1 writing a business plan

8/14/2019 1 Writing a Business Plan

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Richard OCallaghanHook Head Training and Consulting Limited


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Contents What is a business plan? Reasons for business planning

Typical Business Plan Model Information Required for a Business Plan Gathering Information

Your Product or Service You and your Team Marketing your product/service and

business


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A Business Plan

Describes The business - What business are you in? The markets - Where is the opportunity?

Industry forces - What are the competitivethreats? Whats our competitive edge?

Who is the team to implement the Plan? What resources are available for success? How much capital is required? What are the financial rewards to

investors?


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5 Major Reasons for

Business Planning Forces you to look at your business as a whole The Plan is a tool to manage your business

It demonstrates to others your goals andobjectives It provides the basis for your financial

projections

It can help you get the money you need tolaunch your business


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Why write a Business

Plan ? It forces you to think in concrete terms (justify

the potential you see in your business) It prepares you to face a number of

stakeholders Incubator managers Bankers Financers

Senior employees It gets the buy in from the team


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Cost Projections Sales Projections

Pro Forma Financial Statements

Operating Plan Marketing Plan

Financial Plan

What will it cost to produceyour product or service?

What will it cost to sell any givenamount of your product or service?

How will your business make money?How much? For how long? Risks?

Industry,Buyer & Competitor

Analyses

Opportunity Product/ServiceWhy this business? Whynow? Why you?

What are you going to provideand who wants to buy it?


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Typical Contents can

Include Statement of Purpose/Mission Statement Table of Contents Business Description

The Market Location Management Personnel

Operational Plan Resources Financial Statements Supporting Documents


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Before you start writing the

plan You must gather a significant amount of

information on: You Your firm Your product Your finances

Your targets Future potential


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Business Planning is an

Iterative Process

Tell the story(Draft your narrative sections)

Run the numbers(Develop your Financial Plan)

Verify the story(Examine the narrative sections)

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3


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Gathering Information Get a hard back notebook or a ring-binder and

a folder/pouchor Use a folder on your computer Gather all your information first A lot of thinking will be required


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Where Is Your Firm Now? Consider the following: Are you a company, partnership or sole trader Have you completed a design or developed a

prototype product/ service Have you developed or launched its firstproduct/service

Are there any secured customer commitments ororders

Have you generated any revenue; if so, howmuch, from where, etc.

Have you secured finance from any source(including government grants)

Underpin this with a statement of who is involvedand what their experience, track record and

commitment to business is


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What is your

Product/Service? Write a short description of the product/service Then outline:

How does your product/service address a real marketopportunity ? What the specific benefits and value does the

customer derive from using your product? How can these benefits can be demonstrated and

measured

Why will the customer purchase your product/serviceon an ongoing basis? What are the distinctive advantages of your product

and why it is a potential winner? At the outset it is essential to establish the link

between the market opportunity and your product

or service


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Typical Mistakes at this

Stage You are so close to the product that you cannotdescribe it clearly

You provide excessive productdetail/specifications etc

You are of the opinion that the customer benefitsare self-evident you may know them but

You have not considered how long yourcompetitive advantage will last?

You concentrate on the product/service and donot adequately outline your skills and those of your team


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You need to convey to the reader aclear picture

This is the market opportunity

This is my product

These are the key benefits: the value proposition

This is the evidence that substantiates the valueproposition

And these are the people who will make it happen - andwhy


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What is your Market? Having understood your core proposition thereader wants a clear picture of your market interms of

Market size Market segmentation and niches Actual and projected growth rates in target

market Geographic breadth and variation Market context - relevant environmental,

regulatory, technological, demographic/socialchanges


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How do people make money

in this market? Basis of competition - price, differentiation,

range, discount structure, etc. Nature and number of substitutes (and near

substitutes) The ease or difficulty of gaining market entry The margin opportunity - current and future

It is essential to demonstrate a real understandingof what makes the market tick, why it is anattractive market, and why it will remain so forsome time


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You then need to explain where in themarket you will compete ...

choice of target market segment and rationale for this precise description of target customers key buying factors

the purchasing process: who buys and over what timeframe?

And how you will compete product positioning in the market: performance, image,

quality, etc. pricing and discount structure product support and service customer retention strategy scope for follow-on sales
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In addressing these issues beware

of Providing information unsupported by factual

evidence Lack of basic, first-hand market research The risks inherent in under-pricing Equating a large, growing market with ease of

gaining share


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Who will you Compete Against?

Basic competitor analysis tells us aboutcompetitors

Identity, size, financial results, etc. Product range and performance Market reputation - quality, service, image Market positioning - price, support, selling methods

But this is only a photograph


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A Good Business Plan will also

Illustrate how you will Withstand retaliation from incumbents Renew and extending initial competitive

advantage Retain customers and building loyalty Prevent others from capturing the value you

create


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How will your Product or

Service be Produced? The operational part of the plan should set out

What is involved in producing the product ordelivering the service

Resources required to do this: labor, material,facilities, etc.

Capital expenditure - amount and phasing Which activities will be controlled in-house (eg.

design or assembly) and which will be sub-contracted (eg. packaging) What it will take to gear up production post

start-up Status of any agreements with suppliers


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Who are the People?The question with which most investors start.

In describing yourself and your team youneed to focus on ... It is the people who

make it happen

Directly relevant industry, market experience andskills Accomplishments and track record (P&L

responsibility) Range, depth and quality of relevant contacts:

customers, suppliers, key personnel etc. Experience that the team has had working together Status and nature of the commitment of both

yourself and the team Key recruits still required


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What are your Financial

Projections? This part of the plan should focus on ...

Core assumptions behind the financial model The link between these assumptions and your

market data Key financial indicators - projected cash flow,

maximum cash requirement, summary profit &loss statement, balance sheet

Your expected best/worst/most likely positionsand your reasoning for these positions The potential downside (what happens if the wheels

fall off) and upside (what happens if it really takesoff)


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How much Money do you Need?

Your summary financial projections willdrive the funding requirement. Forinvestors, the key issues are ...

how much money is needed what it is need for: staff, premises, capital

expenditures, research & development, markettesting, and so on

when and in what stages it is required the key milestones against which funds will be

drawn down the form in which the finance is required


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Ability to make

Repayments The projected timetablefor the business to achievelift off

Target time to break even,generate positive cashand profit

Repayment projections,

and proof how you canmeet them Valuations achieved by

comparable businesses

THIS ISTHEKEY

ISSUEFOR THE

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