Constructing the Elementary Business Plan

*Based on inputs from venture capitalists and from commercial banks

Session Objectives
To list the uses of a business plan To lay out the steps involved in writing a business plan To list out data required in drawing up a business plan To understand the Elementary business plan To understand the structure and composition of various sections of a business plan To list the various appendices and exhibits needed in a business plan

Uses of a Business Plan

Equity funding Bank finance Alliances Recruitment Clarify the business Others

The Elementary Business Plan

1. 2. 3. 4. 5. What is the product/service? Who is your customer? How will you reach the customer? Why you? How will you defend your market? How will we make money?

Kinds of Business Plans

Summary Plan Executive summary Full Business Plan Operational Business Plan The oral presentation Slide Deck

Steps in Writing a Business Plan

Define purpose Collect Information Put it down The rough draft Financial analysis Finishing Review

Data Required
Company details
Documents relating to formation Shareholding details Permits and registrations

Management
Organization chart Details of key employees Consultants and advisors Compensation and other employee agreements Market statistics from secondary sources Reports on trends, etc Competitor data Customer surveys

Industry and Competitors

Data Required
Operations
Product specifications Contracts and purchase orders for raw materials Competitive advantages Details of Intellectual Property (Patent, license, and trademarks) Regulatory approvals Industry standards as per regulations Plant layout and operations plan Research and development plans

Data Required
Marketing and Sales
Marketing plan Advance orders, if any Marketing materials

Financial Information
Data on fixed and variable costs to be incurred Financial forecasts

Schilit (1987, Business Horizons)

1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. Executive summary Background and purpose Objectives Market analysis Development and production Marketing Financial plans Organisation and management Ownership Critical risks and problems Summary and conclusions Appendices

Key Sections of a Business Plan

Executive summary The company The management team The industry and the market Operations The marketing plan Financial plan Risks and contingencies Appendices

Executive Summary
The executive summary is probably the most important section of the business plan. It is basically the whole business plan condensed into a few pages The main objective of the executive summary is to entice the reader to go through the entire plan.

The Company
History Current Status Future

The Management Team

Technical and professional qualifications Quality of work experience Experience in the relevant sector Reputation in the business community Evidence of moral integrity Financial capacity Networking with other vital people in the industry

The Industry and the market

An industry is a collection of sellers A market is a collection of buyers
Concentrate on the relevant segments

Competition

Operations
Gantt chart outline setup Technology Raw material strategy Production planning Quality HR policy

Marketing
Target Segments Branding Product Packaging Pricing Distribution Promotion

Finance
Funds sought Projected financial statements Costing details Break even and payback analysis

Risks and Contingencies

Identify major threats and risks Outline strategies for countering them

Appendices
1. Copy of documents pertaining to incorporation or formalization of partnership. 2. CVs of the entrepreneur/s and of key employees 3. Copies of various permits or permissions granted. 4. Copies of papers pertaining to sale or lease of land for the business 5. Copies of documentation of proprietary intellectual property 6. Graphical representation of schedule including milestones and dates 7. Photographs of location 8. Factory or plant layout 9. Graphical representation of production process

Appendices
10. Findings of market survey conducted 11. Photograph of product or prototype 12. Storyboards or mock-ups of advertisements 13. Projected balance sheets 14. Projected profit and loss accounts 15. Projected cash flow statements 16. Sensitivity analysis of P&L a/c 17. Break even analysis 18. Financial ratios

OIO