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Business Plan

Dr. Harris Turino

Agenda
Introduction What is Business Plan Writing a Business Plan

Part-I

Introduction: From Idea to Business

Idea Generation

To set up a new business, you have to start with an idea or insight.

Idea or insight may come from anywhere, be captured anytime, inspired by everyone, imitated from any parties, invented through any researches. Creative people have the ability to generate ideas that have not yet recognized by others with regarding its space and time.
Creative ideas may become the source of business opportunities, and finally drive to a new business.

Creative Ideas
Idea
Low cost air transportation Deliver furniture products more efficient Animate characters from folklore & fable Sell thousand books without physical bookstore Sell customized personal computer Invention of copier technology Inexpensive copier machine

Opportunity
Target price sensitive customers Produce knock-down furniture

Business
Southwest Airline

Olympic Furniture Walt Disney


Amazone.com

Animation movie for entertainment


Online bookstore

Sell PC directly to customer Produce copier machine Compact copier for small company

Dell Computer Xerox Canon

Idea and Opportunity

Not every idea can be transferred into business opportunity. Many creative ideas appears in the festival (e.g. Jarum Black Innovation), or in the form of researches in universities. Much of them are still collection of ideas. Creative ideas is one thing, business opportunity is another thing, though they are closely linked. Creative ideas have a potential business opportunity if they are in the intersection of three aspects, i.e. customer need, asset we have, and enablers.

Business Opportunity
idea
Something worth we own
assets competency expertise network etc

Something valued by consumer


fulfill their needs solve their problems

Something that accelerates success of an idea


(trend, lifestyle, technology, public figure, etc.)

Business opportunity

We can start to explore business opportunities from any points in the three aspects.

Opportunities: Harman Intl


CAPABILITIES
Resources: brand equity Capabilities: high fidelity technology, stereo system

CUSTOMER NEEDS
People want to have music quality as good as in their home

Digitalization People spend their time much more in the car New capabilities needed: digital technology (acquire Becker)

Automotive infotainment

ENABLER

Opportunities: Apple iTunes


CAPABILITIES
Resources: brand equity Capabilities: software development, user friendly product design, imaginative marketing Business: consumer electronics, personal computer, computer software

CUSTOMER NEEDS
People want to collect individual music songs rather than buy a CD People want to download high quality music songs with less price

New capabilities needed: digital right management Access to the content (contractual agreement, and Fairplay software )

Internet-based technology Rapid development of digital music Illegal music sharing

Digital music

ENABLER

From Opportunity to Business

Many prospective opportunities fails to transform into successful business.

Some reasons are: The products are not (yet) needed or affordable by customers Example: hybrid car Bad strategy formulation and implementation
This is the time we need a strategic planning, in the form of business plan or project plan.

Innovation Process

While idea generation is the first step of innovation process, the idea development is its next process.
Idea Generation Idea Development Idea Diffusion

It includes building a business model (concept of business), and then formulating business strategy to achieve success as defined.
They all are explicated in the business plan.

Part-II

What is Business Plan

What Is Business Plan

Formal integrated concept that construes strategic initiatives in order to achieve business goals that are believed to work under certain circumstance Key words:

Integrated concept Strategic initiatives Business goals Circumstance

BP explicitly defines what we are going to do in the future to achieve success (roadmap to business goal).

Why Prepare a Business Plan?

Business Plan is a vital importance for small, medium, or large enterprise, as well as, for start-up or established business. A business plan is important to:

Defines and focuses strategic planning to a achieve success using appropriate information and analysis process. Uncover omissions and/or weakness in planning process. Focus your energy to meet short- and long- term goal As a selling tool in dealing with important partners, e.g. creditors, investors, banks, shareholders.

Business Plan for Who?


Shareholders Investors Start up a new business Ask for (additional) capital

Initial public offering Investor relation


Propose a loan facility Loan rescheduling Attract partners to join Uncover omissions and/or weakness in planning process Guidance to cascade more detail technical activities

Creditors
Business Plan Partners Reviewer Internal

Business Plan Process

Analysis Process
Process of identifying opportunities and creating strategic planning for your (new) business to achieve preset goals.

Write it on a Business Plan

Write your analysis process on paper Not every analysis process has to be written on business plan Know who are the audience of your business plan, then explore some areas has great interests for your audience

Analysis Process Framework


External Environment Insight or Idea Internal Environment

Business Model

PEST analysis Industrial analysis Market analysis Competitive analysis (Five Forces, Strategic group)

Vision Mission Objectives

Resources Process Performance Innovation

O and T

Strategy

S and W

Elements of Business Plan


Executive Summary Company Profile Products and What do you offer? For who? Services Strategic Planning Human Resource
How do you create money and win the competition?

Who are you?

Opportunities Market & Industry & Threats

Analysis

Marketing

Operation

Financial

Elements of Business Plan


Executive Summary (write it later in max 2 pages) Company Summary (what assets do you have, and what is the profile of your company) Products and Services (what do you offer) Market and Industry Analysis (external situation) Strategic Planning (business model and overall company strategy) Management (functional, i.e. marketing, operation, HR) Financial Plan (source of fund, and how you allocate it) Conclusion

http://www.bplans.com/sample_business_plans.cfm

Part-III

Writing a Business Plan

By failing to prepare, you are preparing to fail


- Benjamin Franklin -

Company Summary

Describe:

Who you are What is your vision, mission, goals and objectives (success criteria) Where is your location What assets do you have

Difference between vision, mission, goal & objectives:


Vision : where you want to go (abstract version, long-term) Mission : who you are, and what are you doing Goals : What is your target in 5 or 10 years (middle-term) Objective: What is your 1 - 3 years target (short-term)

Product and Service

Describe: What are your products and services? For who? Provide the picture of products if possible What is your uniqueness compare rivals products

Market and Industry Analysis

Note:

Market : group of customers (segments) Industry : group of companies or business players in a specific area

The aims of market and industry analysis are to identify opportunities and threats. Describe:

Define your industry, who are your direct and indirect rivals? Key success factors What are segments in your market? Which segment do you target? What are their profiles? Summarize the opportunities and threats.

Example: Market Profile

Market Analysis
Potential Customers Growth Year 1 Year 2 Year 3 Year 4 Year 5 CAGR

Under 24
Age 25 to 55 Age 56 and over Private Organizations Public Organizations Other

0%
0% 0% 0% 0% 0%

18
33 31 40 62 5

18
33 31 40 62 5

20
44 37 102 105 7

21
51 40 163 137 8

22
59 44 261 178 9

5.14%
15.63% 9.15% 59.83% 30.17% 15.83%

Total

31.95%

189

189

315

420

573

31.95%

Strategic Planning

It is a business strategy in general. Describe what is your generic strategy, what general activities you will perform, and what are your competitive advantage If your business is new and has unique characteristics, it is often useful to describe your business model. Describe in short-version:

What is your marketing strategy and your sales forecast? Milestone of preparation and time horizon Source of employees, personnel plan, team building etc.) Start-up expenses, source of fund, breakeven, profit and loss

Example: Sales Forecast


Sales Forecast

Sales
Private Public Other Total Sales Direct Cost of Sales Private Public Other Subtotal Direct Cost of Sales

Year 1 $206,170 $113,185 $33,794 $353,149 Year 1 $28,864 $11,319 $1,690 $41,872

Year 2 $276,099 $178,490 $40,081 $494,670 Year 2 $38,654 $17,849 $2,004 $58,507

Year 3 $299,002 $193,000 $62,777 $554,779 Year 3 $41,860 $19,300 $3,139 $64,299

It is often very useful to visualize in graph

Example: Milestone
Milestones
Milestone Sample Milestones Finish Business Plan Acquire Financing Ah HA! Event Oooooh Noooooo! Event Grande Opening Start Date 1/4/2008 5/7/2009 5/17/2009 5/27/2009 6/26/2009 7/6/2009 End Date 1/4/2008 6/6/2009 7/6/2009 6/1/2009 7/1/2009 7/11/2009 Budget $0 $100 $200 $60 $250 $500 Manager ABC Dude Dudette Marianne Marionette Gloworm Department Department LeGrande Fromage Legumers Bosses Chvre deBlme Nobs

Marketing Program Starts


Plan vs. Actual Review First Break-even Month Hire Employees Upgrade Business Plan Pro Totals

6/6/2009
11/1/2009 3/5/2010 2/1/2010 4/22/2010

7/1/2009
11/8/2009 4/4/2010 3/3/2010 4/24/2010

$1,000
$0 $0 $150 $100 $2,360

Glower
Galore Bouys Gulls Brass

Marketeers
Alles Salers HRM Bossies

Example: Personnel Plan


Personnel Plan

Year 1 Event Specialist Site Manager Other Total People Total Payroll $36,000 $11,097 $8,947 0 $56,044

Year 2 $40,000 $13,750 $9,560 0 $63,310

Year 3 $42,000 $14,560 $10,000 0 $66,560

Example: Start-Up Expenses


Start-up Requirements
Start-up Expenses Legal Stationery etc. Brochures Consultants Insurance Rent Expensed Equipment Other Total Start-up Expenses Start-up Assets Cash Required Start-up Inventory Other Current Assets $2,300 $0 $0 $200 $300 $185 $200 $145 $150 $1,985 $200 $3,365

Start-up Funding
Start-up Expenses to Fund Start-up Assets to Fund Total Funding Required Assets Non-cash Assets from Start-up Cash Requirements from Start-up Additional Cash Raised Cash Balance on Starting Date Total Assets Liabilities and Capital Liabilities Current Borrowing Long-term Liabilities Accounts Payable (Outstanding Bills) Other Current Liabilities (interest-free) Total Liabilities Capital Alicia Nollan Other Additional Investment Requirement Total Planned Investment Loss at Start-up (Start-up Expenses) Total Capital Total Capital and Liabilities $3,400 $265 $0 $3,665 ($3,365) $300 $2,300 $5,665 $2,000 $0 $0 $0 $2,000 $0 $2,300 $0 $2,300 $2,300 $3,365 $2,300 $5,665

Long-term Assets
Total Assets Total Requirements

$0
$2,300 $5,665

Total Funding

Example: Breakeven Analysis


Profit

Sales

Example: Profit and Loss


Year 1 Sales Direct Cost of Sales Other Costs of Sales Total Cost of Sales Gross Margin Gross Margin % $353,149 $41,872 $196 $42,068 $311,081 88.09% $56,044 $146,013 $0 $0 $516 $264 $1,440 $0 $0 $204,277 $106,804 $106,804 $406 $25,535 $80,862 22.90% Year 2 $494,670 $58,507 $203 $58,710 $435,960 88.13% $63,310 $68,400 $0 $0 $750 $750 $1,800 $0 $0 $135,010 $300,950 $300,950 $279 $72,161 $228,510 46.19% Year 3 $554,779 $64,299 $221 $64,520 $490,259 88.37% $66,560 $73,400 $0 $0 $800 $1,000 $1,800 $0 $0 $143,560 $346,699 $346,699 $362 $83,121 $263,216 47.45%

Expenses
Payroll Sales & Marketing & Other Expenses Depreciation Leased Equipment Utilities Insurance Rent Payroll Taxes Other Total Operating Expenses Profit Before Interest and Taxes EBITDA Interest Expense Taxes Incurred Net Profit Net Profit/Sales

The Rest Elements

The rest elements of business plan are to describe more details the functional strategy:

Marketing Strategy (e.g. pricing, promotion) Operation Strategy (e.g. layout, inventory, production capacity, facilities, etc). Human Resource Strategy (e.g. structure, work design Financial Planning (e.g. cash management, debt planning, additional capital needed, etc.).

Executive Summary

Know your audience Highlight the most important information you want to deliver. If you propose business plan to investors:

Who you are, and what business are you in Your product and its uniqueness Your general strategy Profit and loss