Business plan Typical questions addressed by a business plan for a start up venture What problem does the company's

ompany's product or service solve? What niche will it fill? What is the company's solution to the problem? Who are the company's customers, and how will the company market and sell its products to them? What is the size of the market for this solution? What is the business model for the business (how will it make money)? Who are the competitors and how will the company maintain a competitive advantage? How does the company plan to manage its operations as it grows? Who will run the company and what makes them ualified to do so? What are the risks and threats confronting the business, and what can be done to mitigate them? What are the company's capital and resource re uirements? What are the company's historical and pro!ected financial statements?

"usiness plans are decision#making tools$ %here is no fi&ed content for a business plan$ 'ather, the content and format of the business plan is determined by the goals and audience$ ( business plan represents all aspects of business planning process declaring vision and strategy alongside sub#plans to cover marketing, finance, operations, human resources as well as a legal plan, when re uired$ ( business plan is a summary of those disciplinary plans$ )or e&ample, a business plan for a non#profit might discuss the fit between the business plan and the organization*s mission$ "anks are uite concerned about defaults, so a business plan for a bank loan will build a convincing case for the organization*s ability to repay the loan$ +enture capitalists are primarily concerned about initial investment, feasibility, and e&it valuation$ ( business plan for a pro!ect re uiring e uity financing will need to e&plain why current resources, upcoming growth opportunities, and sustainable competitive advantage will lead to a high e&it valuation$ ,reparing a business plan draws on a wide range of knowledge from many different business disciplines- finance, human resource management, intellectual property management, supply chain management, operations management, and marketing, among others$ .t can be helpful to view the business plan as a collection of sub#plans, one for each of the main business disciplines$ %he format of a business plan depends on its presentation conte&t$ .t is common for businesses, especially start#ups to have three or four formats for the same business plan an "elevator pitch" - a three minute summary of the business plan's e&ecutive summary$ %his is often used as a teaser to awaken the interest of potential funders, customers, or strategic partners$ (n elevator pitch, elevator speech, or elevator statement is a short summary used to uickly and simply define a person, profession, product, service, organization or event and its value proposition$ %he name /elevator pitch/ reflects the idea that it should be possible to deliver the summary in the time span of an elevator ride, or appro&imately thirty seconds to two minutes$ ( variety of people, including pro!ect managers, salespeople, evangelists, and policy# makers, commonly rehearse and use elevator pitches to get their point across uickly$ %he term itself comes from a scenario of an accidental meeting with someone important in the elevator$ .f the conversation inside the elevator in those few seconds is interesting and value adding, the conversation will continue after the elevator ride or end in e&change of business card or a scheduled meeting$ a pitch deck with oral narrative - a hopeful, entertaining slide show and oral narrative that is meant to trigger discussion and interest potential investors in reading the written presentation$ %he content of the presentation is usually limited to the e&ecutive summary and a few key

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graphs showing financial trends and key decision making benchmarks$ .f a new product is being proposed and time permits, a demonstration of the product may also be included$ a written presentation for external stakeholders - a detailed, well written, and pleasingly formatted plan targeted at e&ternal stakeholders$ an internal operational plan - a detailed plan describing planning details that are needed by management but may not be of interest to e&ternal stakeholders$ 0uch plans have a somewhat higher degree of candor and informality than the version targeted at e&ternal stakeholders and others$

Typical structure for a business plan for a start up venture 1. Cover pa e and table of contents !. executive summary (n executive summary, is a short document or section of a document, produced for business purposes, that summarizes a longer report or proposal or a group of related reports in such a way that readers can rapidly become ac uainted with a large body of material without having to read it all$ .t will usually contain a brief statement of the problem or proposal covered in the ma!or document(s), background information, concise analysis and main conclusions$ .t is intended as an aid to decision making by managers and has been described as possibly the most important part of a business plan$%hey must be short and to the point$ (n e&ecutive summary differs from an abstract in that an abstract will usually be shorter and is intended to provide a neutral overview or orientation rather than being a condensed version of the full document$ (bstracts are e&tensively used in academic research where the concept of the e&ecutive summary would be meaningless$ /(n abstract is a brief summarizing statement$$$ read by parties who are trying to decide whether or not to read the main document/, while /an e&ecutive summary, unlike an abstract, is a document in miniature that may be read in place of the longer document/$%here is wide general agreement on the structure of a "typical" executive summary - books and training courses emphasise similar points$ %ypically, an e&ecutive summary will be possibly 1#234 or so of the length of the main report be written in language appropriate for the target audience consist of short and concise paragraphs start with a summary be written in the same order as the main report only include material present in the main report make recommendations provide a !ustification have a conclusion be able to be read separately from the main report sometimes summarize more than one document

". Business description #. Business environment analysis $. %&'T analysis

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%&'T analysis (alternatively %&'T (atrix) is a structured planning method used to evaluate the %trengths, &eaknesses, 'pportunities, and Threats involved in a pro!ect or in a business venture$ ( 0W5% analysis can be carried out for a product, place, industry or person$ .t involves specifying the ob!ective of the business venture or pro!ect and identifying the internal and e&ternal factors that are favorable and unfavorable to achieving that ob!ective$ %he techni ue is credited to (lbert Humphrey, who led a convention at the 0tanford 'esearch .nstitute (now 0'. .nternational) in the 2673s and 2683s using data from )ortune 133 companies$ %he degree to which the internal environment of the firm matches with the e&ternal environment is e&pressed by the concept of strategic fit$0etting the ob!ective should be done after the 0W5% analysis has been performed$ %his would allow achievable goals or ob!ectives to be set for the organization$ %trengths- characteristics of the business or pro!ect that give it an advantage over others$ &eaknesses- characteristics that place the team at a disadvantage relative to others 'pportunities- elements that the pro!ect could e&ploit to its advantage Threats- elements in the environment that could cause trouble for the business or pro!ect

.dentification of 0W5%s is important because they can inform later steps in planning to achieve the ob!ective$)irst, the decision makers should consider whether the ob!ective is attainable, given the 0W5%s$ .f the ob!ective is not attainable a different ob!ective must be selected and the process repeated$9sers of 0W5% analysis need to ask and answer uestions that generate meaningful information for each category (strengths, weaknesses, opportunities, and threats) to make the analysis useful and find their competitive advantage$ 0W5% analysis aims to identify the key internal and e&ternal factors seen as important to achieving an ob!ective$ %he factors come from within a company's uni ue value chain$ 5ne way of utilizing 0W5% is matching and converting as well as sub!ecting$ :atching is used to find competitive advantage by matching the strengths to opportunities$ ;onverting is to apply conversion strategies to convert weaknesses or threats into strengths or opportunities$ (n e&ample of conversion strategy is to find new markets$ .f the threats or weaknesses cannot be converted, a company should try to minimize or avoid them$ 0W5% analysis groups key pieces of information into two main categories2$ internal factors < the strengths and weaknesses internal to the organization =$ e&ternal factors < the opportunities and threats presented by the environment e&ternal to the organization (nalysis may view the internal factors as strengths or as weaknesses depending upon their effect on the organization's ob!ectives$ What may represent strengths with respect to one ob!ective may be weaknesses (distractions, competition) for another ob!ective$ %he factors may include all of the >,s? as well as personnel, finance, manufacturing capabilities, and so on$%he e&ternal factors may include macroeconomic matters, technological change, legislation, and sociocultural changes, as well as changes in the marketplace or in competitive position$ %he results are often presented in the form of a matri&$0W5% analysis is !ust one method of categorization and has its own weaknesses$ )or e&ample, it may tend to persuade its users to compile lists rather than to think about actual important factors in achieving ob!ectives$ .t also presents the resulting lists uncritically and without clear prioritization so that, for e&ample, weak opportunities may appear to balance strong threats$.t is prudent not to eliminate any candidate 0W5% entry too uickly$ %he importance of individual 0W5%s will be revealed by the value of the strategies they generate$ ( 0W5% item that produces valuable strategies is important$ ( 0W5% item that generates no strategies is not important$n many competitor analyses, marketers build detailed profiles of each competitor in the market, focusing especially on their relative competitive strengths and weaknesses using 0W5% analysis$ :arketing managers will e&amine each competitor's cost structure, sources of profits, resources and competencies, competitive positioning and product differentiation, degree of vertical integration, historical responses to industry developments, and other factors$:arketing management often finds it necessary to invest in research to collect the data re uired

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to perform accurate marketing analysis$ (ccordingly, management often conducts market research (alternately marketing research) to obtain this information$ :arketers employ a variety of techni ues to conduct market research, but some of the more common include @ualitative marketing research, such as focus groups @uantitative marketing research, such as statistical surveys A&perimental techni ues such as test markets 5bservational techni ues such as ethnographic (on#site) observation :arketing managers may also design and oversee various environmental scanning and competitive intelligence processes to help identify trends and inform the company's marketing analysis$

"elow is an e&ample 0W5% analysis of a market position of a small management consultancy with specialism in H':$ %tren ths
'eputation in marketplace

&eaknesses
0hortage of consultants at operating level rather than partner level 9nable to deal with multi#disciplinary assignments because of size or lack of ability

'pportunities
Well established position with a well defined market niche .dentified market for consultancy in areas other than H':

Threats
Barge consultancies operating at a minor level 5ther small consultancies looking to invade the marketplace

A&pertise at partner level in H': consultancy

). *ndustry back round +. Competitor analysis Competitor analysis in marketing and strategic management is an assessment of the strengths and weaknesses of current and potential competitors$ %his analysis provides both an offensive and defensive strategic conte&t to identify opportunities and threats$ ,rofiling coalesces all of the relevant sources of competitor analysis into one framework in the support of efficient and effective strategy formulation, implementation, monitoring and ad!ustment$ ;ompetitor analysis is an essential component of corporate strategy$ .t is argued that most firms do not conduct this type of analysis systematically enough$ .nstead, many enterprises operate on what is called Cinformal impressions, con!ectures, and intuition gained through the tidbits of information about competitors every manager continually receives$D (s a result, traditional environmental scanning places many firms at risk of dangerous competitive blindspots due to a lack of robust competitor analysis$ 5ne common and useful techni ue is constructing a competitor array$ %he steps include2$ =$ F$ >$ 1$ Eefine your industry # scope and nature of the industry Eetermine who your competitors are Eetermine who your customers are and what benefits they e&pect Eetermine what the key success factors are in your industry 'ank the key success factors by giving each one a weighting # %he sum of all the weightings must add up to one$ 7$ 'ate each competitor on each of the key success factors 8$ :ultiply each cell in the matri& by the factor weighting$ %his can best be displayed on a two dimensional matri& # competitors along the top and key success factors down the side$ (n e&ample of a competitor array follows,ey %uccess -actors *ndustry Competitor Competitor Competitor Competitor &ei htin .1 ratin .1 wei hted .! ratin .! wei hted

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2 # A&tensive distribution = # ;ustomer focus F # Aconomies of scale > # ,roduct innovation Totals 1. (arket analysis

$> $F $= $2 1./

7 > F 8 !/

=$> 2$= $7 $8 #.0

F 1 F > 1$

2$= 2$1 $7 $> ".+

( market analysis studies the attractiveness and the dynamics of a special market within a special industry$ .t is part of the industry analysis and thus in turn of the global environmental analysis$ %hrough all of these analyses the strengths, weaknesses, opportunities and threats (0W5%) of a company can be identified$ )inally, with the help of a 0W5% analysis, ade uate business strategies of a company will be defined$ %he market analysis is also known as a documented investigation of a market that is used to inform a firm's planning activities, particularly around decisions of inventory, purchase, work force e&pansionGcontraction, facility e&pansion, purchases of capital e uipment, promotional activities, and many other aspects of a company$ Eavid ($ (aker outlined the following dimensions of a market analysis :arket size (current and future) :arket %rend :arket growth rate :arket profitability .ndustry cost structure Eistribution channels Hey success factors Hey success Eetails

%he goal of a market analysis is to determine the attractiveness of a market, both now and in the future$ 5rganizations evaluate the future attractiveness of a market by gaining an understanding of evolving opportunities and threats as they relate to that organization's own strengths and weaknesses$5rganizations use the finding to guide the investment decisions they make to advance their success$ %he findings of a market analysis may motivate an organization to change various aspects of its investment strategy$ (ffected areas may include inventory levels, a work force e&pansionGcontraction, facility e&pansion, purchases of capital e uipment, and promotional activities$ (arket si2e %he market size is defined through the market volume and the market potential$ %he market volume e&hibits the totality of all realized sales volume of a special market$ %he volume is therefore dependent on the uantity of consumers and their ordinary demand$ )urthermore, the market volume is either measured in uantities or ualities$ %he uantities can be given in technical terms, like IW for power capacities, or in numbers of items$ @ualitative measuring mostly uses the sales turnover as an indicator$ %hat means that the market price and the uantity are taken into account$ "esides the market volume, the market potential is of e ual importance$ .t defines the upper limit of the total demand and takes potential clients into consideration$ (lthough the market potential is rather fictitious, it offers good values of orientation$ %he relation of market volume to market potential provides information about the chances of market growth$ %he following are e&amples of information sources for determining market size Iovernment data %rade association data )inancial data from ma!or players

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;ustomer surveys

(arket trends :arket trends are the upward or downward movement of a market, during a period of time$ %he market size is more difficult to estimate if one is starting with something completely new$ .n this case, you will have to derive the figures from the number of potential customers, or customer segments$"esides information about the target market, one also needs information about one's competitors, customers, products, etc$ Bastly, you need to measure marketing effectiveness$ ( few techni ues are ;ustomer analysis ;hoice modelling ;ompetitor analysis 'isk analysis ,roduct research (dvertising the research :arketing mi& modeling 0imulated %est :arketing

;hanges in the market are important because they often are the source of new opportunities and threats$ :oreover, they have the potential to dramatically affect the market size$A&amples include changes in economic, social, regulatory, legal, and political conditions and in available technology, price sensitivity, demand for variety, and level of emphasis on service and support$ (arket rowth rate ( simple means of forecasting the market growth rate is to e&trapolate historical data into the future$ While this method may provide a first#order estimate, it does not predict important turning points$ ( better method is to study market trends and sales growth in complementary products$ 0uch drivers serve as leading indicators that are more accurate than simply e&trapolating historical data$.mportant inflection points in the market growth rate sometimes can be predicted by constructing a product diffusion curve$ %he shape of the curve can be estimated by studying the characteristics of the adoption rate of a similar product in the past$9ltimately, many markets mature and decline$ 0ome leading indicators of a market's decline include market saturation, the emergence of substitute products, andGor the absence of growth drivers$ (arket opportunity ( market opportunity product or a service, based on either one technology or several, fulfills the need(s) of a (preferably increasing) market better than the competition and better than substitution#technologies within the given environmental frame (e$g$ society, politics, legislation, etc$)$ (arket profitability While different organizations in a market will have different levels of profitability, they are all similar to different market conditions$ :ichael ,orter devised a useful framework for evaluating the attractiveness of an industry or market$ %his framework, known as ,orter five forces analysis, identifies five factors that influence the market profitability "uyer power 0upplier power "arriers to entry

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%hreat of substitute products 'ivalry among firms in the industry

*ndustry cost structure %he cost structure is important for identifying key factors for success$ %o this end, ,orter's value chain model is useful for determining where value is added and for isolating the costs$ %he cost structure also is helpful for formulating strategies to develop a competitive advantage$ )or e&ample, in some environments the e&perience curve effect can be used to develop a cost advantage over competitors$ 3istribution channels A&amining the following aspects of the distribution system may help with a market analysis A&isting distribution channels # can be described by how direct they are to the customer$ %rends and emerging channels # new channels can offer the opportunity to develop a competitive advantage$ ;hannel power structure # for e&ample, in the case of a product having little brand e uity, retailers have negotiating power over manufacturers and can capture more margin$

%uccess factors %he key success factors are those elements that are necessary in order for the firm to achieve its marketing ob!ectives$ ( few e&amples of such factors include (ccess to essential uni ue resources (bility to achieve economies of scale (ccess to distribution channels %echnological progress

.t is important to consider that key success factors may change over time, especially as the product progresses through its life cycle$ 0. (arketin plan .n detail, a complete marketing plan typically includesTitle 4a e 1. 5xecutive %ummary =$ Current %ituation # :acroenvironment o economy o legal o government o technology o ecological o sociocultural o supply chain F$ Current %ituation # :arket (nalysis o market definition o market size

Prepared by Dr.S.C.Sivasundaram Anushan

>$

1$

7$

8$

J$

6$

o market segmentation o industry structure and strategic groupings o ,orter 1 forces analysis o competition and market share o competitors' strengths and weaknesses o market trends Current %ituation # ;onsumer (nalysis o nature of the buying decision o participants o demographics o psychographics o buyer motivation and e&pectations o loyalty segments Current %ituation # .nternal o company resources financial people time skills o ob!ectives mission statement and vision statement corporate ob!ectives financial ob!ective marketing ob!ectives long term ob!ectives description of the basic business philosophy o corporate culture %ummary of %ituation 6nalysis o e&ternal threats o e&ternal opportunities o internal strengths o internal weaknesses o ;ritical success factors in the industry o our sustainable competitive advantage (arketin 7esearch o information re uirements o research methodology o research results (arketin %trate y # ,roduct o product mi& o product strengths and weaknesses perceptual mapping o product life cycle management and new product development o "rand name, brand image, and brand e uity o the augmented product o product portfolio analysis "$;$I$ (nalysis contribution margin analysis I$A$ :ulti )actoral analysis @uality )unction Eeployment (arketin %trate y K7L # segmented marketing actions and market share ob!ectives o by product

Prepared by Dr.S.C.Sivasundaram Anushan

23$

22$

2=$

2F$

2>$

21$

27$

o by customer segment o by geographical market o by distribution channel (arketin %trate y # ,rice o pricing ob!ectives o pricing method (e$g$- cost plus, demand based, or competitor inde&ing) o pricing strategy (e$g$- skimming, or penetration) o discounts and allowances o price elasticity and customer sensitivity o price zoning o break even analysis at various prices (arketin %trate y # ,romotion o promotional goals o promotional mi& o advertising reach, fre uency, flights, theme, and media o sales force re uirements, techni ues, and management o sales promotion o publicity and public relations o electronic promotion (e$g$- web, or telephone) o word of mouth marketing (buzz) o viral marketing (arketin %trate y # Eistribution o geographical coverage o distribution channels o physical distribution and logistics o electronic distribution *mplementation o personnel re uirements assign responsibilities give incentives training on selling methods o financial re uirements o management information systems re uirements o month#by#month agenda ,A'% or critical path analysis o monitoring results and benchmarks o ad!ustment mechanism o contingencies (what ifs) -inancial %ummary o assumptions o pro#forma monthly income statement o contribution margin analysis o breakeven analysis o :onte ;arlo method o .0.- .nternet 0trategic .ntelligence %cenarios o prediction of future scenarios o plan of action for each scenario 6ppendix o pictures and specifications of the new product o results from research already completed

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1/. 'perations plan 11. (ana ement summary 1!. -inancial plan .n general usage, a financial plan is a series of steps or goals used by an individual or business, the progressive and cumulative attainment of which is designed to accomplish a financial goal or set of circumstances, e$g$ elimination of debt, retirement preparedness, etc$ %his often includes a budget which organizes an individual's finances and sometimes includes a series of steps or specific goals for spending and savin future$ %his plan allocates future income to various types of e&penses, such as rent or utilities, and also reserves some income for short and long#term savings$ 1". 6ttachments and milestones

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10