Writing Business Plan
- 1. Writing Business plan “You’ve got to be careful if you don’t know where you’re going because you might not get there.” —Yogi Berra
- 2. Business plan By writing this type of plan, you’ll gain a thorough understanding of all aspects of your business. What Is a Business Plan? • The business plan is your sales tool. Make sure that you know what you are using this tool for and take time to develop it. • A business plan is a written statement that describes and analyzes your business and gives detailed projections about its future. • A business plan also covers the financial aspects of starting or expanding your business—how much money you need and how you’ll pay it back.
- 3. Why What Is a Business Plan? You need Business Plan? Helps You Get Money • • Helps You Decide to Proceed or Stop • Improve Your Business • Order own ideas. Checklist important aspects, Study feasibility, • Gives direction to business development, Reference for operational plans • Reference for results, Be able to react quick on new developments • Internal partners, External partners • Financiers
- 4. Business plan Who • Entrepreneur, team, network Why • Motivation, objectives What • Product, services, market How • Strategy, organisation, finances
- 5. What business should I start? • Know Your Business • Be Sure You Like Your Business My note: • I don’t believe any business exists that is so foolproof that anyone can enter and make a sure profit. On the other hand, a skilled, dedicated owner often can make a venture successful when others have failed. Remember, your potential customers will exchange their money only for the conviction that you are giving them their money’s worth. And that means you’ll need to know what you’re doing. While this point should appear obvious, sadly—it isn’t.
- 6. TABLE OF CONTENTS Front page, Executive summary, Table of content 1.Information about entrepreneur 2.Business description 3.Market review 4.Product/service 5.Marketing and selling strategy 6. Production and supply 7. Management and organization 8. Future growth and development 9. Success and risk factors 10. Financial plan 11. Annex
- 7. Describe Your Business - Where do you go ? • Motivation: – Why are you starting the company? • Vision: – What do you see as promising future situation for your company? • Mission: – What contribution will your company give to the community / clients • Objectives: – Identify Your Type of Business , Reaching the market – Start to writing step by step
- 8. Introduce entrepreneur • Introduce yourself • Motivation for start up business • Describe your roll in implementation of the plan • Your specific experience • Experience in entrepreneurship and management
- 9. Company Profile • What is company profile? • It is a snapshot of your business and who is involved in it. There include: form of business, owners, business description, location etc. Basic Questions: 1) What general type of business is this? 2) What is the status of the business? Start-up, expansion or takeover? 3) What is the business form? 4) What are your products? 5) Who are (will be) your customers?
- 10. Products or Services • In many cases it is not just a service or a product you are providing but both. • What is it? – Describe every product that You sell. That is your product mix – Describe key characteristics of the product and how it is different of competition (function, permanence, easy to use, ...) – Describe key characteristics of the service and benefit for costumer – Describe protection of your products/services, patents, copyright and so on
- 11. Products or Services Basic Questions: 1) What products/services are you (will you be) selling? 2) What are the features and benefits of what you sell? 3) What Position do you have (or want to have) in the market? 4) How do your products/services differ from the competition? 5) What makes your products unique and desirable? 6) Why do (will) customers buy from you?
- 12. Unique selling points • Offering more costumer value than competing products • Providing specific costumer benefits • Satisfying needs and solving problems • Distinguishing your company from your • Competitors • Why should a potential costumer buy your product rather than that of one of your competitors
- 13. Management • This is a description of the people who will provide the expertise required to run your business. Do!! • Job descriptions, detailed listings and roles and responsibilities!!!!
- 14. Marketing Basic Questions: 1)Who are the purchasers of your products or type of products? 2) What is the size of the market? Is it growing? 3) What is (will be) your share? How will your share change over time? 4) Are there segments of users who are underserved by competition? 5) Do any of these under-served segments present opportunities? Etc.
- 15. Marketing Mix • • • • Product Price, Place (distribution), and Promotion.
- 16. Promotional Strategy What do I include?
- 17. Promotional Strategy Costs • • • • Readership Target market profile Distribution coverage Distribution frequency of the chosen promotional mediums etc.
- 18. Promotional Strategy Place How will your method of distribution affect: 1. Sales 2. Service 3. Promotion 4. Timing 5. Economics
- 19. Promotional Strategy Pricing • Price is a function of your costs, competition and customers. Your customers must have a desire, willingness and ability to pay for your product or service. • Pricing Strategy – • • – – What do I include? Pricint fot a service: labour, overhead, profit margin Pricint fot a product: labour, overhead, materials, profit margin Pricing considerations: Low, medium, high Client's perception of value
- 20. Pricing Strategies Pricing Strategies 1.What will be your pricing strategies? 2.How will you compare with competition and how will they respond? 3.Why will customers pay your price? 4.What will be your credit policies? 5.Is there anything about your business which insulates you from price competition? etc
- 21. Target marketing and reaching the market • Before you target you must do reaching the market! – You have described the market, identified your target segment and analyzed the competition; now you need to show how you will reach the market. • A target market is a homogeneous group of potential customers that have both a need and a willingness to pay for the business' product or service. • Target include: • consumer demographics, • psychographics, • business demographics and psychographics etc.
- 22. Research Advice: Be concrete, use annex statistic data, numbers and data sources
- 23. Promotional Strategy Competition • This is a thorough analysis of both direct and indirect competitors. • Your analysis must identify the strengths and weaknesses of the competitors. • Competition research and strategy must include? • YOUR COMPETITION • • • • • • Hours of Operation, Product/Service description, Customer profile, Pricing, Marketing/Advertising, Strengths/weaknesses - why do customers buy from them? Etc.
- 24. Competition Factor Product Price Quality Service Selling methods Reputation Advertising Image Location My company Strengths Weaknesses Competitor 1 Competitor 2 Importance for customer
- 25. Promotional Strategy Basic Questions: 1) Who are (will be) your largest competitors? List them. 2) How will your operation be better (and worse) than your competitors? 3) How are competitors doing? What are their sales and profits? 4) How will competition respond to your market entry?
- 26. Selling plan Jan. Sold units A Price per unit A Total A Sold units B Price per unit B Total B Total for month Feb. Mart April May Jun Total
- 27. Future Growth and Expansion • How will your business grow in the next year, next 2 years and next 3 years – – – – Staff Number of clients Turnover Other resources It is important to be able to understand the needs of your business as it grows
- 28. Key Success Factors • • • • • Listening to the voice of the customer Building a team working environment Striving for continuous improvement Failing to plan means planning to fail Understanding financial implications of laws and tax regime
- 29. Key Risk Factors (swot) Internal Risks • Inability to create a client base • Sustainability is difficult to achieve in the beginning • Loosing key people of the company • Staff are not skilled • Key positions within the company can not be filled with staff External Risks • Beware of competition – they are watching you very closely • Economic instability can affect your business • New government regulations could be introduced • Sales go down due to low purchasing power
- 30. Financial documents Basic Questions: 1) What is the total investment required? 2) How will the loan or investment be used? 3) How will the loan or investment make the business more profitable? 4) When will the loan be repaid?
- 31. Key documents of Financial plan Key documents of Financial plan Break-even Point Profit & Loss Statement Balance Sheet Cash flow
- 32. Financial documents - Cash Flow • It is the actual money that is collected from sales and the actual money that is paid out for expenses on a monthly basis. • A cash flow statement takes the predictions and estimates that you have determined in your business plan and transfers them to a comprehensive financial statement. • What do I include? SOURCES OF CASH • • • • • • Sales Loans Equity Investments USES OF CASH Expenses to be paid Start-up Costs
- 33. Financial documents - Break-even Analysis Break even (B/E) analysis is a simple, but very effective financial feasibility test. B/E is used to find the amount of sales necessary to pay all fixed costs (and have zero income.) In your business plan, it represents a minimum acceptable performance. Follow these steps to calculate: 1) Determine Contribution Margin Percent. Contribution Margin (CM) equals Sales minus 2) Variable Expenses. CM% equals CM dollars divided by Sales. Note: The biggest variable expense is usually Cost of Goods Sold (CGS), which is the direct material and labor necessary to make a product or service ready for sale. 3) List and total all Fixed Expenses for a specific time period (usually one month.) Fixed expenses do not rise or fall with sales volume. Examples: rent, insurance, utilities, etc. 4) Break Even Sales is Fixed Expenses divided by Contribution Margin %.
- 34. Price Breakeven Point – point where Revenues match the Costs and the business has no profit and no losses R nu ve e es Break- even point P Cost iable Var Fixed Cost n Number of Units Sold
- 35. Financial documents - Balance Sheet • The Balance Sheet is the financial statement that reports the assets, liabilities and net worth of a company at a specific point in time. Assets represent the total resources of a company, which may shrink or increase depending on the results of operations. Assets are listed in liquidity order - ease of converting into cash.
- 36. Financial documents - Profit & Loss projection 1)Sell 0 100% Direct costs of working force 0 % Materials costs 0 % Other direct costs 0 % 2) Total costs of sold goods 0 % 3) Brutto Profit (1-2) 0 % Selling and marketing costs 0 % General and administrative costs 0 % 4) Total operational costs 0 % 5) Net operational profit (3-4) 0 % Depreciation 0 % Other revenues 0 % Other costs 0 % Costs of interest fees 0 % 6) Total other revenues/costs 0 % 7) Net profit before taxes (5-6) 0 % 8) Profit tax 0 9) Net profit /loss (7-8) 0 %
- 37. Financial documents - Balance Sheet Assets EUR Liabilities EUR Current assets Current liabilities Cash Debts Accounts receivable Acrual liabilities Inventory Short-term loan Total current assets Part of long-term debt Capital assets Total current liabilities Long-term liabilities Vehicles Total liabilities Office equipment Capital Fabric equipment Land and buildings Private capital Minus: Accumulate depreciation Retained profit Total Capital assets Total capital Total assets Total Liabilities + Capital
- 38. Cash flow The most important financial document It is your alarm for liquidity Cash is King!
- 39. Financial documents Important Appendix : • supporting Documents Historical financial statements, tax returns, resumes, reference letters, personal financial statements, facilities diagrams, letters of intent, purchase orders, contracts
- 40. Mistake to avoid • NO Cover Sheet or Table of Contents • Poor organization – follow the outline, don’t rely on business plan software • Poorly researched • Poorly defined customers or competition • Unrealistic assumptions of costs & sales • Inconsistencies, financials must agree with text
- 41. Writing Business plan Conclusion and workshop
- 42. GOOD LUCK!!
- 43. Q&A
- 44. Writing Business plan More about me: www.sandrajakovljevic.com