
• Why the entrepreneur has decided to set up this
  business
• Little detail but designed to give an overall
  impression of the business idea

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Personal information

• Curriculum vitae (CV) of each owner focused on
  previous experience, line of business, management
  generally
• Personal details of key staff within the business
• Statement of the owners personal objectives, how
  committed they are and what they hope to gain
  from the enterprise

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Objectives

• Quantifiable targets
• It should be possible to measure whether or not
  the objective has been achieved within the
  timescale allowed for that target
• Split into short, medium and longterm
• Diversification into other markets, products or
  regions

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Marketing plan

• What will make this product or service stand out?
• USP
• How will this USP be communicated to the
  potential costumer?
• How well do pricing and promotion fit in this
  strategy
• Is enough money budgeted to communicate the USP
  carefully

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Marketing plan place

• How, where and at what cost is distribution to be
  achieved? E.g. Fair Trade products how will
  Billa and Spar be persuaded to stock them?
• The marketing plan may be structured around the 4
  Ps
• A small firms marketing strategy is very
  different from that of a large firm

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Marketing plan pricing

• Will be based on breaking even
• Cost based methods mark-up pricing will be used
• Small businesses must also consider the marketing
  within which they are operating (likely to be
  price takers)
• Finding the right balance between covering costs
  and undercutting competitors in attempt to gain
  market share
• Penetration pricing in the first few months of
  trading to build up a customer base

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Marketing plan sales forecast

• Most important feature key question
• Key financial issue
• Revenue must be high enough to cover the costs

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Marketing plan answer the questions

• What is the market size and potential? Is the
  market growing or getting smaller?
• Who are your customers? What are their needs?
• Who are the major competitors? What are their
  prices, strengths and weaknesses?
• What is your expected turnover in the first year?
• Why do you think you can achieve your expected
  turnover?
• Has your product or service been market tested?
• What marketing and sales methods will you use?
  What are the costs involved?

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Production plan

• Section of the business plan which explains how
  the business will create the goods or services it
  intends to selle
• To be considered staffing levels, knowledge and
  qualification required and stocks of certain
  items (shop)
• Details of how the business will run the
  day-to-day practical details.

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Details required in a production plan

• How customers are to be served personally or
  with automated systems or the Internet
• The staff levels needed (and their training)
• The equipment required for information and
  communications technology, the target stock
  levels
• The planned customer service times

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Financial information

• Projected balance sheet for the end of the first
  years trading
• A projected profit and loss account for the first
  year and
• a cash flow forecast for the first six to twelve
  months
• Break-even analysis (number of units the business
  needs to sell or the sales turnover needed to
  cover the overheads
• Statement of financial requirements showing a
  prospective lender how much money is required and
  how much money will be spent

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Marketing plan collateral

• This means security securing the loans against
  assets which can be sold to repay any debts
• If the business has no assets to use as
  collateral, the entrepreneur has to offer
  personal assets as security, such as his or her
  house. In which case business failure may be a
  financial desaster for the family concerned

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Key terms

• Collateral the asset needed as security on a
  bank loan
• Entrepreneur a person who is prepared to take
  business opportunities,often in the context of
  starting up a new business
• Venture capital risk capital put into a small
  to medium-sized business, usually as a mix of
  eqity and loan capital