Business Planning

How to create a Business Planby

Mag. Maria Peer

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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 owner‘s 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 firm‘s 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 year‘s

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